As filed with the Securities and Exchange Commission on
September 19, 2005
Registration No. 333-127124
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
Form S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
BANK OF AMERICA CORPORATION
(Exact Name of Registrant as Specified in its Charter)
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Delaware |
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6021 |
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56-0906609 |
(State or other
jurisdiction of incorporation) |
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(Primary Standard Industrial
Classification Code Number) |
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(I.R.S. Employer
Identification Number) |
Bank of America Corporate Center
100 N. Tryon Street
Charlotte, North Carolina 28255
(704) 386-5681
(Address, including Zip Code, and Telephone Number, including
Area Code, of Registrants Principal Executive Offices)
Timothy J. Mayopoulos, Esq.
Executive Vice President and General Counsel
Bank of America Corporation
Bank of America Corporate Center
100 N. Tryon Street
Charlotte, North Carolina 28255
(704) 386-7484
(Name, Address, including Zip Code, and Telephone Number,
including Area Code, of Agent for Service)
With copies to:
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John C. Murphy, Jr., Esq.
Cleary Gottlieb Steen & Hamilton LLP
2000 Pennsylvania Avenue, NW
Washington, DC 20006
(202) 974-1500 |
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Louis J. Freeh, Esq.
Vice Chairman, General Counsel and
Secretary
MBNA Corporation
1100 North King Street
Wilmington, Delaware 19884
(800) 362-6255 |
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Edward D. Herlihy, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
(212) 403-1000 |
Approximate date of commencement of the proposed sale of the
securities to the public: As soon as practicable after this
Registration Statement becomes effective and upon completion of
the merger described in the enclosed document.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check the
following
box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act
of 1933, as amended, check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such dates as
the Commission, acting pursuant to said Section 8(a), may
determine.
MERGER PROPOSED YOUR VOTE IS VERY IMPORTANT
The boards of directors of Bank of America Corporation and MBNA
Corporation each have unanimously approved a merger that will
create one of the top retailers of financial services in the
United States.
In the merger, MBNA will merge into Bank of America. If the
merger is completed, you will have a right to receive 0.5009 of
a share of Bank of America common stock and $4.125 in cash for
each share of MBNA common stock you hold immediately prior to
the merger. The value of the merger consideration will fluctuate
with the market price of Bank of America common stock. The
following table shows the closing sale prices of Bank of America
common stock and MBNA common stock as reported on the New York
Stock Exchange on June 29, 2005, the last trading day
before we announced the merger, and on September 16, 2005,
the last practicable trading day before the distribution of this
document. This table also shows the implied value of the merger
consideration proposed for each share of MBNA common stock,
which we calculated by multiplying the closing price of Bank of
America common stock on those dates by 0.5009, the exchange
ratio, and adding $4.125.
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Implied Value per | |
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MBNA | |
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Share of MBNA | |
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Common Stock | |
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Common Stock | |
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Common Stock | |
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At June 29, 2005
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$ |
46.91 |
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$ |
21.07 |
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$ |
27.62 |
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At September 16, 2005
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$ |
43.68 |
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$ |
25.38 |
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$ |
26.00 |
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The market prices of both Bank of America common stock and MBNA
common stock will fluctuate before the merger. You should obtain
current stock price quotations for Bank of America common stock
and MBNA common stock. Bank of America common stock is quoted on
the NYSE under the symbol BAC. MBNA common stock is
quoted on the NYSE under the symbol KRB.
We expect that the merger will generally be tax-free to you as
to shares of Bank of America common stock you receive in the
merger and generally taxable as to the cash you receive.
We cannot complete the merger unless MBNAs common
stockholders approve it. MBNA will hold a special meeting of its
stockholders to vote on this merger proposal at MBNAs
international headquarters located at 1100 North King
Street, Wilmington, Delaware, on November 3, 2005, at
10:00 a.m., local time. Your vote is important.
Regardless of whether you plan to attend the special
stockholders meeting, please take the time to vote your
shares in accordance with the instructions contained in this
document. Failing to vote will have the same effect as voting
against the merger. The MBNA board of directors unanimously
recommends that MBNA stockholders vote FOR approval of
the merger.
This document describes the special meeting, the merger, the
documents related to the merger and other related matters.
Please carefully read this entire document, including Risk
Factors beginning on page 14 for a discussion of the
risks relating to the proposed merger. You also can obtain
information about our companies from documents that each of us
has filed with the Securities and Exchange Commission.
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![-s- Bruce Hammonds](g96430a1g9643002.gif) |
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Bruce Hammonds
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President and Chief Executive Officer |
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MBNA Corporation |
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved the Bank of
America common stock to be issued under this document or
determined if this document is accurate or adequate. Any
representation to the contrary is a criminal offense.
The date of this document is September 19, 2005, and it is
first being mailed or otherwise delivered to MBNA stockholders
on or about September 26, 2005.
MBNA CORPORATION
1100 North King Street
Wilmington, Delaware 19884
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
MBNA Corporation will hold a special meeting of stockholders at
its international headquarters located at 1100 North King
Street, Wilmington, Delaware at 10:00 a.m., local time, on
November 3, 2005 to consider and vote upon the following
matters:
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a proposal to approve the merger of MBNA with and into Bank of
America, substantially on the terms set forth in the Agreement
and Plan of Merger, dated as of June 30, 2005, by and
between Bank of America Corporation and MBNA Corporation, as it
may be amended from time to time; and |
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a proposal to approve the adjournment of the special meeting, if
necessary, to solicit additional proxies, in the event that
there are not sufficient votes at the time of the special
meeting to approve the merger. |
The MBNA board of directors has fixed the close of business on
September 2, 2005 as the record date for the special
meeting. Only MBNA stockholders of record at that time are
entitled to notice of, and to vote at, the special meeting, or
any adjournment or postponement of the special meeting. In order
for the merger to be approved, the holders of at least a
majority of the MBNA shares outstanding and entitled to vote
thereon must vote in favor of approval of the merger.
Regardless of whether you plan to attend the special meeting,
please submit your proxy with voting instructions. Please vote
as soon as possible. If you hold stock in your name as a
stockholder of record, please complete, sign, date and return
the accompanying proxy card in the enclosed self-addressed,
stamped envelope. If you hold your stock in street
name through a bank or broker, please direct your bank or
broker to vote in accordance with the instructions you have
received from your bank or broker. This will not prevent you
from voting in person, but it will help to secure a quorum and
avoid added solicitation costs. Any holder of MBNA common stock
who is present at the special meeting may vote in person instead
of by proxy, thereby canceling any previous proxy. In any event,
a proxy may be revoked in writing at any time before the special
meeting in the manner described in the accompanying document.
The MBNA board of directors has unanimously approved the
merger and the merger agreement and unanimously recommends that
MBNA stockholders vote FOR approval of the
merger.
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BY ORDER OF THE BOARD OF DIRECTORS, |
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![-s- Louie Freeh](g96430a1g9643003.gif) |
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Louis J. Freeh |
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Secretary |
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September 19, 2005 |
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YOUR VOTE IS IMPORTANT. PLEASE VOTE YOUR SHARES PROMPTLY,
REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE SPECIAL MEETING.
REFERENCES TO ADDITIONAL INFORMATION
This document incorporates important business and financial
information about Bank of America and MBNA from documents that
are not included in or delivered with this document. You can
obtain documents incorporated by reference in this document,
other than certain exhibits to those documents, by requesting
them in writing or by telephone from the appropriate company at
the following addresses:
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Bank of America Corporation |
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MBNA Corporation |
Bank of America Corporate Center |
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1100 North King Street |
100 N. Tryon Street |
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Wilmington, Delaware 19884 |
Charlotte, North Carolina 28255 |
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Attention: Investor Relations |
Attention: Investor Relations
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Telephone: (800) 362-6255 |
Telephone: (704) 386-5681
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You will not be charged for any of these documents that you
request. MBNA stockholders requesting documents should do so by
October 27, 2005 in order to receive them before the
special meeting.
See Where You Can Find More Information on
page 64.
TABLE OF CONTENTS
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II-1 |
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APPENDICES: |
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Agreement and Plan of Merger, dated as of June 30, 2005, by
and between Bank of America Corporation and MBNA Corporation
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A-1 |
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Stock Option Agreement, dated as of June 30, 2005, by and
between MBNA Corporation, as issuer, and Bank of America
Corporation, as grantee
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B-1 |
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Opinion of UBS Securities LLC
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C-1 |
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Ex-5(a) |
Ex-8(a) |
Ex-8(b) |
Ex-23(b) |
Ex-23(c) |
Ex-24(b) |
ii
QUESTIONS AND ANSWERS ABOUT VOTING PROCEDURES FOR THE SPECIAL
MEETING
Q: What do I need to do now?
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A: |
After you have carefully read this document and have decided how
you wish to vote your shares, please vote your shares promptly.
If you hold stock in your name as a stockholder of record, you
must complete, sign, date and mail your proxy card in the
enclosed postage paid return envelope as soon as possible. If
you hold your stock in street name through a bank or
broker, you must direct your bank or broker to vote in
accordance with the instructions you have received from your
bank or broker. Submitting your proxy card or directing your
bank or broker to vote your shares will ensure that your shares
are represented and voted at the special meeting. |
Q: Why is my vote important?
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A: |
If you do not vote by proxy or vote in person at the special
meeting, it will be more difficult for us to obtain the
necessary quorum to hold our special meeting. In addition, your
failure to vote, by proxy or in person, will have the same
effect as a vote against the merger. The merger must be approved
by the holders of a majority of the outstanding shares of MBNA
common stock entitled to vote at the special meeting. The
MBNA board of directors unanimously recommends that you vote to
approve the merger. |
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If my shares of common stock are held in street name by my
broker, will my broker automatically vote my shares for me? |
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No. Your broker cannot vote your shares without
instructions from you. You should instruct your broker as to how
to vote your shares, following the directions your broker
provides to you. Please check the voting form used by your
broker. |
Q: What if I abstain from voting or fail to instruct my
broker?
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If you abstain from voting, the abstention will be counted
toward a quorum at the special meeting, but it will have the
same effect as a vote against the merger. |
Q: Can I attend the special meeting and vote my shares
in person?
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Yes. All stockholders, including stockholders of record and
stockholders who hold their shares through banks, brokers,
nominees or any other holder of record, are invited to attend
the special meeting. Holders of record of MBNA common stock can
vote in person at the special meeting. If you are not a
stockholder of record, you must obtain a proxy, executed in your
favor, from the record holder of your shares, such as a broker,
bank or other nominee, to be able to vote in person at the
special meeting. If you plan to attend the special meeting, you
must hold your shares in your own name or have a letter from the
record holder of your shares confirming your ownership and you
must bring a form of personal photo identification with you in
order to be admitted. We reserve the right to refuse admittance
to anyone without proper proof of share ownership and without
proper photo identification. |
Q: Can I change my vote?
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Yes. You may revoke any proxy at any time before it is voted by
signing and returning a proxy card with a later date, delivering
a written revocation letter to the Secretary of MBNA, or by
attending the special meeting in person, notifying the Secretary
and voting by ballot at the special meeting. The MBNA
Secretarys mailing address is 1100 North King Street,
Wilmington, Delaware 19884. |
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Any common stockholder entitled to vote in person at the
special meeting may vote in person regardless of whether a proxy
has been previously given, but the mere presence (without
notifying the Secretary of MBNA) of a stockholder at the special
meeting will not constitute revocation of a previously given
proxy. |
Q: If I am an MBNA stockholder, should I send in my MBNA
stock certificates now?
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No. You should not send in your MBNA stock
certificates at this time. After the merger, Bank of America
will send you instructions for exchanging MBNA stock
certificates for the merger consideration. Unless MBNA
stockholders specifically request to receive Bank of America
stock certificates, the shares of Bank of America stock they
receive in the merger will be issued in book-entry form. |
1
Q: When do you expect to complete the merger?
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A: |
We expect to complete the merger on or about January 1,
2006. However, we cannot assure you when or if the merger will
occur. We must first obtain the approval of MBNA stockholders at
the special meeting and the necessary regulatory approvals. |
Q: Whom should I call with questions?
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A: |
MBNA stockholders should call Georgeson Shareholder
Communications Inc., MBNAs proxy solicitor, at
(866) 203-2636 with any questions about the merger and
related transactions. |
2
SUMMARY
This summary highlights selected information from this
document. It may not contain all of the information that is
important to you. We urge you to carefully read the entire
document and the other documents to which we refer in order to
fully understand the merger and the related transactions. See
Where You Can Find More Information on page 64.
Each item in this summary refers to the page of this document on
which that subject is discussed in more detail.
In the Merger, MBNA Stockholders Will Have a Right to Receive
0.5009 of a Share of Bank of America Common Stock and $4.125 in
Cash per Share of MBNA Common Stock (page 37)
We are proposing the merger of MBNA with and into Bank of
America. Bank of America will survive the merger. If the merger
is completed, you will have a right to receive 0.5009 of a share
of Bank of America common stock and $4.125 in cash for each
share of MBNA common stock you hold immediately prior to the
merger. Bank of America will not issue any fractional shares of
Bank of America common stock in the merger. MBNA stockholders
who would otherwise be entitled to a fractional share of Bank of
America common stock will instead receive an additional amount
in cash based on the average of the closing sale prices of Bank
of America common stock on the five trading days immediately
prior to the date on which the merger is completed.
Example: If you hold 110 shares of MBNA common
stock, you will have a right to receive 55 shares of Bank
of America common stock, $453.75 in cash and an additional cash
payment instead of the 0.099 shares of Bank of America
common stock that you otherwise would have received (i.e.,
110 shares x 0.5009 = 55.099 shares).
What Holders of MBNA Stock Options and Other Equity-Based
Awards Will Receive (page 37)
When we complete the merger, MBNA stock options and restricted
share units that are outstanding immediately before completing
the merger will become stock options and restricted share units
on shares of Bank of America common stock (except that
restricted share units that vest upon a change of control will
instead be converted into the right to receive the merger
consideration). The number of common shares subject to such
stock options and restricted share units, and the exercise price
of the MBNA stock options, will be adjusted according to an
award exchange ratio. The award exchange ratio will be the sum
of (a) 0.5009 and (b) $4.125 divided by the average
closing price of Bank of America common stock over the five
trading days immediately prior to the date on which the merger
is completed.
Each MBNA restricted share outstanding immediately before
completing the merger will be converted upon the completion of
the merger into the right to receive the merger consideration
(with the same terms as the MBNA restricted shares, including
transfer restrictions on the stock consideration to the extent
such shares do not vest and transfer restrictions do not lapse
on the change of control).
The Merger Will Generally Be Tax-Free to MBNA Stockholders as
to the Shares of Bank of America Common Stock They Receive and
Taxable as to the Cash They Receive (page 51)
The merger is intended to qualify as a reorganization for
U.S. federal income tax purposes, and it is a condition to
our respective obligations to complete the merger that each of
Bank of America and MBNA receive a legal opinion to that effect.
Accordingly, the merger will generally be tax-free to you as to
the shares of Bank of America common stock you receive in the
merger and generally taxable as to the cash you receive in the
merger. The amount of gain that you recognize in the merger will
generally be limited to the lesser of the amount of gain that
you realize and the amount of cash that you receive in the
merger. The amount of gain that you realize is generally equal
to the excess, if any, of the sum of the cash and the fair
market value of the Bank of America common stock that you
receive over your tax basis in the MBNA common stock you
surrender in the merger.
The federal income tax consequences described above may not
apply to all holders of MBNA common stock. Your tax consequences
will depend on your individual situation. Accordingly, we
strongly urge you to consult your tax advisor for a full
understanding of the particular tax consequences of the merger
to you.
3
Comparative Market Prices and Share Information
(pages 12 and 63)
Bank of America common stock is quoted on the NYSE under the
symbol BAC. MBNA common stock is quoted on the NYSE
under the symbol KRB. The following table shows the
closing sale prices of Bank of America common stock and MBNA
common stock as reported on the NYSE on June 29, 2005, the
last trading day before we announced the merger, and on
September 16, 2005, the last practicable trading day before
the distribution of this document. This table also shows the
implied value of the merger consideration proposed for each
share of MBNA common stock, which we calculated by multiplying
the closing price of Bank of America common stock on those dates
by 0.5009, the exchange ratio, and adding $4.125, the cash
portion of the merger consideration.
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Implied Value of | |
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One Share of | |
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Common Stock | |
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Common Stock | |
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Common Stock | |
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At June 29, 2005
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$ |
46.91 |
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21.07 |
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27.62 |
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At September 16, 2005
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$ |
43.68 |
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25.38 |
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26.00 |
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The market price of Bank of America common stock and MBNA
common stock will fluctuate prior to the merger. You should
obtain current market quotations for the shares.
UBS Securities LLC Has Provided an Opinion to the MBNA Board
of Directors Regarding the Merger Consideration
(page 24)
In connection with the merger, MBNAs board of directors
received a written opinion from UBS Securities LLC, MBNAs
financial advisor, which we refer to as UBS, as to the fairness,
from a financial point of view and as of the date of the
opinion, of the merger consideration. The full text of UBS
written opinion, dated June 29, 2005, is attached to this
document as Appendix C. We encourage you to read this
opinion carefully in its entirety for a description of the
assumptions made, procedures followed, matters considered and
limitations on the review undertaken. UBS opinion was
provided to MBNAs board of directors in its evaluation of
the merger consideration, does not address any other terms or
aspects of the merger and does not constitute a recommendation
to any stockholder as to how to vote or act with respect to any
matters relating to the merger.
The MBNA Board of Directors Recommends that MBNA Stockholders
Vote FOR Approval of the Merger (page 22)
The MBNA board of directors believes that the merger is in the
best interests of MBNA and its stockholders and has unanimously
approved the merger and the merger agreement. The MBNA board of
directors unanimously recommends that MBNA stockholders vote
FOR approval of the merger.
MBNAs Directors and Officers Have Financial Interests
in the Merger That Differ From Your Interests (page 33)
MBNAs executive officers and directors have economic
interests in the merger that are different from, or in addition
to, their interests as MBNA stockholders. The MBNA board of
directors considered these interests in its decision to approve
the merger agreement. The executive officers of MBNA have change
of control agreements that provide severance and other benefits
in the case of qualifying terminations of employment following a
change of control, including completion of the merger. In
addition, the MBNA equity compensation plans provide for the
vesting of stock-based awards upon completion of the merger, and
the benefits of executive officers under MBNAs
supplemental executive retirement plan and life insurance plan
will be enhanced upon qualifying terminations of employment
following completion of the merger. Bruce Hammonds, MBNAs
President and Chief Executive Officer and an MBNA director, will
be CEO and President of Bank of America Card Services following
completion of the merger, and Frank P. Bramble, Sr., until
December 2004 a Vice Chairman of MBNA and currently serving as
Senior Advisor to the Chief Executive Officer of MBNA, will join
the Bank of America board of directors upon completion of the
merger. Executive officers and directors of MBNA have
indemnification rights that will survive completion of the
merger.
4
Holders of MBNA Common Stock Do Not Have Appraisal Rights
(page 31)
Appraisal rights are statutory rights that enable stockholders
to dissent from an extraordinary transaction, such as a merger,
and to demand that the corporation pay the fair value for their
shares as determined by a court in a judicial proceeding instead
of receiving the consideration offered to stockholders in
connection with the extraordinary transaction. Appraisal rights
are not available in all circumstances, and exceptions to these
rights are provided under the Maryland General Corporation Law.
As a result of one of these exceptions, the holders of MBNA
common stock are not entitled to appraisal rights in the merger.
Conditions That Must Be Satisfied or Waived for the Merger to
Occur (page 44)
Currently, we expect to complete the merger on or about
January 1, 2006. As more fully described in this document
and in the merger agreement, the completion of the merger
depends on a number of conditions being satisfied or, where
legally permissible, waived. These conditions include, among
others, approval by MBNA stockholders, the receipt of all
required regulatory approvals (such as approval by the Board of
Governors of the Federal Reserve System and financial regulators
in Delaware, the United Kingdom and Canada) without a condition
or a restriction that would have a material adverse effect
measured relative to MBNA, and the receipt of legal opinions by
each company regarding the tax treatment of the merger.
We cannot be certain when, or if, the conditions to the merger
will be satisfied or waived, or that the merger will be
completed.
Termination of the Merger Agreement (page 45)
We may mutually agree to terminate the merger agreement before
completing the merger, even after stockholder approval, as long
as the termination is approved by each of our boards of
directors.
In addition, either of us may decide to terminate the merger
agreement, even after stockholder approval, if a governmental
entity issues a non-appealable final order prohibiting the
merger, if a governmental entity which must grant a regulatory
approval as a condition to the merger denies such approval of
the merger and such action has become final and non-appealable,
or if the other party breaches the merger agreement in a way
that would entitle the party seeking to terminate the agreement
not to consummate the merger, subject to the right of the
breaching party to cure the breach within 45 days following
written notice (unless it is not possible due to the nature or
timing of the breach for the breaching party to cure the
breach). Either of us may terminate the merger agreement if the
merger has not been completed by June 30, 2006, unless the
reason the merger has not been completed by that date is a
breach of the merger agreement by the company seeking to
terminate the merger agreement. If MBNA fails to obtain
stockholder approval of the merger, we may not terminate the
merger agreement before June 30, 2006 as long as both of us
continue to make specified efforts to restructure the
transaction for the purpose of re-presenting a merger proposal
for approval by you. Bank of America may terminate the merger
agreement if the MBNA board withdraws or adversely changes its
recommendation of the merger or recommends a competing proposal
to acquire MBNA.
MBNA Granted a Stock Option to Bank of America
(page 47)
To induce Bank of America to enter into the merger agreement,
MBNA granted Bank of America an option to purchase up to
249,764,005 shares of MBNA common stock at a price per
share of $21.30; however, in no case may Bank of America acquire
more than 19.9% of the outstanding shares of MBNA common stock
under this stock option agreement. Bank of America cannot
exercise the option unless the merger is not completed and
specified triggering events occur. These events generally relate
to business combinations or acquisition transactions involving
MBNA and a third party. We do not know of any event that has
occurred as of the date of this document that would allow Bank
of America to exercise the option. The option will expire upon
completion of the merger.
The option could have the effect of discouraging a company from
trying to acquire MBNA prior to completion of the merger or
termination of the merger agreement. Upon the occurrence of
certain triggering events, MBNA may be required to repurchase
the option and any shares of MBNA common stock purchased under
the option at a predetermined price, or Bank of America may
choose to surrender the option to MBNA for a cash payment of
$1.0559 billion. In no event will the total profit received
by Bank of America with respect to this option exceed
$1.4078 billion.
The MBNA stock option agreement is attached to this document
as Appendix B.
5
Regulatory Approvals Required for the Merger
(page 31)
We have agreed to use our reasonable best efforts to obtain all
regulatory approvals required to complete the transactions
contemplated by the merger agreement. These approvals include
approval from the Federal Reserve Board and other federal, state
and foreign regulatory authorities, including the Delaware State
Bank Commissioner, the U.K. Financial Services Authority and the
Canadian Office of the Superintendent of Financial Institutions.
Bank of America and MBNA have completed, or will complete, the
filing of applications and notifications to obtain the required
regulatory approvals. In obtaining the required regulatory
approvals, Bank of America is not required to agree to any
restriction or condition that would have a material adverse
effect on MBNA or Bank of America, measured on a scale relative
to MBNA.
Although we do not know of any reason why we cannot obtain these
regulatory approvals in a timely manner, we cannot be certain
when or if we will obtain them.
Board of Directors and Management of Bank of America
following Completion of the Merger (page 30)
Upon completion of the merger, Bruce Hammonds will be CEO and
President of Bank of America Card Services and will join Bank of
Americas Risk and Capital Committee, which will continue
to be chaired by Ken Lewis, Bank of Americas Chief
Executive Officer. Also, following completion of the merger,
Frank P. Bramble, Sr., who was until December 2004 a
Vice Chairman of MBNA and who currently serves as Senior Advisor
to the Chief Executive Officer of MBNA, will join the Bank of
America board of directors.
The Rights of MBNA Stockholders will be Governed by Delaware
Law and by New Governing Documents after the Merger
(page 53)
The rights of MBNA stockholders will change as a result of the
merger due to differences in Bank of Americas and
MBNAs governing documents and due to the fact that the
companies are incorporated in different states (MBNA in Maryland
and Bank of America in Delaware). This document contains
descriptions of stockholder rights under each of the Bank of
America and MBNA governing documents and applicable state law,
and describes the material differences between them.
MBNA will Hold its Special Meeting on November 3, 2005
(page 17)
The special meeting will be held on November 3, 2005, at
10:00 a.m., local time, at MBNAs international
headquarters located at 1100 North King Street, Wilmington,
Delaware. At the special meeting, MBNA stockholders will be
asked to:
|
|
|
|
|
approve the merger; and |
|
|
|
approve the adjournment of the special meeting, if necessary, to
solicit additional proxies, in the event that there are not
sufficient votes at the time of the special meeting to approve
the merger. |
Record Date. Only holders of record at the close of
business on September 2, 2005 will be entitled to vote at
the special meeting. Each share of MBNA common stock is entitled
to one vote. As of the record date of September 2, 2005,
there were 1,259,681,391 shares of MBNA common stock
entitled to vote at the special meeting.
Required Vote. To approve the merger, the holders of a
majority of the outstanding shares of MBNA common stock entitled
to vote must vote in favor of approving the merger. Because
approval is based on the affirmative vote of a majority of
shares outstanding, an MBNA stockholders failure to vote
or an abstention will have the same effect as a vote against the
merger.
Approval of any necessary adjournment of the special meeting may
be obtained by the affirmative vote of the holders of a majority
of the shares present in person or by proxy, even if less than a
quorum. Because approval of such adjournment is based on the
affirmative vote of a majority of shares present in person or by
proxy, abstentions will have the same effect as a vote against
this proposal.
As of the MBNA record date, directors and executive officers of
MBNA and their affiliates had the right to vote
97,084,854 shares of MBNA common stock, or 7.7% of the
outstanding MBNA common stock entitled to be voted at the
special meeting. At that date, directors and executive officers
of Bank of America and their affiliates had the right to vote
0 shares of MBNA common stock entitled to be voted at the
special meeting, or 0% of the outstanding MBNA common stock. We
currently expect that each of
6
these individuals will vote their shares of MBNA common stock in
favor of the proposals to be presented at the special meeting.
Information about the Companies (page 20)
|
|
|
Bank of America Corporation |
Bank of America Corporation is a Delaware corporation, a bank
holding company and a financial holding company under
U.S. federal law. Bank of America is one of the
worlds largest financial institutions, serving individual
consumers, small and middle market businesses and large
corporations with a full range of banking, investing, asset
management and other financial and risk-management products and
services. The company provides unmatched convenience in the
United States, serving 33 million consumer relationships
with more than 5,800 retail banking offices, more than 16,600
ATMs and award-winning online banking with more than
13 million active users. Bank of America is ranked the
No. 1 Small Business Administration (SBA) Lender in the
United States by the SBA. The company serves clients in 150
countries and has relationships with 96 percent of the
U.S. Fortune 500 companies and 85 percent of the
Global Fortune 500. Bank of America Corporation stock
(NYSE: BAC) is listed on the New York Stock Exchange. As of
June 30, 2005, Bank of America had total consolidated
assets of approximately $1.25 trillion, total consolidated
deposits of approximately $635 billion and total
consolidated stockholders equity of approximately
$101 billion. The principal executive offices of Bank of
America are located in the Bank of America Corporate Center,
100 N. Tryon Street, Charlotte, North Carolina 28255,
and its telephone number is (704) 386-5681.
MBNA Corporation is a Maryland corporation and a bank holding
company. It is the largest independent credit card lender in the
world and a recognized leader in affinity marketing, and is an
international financial services company providing lending,
deposit, and credit insurance products and services. MBNA credit
cards and related products and services are endorsed by more
than 5,000 organizations world-wide. MBNA Corporation stock
(NYSE: KRB) is listed on the New York Stock Exchange. As of
June 30, 2005, MBNA had total consolidated assets of
approximately $63.0 billion, including total consolidated
loan receivables of $32.3 billion, and total consolidated
stockholders equity of approximately $12.8 billion.
The principal executive offices of MBNA are located at
1100 North King Street, Wilmington, Delaware 19884, and its
telephone number is (800) 362-6255.
7
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF BANK OF
AMERICA
Set forth below are highlights from Bank of Americas
audited consolidated financial data as of and for the years
ended December 31, 2000 through 2004 and Bank of
Americas unaudited consolidated financial data as of and
for the six months ended June 30, 2004 and 2005. The
results of operations for the six months ended June 30,
2005 are not necessarily indicative of the results of operations
for the full year or any other interim period. Bank of America
management prepared the unaudited information on the same basis
as it prepared Bank of Americas audited consolidated
financial statements. In the opinion of Bank of America
management, this information reflects all adjustments,
consisting of only normal recurring adjustments, necessary for a
fair presentation of this data for those dates. You should read
this information in conjunction with Bank of Americas
consolidated financial statements and related notes included in
Bank of Americas Form 8-K dated July 12, 2005,
and Bank of Americas Quarterly Report on Form 10-Q
for the quarters ended March 31, 2005 and June 30,
2005, which are incorporated by reference in this document and
from which this information is derived. See Where You Can
Find More Information on page 64.
Bank of America Summary of Consolidated Financial
Data(1)
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended | |
|
|
Years Ended December 31, | |
|
June 30, | |
|
|
| |
|
| |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
2000 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
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(Dollars in millions, except per share information) | |
Income statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$ |
28,794 |
|
|
$ |
21,464 |
|
|
$ |
20,923 |
|
|
$ |
20,290 |
|
|
$ |
18,349 |
|
|
$ |
15,523 |
|
|
$ |
13,382 |
|
Noninterest income
|
|
|
20,085 |
|
|
|
16,450 |
|
|
|
13,580 |
|
|
|
14,348 |
|
|
|
14,582 |
|
|
|
12,514 |
|
|
|
9,197 |
|
Total revenue
|
|
|
48,879 |
|
|
|
37,914 |
|
|
|
34,503 |
|
|
|
34,638 |
|
|
|
32,931 |
|
|
|
28,037 |
|
|
|
22,579 |
|
Provision for credit losses
|
|
|
2,769 |
|
|
|
2,839 |
|
|
|
3,697 |
|
|
|
4,287 |
|
|
|
2,535 |
|
|
|
1,455 |
|
|
|
1,413 |
|
Gains on sales of debt securities
|
|
|
2,123 |
|
|
|
941 |
|
|
|
630 |
|
|
|
475 |
|
|
|
25 |
|
|
|
984 |
|
|
|
1,290 |
|
Noninterest expense
|
|
|
27,012 |
|
|
|
20,155 |
|
|
|
18,445 |
|
|
|
20,709 |
|
|
|
18,633 |
|
|
|
14,076 |
|
|
|
12,658 |
|
Income before income taxes
|
|
|
21,221 |
|
|
|
15,861 |
|
|
|
12,991 |
|
|
|
10,117 |
|
|
|
11,788 |
|
|
|
13,490 |
|
|
|
9,798 |
|
Income tax expense
|
|
|
7,078 |
|
|
|
5,051 |
|
|
|
3,742 |
|
|
|
3,325 |
|
|
|
4,271 |
|
|
|
4,499 |
|
|
|
3,268 |
|
Net income
|
|
|
14,143 |
|
|
|
10,810 |
|
|
|
9,249 |
|
|
|
6,792 |
|
|
|
7,517 |
|
|
|
8,991 |
|
|
|
6,530 |
|
Average common shares issued and outstanding (in thousands)
|
|
|
3,758,507 |
|
|
|
2,973,407 |
|
|
|
3,040,085 |
|
|
|
3,189,914 |
|
|
|
3,292,797 |
|
|
|
4,019,089 |
|
|
|
3,471,516 |
|
Average diluted common shares issued and outstanding (in
thousands)
|
|
|
3,823,943 |
|
|
|
3,030,356 |
|
|
|
3,130,935 |
|
|
|
3,251,308 |
|
|
|
3,329,858 |
|
|
|
4,081,921 |
|
|
|
3,531,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
1.35 |
% |
|
|
1.44 |
% |
|
|
1.41 |
% |
|
|
1.05 |
% |
|
|
1.12 |
% |
|
|
1.46 |
% |
|
|
1.36 |
% |
Return on average common stockholders equity
|
|
|
16.83 |
|
|
|
21.99 |
|
|
|
19.44 |
|
|
|
13.96 |
|
|
|
15.96 |
|
|
|
18.42 |
|
|
|
18.54 |
|
Total equity to total assets (at period end)
|
|
|
8.97 |
|
|
|
6.67 |
|
|
|
7.78 |
|
|
|
7.87 |
|
|
|
7.45 |
|
|
|
8.07 |
|
|
|
9.35 |
|
Total average equity to total average assets
|
|
|
8.06 |
|
|
|
6.57 |
|
|
|
7.28 |
|
|
|
7.55 |
|
|
|
7.03 |
|
|
|
7.96 |
|
|
|
7.36 |
|
Dividend payout
|
|
|
45.67 |
|
|
|
39.58 |
|
|
|
40.07 |
|
|
|
53.44 |
|
|
|
45.02 |
|
|
|
40.53 |
|
|
|
42.85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Per common share data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
|
|
$ |
3.76 |
|
|
$ |
3.63 |
|
|
$ |
3.04 |
|
|
$ |
2.13 |
|
|
$ |
2.28 |
|
|
$ |
2.23 |
|
|
$ |
1.88 |
|
Diluted earnings
|
|
|
3.69 |
|
|
|
3.57 |
|
|
|
2.95 |
|
|
|
2.09 |
|
|
|
2.26 |
|
|
|
2.20 |
|
|
|
1.85 |
|
Dividends paid
|
|
|
1.70 |
|
|
|
1.44 |
|
|
|
1.22 |
|
|
|
1.14 |
|
|
|
1.03 |
|
|
|
0.90 |
|
|
|
0.80 |
|
Book value
|
|
|
24.56 |
|
|
|
16.63 |
|
|
|
16.75 |
|
|
|
15.54 |
|
|
|
14.74 |
|
|
|
24.96 |
|
|
|
23.51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended | |
|
|
Years Ended December 31, | |
|
June 30, | |
|
|
| |
|
| |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
2000 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(Dollars in millions, except per share information) | |
Average balance sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
$ |
472,645 |
|
|
$ |
356,148 |
|
|
$ |
336,819 |
|
|
$ |
365,447 |
|
|
$ |
392,622 |
|
|
$ |
522,672 |
|
|
$ |
435,618 |
|
Total assets
|
|
|
1,044,660 |
|
|
|
749,056 |
|
|
|
653,774 |
|
|
|
644,887 |
|
|
|
670,078 |
|
|
|
1,239,398 |
|
|
|
963,825 |
|
Total deposits
|
|
|
551,559 |
|
|
|
406,233 |
|
|
|
371,479 |
|
|
|
362,653 |
|
|
|
353,294 |
|
|
|
634,043 |
|
|
|
503,690 |
|
Long-term debt
|
|
|
93,330 |
|
|
|
68,432 |
|
|
|
66,045 |
|
|
|
69,622 |
|
|
|
70,293 |
|
|
|
97,244 |
|
|
|
87,623 |
|
Common stockholders equity
|
|
|
83,953 |
|
|
|
49,148 |
|
|
|
47,552 |
|
|
|
48,609 |
|
|
|
47,057 |
|
|
|
98,343 |
|
|
|
70,787 |
|
Total stockholders equity
|
|
|
84,183 |
|
|
|
49,204 |
|
|
|
47,613 |
|
|
|
48,678 |
|
|
|
47,132 |
|
|
|
98,614 |
|
|
|
70,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital ratios (at period end)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-based capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1
|
|
|
8.10 |
% |
|
|
7.85 |
% |
|
|
8.22 |
% |
|
|
8.30 |
% |
|
|
7.50 |
% |
|
|
8.06 |
% |
|
|
8.20 |
% |
|
Total
|
|
|
11.63 |
|
|
|
11.87 |
|
|
|
12.43 |
|
|
|
12.67 |
|
|
|
11.04 |
|
|
|
11.12 |
|
|
|
11.97 |
|
Leverage
|
|
|
5.82 |
|
|
|
5.73 |
|
|
|
6.29 |
|
|
|
6.55 |
|
|
|
6.11 |
|
|
|
5.59 |
|
|
|
5.83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market price per share of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing
|
|
$ |
46.99 |
|
|
$ |
40.22 |
|
|
$ |
34.79 |
|
|
$ |
31.48 |
|
|
$ |
22.94 |
|
|
$ |
45.61 |
|
|
$ |
42.31 |
|
High closing
|
|
|
47.44 |
|
|
|
41.77 |
|
|
|
38.45 |
|
|
|
32.50 |
|
|
|
29.63 |
|
|
|
47.08 |
|
|
|
42.72 |
|
Low closing
|
|
|
38.96 |
|
|
|
32.82 |
|
|
|
27.08 |
|
|
|
23.38 |
|
|
|
19.00 |
|
|
|
43.66 |
|
|
|
38.96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
As a result of the adoption of Statement of Financial Accounting
Standards (SFAS) No. 142 Goodwill and Other
Intangible Assets (SFAS 142) on January 1, 2002,
Bank of America no longer amortizes goodwill. Goodwill
amortization expense was $662 million and $635 million
in 2001 and 2000, respectively. |
9
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF MBNA
Set forth below are highlights from MBNAs audited
consolidated financial data as of and for the years ended
December 31, 2000 through 2004 and MBNAs unaudited
consolidated financial data as of and for the six months ended
June 30, 2004 and 2005. The results of operations for the
six months ended June 30, 2005 are not necessarily
indicative of the results of operations for the full year or any
other interim period. The unaudited information was prepared on
the same basis as MBNAs audited consolidated financial
statements. In the opinion of MBNA management, this information
reflects all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of this data for
those dates. You should read this information in conjunction
with MBNAs consolidated financial statements and related
notes incorporated by reference within MBNAs Annual Report
on Form 10-K for the year ended December 31, 2004, and
MBNAs Quarterly Report on Form 10-Q for the quarters
ended March 31, 2005 and June 30, 2005, which are
incorporated by reference in this document and from which this
information is derived. See Where You Can Find More
Information on page 64.
MBNA Summary of Consolidated Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended | |
|
|
Years Ended December 31, | |
|
June 30, | |
|
|
| |
|
| |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
2000 | |
|
2005(1) | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(Dollars in millions, except per share information) | |
Income statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$ |
2,537 |
|
|
$ |
2,350 |
|
|
$ |
2,074 |
|
|
$ |
1,658 |
|
|
$ |
1,395 |
|
|
$ |
1,320 |
|
|
$ |
1,262 |
|
Noninterest income
|
|
|
8,257 |
|
|
|
7,826 |
|
|
|
6,753 |
|
|
|
6,673 |
|
|
|
4,921 |
|
|
|
3,714 |
|
|
|
3,942 |
|
Total revenue
|
|
|
10,794 |
|
|
|
10,176 |
|
|
|
8,827 |
|
|
|
8,331 |
|
|
|
6,316 |
|
|
|
5,034 |
|
|
|
5,204 |
|
Provision for credit losses
|
|
|
1,147 |
|
|
|
1,393 |
|
|
|
1,340 |
|
|
|
1,141 |
|
|
|
547 |
|
|
|
460 |
|
|
|
616 |
|
Gains on sales of debt securities
|
|
|
1 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Noninterest expense
|
|
|
5,517 |
|
|
|
5,124 |
|
|
|
4,702 |
|
|
|
4,475 |
|
|
|
3,648 |
|
|
|
3,540 |
|
|
|
2,814 |
|
Income before income taxes
|
|
|
4,131 |
|
|
|
3,659 |
|
|
|
2,785 |
|
|
|
2,715 |
|
|
|
2,121 |
|
|
|
1,034 |
|
|
|
1,774 |
|
Income tax expense
|
|
|
1,454 |
|
|
|
1,321 |
|
|
|
1,019 |
|
|
|
1,021 |
|
|
|
808 |
|
|
|
370 |
|
|
|
594 |
|
Net income
|
|
|
2,677 |
|
|
|
2,338 |
|
|
|
1,766 |
|
|
|
1,694 |
|
|
|
1,313 |
|
|
|
664 |
|
|
|
1,180 |
|
Average common shares issued and outstanding (in thousands)
|
|
|
1,278 |
|
|
|
1,278 |
|
|
|
1,278 |
|
|
|
1,278 |
|
|
|
1,231 |
|
|
|
1,268 |
|
|
|
1,278 |
|
Average diluted common shares issued and outstanding (in
thousands)
|
|
|
1,297 |
|
|
|
1,295 |
|
|
|
1,303 |
|
|
|
1,314 |
|
|
|
1,270 |
|
|
|
1,280 |
|
|
|
1,299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
4.39 |
% |
|
|
4.16 |
% |
|
|
3.67 |
% |
|
|
4.16 |
% |
|
|
3.94 |
% |
|
|
2.18 |
% |
|
|
3.93 |
% |
Return on average common stockholders equity
|
|
|
22.09 |
|
|
|
23.46 |
|
|
|
21.83 |
|
|
|
24.79 |
|
|
|
26.88 |
|
|
|
10.28 |
|
|
|
20.30 |
|
Total equity to total assets (at period end)
|
|
|
21.59 |
|
|
|
18.80 |
|
|
|
17.22 |
|
|
|
17.16 |
|
|
|
17.13 |
|
|
|
20.35 |
|
|
|
19.50 |
|
Total average equity to total average assets
|
|
|
20.23 |
|
|
|
18.09 |
|
|
|
17.22 |
|
|
|
17.27 |
|
|
|
15.28 |
|
|
|
21.55 |
|
|
|
19.69 |
|
Dividend payout
|
|
|
23.41 |
|
|
|
20.11 |
|
|
|
20.15 |
|
|
|
18.75 |
|
|
|
20.59 |
|
|
|
54.37 |
|
|
|
26.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
|
|
$ |
2.08 |
|
|
$ |
1.82 |
|
|
$ |
1.37 |
|
|
$ |
1.31 |
|
|
$ |
1.05 |
|
|
$ |
0.52 |
|
|
$ |
0.92 |
|
Diluted earnings
|
|
|
2.05 |
|
|
|
1.79 |
|
|
|
1.34 |
|
|
|
1.28 |
|
|
|
1.02 |
|
|
|
0.51 |
|
|
|
0.90 |
|
Dividends paid
|
|
|
0.48 |
|
|
|
0.36 |
|
|
|
0.27 |
|
|
|
0.24 |
|
|
|
0.21 |
|
|
|
0.28 |
|
|
|
0.24 |
|
Book value
|
|
|
10.26 |
|
|
|
8.53 |
|
|
|
6.96 |
|
|
|
5.94 |
|
|
|
5.02 |
|
|
|
10.03 |
|
|
|
9.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average balance sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
$ |
31,056 |
|
|
$ |
28,184 |
|
|
$ |
25,315 |
|
|
$ |
20,339 |
|
|
$ |
17,718 |
|
|
$ |
31,405 |
|
|
$ |
30,935 |
|
Total assets
|
|
|
60,953 |
|
|
|
56,233 |
|
|
|
48,154 |
|
|
|
40,764 |
|
|
|
33,299 |
|
|
|
61,376 |
|
|
|
60,418 |
|
Total deposits
|
|
|
31,894 |
|
|
|
31,881 |
|
|
|
28,481 |
|
|
|
25,148 |
|
|
|
20,654 |
|
|
|
31,081 |
|
|
|
31,766 |
|
Long-term debt
|
|
|
11,715 |
|
|
|
10,558 |
|
|
|
8,040 |
|
|
|
6,309 |
|
|
|
5,700 |
|
|
|
11,824 |
|
|
|
11,843 |
|
Common stockholders equity
|
|
|
12,123 |
|
|
|
9,967 |
|
|
|
8,088 |
|
|
|
6,834 |
|
|
|
4,883 |
|
|
|
13,021 |
|
|
|
11,690 |
|
Total stockholders equity
|
|
|
12,328 |
|
|
|
10,173 |
|
|
|
8,294 |
|
|
|
7,040 |
|
|
|
5,089 |
|
|
|
13,227 |
|
|
|
11,896 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended | |
|
|
Years Ended December 31, | |
|
June 30, | |
|
|
| |
|
| |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
2000 | |
|
2005(1) | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(Dollars in millions, except per share information) | |
Capital ratios (at period end)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-based capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1
|
|
|
21.82 |
% |
|
|
18.47 |
% |
|
|
15.73 |
% |
|
|
15.99 |
% |
|
|
14.98 |
% |
|
|
21.15 |
% |
|
|
19.82 |
% |
|
Total
|
|
|
25.39 |
|
|
|
22.18 |
|
|
|
19.65 |
|
|
|
17.97 |
|
|
|
16.61 |
|
|
|
24.47 |
|
|
|
23.54 |
|
Leverage
|
|
|
22.80 |
|
|
|
20.52 |
|
|
|
18.55 |
|
|
|
18.12 |
|
|
|
17.30 |
|
|
|
21.98 |
|
|
|
20.83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market price per share of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing
|
|
$ |
28.19 |
|
|
$ |
24.85 |
|
|
$ |
19.02 |
|
|
$ |
23.47 |
|
|
$ |
24.63 |
|
|
$ |
26.16 |
|
|
$ |
25.79 |
|
High closing
|
|
|
28.78 |
|
|
|
25.45 |
|
|
|
25.97 |
|
|
|
26.04 |
|
|
|
26.54 |
|
|
|
28.49 |
|
|
|
28.78 |
|
Low closing
|
|
|
22.92 |
|
|
|
12.15 |
|
|
|
13.80 |
|
|
|
16.70 |
|
|
|
13.33 |
|
|
|
18.45 |
|
|
|
23.42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
In the first six months of 2005, MBNA recorded a restructuring
charge in noninterest expense of $782 million pre-tax
($497 million net of tax) in connection with its
restructuring plan. This charge has resulted in significantly
higher noninterest expense and significantly lower earnings per
common share, return on average assets, and return on average
stockholders equity ratios for the six months ended
June 30, 2005. |
11
COMPARATIVE PER SHARE DATA
The following table sets forth for Bank of America common stock
and MBNA common stock certain historical, pro forma and pro
forma-equivalent per share financial information. The pro forma
and pro forma-equivalent per share information gives effect to
the merger as if the merger had been effective on the dates
presented, in the case of the book value data, and as if the
merger had become effective on January 1, 2004, in the case
of the net income and dividends declared data. The pro forma
data in the tables assume that the merger is accounted for using
the purchase method of accounting and represents a current
estimate based on available information of the combined
companys results of operations. The pro forma financial
adjustments record the assets and liabilities of MBNA at their
estimated fair values and are subject to adjustment as
additional information becomes available and as additional
analyses are performed. See Accounting Treatment on
page 50. The information in the following table is based
on, and should be read together with, the historical financial
information that we have presented in our prior filings with the
Securities and Exchange Commission, which we refer to as the
SEC. See Where You Can Find More Information on
page 64.
We anticipate that the merger will provide the combined company
with financial benefits that include reduced operating expenses
and revenue enhancement opportunities. The pro forma
information, while helpful in illustrating the financial
characteristics of the combined company under one set of
assumptions, does not reflect the impact of possible revenue
enhancements, expense efficiencies, asset dispositions and share
repurchases, among other factors, that may result as a
consequence of the merger and, accordingly, does not attempt to
predict or suggest future results. It also does not necessarily
reflect what the historical results of the combined company
would have been had our companies been combined during these
periods. The Comparative Per Share Data Table for the six months
ended June 30, 2005 and the year ended December 31,
2004 combines the historical income per share data of Bank of
America and subsidiaries and MBNA and subsidiaries giving effect
to the merger as if the merger had become effective on
January 1, 2004, using the purchase method of accounting.
Upon completion of the merger, the operating results of MBNA
will be reflected in the consolidated financial statements of
Bank of America on a prospective basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank of | |
|
|
|
|
|
Per Equivalent | |
|
|
America | |
|
MBNA | |
|
Pro Forma | |
|
MBNA | |
|
|
Historical | |
|
Historical | |
|
Combined | |
|
Share(1) | |
|
|
| |
|
| |
|
| |
|
| |
Income from continuing operations for the twelve months ended
December 31, 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
3.76 |
|
|
$ |
2.08 |
|
|
$ |
3.75 |
|
|
$ |
1.88 |
|
Diluted
|
|
|
3.69 |
|
|
|
2.05 |
|
|
|
3.69 |
|
|
|
1.85 |
|
Income from continuing operations for the six months ended
June 30, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
2.23 |
|
|
|
0.52 |
|
|
|
2.05 |
|
|
|
1.03 |
|
Diluted
|
|
|
2.20 |
|
|
|
0.51 |
|
|
|
2.02 |
|
|
|
1.01 |
|
Dividends Paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the twelve months ended December 31, 2004
|
|
|
1.70 |
|
|
|
0.48 |
|
|
|
1.70 |
|
|
|
0.85 |
|
For the six months ended June 30, 2005
|
|
|
0.90 |
|
|
|
0.28 |
|
|
|
0.90 |
|
|
|
0.45 |
|
Book Value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2004
|
|
|
24.56 |
|
|
|
10.26 |
|
|
|
n/m |
(2) |
|
|
n/m |
(2) |
As of June 30, 2005
|
|
|
24.96 |
|
|
|
10.03 |
|
|
|
28.08 |
|
|
|
14.07 |
|
|
|
(1) |
Reflects MBNA shares at the exchange ratio of 0.5009. |
|
|
(2) |
Book value as of December 31, 2004 is not meaningful (n/m)
as purchase accounting adjustments were estimated as of
June 30, 2005. |
|
12
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This document contains or incorporates by reference a number of
forward-looking statements, including statements about the
financial conditions, results of operations, earnings outlook
and prospects of Bank of America, MBNA and the potential
combined company and may include statements for the period
following the completion of the merger. You can find many of
these statements by looking for words such as plan,
believe, expect, intend,
anticipate, estimate,
project, potential, possible
or other similar expressions.
The forward-looking statements involve certain risks and
uncertainties. The ability of either Bank of America or MBNA to
predict results or the actual effects of its plans and
strategies, or those of the combined company, is subject to
inherent uncertainty. Factors that may cause actual results or
earnings to differ materially from such forward-looking
statements include, among others, the following:
|
|
|
|
|
projected business increases following process changes and other
investments are lower than expected; |
|
|
|
competitive pressure among financial services companies
increases significantly; |
|
|
|
general economic conditions are less favorable than expected; |
|
|
|
political conditions including the threat of future terrorist
activity and related actions by the United States abroad may
adversely affect either companys businesses and economic
conditions as a whole; |
|
|
|
changes in the interest rate environment reduce interest margins
and impact funding sources; |
|
|
|
changes in foreign exchange rates increases exposure; |
|
|
|
changes in market rates and prices may adversely impact the
value of financial products; |
|
|
|
legislation or regulatory environments, requirements or changes
adversely affect businesses in which either company is engaged; |
|
|
|
litigation liabilities, including costs, expenses, settlements
and judgments, may adversely affect either company or its
businesses; |
|
|
|
completion of the merger is dependent on, among other things,
receipt of stockholder and regulatory approvals, the timing of
which cannot be predicted with precision and which may not be
received at all; |
|
|
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the merger may be more expensive to complete than anticipated,
including as a result of unexpected factors or events; |
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the integration of MBNAs business and operations with
those of Bank of America may take longer than anticipated, may
be more costly than anticipated and may have unanticipated
adverse results relating to MBNAs or Bank of
Americas existing businesses; |
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the anticipated cost savings and other synergies of the merger
may take longer to be realized or may not be achieved in their
entirety, and attrition in key client, partner and other
relationships relating to the merger may be greater than
expected; and |
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decisions to downsize, sell or close units or otherwise change
the business mix of either company. |
Because these forward-looking statements are subject to
assumptions and uncertainties, actual results may differ
materially from those expressed or implied by these
forward-looking statements. You are cautioned not to place undue
reliance on these statements, which speak only as of the date of
this document or the date of any document incorporated by
reference in this document.
All subsequent written and oral forward-looking statements
concerning the merger or other matters addressed in this
document and attributable to Bank of America or MBNA or any
person acting on their behalf are expressly qualified in their
entirety by the cautionary statements contained or referred to
in this document. Except to the extent required by applicable
law or regulation, Bank of America and MBNA undertake no
obligation to update these forward-looking statements to reflect
events or circumstances after the date of this document or to
reflect the occurrence of unanticipated events.
13
RISK FACTORS
Because the Market Price of Bank of America Common Stock Will
Fluctuate, MBNA Stockholders Cannot Be Sure of the Value of the
Merger Consideration They Will Receive.
Upon completion of the merger, each share of MBNA common stock
will be converted into merger consideration consisting of 0.5009
of a share of Bank of America common stock and $4.125 in cash.
The market value of the stock portion of the merger
consideration may vary from the closing price of Bank of America
common stock on the date we announced the merger, on the date
that this document was mailed to MBNA stockholders, on the date
of the special meeting of the MBNA stockholders and on the date
we complete the merger and thereafter. Any change in the market
value of Bank of America common stock prior to completion of the
merger will affect the value of the merger consideration that
MBNA stockholders will receive upon completion of the merger.
Accordingly, at the time of the special meeting, MBNA
stockholders will not know or be able to calculate the market
value of the merger consideration they would receive upon
completion of the merger. Neither company is permitted to
terminate the merger agreement or resolicit the vote of MBNA
stockholders solely because of changes in the market prices of
either companys stock. There will be no adjustment to the
merger consideration for changes in the market price of either
shares of Bank of America common stock or shares of MBNA common
stock. Stock price changes may result from a variety of factors,
including general market and economic conditions, changes in our
respective businesses, operations and prospects, and regulatory
considerations. Many of these factors are beyond our control.
You should obtain current market quotations for shares of Bank
of America common stock and for shares of MBNA common stock.
We May Fail To Realize All of the Anticipated Benefits of the
Merger.
The success of the merger will depend, in part, on our ability
to realize the anticipated benefits and cost savings from
combining the businesses of Bank of America and MBNA. However,
to realize these anticipated benefits and cost savings, we must
successfully combine the businesses of Bank of America and MBNA.
If we are not able to achieve these objectives, the anticipated
benefits and cost savings of the merger may not be realized
fully or at all or may take longer to realize than expected.
Bank of America and MBNA have operated and, until the completion
of the merger, will continue to operate, independently. It is
possible that the integration process could result in the loss
of key employees, the disruption of each companys ongoing
businesses or inconsistencies in standards, controls, procedures
and policies that adversely affect our ability to maintain
relationships with clients, customers, depositors and employees
or to achieve the anticipated benefits of the merger.
Integration efforts between the two companies will also divert
management attention and resources. These integration matters
could have an adverse effect on each of MBNA and Bank of America
during such transition period.
The Market Price of Bank of America Common Stock after the
Merger May Be Affected by Factors Different from Those Affecting
the Shares of MBNA or Bank of America Currently.
The businesses of Bank of America and MBNA differ in important
respects and, accordingly, the results of operations of the
combined company and the market price of the combined
companys shares of common stock may be affected by factors
different from those currently affecting the independent results
of operations of MBNA. For a discussion of the businesses of
Bank of America and MBNA and of certain factors to consider in
connection with those businesses, see the documents incorporated
by reference in this document and referred to under Where
You Can Find More Information.
The Opinion Obtained by MBNA from its Financial Advisor Will
Not Reflect Changes in Circumstances between Signing the Merger
Agreement and the Merger.
MBNA has not obtained an updated opinion as of the date of this
document from its financial advisor. Changes in the operations
and prospects of Bank of America or MBNA, general market and
economic conditions and other factors which may be beyond the
control of Bank of America and MBNA, and on which the financial
advisors opinion was based, may significantly alter the
value of Bank of America or MBNA or the prices of shares of Bank
of America common stock or MBNA common stock by the time the
merger is completed. The opinion does not speak as of the time
the merger will be completed or as of any date other than the
date of such opinion. Because MBNA currently does not
14
anticipate asking its financial advisor to update its opinion,
the opinion will not address the fairness of the merger
consideration, from a financial point of view, at the time the
merger is completed. For a description of the opinion that MBNA
received from its financial advisor, please refer to The
Merger Opinion of MBNAs Financial Advisor. For
a description of the other factors considered by MBNAs
board of directors in determining to approve the merger, please
refer to The Merger MBNAs Reasons for the
Merger; Recommendation of the MBNA Board of Directors.
The Merger Agreement Limits MBNAs Ability to Pursue
Alternatives to the Merger.
The merger agreement contains no shop provisions
that, subject to limited exceptions, limit MBNAs ability
to discuss, facilitate or commit to competing third-party
proposals to acquire all or a significant part of the company.
In addition, MBNA has granted to Bank of America an option to
acquire up to approximately 249.8 million shares of MBNA
common stock under the stock option agreement. These provisions
might discourage a potential competing acquiror that might have
an interest in acquiring all or a significant part of MBNA from
considering or proposing that acquisition even if it were
prepared to pay consideration with a higher per share market
price than that proposed in the merger, or might result in a
potential competing acquiror proposing to pay a lower per share
price to acquire MBNA than it might otherwise have proposed to
pay.
The Merger is Subject to the Receipt of Consents and
Approvals from Government Entities that May Impose Conditions
that Could Have an Adverse Effect on Bank of America.
Before the merger may be completed, various approvals or
consents must be obtained from the Federal Reserve Board and
various domestic and foreign bank regulatory, antitrust,
insurance and other authorities. These governmental entities,
including the Federal Reserve Board, may impose conditions on
the completion of the merger or require changes to the terms of
the merger. Although Bank of America and MBNA do not currently
expect that any such conditions or changes would be imposed,
there can be no assurance that they will not be, and such
conditions or changes could have the effect of delaying
completion of the merger or imposing additional costs on or
limiting the revenues of Bank of America following the merger,
any of which might have a material adverse effect on Bank of
America following the merger. Bank of America is not obligated
to complete the merger if the regulatory approvals received in
connection with the completion of the merger include any
conditions or restrictions that, in the aggregate, would
reasonably be expected to have a material adverse effect on MBNA
or Bank of America, measured relative to MBNA, but Bank of
America could choose to waive this condition.
The 10% National Deposit Cap May Restrict the Combined
Companys Ability to Make Additional Bank Acquisitions in
the U.S.
Federal banking law contains provisions that limit the ability
of the Federal Reserve Board to approve an application by a bank
holding company to acquire domestic banks located outside of the
acquirors home state without regard to state law if the
acquisition would result in the combined company holding more
than 10% of the deposits held by insured depository institutions
in the United States. The combined companys home state
will be North Carolina. While the percentage of the combined
companys deposits will change from time to time, we expect
that the combined company will hold a percentage of deposits
that approaches the 10% limit. While this limit does not impede
the combined companys ability to grow by attracting
additional deposits from new or existing customers, by acquiring
thrifts or by other transactions that do not involve the
acquisition of a domestic bank located outside of North
Carolina, unless it is repealed or modified, or unless a
transaction can be structured appropriately to comply with its
application, the national deposit cap will restrict the ability
of the combined company to acquire additional domestic banks
located outside of North Carolina that would result in the
combined company holding deposits in excess of the 10% limit.
Repeal or modification of the national deposit cap would require
an act of Congress. It is the responsibility of the Federal
Reserve Board as part of its application approval process to
determine if an acquisition would or would not surpass the 10%
national limit.
MBNA Executive Officers and Directors Have Financial
Interests in the Merger that Are Different from, or in Addition
to, the Interests of MBNA Stockholders.
Executive officers of MBNA negotiated the terms of the merger
agreement with their counterparts at Bank of America, and
MBNAs board of directors approved the merger agreement and
unanimously
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recommended that MBNA stockholders vote to approve the merger.
In considering these facts and the other information contained
in this document, you should be aware that MBNAs executive
officers and directors have financial interests in the merger
that are different from, or in addition to, the interests of
MBNA stockholders. For example, certain executive officers have
entered into agreements with MBNA that may provide, among other
things, non-competition payments and severance and other
benefits following the merger. These and some other additional
interests of MBNA directors and executive officers may create
potential conflicts of interest and cause some of these persons
to view the proposed transaction differently than you may view
it, as a stockholder. Please see The
MergerMBNAs Directors and Officers Have Financial
Interests in the Merger for information about these
financial interests.
16
THE MBNA SPECIAL MEETING
This section contains information about the special meeting of
MBNA stockholders that has been called to consider and approve
the merger.
Together with this document, we are also sending you a notice of
the special meeting and a form of proxy that is solicited by the
MBNA board of directors. The special meeting will be held on
November 3, 2005 at 10:00 a.m., local time, at
MBNAs international headquarters located at
1100 North King Street, Wilmington, Delaware.
Matters to Be Considered
The purpose of the special meeting is to vote on a proposal for
approval of the merger.
You also will be asked to vote upon a proposal to approve the
adjournment of the special meeting, if necessary, to solicit
additional proxies in the event that there are not sufficient
votes at the time of the special meeting to approve the merger.
Proxies
Each copy of this document mailed to holders of MBNA common
stock is accompanied by a form of proxy with instructions for
voting. If you hold stock in your name as a stockholder of
record, you should complete and return the proxy card
accompanying this document to ensure that your vote is counted
at the special meeting, or at any adjournment or postponement of
the special meeting, regardless of whether you plan to attend
the special meeting.
If you hold your stock in street name through a bank
or broker, you must direct your bank or broker to vote in
accordance with the instructions you have received from your
bank or broker.
If you hold stock in your name as a stockholder of record, you
may revoke any proxy at any time before it is voted by signing
and returning a proxy card with a later date, delivering a
written revocation letter to MBNAs Secretary, or by
attending the special meeting in person, notifying the
Secretary, and voting by ballot at the special meeting.
Any stockholder entitled to vote in person at the special
meeting may vote in person regardless of whether a proxy has
been previously given, but the mere presence (without notifying
the Secretary) of a stockholder at the special meeting will not
constitute revocation of a previously given proxy.
Written notices of revocation and other communications about
revoking your proxy should be addressed to:
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MBNA Corporation |
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1100 North King Street |
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Wilmington, Delaware 19884 |
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Attention: Louis J. Freeh |
If your shares are held in street name by a bank or
broker, you should follow the instructions of your bank or
broker regarding the revocation of proxies.
All shares represented by valid proxies that we receive through
this solicitation, and that are not revoked, will be voted in
accordance with your instructions on the proxy card. If you make
no specification on your proxy card as to how you want your
shares voted before signing and returning it, your proxy will be
voted FOR approval of the merger and FOR
approval of the proposal to adjourn the special meeting, if
necessary, to solicit additional proxies in the event that there
are not sufficient votes at the time of the special meeting to
approve the merger. According to the MBNA bylaws, business to be
conducted at a special meeting of stockholders may only be
brought before the meeting by means of MBNAs notice of the
meeting. Accordingly, no matters other than the matters
described in this document will be presented for action at the
special meeting or at any adjournment or postponement of the
special meeting.
MBNA stockholders should not send MBNA stock certificates
with their proxy cards. After the merger is completed, holders
of MBNA common stock will be mailed a transmittal form with
instructions
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on how to exchange their MBNA stock certificates for Bank of
America stock certificates, the cash portion of the merger
consideration and cash instead of fractional Bank of America
shares, if applicable.
Solicitation of Proxies
MBNA will bear the entire cost of soliciting proxies from you.
In addition to solicitation of proxies by mail, MBNA will
request that banks, brokers, and other record holders send
proxies and proxy material to the beneficial owners of MBNA
common stock and secure their voting instructions. We will
reimburse the record holders for their reasonable expenses in
taking those actions. We have also made arrangements with
Georgeson Shareholder Communications Inc. to assist us in
soliciting proxies and have agreed to pay them $25,000 plus
reasonable expenses for these services. If necessary, we may use
several of our regular employees, who will not be specially
compensated, to solicit proxies from MBNA stockholders, either
personally or by telephone, facsimile, letter or other
electronic means.
Record Date
The close of business on September 2, 2005 has been fixed
as the record date for determining the MBNA stockholders
entitled to receive notice of and to vote at the special
meeting. At that time, 1,259,681,391 shares of MBNA common
stock were outstanding, held by approximately 2,937 holders of
record.
Voting Rights and Vote Required
The presence, in person or by properly executed proxy, of the
holders of a majority of the outstanding shares of MBNA common
stock entitled to vote is necessary to constitute a quorum at
the special meeting. Abstentions will be counted for the purpose
of determining whether a quorum is present.
Approval of the merger requires the affirmative vote of the
holders of a majority of the outstanding shares of MBNA common
stock entitled to vote at the special meeting. You are entitled
to one vote for each share of MBNA common stock you held as of
the record date. Holders of shares of MBNA preferred stock are
not entitled to vote on the merger or otherwise at the special
meeting.
Approval of any proposal to adjourn or postpone the meeting, if
necessary, for the purpose of soliciting additional proxies may
be obtained by the affirmative vote of the holders of a majority
of the shares present in person or by proxy, even if less than a
quorum. Because approval of such adjournments is based on the
affirmative vote of a majority of shares present in person or by
proxy, abstentions will have the same effect as a vote against
this proposal.
Stockholders will vote at the meeting by ballot. Votes cast at
the meeting, in person or by proxy, will be tallied by
MBNAs transfer agent.
Because the affirmative vote of the holders of a majority of the
outstanding shares of MBNA common stock entitled to vote at the
special meeting is needed for us to proceed with the merger, the
failure to vote by proxy or in person will have the same effect
as a vote against the merger. Abstentions also will have the
same effect as a vote against the merger. Accordingly, the MBNA
board of directors urges MBNA stockholders to promptly vote by
completing, dating, and signing the accompanying proxy card and
to return it promptly in the enclosed postage-paid envelope, or,
if you hold your stock in street name through a bank
or broker, by following the voting instructions of your bank or
broker.
As of the record date:
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Directors and executive officers of MBNA, and their affiliates,
had the right to vote 97,084,854 shares of MBNA common
stock, or 7.7% of the outstanding MBNA common stock at that
date. We currently expect that each of these individuals will
vote their shares of MBNA common stock in favor of the proposals
to be presented at the special meeting. |
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Directors and executive officers of Bank of America and their
affiliates had the right to vote 0 shares of MBNA common
stock, or 0% of the outstanding MBNA common stock on that date. |
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Recommendation of the MBNA Board of Directors
The MBNA board of directors has unanimously approved the merger
agreement and the transactions it contemplates, including the
merger. The MBNA board of directors determined that the merger,
merger agreement and the transactions contemplated by the merger
agreement are advisable and in the best interests of MBNA and
its stockholders and unanimously recommends that you vote
FOR approval of the merger. See The
MergerMBNAs Reasons for the Merger; Recommendation
of the MBNA Board of Directors on page 22 for a more
detailed discussion of the MBNA board of directors
recommendation.
Attending the Meeting
All holders of MBNA common stock, including stockholders of
record and stockholders who hold their shares through banks,
brokers, nominees or any other holder of record, are invited to
attend the special meeting. Stockholders of record can vote in
person at the special meeting. If you are not a stockholder of
record, you must obtain a proxy executed in your favor, from the
record holder of your shares, such as a broker, bank or other
nominee, to be able to vote in person at the special meeting. If
you plan to attend the special meeting, you must hold your
shares in your own name or have a letter from the record holder
of your shares confirming your ownership and you must bring a
form of personal photo identification with you in order to be
admitted. We reserve the right to refuse admittance to anyone
without proper proof of share ownership and without proper photo
identification.
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INFORMATION ABOUT THE COMPANIES
Bank of America Corporation
Bank of America Corporation is a Delaware corporation, a bank
holding company and a financial holding company under
U.S. federal law. Bank of America is one of the
worlds largest financial institutions, serving individual
consumers, small and middle market businesses and large
corporations with a full range of banking, investing, asset
management and other financial and risk-management products and
services. The company provides unmatched convenience in the
United States, serving 33 million consumer relationships
with more than 5,800 retail banking offices, more than
16,600 ATMs and award-winning online banking with more than
13 million active users. Bank of America is ranked the
No. 1 Small Business Administration (SBA) Lender in the
United States by the SBA. The company serves clients in 150
countries and has relationships with 96 percent of the
U.S. Fortune 500 companies and 85 percent of the
Global Fortune 500. Bank of America Corporation stock (NYSE:
BAC) is listed on the New York Stock Exchange. As of
June 30, 2005, Bank of America had total consolidated
assets of approximately $1.25 trillion, total consolidated
deposits of approximately $635 billion and total
consolidated stockholders equity of approximately
$101 billion. The principal executive offices of Bank of
America are located in the Bank of America Corporate Center,
100 N. Tryon Street, Charlotte, North Carolina 28255,
and its telephone number is (704) 386-5681.
Additional information about Bank of America and its
subsidiaries is included in documents incorporated by reference
in this document. See Where You Can Find More
Information on page 64.
MBNA Corporation
MBNA Corporation is a Maryland corporation and a bank holding
company. It is the largest independent credit card lender in the
world and a recognized leader in affinity marketing, and is an
international financial services company providing lending,
deposit, and credit insurance products and services. MBNA credit
cards and related products and services are endorsed by more
than 5,000 organizations world-wide. MBNA Corporation stock
(NYSE: KRB) is listed on the New York Stock Exchange. As of
June 30, 2005, MBNA had total consolidated assets of
approximately $63.0 billion, including total consolidated
loan receivables of $32.3 billion, and total consolidated
stockholders equity of approximately $12.8 billion.
The principal executive offices of MBNA are located at 1100
North King Street, Wilmington, Delaware 19884, and its telephone
number is (800) 362-6255.
Additional information about MBNA and its subsidiaries is
included in documents incorporated by reference in this
document. See Where You Can Find More Information on
page 64.
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THE MERGER
Background of the Merger
The MBNA Board of Directors has periodically met with MBNA
management to discuss potential strategic directions for the
company in light of the companys financial performance and
market, economic, competitive, regulatory and other conditions
and developments. These meetings have included a review of the
companys business and the key issues and challenges faced
by it, and possible strategic directions available to MBNA and
the potential impact on stockholder value, including, from time
to time, hypothetical acquisitions or business combinations
involving various other financial institutions.
As part of its operations, Bank of America also regularly
evaluates the potential acquisition of and holds discussions
with various financial institutions and other businesses of a
type eligible for financial holding company ownership or control.
In early June 2005, the MBNA board of directors met with MBNA
management and the companys outside advisors, including
representatives of UBS and Wachtell, Lipton, Rosen &
Katz, to discuss MBNAs recent financial performance and
prospects, consolidation activity in the credit card industry
and the general environment, long-term trends and other
developments in the markets in which MBNA conducts business.
Possible strategic alternatives were summarized, including
hypothetical scenarios involving a business combination. During
the meeting, several major financial institutions were discussed
as potential partners. At the meeting, the MBNA board of
directors determined that a possible strategic combination could
have benefits for MBNA and its stockholders if a partner were
willing to reach an appropriate level of consideration to MBNA
stockholders, and requested that MBNA management and
representatives commence a confidential process to contact up to
a small number of the most promising potential partners to
determine their level of interest in a possible transaction with
MBNA.
In mid-June 2005, representatives of MBNA contacted a major
financial institution identified at the MBNA board meeting as
potentially having the greatest interest in a possible
transaction. Thereafter, discussions were held between MBNA
management and representatives and the management of this
financial institution. As a result of these discussions, MBNA
management concluded that it was not likely that a transaction
could be negotiated with this financial institution at a level
of consideration that would be satisfactory to MBNA. Members of
the MBNA board were apprised of the status of discussions.
During the week of June 20, representatives of MBNA
contacted the management of Bank of America to gauge the level
of Bank of Americas interest in a possible transaction
with MBNA at ranges of consideration that were more likely to be
satisfactory to the MBNA board of directors.
Initial discussions between Mr. Hammonds and Mr. Lewis
and other members of MBNA and Bank of America management were
viewed as constructive by MBNA management and resulted in Bank
of America indicating that, subject to confirmatory due
diligence, it would be willing to proceed based on consideration
in the range of $27.50 per MBNA share. MBNA and Bank of
America entered into a confidentiality agreement and, late in
the week of June 20, commenced due diligence discussions
and investigations. Due diligence continued over the next
several days along with further discussions of the financial and
other terms of a possible transaction. Early in the week of
June 27, 2005, counsel to MBNA and Bank of America began
discussing the terms of a potential definitive merger agreement
and exchanged draft agreements. During the next several days,
the final exchange ratio of 0.5009 and cash consideration amount
of $4.125, as well as the terms of the merger agreement and
option agreement, were negotiated and the parties continued to
discuss various due diligence and business integration issues.
The executive committee of the Bank of America board of
directors held a special meeting on June 28, 2005 to review
and discuss the potential transaction and its proposed terms.
On June 29, 2005, the Bank of America board of directors
held a special meeting at which members of Bank of America
senior management made various presentations about, and the
board discussed, the potential strategic combination with MBNA
and the proposed terms of the merger. At this meeting, the Bank
of America board approved the merger agreement, the stock option
agreement and the transactions contemplated by the merger
agreement.
The MBNA board of directors met again in the afternoon of
June 29, 2005. Mr. Hammonds summarized for the board
of directors the events that had occurred since the last board
meeting and the discussions with Bank of America and the other
financial institution. Senior management of MBNA
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discussed Bank of America and described the proposed transaction
with Bank of America in light of the Boards earlier
discussions of MBNAs strategic alternatives, and also
described the due diligence process between the two institutions
and summarized the results of MBNAs due diligence on Bank
of America. Following discussion among, and questions by,
members of the MBNA board and the others present, MBNAs
financial advisor, UBS, reviewed with the MBNA board of
directors its financial analysis of the merger consideration, as
more fully described below under the heading Opinion
of MBNAs Financial Advisor, and rendered to the MBNA
board of directors its opinion to the effect that, as of that
date and based on and subject to various assumptions, matters
considered and limitations described in the opinion, the merger
consideration was fair, from a financial point of view, to the
holders of MBNA common stock. The board also met with
Mr. Lewis, Chief Executive Officer of Bank of America.
MBNAs counsel, Wachtell, Lipton, Rosen & Katz,
then discussed with the MBNA board of directors the legal
principles and standards applicable to its consideration of the
proposed merger, described the material terms of the merger and
stock option agreements and discussed the projected timetable
for the transaction, including the principal regulatory
approvals that would be required. Following further discussion
and questions to MBNA management and advisors, the MBNA board of
directors unanimously approved and adopted the merger agreement
and the stock option agreement.
Following approval by the MBNA board, the parties continued to
work to finalize the last details of, and make final corrections
to, the definitive agreements and disclosure schedules. The
proposed merger was jointly announced by Bank of America and
MBNA on the morning of June 30, 2005, prior to the opening
of U.S. financial markets.
MBNAs Reasons for the Merger; Recommendation of the
MBNA Board of Directors
The MBNA board of directors consulted with MBNA management, as
well as its legal and financial advisors, in its evaluation of
the merger. In reaching its conclusion to approve the merger
agreement and in determining that the merger is in the best
interests of MBNA and its stockholders, the MBNA board
considered a number of factors, including the following:
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its understanding of MBNAs business, operations, financial
condition, earnings, prospects and likely strategic
alternatives, and of Bank of Americas business,
operations, financial condition, earnings and prospects; |
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the current and prospective environment in which MBNA and Bank
of America operate, including national and local economic
conditions, the competitive environment for financial
institutions generally, the trend toward consolidation in the
financial services industry generally and the consumer finance
and credit card industries in particular, and the potential
effects of these factors on MBNA; |
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the financial and other terms of the merger agreement; |
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the value to MBNA stockholders represented by the merger
consideration, including the fact that, based on the closing
price of Bank of America common stock on June 28, 2005, the
value of the per share merger consideration to be received by
MBNA stockholders in the merger represented a premium of
approximately 29% over the closing price of MBNA common stock on
the NYSE on June 28, 2005; |
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the reports to MBNAs board of directors concerning the
operations, financial condition and prospects of Bank of America
and the expected financial impact of the merger on the combined
company, including pro forma assets, earnings, deposits and
regulatory capital ratios; |
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the potential cost saving opportunities, currently estimated to
be approximately $850 million after-tax per year when fully
phased in after the merger; |
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the fact that the complementary nature of the respective
businesses, customer bases, products and skills of MBNA and Bank
of America are expected to result in opportunities to obtain
further synergies as funding sources are optimized and MBNA
marketing expertise is applied to a broader range of products
and Bank of Americas branch network is leveraged to
distribute MBNA products; |
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the market position of the combined company, including that it
would become the largest general purpose card issuer in the
United States, measured by receivables with approximately
$143 billion |
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in managed assets outstanding and 40 million active
accounts, and the number one issuer worldwide of Visa/Mastercard
credit, debit and prepaid cards, based on total volume; |
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the scale, scope, strength and diversity of operations, product
lines and delivery systems that could be achieved by combining
MBNA and Bank of America; |
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the proposed board and management arrangements of the combined
company, including the fact that Frank P. Bramble, Sr., who
was until December 2004 a Vice Chairman of MBNA and who
currently serves as Senior Advisor to the Chief Executive
Officer of MBNA, will join the Bank of America board of
directors upon completion of the merger and that
Mr. Hammonds will be CEO and President of Bank of America
Card Services after the merger; |
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the likelihood that the regulatory approvals needed to complete
the transaction will be obtained; |
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the MBNA boards understanding of Bank of Americas
prior track record and expertise in successfully integrating
substantial acquisitions; |
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the historical and current market prices of Bank of America
common stock and MBNA common stock as well as comparative
valuation analyses for the two companies; |
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the financial presentation of UBS, including UBS opinion
dated June 29, 2005, to the MBNA board of directors as to
the fairness, from a financial point of view and as of the date
of the opinion and subject to the matters described in the
opinion, of the merger consideration. See Opinion of
MBNAs Financial Advisor; |
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|
the terms of the stock option agreement and related provisions
of the merger agreement, including provisions limiting the
circumstances under which MBNA could discuss potential
alternative transactions with third parties, requiring MBNA to
present the merger to MBNA stockholders regardless of whether
the MBNA board of directors continues to recommend the merger
and giving Bank of America the right to terminate the merger
agreement if the MBNA board of directors recommends another
transaction or modifies its recommendation of the merger in a
manner adverse to Bank of America; |
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the expected tax treatment of the merger and of the receipt by
MBNA stockholders of the merger consideration; |
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the potential impact of the transaction on MBNA employees and
other key constituencies; and |
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the fact that MBNA directors and executive officers have
interests in the merger that are in addition to their interests
as MBNA stockholders. See MBNAs Directors and
Officers Have Financial Interests in the Merger on
page 33. |
The MBNA board of directors also considered potential risks
associated with the merger in connection with its deliberations
of the proposed transaction, including the possibility that the
stock option agreement and portions of the merger agreement
could have the effect of discouraging other parties potentially
interested in a transaction with MBNA from proposing a
transaction; the challenges of integrating MBNAs
businesses, operations and workforce with those of Bank of
America; the need to obtain MBNA stockholder and regulatory
approvals in order to complete the transaction; the risks
associated with achieving the anticipated cost savings and other
synergies; and possible customer, partner and other relationship
attrition, and resultant possible revenue loss, relating to
various aspects of MBNAs business, including its card
marketing agreements and particularly those with other financial
institutions that might regard Bank of America as a significant
competitor. The MBNA board of directors considered all these
factors as a whole, and overall considered them on balance to be
favorable to, and to support, its determination.
The foregoing discussion of the information and factors
considered by the MBNA board of directors is not exhaustive, but
includes the material factors considered by the MBNA board of
directors. In view of the wide variety of factors considered by
the MBNA board of directors in connection with its evaluation of
the merger and the complexity of these matters, the MBNA board
of directors did not consider it practical to, nor did it
attempt to, quantify, rank or otherwise assign relative weights
to the specific factors that it considered in reaching its
decision. The MBNA board of directors evaluated the factors
described above, including by asking questions of MBNA
management and MBNA legal and financial advisors, and reached
consensus that the merger was in the best interests of MBNA and
MBNA stockholders. In
23
considering the factors described above, individual members of
the MBNA board of directors may have given different weights to
different factors.
The MBNA board of directors determined that the merger, the
merger agreement and the transactions contemplated by the merger
agreement are in the best interests of MBNA and its
stockholders. Accordingly, the MBNA board of directors
unanimously approved the merger and the merger agreement and
unanimously recommends that MBNA stockholders vote
FOR approval of the merger.
Opinion of MBNAs Financial Advisor
On June 29, 2005, at a meeting of MBNAs board of
directors held to approve the proposed merger, UBS delivered to
MBNAs board an oral opinion, confirmed by delivery of a
written opinion dated June 29, 2005, to the effect that, as
of that date and based on and subject to various assumptions,
matters considered and limitations described in its opinion, the
merger consideration was fair, from a financial point of view,
to the holders of MBNA common stock.
The full text of UBS opinion describes the assumptions
made, procedures followed, matters considered and limitations on
the review undertaken by UBS. This opinion is attached as
Appendix C and is incorporated into this document by
reference. UBS opinion relates solely to the fairness,
from a financial point of view, of the merger consideration and
does not address any other terms or aspects of the merger. The
opinion does not address the relative merits of the merger as
compared to other business strategies or transactions that might
be available with respect to MBNA or the underlying business
decision of MBNA to effect the merger. The opinion does not
constitute a recommendation to any stockholder as to how such
stockholder should vote or act with respect to any matters
relating to the merger. Holders of MBNA common stock are
encouraged to read the opinion carefully in its entirety.
The following summary of UBS opinion is qualified in its
entirety by reference to the full text of its opinion.
In arriving at its opinion, UBS:
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reviewed publicly available business and historical financial
information relating to MBNA and Bank of America, including
publicly available financial forecasts and estimates relating to
Bank of America that were reviewed and discussed with UBS by
Bank of Americas management; |
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reviewed internal financial information and other data relating
to the businesses and financial prospects of MBNA that were
provided to UBS by the management of MBNA and not publicly
available, including financial forecasts and estimates relating
to MBNA prepared by MBNA management; |
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conducted discussions with members of the senior managements of
MBNA and Bank of America concerning the businesses and financial
prospects of MBNA and Bank of America; |
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reviewed current and historical market prices of MBNA common
stock and Bank of America common stock; |
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reviewed publicly available financial and stock market data with
respect to companies in lines of business which UBS believed to
be generally comparable to those of MBNA and Bank of America; |
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compared the financial terms of the merger with publicly
available financial terms of other transactions which UBS
believed to be generally relevant; |
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reviewed estimates prepared by the managements of MBNA and Bank
of America as to the potential cost savings, revenue
enhancements and other synergies anticipated to result from the
merger; |
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reviewed the potential pro forma financial effect of the merger,
including potential cost savings, revenue enhancements and other
synergies, on the estimated earnings per share of Bank of
America based on financial forecasts and estimates prepared by
MBNAs management and publicly available financial
forecasts and estimates relating to Bank of America that were
reviewed and discussed with UBS by Bank of Americas
management; |
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reviewed a draft dated June 29, 2005 of the merger
agreement; and |
24
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conducted other financial studies, analyses and investigations,
and considered other information, as UBS deemed necessary or
appropriate. |
In connection with its review, with MBNAs consent, UBS did
not assume any responsibility for independent verification of
any of the information provided to or reviewed by UBS for the
purpose of its opinion and, with MBNAs consent, relied on
that information being complete and accurate in all material
respects. In addition, at MBNAs direction, UBS did not
make any independent evaluation or appraisal of any of the
assets or liabilities, contingent or otherwise, of MBNA or Bank
of America, and was not furnished with any evaluation or
appraisal. With respect to the publicly available financial
forecasts and estimates relating to Bank of America referred to
above, UBS was advised by Bank of Americas management and
UBS assumed, with MBNAs consent, that they represented
reasonable estimates and judgments as to the future financial
performance of Bank of America. With respect to internal
financial forecasts and estimates, pro forma effects and
calculation of cost savings, revenue enhancements and other
synergies referred to above, UBS assumed, at MBNAs
direction, that they were reasonably prepared on a basis
reflecting the best currently available estimates and judgments
of the management of MBNA as to the future financial performance
of MBNA, and of the management of Bank of America, with respect
to cost savings, revenue enhancements and other synergies and
other matters covered thereby. In addition, UBS assumed that the
future financial results and potential cost savings, revenue
enhancements and other synergies reflected in such forecasts and
estimates would be achieved at the times and in the amounts
projected. UBS opinion was necessarily based on economic,
monetary, market and other conditions as in effect on, and
information made available to UBS as of, the date of its opinion.
UBS expressed no opinion as to what the value of Bank of America
common stock would be when issued in the merger or the prices at
which Bank of America common stock or MBNA common stock would
trade at any time. In rendering its opinion, UBS assumed, with
MBNAs consent, that the merger would qualify for federal
income tax purposes as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as
amended, which we refer to as the Code. UBS also assumed, with
MBNAs consent, that each of MBNA and Bank of America would
comply with all material terms of the merger agreement and that
the merger would be consummated in accordance with its terms
without waiver, modification or amendment of any material term,
condition or agreement. UBS further assumed, with MBNAs
consent, that all governmental, regulatory or other consents and
approvals necessary for the consummation of the merger would be
obtained without any material adverse effect on MBNA, Bank of
America or the contemplated benefits of the merger. In addition,
UBS assumed, with MBNAs consent, that the final executed
form of the merger agreement would not differ in any material
respect from the draft of the merger agreement that UBS
reviewed. MBNA imposed no other instructions or limitations on
UBS with respect to the investigations made or the procedures
followed by UBS in rendering its opinion.
In connection with rendering its opinion to MBNAs board of
directors, UBS performed a variety of financial and comparative
analyses which are summarized below. The following summary is
not a complete description of all analyses performed and factors
considered by UBS in connection with its opinion. The
preparation of a financial opinion is a complex process
involving subjective judgments and is not necessarily
susceptible to partial analysis or summary description. With
respect to the selected public companies analyses and the
selected precedent transactions analysis summarized below, no
company or transaction used as a comparison is identical to
MBNA, Bank of America or the merger. These analyses necessarily
involve complex considerations and judgments concerning
financial and operating characteristics and other factors that
could affect the public trading or acquisition values of the
companies concerned.
UBS believes that its analyses and the summary below must be
considered as a whole and that selecting portions of its
analyses and factors or focusing on information presented in
tabular format, without considering all analyses and factors or
the narrative description of the analyses, could create a
misleading or incomplete view of the processes underlying
UBS analyses and opinion. None of the analyses performed
by UBS was assigned greater significance or reliance by UBS than
any other. UBS arrived at its ultimate opinion based on the
results of all analyses undertaken by it and assessed as a
whole. UBS did not draw, in isolation, conclusions from or with
regard to any one factor or method of analysis for purposes of
its opinion.
The estimates of the future performance of MBNA and Bank of
America in or underlying UBS analyses are not necessarily
indicative of future results or values, which may be
significantly more or less favorable than those estimates. In
performing its analyses, UBS considered industry performance,
general
25
business and economic conditions and other matters, many of
which are beyond the control of MBNA and Bank of America.
Estimates of the financial value of companies do not necessarily
purport to be appraisals or reflect the prices at which
companies actually may be sold.
The merger consideration was determined through negotiation
between MBNA and Bank of America. UBS opinion and
financial analyses were only one of a number of factors
considered by MBNAs board in its evaluation of the merger
and should not by itself be viewed as determinative of the views
of MBNAs board of directors with respect to the merger.
The following is a brief summary of the material financial
analyses performed by UBS and reviewed with MBNAs board of
directors in connection with its opinion relating to the
proposed merger. The financial analyses summarized below
include information presented in tabular format. In order to
fully understand UBS financial analyses, the tables must
be read together with the text of each summary. The tables alone
do not constitute a complete description of the financial
analyses. Considering the data below without considering the
full narrative description of the financial analyses, including
the methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of UBS financial
analyses.
Selected Public Companies Analysis. UBS compared selected
financial and stock market data of MBNA with corresponding data
of the following seven publicly traded companies in the banking
and financial services industry:
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American Express Company |
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Bank of America |
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Capital One Financial Corporation |
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Citigroup Inc. |
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JPMorgan Chase & Co. |
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U.S. Bancorp |
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Wells Fargo & Company |
UBS reviewed closing stock prices as multiples of calendar years
2005 and 2006 estimated earnings per share, commonly referred to
as EPS, and book value per share and tangible book value per
share as of March 31, 2005. UBS then compared these
multiples derived from the selected companies with corresponding
multiples implied for MBNA based both on the closing price of
MBNA common stock on June 28, 2005 and the implied per
share value of the merger consideration utilizing, for the stock
portion of the merger consideration, the closing price of Bank
of America common stock on June 28, 2005. Multiples for the
selected companies were based on closing stock prices on
June 28, 2005. Financial data for the selected companies
were based on I/B/E/S median EPS estimates, public filings and
other publicly available information. Financial data for MBNA
were based on internal estimates of MBNAs management,
public filings and other publicly available information. This
analysis indicated the following implied high, median and low
multiples for the selected companies, as compared to
corresponding multiples implied for MBNA:
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Implied Multiples for |
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MBNA Based on |
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Implied Multiples for |
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Implied Multiples for |
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Closing Stock Price |
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MBNA Based on |
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Selected Companies |
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on 6/28/05 |
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Merger Consideration |
Closing Stock Price as |
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Multiples of: |
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High |
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Median |
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Low |
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EPS
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Calendar year 2005
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17.2x |
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12.1x |
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10.8x |
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11.2x |
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14.4x |
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Calendar year 2006
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15.2x |
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10.5x |
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9.6x |
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10.4x |
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13.4x |
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Book Value
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4.17x |
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2.24x |
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1.21x |
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2.14x |
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2.76x |
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Tangible Book Value
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4.97x |
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3.83x |
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2.17x |
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2.96x |
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3.83x |
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26
Selected Precedent Transactions Analysis. UBS reviewed
transaction value multiples in the following five selected
transactions involving companies in the specialty financial
services industry with transaction values of over
$5 billion announced since January 1, 2000:
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Acquiror |
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Target |
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Washington Mutual, Inc.
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Providian Financial Corporation |
HSBC Holdings plc
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Household International, Inc. |
General Electric Capital Corporation
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Heller Financial, Inc. |
Tyco International Ltd.
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CIT Group, Inc. |
Citigroup Inc.
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Associates First Capital Corporation |
UBS reviewed purchase prices in the selected transactions as
multiples of the target companies next 12 months EPS
and book value per share and tangible book value per share as of
the most recent completed accounting period prior to public
announcement of the relevant transaction. UBS also reviewed the
premiums paid over tangible book value as a percentage of
managed receivables as of the most recent completed accounting
period prior to public announcement of the relevant transaction.
UBS then compared these multiples and premium percentages
derived from the selected transactions with corresponding
multiples and premium percentages implied in the merger for MBNA
based on the implied value of the merger consideration
utilizing, for the stock portion of the merger consideration,
the closing price of Bank of America common stock on
June 28, 2005. Multiples for the selected transactions were
based on I/B/E/S median EPS estimates, public filings and other
publicly available information at the time of announcement of
the relevant transaction. Financial data for MBNA were based on
internal estimates of MBNAs management, public filings and
other publicly available information. This analysis indicated
the following implied high, median and low multiples for the
selected transactions, as compared to corresponding multiples
implied for MBNA:
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Implied Multiples | |
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for MBNA Based | |
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Implied Multiples for | |
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on Merger | |
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Selected Transactions | |
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Consideration | |
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Transaction Value as Multiples of: |
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High | |
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Median | |
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Low | |
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EPS
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Next 12 Months
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17.1x |
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13.9x |
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6.5x |
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14.2x |
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Book Value
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3.01x |
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1.93x |
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1.53x |
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2.76x |
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Tangible Book Value
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6.77x |
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2.27x |
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1.93x |
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3.83x |
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Premium over Tangible Book Value as Percentage of:
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Managed Receivables
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28.5% |
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17.2% |
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6.8% |
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22.4% |
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Discounted Cash Flow Analysis. UBS performed a discounted
cash flow analysis of MBNA to calculate the estimated present
value of the standalone cash flows that MBNA could generate over
calendar years 2006 through 2010. Estimated financial data for
MBNA were based on internal EPS and net income estimates of
MBNAs management for calendar years 2005 and 2006 and the
assumptions described below. UBS calculated a range of terminal
values by applying forward net income terminal value multiples
of 10.0x to 12.0x to MBNAs calendar year 2011 estimated
net income. The cash flows and terminal values were then
discounted to present value using discount rates ranging from
13.0% to 15.0%. For purposes of this analysis, UBS utilized the
following assumptions provided to UBS by MBNAs management:
a long-term EPS growth rate of 10% per annum for calendar
years 2007 through 2011, a managed asset growth rate of
9.4% per annum for calendar years 2005 to 2006, decreased
to 8.0% per annum thereafter, and a target tangible common
equity/tangible managed assets ratio of 7.0%. This analysis
indicated an implied per share equity reference range for MBNA
of $20.31 to $25.48, as compared to the $27.50 per share
equity value implied for MBNA in the merger based on the merger
consideration utilizing, for the stock portion of the merger
consideration, the closing price of Bank of America common stock
on June 28, 2005.
27
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Bank of America Financial Analyses |
Selected Public Companies Analysis. UBS compared selected
financial and stock market data of Bank of America with
corresponding data of the following six publicly traded
companies in the banking and financial services industry:
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Citigroup Inc. |
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HSBC Holdings plc |
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JPMorgan Chase & Co. |
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U.S. Bancorp |
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Wachovia Corporation |
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Wells Fargo & Company |
UBS reviewed closing stock prices as multiples of calendar years
2005 and 2006 estimated EPS and book value per share and
tangible book value per share as of March 31, 2005. UBS
then compared these multiples derived from the selected
companies with corresponding multiples implied for Bank of
America based on the closing price of Bank of America common
stock on June 28, 2005. Multiples for the selected
companies and Bank of America were based on closing stock prices
on June 28, 2005. Financial data for the selected companies
and Bank of America were based on I/B/E/S median EPS estimates,
public filings and other publicly available information. This
analysis indicated the following implied high, median and low
multiples for the selected companies, as compared to
corresponding multiples implied for Bank of America:
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Implied Multiples for |
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Bank of America |
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Based on Closing |
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Implied Multiples for |
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Stock Price on |
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Selected Companies |
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6/28/05 |
Closing Stock Price |
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as Multiples of: |
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High |
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Median |
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Low |
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EPS
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Calendar year 2005
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13.5x |
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12.1x |
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11.2x |
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11.0x |
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Calendar year 2006
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12.1x |
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10.8x |
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10.2x |
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10.5x |
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Book Value
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2.81x |
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2.16x |
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1.21x |
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1.92x |
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Tangible Book Value
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4.75x |
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3.55x |
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2.42x |
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3.83x |
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Discounted Cash Flow Analysis. UBS performed a discounted
cash flow analysis of Bank of America to calculate the estimated
present value of the standalone cash flows that Bank of America
could generate over calendar years 2006 through 2010. Estimated
financial data for Bank of America were based on I/B/E/S mean
EPS and net income estimates for Bank of America for calendar
years 2005 and 2006, the I/B/E/S mean long-term EPS growth rate
for Bank of America of 9.2% per annum, assuming an EPS
growth of 2.0% per annum generated through capital
management activities, for subsequent calendar years and the
other assumptions described below. UBS calculated a range of
terminal values by applying forward net income terminal value
multiples of 10.0x to 12.0x to Bank of Americas calendar
year 2011 estimated net income. The cash flows and terminal
values were then discounted to present value using discount
rates ranging from 9.0% to 11.0%. For purposes of this analysis,
UBS utilized the following assumptions as discussed with and
confirmed as reasonable by Bank of Americas management: an
asset growth rate of 5.0% per annum and a target tangible
common equity/tangible assets ratio of 4.25%. This analysis
indicated an implied per share equity reference range for Bank
of America of $50.07 to $62.06, as compared to the closing price
of Bank of America common stock on June 28, 2005 of $46.67.
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Pro Forma Merger Analysis |
UBS analyzed the potential pro forma financial effect of the
merger on Bank of Americas estimated EPS for calendar
years 2006 and 2007 after giving effect to potential cost
savings, revenue enhancements and other synergies anticipated by
the managements of MBNA and Bank of America to result from the
merger and assuming, for purposes of such analysis, that 85% of
the total merger consideration would be payable in shares of
Bank of America common stock. Estimated standalone data for Bank
of America were based on I/B/E/S mean EPS estimates for Bank of
America for calendar years 2005 and 2006 and the I/B/E/S mean
long-term EPS growth rate for Bank of America of 9.2% per
annum. Estimated
28
standalone data for MBNA were based on internal EPS and net
income estimates of MBNAs management for calendar years
2005 and 2006 and an estimated long-term EPS growth rate of
10.0% per annum provided to UBS by MBNAs management.
For purposes of this analysis, UBS utilized the following
assumptions as discussed with and confirmed as reasonable by
Bank of Americas management:
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a closing date for the merger of December 31, 2005; |
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purchased credit card receivables equal to 5.0% of managed
credit card receivables and a core deposit intangible equal to
2.0% of non-time deposits, each amortized over a 10-year period
on a sum-of-the-years basis; |
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a pre-tax cost of funding rate of 5.0% to fund the aggregate
cash portion of the merger consideration and incremental
dividends and 2.5% to fund incremental share repurchases of
16,000,000 and 35,000,000 shares of Bank of America common
stock in calendar years 2006 and 2007, respectively; and |
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a pre-tax restructuring charge of $2.0 billion. |
Based on the merger consideration and the closing price of Bank
of America common stock on June 28, 2005, this analysis
suggested that the merger could be dilutive to Bank of
Americas estimated EPS in calendar year 2006 and accretive
to Bank of Americas estimated EPS in calendar year 2007.
UBS also separately analyzed the potential pro forma financial
effect of the merger relative to MBNAs standalone
estimated EPS for calendar years 2006 and 2007 based on internal
estimates of MBNAs management and utilizing the same
assumptions as described above but assuming, for purposes of
such analysis, that 100% of the total merger consideration would
be payable in shares of Bank of America common stock. This
analysis suggested that the merger could be accretive relative
to MBNAs standalone estimated EPS in calendar years 2006
and 2007.
The actual results achieved by the combined company may vary
from projected results and the variations may be material.
In rendering its opinion, UBS also reviewed and considered other
factors, including:
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forward 12 months EPS multiples for Bank of America and the
selected companies referred to under Bank of America
Financial AnalysesSelected Public Companies Analysis
over the three-year period ended June 28, 2005; |
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the premiums implied for MBNA in the merger based on the merger
consideration relative to the closing price of MBNA common stock
on June 28, 2005, the high and low closing prices of MBNA
common stock over the 52-week period ended June 28, 2005,
and MBNAs managed receivables as of March 31, 2005; |
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the aggregate premium implied for MBNA in the merger, based on
the merger consideration relative to the closing price of MBNA
common stock on June 28, 2005, as a percentage of the
present value of the cost savings, revenue enhancements and
other synergies anticipated by the managements of MBNA and Bank
of America to result from the merger; |
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the total returns on Bank of America common stock over the
one-year, three-year and five-year periods ended June 28,
2005 as compared to corresponding average returns for the
selected companies referred to under Bank of America
Financial AnalysesSelected Public Companies
Analysis, the Standard and Poors 500 Stock Price
Index and the BKX banking sector stock index; and |
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publicly available research analysts share price targets
for MBNA. |
Under the terms of its engagement, MBNA has agreed to pay UBS
for its financial advisory services in connection with the
merger an aggregate fee equal to 0.11% of the total value of the
merger consideration, a portion of which was payable in
connection with the opinion and a significant portion of which
is contingent upon the consummation of the merger. In addition,
MBNA has agreed to reimburse UBS for its expenses, including
fees, disbursements and other reasonable charges of counsel, and
to
29
indemnify UBS and related parties against liabilities, including
liabilities under federal securities laws, relating to, or
arising out of, its engagement. UBS and its affiliates in the
past have provided services to MBNA and Bank of America
unrelated to the proposed merger, for which services UBS and its
affiliates have received compensation, including having
participated in bank financings for MBNA and various equity and
debt financings for Bank of America. An affiliate of UBS is
currently a lender under an existing credit facility of MBNA,
for which services such affiliate has received and will receive
compensation. In the ordinary course of business, UBS, its
successors and affiliates may hold or trade, for their own
accounts and accounts of customers, securities of MBNA and Bank
of America and, accordingly, may at any time hold a long or
short position in such securities.
MBNA selected UBS as its financial advisor in connection with
the merger because UBS is an internationally recognized
investment banking firm with substantial experience in similar
transactions and is familiar with MBNA and its business. UBS is
continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions,
leveraged buyouts, negotiated underwritings, competitive bids,
secondary distributions of listed and unlisted securities and
private placements.
Bank of Americas Reasons for the Merger
Bank of Americas reasons for entering into the merger
agreement include:
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Bank of Americas understanding of the current environment
in the financial services business, including the current
outlook for the credit card industry; |
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the quality of MBNAs business, customer relationships and
assets; |
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the unique opportunity presented to combine MBNAs existing
market position in the credit card industry, its substantial
base of affinity relationships and its marketing expertise with
Bank of Americas national branch and ATM network, strong
market presence and wide product array; |
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the opportunity to enhance Bank of Americas strong
position in the United States financial services industry and to
expand its presence in key markets outside of the United
States; and |
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the expected impact of the acquisition of MBNA on the diversity
of Bank of Americas earnings mix. |
Board of Directors and Management of Bank of America
Following Completion of the Merger
Upon completion of the merger, Mr. Hammonds, CEO and
President of MBNA, will become CEO and President of Bank of
America Card Services, reporting to Liam E. McGee,
President of Bank of America Global Consumer and Small Business
Banking. Mr. Hammonds will join Bank of Americas
Risk & Capital Committee, which guides the
companys strategic direction. Frank P. Bramble, Sr.,
until December 2004 a Vice Chairman of MBNA and currently
serving as Senior Advisor to the Chief Executive Officer of
MBNA, will join the Bank of America board of directors upon
completion of the merger.
Mr. Bramble, age 57, served as Vice Chairman of MBNA
from May 2002 to December 2004. From April 1994 to May 2002,
Mr. Bramble was a director of Allfirst Financial, Inc. and
Allfirst Bank, and from December 1999 to May 2002, he also was
Chairman of the Board. From April 1999 to December 1999, he was
the Chairman of the Board and the Chief Executive Officer of the
same two companies. From November 1998 until May 2002,
Mr. Bramble was the Chief Executive, USA, and a director of
Allied Irish Banks, p.l.c., the parent of Allfirst Financial,
Inc. Mr. Bramble is currently a member of the board of
directors of Constellation Energy Group, Inc.
Information about the current Bank of America directors and
executive officers can be found in Bank of Americas proxy
statement dated March 28, 2005. Information about the
current MBNA directors and executive officers can be found in
MBNAs proxy statement dated March 15, 2005. Bank of
Americas and MBNAs Annual Reports on Form 10-K
for the year ended December 31, 2004 are incorporated by
reference in this document. See Where You Can Find More
Information on page 64.
For more information see MBNAs Directors and
Officers Have Financial Interests in the Merger on
page 33.
30
Public Trading Markets
Bank of America common stock trades on the NYSE and on the
Pacific Exchange under the symbol BAC. Bank of
America common stock is also listed on the London Stock
Exchange, and certain shares are listed on the Tokyo Stock
Exchange. MBNA common stock trades on the NYSE under the symbol
KRB. Upon completion of the merger, MBNA common
stock will be delisted from the NYSE and deregistered under the
Securities Exchange Act of 1934, as amended. The newly issued
Bank of America common stock issuable pursuant to the merger
agreement will be listed on the NYSE.
The shares of Bank of America common stock to be issued in
connection with the merger will be freely transferable under the
Securities Act of 1933, as amended, which we refer to as the
Securities Act, except for shares issued to any stockholder who
may be deemed to be an affiliate of MBNA, as discussed in
The Merger AgreementResales of Bank of America Stock
by Affiliates on page 46.
Bank of Americas Dividend Policy
Bank of America currently pays a quarterly dividend of
$0.50 per share. The Bank of America board of directors may
change this dividend policy at any time, and the payment of
dividends by financial holding companies is generally subject to
legal and regulatory limitations.
MBNA Stockholders Do Not Have Dissenters Appraisal
Rights in the Merger
Appraisal rights are statutory rights that enable stockholders
to dissent from an extraordinary transaction, such as a merger,
and to demand that the corporation pay the fair value for their
shares as determined by a court in a judicial proceeding instead
of receiving the consideration offered to stockholders in
connection with the extraordinary transaction. Appraisal rights
are not available in all circumstances, and exceptions to these
rights are provided under the Maryland General Corporation Law.
As a result of one of these exceptions, the holders of MBNA
common stock are not entitled to appraisal rights in the merger.
Regulatory Approvals Required for the Merger
We have agreed to use our reasonable best efforts to obtain all
regulatory approvals required to complete the transactions
contemplated by the merger agreement. These approvals include
approval from the Federal Reserve Board, the Delaware State Bank
Commissioner, the U.K. Financial Services Authority, the
Canadian Office of the Superintendent of Financial Institutions
and various other federal, state and foreign regulatory
authorities. Bank of America and MBNA have completed, or will
complete, the filing of applications and notifications to obtain
the required regulatory approvals.
Federal Reserve Board. The merger is subject to approval
by the Federal Reserve Board pursuant to Section 3 of the
Bank Holding Company Act of 1956. On July 25, 2005, Bank of
America filed the required application with the Federal Reserve
Board for approval of the merger.
The Federal Reserve Board is prohibited from approving any
transaction under the applicable statutes that (1) would
result in a monopoly, (2) would be in furtherance of any
combination or conspiracy to monopolize or to attempt to
monopolize the business of banking in any part of the United
States, or (3) may have the effect in any section of the
United States of substantially lessening competition, tending to
create a monopoly or resulting in a restraint of trade, unless
the Federal Reserve Board finds that the anti-competitive
effects of the transaction are clearly outweighed in the public
interest by the probable effect of the transaction in meeting
the convenience and needs of the communities to be served. The
Federal Reserve Board may not approve an interstate acquisition
without regard to state law if the applicant controls, or after
completion of the acquisition the combined entity would control,
more than 10 percent of the total deposits of insured
depository institutions in the United States.
In addition, in reviewing a transaction under the applicable
statutes, the Federal Reserve Board will consider the financial
and managerial resources of the companies and their subsidiary
banks and the convenience and needs of the community to be
served as well as the companies effectiveness in combating
money-laundering activities. In connection with its review, the
Federal Reserve Board will provide an opportunity for public
comment on the application for the merger, and is authorized to
hold a public meeting or other proceeding if it determines that
would be appropriate.
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Under the Community Reinvestment Act of 1977, which we refer to
as the CRA, the Federal Reserve Board must take into account the
record of performance of each of Bank of America and MBNA in
meeting the credit needs of the entire communities, including
low- and moderate-income neighborhoods, served by the company
and its subsidiaries. Each of Bank of Americas and
MBNAs principal depository institution has received an
outstanding CRA rating from the United States Office
of the Comptroller of the Currency, and its other depository
institutions have received either an outstanding or satisfactory
CRA rating.
Bank of Americas right to exercise its option under the
stock option agreement is also subject to the prior approval of
the Federal Reserve Board, to the extent that the exercise of
Bank of Americas option under the stock option agreement
would result in Bank of America owning more than 5% of the
outstanding shares of MBNA common stock. In considering whether
to approve Bank of Americas right to exercise its option,
including its right to purchase more than 5% of the outstanding
shares of MBNA common stock, the Federal Reserve Board would
generally apply the same statutory criteria it will apply to its
consideration of the merger.
Other Requisite Approvals, Notices and Consents. The
merger is also subject to the prior approval of the Delaware
State Bank Commissioner. Applications or notifications may also
be required to be filed with various other regulatory
authorities in connection with the merger.
Certain Foreign Approvals. Approvals also will be
required from, and notices must be submitted to, foreign bank,
securities and competition regulatory authorities in connection
with the merger and the change in ownership of certain
businesses that are controlled by MBNA abroad. For example, Bank
of America is required to obtain the prior approval of the
Canadian Office of the Superintendent of Financial Institutions
and the United Kingdom Financial Services Authority in
connection with the merger. Approval must also be obtained from
the Canadian antitrust authorities, and a filing will be made
with the United Kingdom antitrust authorities. Bank of America
and MBNA have filed, or will shortly file, all applications and
notices required to be submitted to obtain these approvals and
any other required approvals and provide these notices as well
as any others that may be required to complete the merger.
Antitrust Considerations. At any time before or after the
acquisition is completed, the Antitrust Division of the United
States Department of Justice or the United States Federal Trade
Commission, which we refer to as the Antitrust Division and the
FTC, respectively, could take action under the antitrust laws as
it deems necessary or desirable in the public interest,
including seeking to enjoin the acquisition or seeking
divestiture of substantial assets of Bank of America or MBNA or
their subsidiaries. Private parties also may seek to take legal
action under the antitrust laws under some circumstances. Based
upon an examination of information available relating to the
businesses in which the companies are engaged, Bank of America
and MBNA believe that the completion of the merger will not
violate U.S. antitrust laws. However, Bank of America and
MBNA can give no assurance that a challenge to the merger on
antitrust grounds will not be made, or, if such a challenge is
made, that Bank of America and MBNA will prevail.
In addition, the merger may be reviewed by the state attorneys
general in the various states in which Bank of America and MBNA
operate. Although Bank of America and MBNA believe there are
substantial arguments to the contrary, these agencies may claim
the authority, under the applicable state and federal antitrust
laws and regulations, to investigate and/or disapprove the
merger. There can be no assurance that one or more state
attorneys general will not attempt to file an antitrust action
to challenge the merger.
Timing. We cannot assure you that all of the regulatory
approvals described above will be obtained, and, if obtained, we
cannot assure you as to the date of any approvals or the absence
of any litigation challenging such approvals. Likewise, we
cannot assure you that the Antitrust Division, the FTC or any
state attorney general will not attempt to challenge the merger
on antitrust grounds, and, if such a challenge is made, we
cannot assure you as to its result.
Pursuant to the Bank Holding Company Act, a transaction approved
by the Federal Reserve Board may not be completed until
30 days after approval is received, during which time the
Antitrust Division may challenge the merger on antitrust
grounds. The commencement of an antitrust action would
staythat is, suspendthe effectiveness of
an approval unless a court specifically were to order
32
otherwise. With the approval of the Federal Reserve Board and
the concurrence of the Antitrust Division, the waiting period
may be reduced to no less than 15 days.
Bank of America and MBNA believe that the merger does not raise
substantial antitrust or other significant regulatory concerns
and that they will be able to obtain all requisite regulatory
approvals on a timely basis without the imposition of any
condition that would have a material adverse effect on Bank of
America or MBNA. In connection with obtaining any required
regulatory approvals, Bank of America is not required to agree
to conditions or restrictions that would have a material adverse
effect on either MBNA or Bank of America, measured on a scale
relative to MBNA.
We are not aware of any material governmental approvals or
actions that are required for completion of the merger other
than those described above. It is presently contemplated that if
any such additional governmental approvals or actions are
required, those approvals or actions will be sought. There can
be no assurance, however, that any additional approvals or
actions will be obtained.
Litigation Relating to the Merger
As disclosed in MBNAs Quarterly Report on Form 10-Q
for the quarter ended June 30, 2005, MBNA and certain of
its officers and directors are currently defendants in several
purported class action and shareholder derivative lawsuits filed
in state and federal court alleging, among other things, that
certain officers and directors of MBNA breached their fiduciary
duties to MBNA and violated federal securities laws. Following
the announcement of the merger agreement, amended complaints
were filed in two of these lawsuits, each a shareholder
derivative action filed in federal court, to add allegations
regarding breaches of fiduciary duties in connection with
entering into the merger agreement. These lawsuits seek as
remedies, among other things, damages and injunctive relief
relating to the merger. MBNA continues to deny the claims made
in these lawsuits and intends to defend these matters vigorously.
MBNAs Directors and Officers Have Financial Interests
in the Merger
In considering the recommendation of the MBNA board of directors
that you vote to approve the merger, you should be aware that
some of MBNAs executive officers and directors have
interests in the merger and have arrangements that are different
from, or in addition to, those of MBNAs stockholders
generally. The MBNA board of directors was aware of these
interests and considered them, among other matters, in reaching
its decisions to approve the merger agreement and to recommend
that you vote in favor of approving the merger.
Board of Directors and Management of the Combined
Company. Upon completion of the merger, Mr. Bruce L.
Hammonds, CEO and President of MBNA, will become CEO and
President of Bank of America Card Services, reporting to Liam E.
McGee, President of Bank of America Global Consumer and Small
Business Banking. Mr. Hammonds will join Bank of
Americas Risk & Capital Committee, which guides
the companys strategic direction. Mr. Frank P.
Bramble, Sr., until December 2004 a Vice Chairman of MBNA
and currently serving as Senior Advisor to the Chief Executive
Officer of MBNA, will join the Bank of America board of
directors upon completion of the merger.
Non-competition Agreements. MBNA has entered into
executive non-competition agreements with each of
Messrs. Richard K. Struthers, Kenneth A.
Vecchione, Bramble, Louis J. Freeh, Douglas R. Denton,
Gregg Bacchieri and John W. Scheflen. The agreements
provide that, if an executives employment is terminated by
MBNA without cause (as defined in the agreement), MBNA will
continue to pay the executives base salary for a period of
18 months in consideration for the executive complying with
non-compete provisions for that period. If an executive
voluntarily resigns or if the executives employment is
terminated by MBNA for cause, MBNA will have the option to
commence making non-compete payments for a period of
18 months in consideration for the executive complying with
non-compete provisions for that period. No payments will be made
to the executive, but the executive will still be bound by the
non-competition covenants, if the executive receives benefits
under the Supplemental Executive Retirement Plan (as described
below). Furthermore, payments made under the change of control
agreements described below satisfy any payment obligations under
these non-competition agreements. Additionally, each of the
executives except for Messrs. Bramble and Freeh received a
grant of restricted shares of MBNAs common stock for
entering into the agreement. The shares would be forfeited
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if the executive competes during the non-compete period. The
restrictions on the restricted shares do not lapse upon a change
of control.
Equity Compensation Awards. The merger agreement provides
that, upon completion of the merger, each MBNA stock option will
be converted into a Bank of America stock option. In addition,
each MBNA restricted share outstanding immediately before
completing the merger will be converted upon the completion of
the merger into the right to receive the merger consideration
(with the same terms as the MBNA restricted shares, including
transfer restrictions on stock consideration to the extent the
MBNA restricted shares do not vest and transfer restrictions do
not lapse on the change of control). Upon a change of control,
such as completion of the merger, except for restricted shares
previously granted in connection with entering into the
non-competition agreements described above, all unvested stock
options and shares of restricted stock will vest in full. Based
on MBNA equity compensation held as of September 2, 2005
and assuming a closing date of January 1, 2006, upon
completion of the merger, Messrs. Cochran, Hammonds,
Struthers, Vecchione and Weaver and all other MBNA executives
and directors, as a group, would vest in respect of 425,000,
425,000, 270,000, 280,000, 270,000 and 1,070,000 shares of
MBNA common stock (prior to the conversion into Bank of America
stock options in accordance with the merger agreement),
respectively, subject to their stock options and in respect of
1,867,677, 1,924,142, 1,219,994, 351,626, 1,304,016 and
1,735,913 restricted shares of MBNA common stock (prior to the
conversion into the right to receive merger consideration in
accordance with the merger agreement).
Supplemental Executive Retirement Plan. MBNA maintains a
supplemental executive retirement plan, which we refer to as the
SERP, under which executive officers of MBNA and
Mr. Bramble are eligible for retirement benefits, outside
of a change of control situation such as the merger, if they
have been employed by MBNA until age 60 with at least
10 years of service (or until age 65 if they do not
have at least 10 years of service) unless the
executives employment is terminated by MBNA for cause. The
amount of the non-change of control benefit under the SERP is up
to 80 percent of the executives highest average base
salary for any consecutive 12-month period during the
144 months preceding retirement and is payable as a monthly
benefit for life. Additional monthly benefits may be payable to
the executives surviving spouse or other beneficiary
following the executives death while in service or death
after having commenced SERP retirement payments. If at any time
following a change of control (such as completion of the merger)
or within 12 months prior to and in connection with such
event, MBNA terminates the executives employment other
than for cause or the executive resigns for
good reason (as each term is defined in the SERP),
or, in the case of each of Messrs. Cochran, Hammonds,
Struthers, Weaver and Lerner, if the executive resigns for any
reason in the 30-day period following the first anniversary of a
change of control, then the SERP provides the following four
enhancements to the executives SERP retirement benefits:
(i) the SERP benefit will be payable even if the executive
had not yet attained age 60 with 10 years of service or age
65 at the date of termination; (ii) the percentage of base
salary payable is determined under a special change of control
schedule that generally provides a higher percentage for each
attained age, but still subject to a maximum of 80%;
(iii) for purposes of applying the special change of
control benefit schedule, each of Messrs. Cochran,
Hammonds, Struthers, Weaver and Lerner are deemed to have an
additional five years of age at termination of employment, and
each of the other executives is deemed to have an additional
three years of age at termination of employment, but in no event
is the executive deemed to be less than 50 years of age for
such purpose; and (iv) the benefit is payable in an
actuarially determined lump sum payment at termination of
employment, unless the executive elects otherwise. Assuming that
the merger is completed on January 1, 2006 and each of the
executives experiences a qualifying termination of employment
immediately thereafter, the annual amount of gross SERP payments
that would be payable beginning at age 60 to
Messrs. Cochran, Hammonds, Struthers, Vecchione and Weaver
and the other executives as a group is $2,000,000, $2,000,000,
$1,600,000, $896,000, $1,600,000 and $5,897,846, respectively.
These amounts would be reduced by amounts payable under social
security, the MBNA Corporate Pension Plan, and any other defined
benefit pension plan.
Supplemental Executive Insurance Plan. MBNA maintains a
supplemental executive life insurance plan. Under the plan, MBNA
pays the premiums on life insurance policies maintained for the
benefit of each of the SERP participants described above other
than Mr. Lerner and pays the executives a gross-up amount
to cover the taxes incurred by the executives as a result of the
premium payment. The benefits generally terminate upon a
termination of an executives employment, but in specified
cases involving a
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change of control, such as the merger, they may continue after
termination. Specifically, in the event that (1) the
executives employment with MBNA is terminated at any time
after a change of control either by MBNA without
cause or by the executive for good
reason (as each term is defined in the plan), (2) the
executives employment with MBNA is terminated before a
change of control by MBNA without cause or is terminated by the
executive for good reason, in either case if the change of
control actually occurs, and subject to other conditions, or
(3) in the case of Messrs. Cochran, Hammonds,
Struthers and Weaver, the executive officers employment
with MBNA is terminated for any reason other than cause,
disability or death within the 30-day period beginning one year
after a change of control, MBNA will continue to make premium
payments and the related tax gross-up payments following the
termination of the executives employment.
Change of Control and Retention Agreements. MBNA has
entered into change of control agreements with each of
Messrs. Cochran, Hammonds, Struthers, Vecchione, Weaver and
Bramble and each of the other MBNA executive officers except for
one executive officer (who is covered by a change of control
severance pay plan sponsored by MBNA). The agreements provide
certain payments and benefits described below if, during the
three-year period following a change of control (such as
completion of the merger) or within 12 months prior to and
in connection with such event, MBNA terminates the
executives employment other than for cause or
disability or the executive resigns for good reason
(as each term is defined in the agreements). In addition, in the
case of Messrs. Cochran, Hammonds, Struthers, Weaver and
Lerner, the executive will become eligible for payments and
benefits under the agreement if the executive resigns for any
reason during the 30-day period following the first anniversary
of the change of control. In the event of a qualifying
termination as described above, the executive will be entitled
to receive a lump sum cash severance payment equal to the sum of
the executives annual base salary (as determined under the
agreement) and highest bonus (defined as the higher
of the average annualized bonus paid to the executive during the
three year period preceding the change of control or the most
recent annual bonus paid to the executive following the change
of control) times a multiple applicable under each agreement.
The applicable multiple is three times for Messrs. Cochran,
Hammonds, Struthers, Weaver and Lerner, two times for
Messrs. Bramble and Bacchieri and one and one-half times
for Mr. Vecchione and all other executives. Also in that
case, the executive is entitled to receive a lump sum payment
equal to the sum of (a) all accrued compensation
obligations, including a pro-rata bonus for the year in which
the termination occurs based on the highest bonus, and
(b) the matching contributions the executive would have
received for three years in the case of Messrs. Cochran,
Hammonds, Struthers, Weaver and Lerner, or for two years in the
case of all other executives, following such termination of
employment under MBNAs tax-qualified 401(k) plan and
non-qualified deferred compensation plan had the
executives employment not terminated. Additionally, the
executive will be entitled to, for three years following the
date of termination in the case of Messrs. Cochran,
Hammonds, Struthers, Weaver and Lerner, and two years following
the date of termination in the case of all other executives,
continuation of welfare benefits, and all equity awards issued
after the change of control will vest and options will remain
exercisable for no less than 90 days. In addition, in the
event that any of the executives becomes subject to an excise
tax under Section 4999 of the Code, the agreements
generally provide for an additional payment to the executive
such that the executive will be placed in the same after-tax
position as if no such excise tax had been imposed, unless the
executives payments exceed the limit on parachute payments
by less than $50,000, in which case the executives
severance payments will be reduced to the minimum extent
necessary so that no portion of the payments are subject to the
excise tax.
In the event that the executive resigns for good reason or is
terminated by MBNA without cause, the executive will be subject
to either two-year or one-year, depending on the executive,
non-competition and non-solicitation of employees covenants.
In connection with the consummation of the merger, Bank of
America planned, during a transition period following the
merger, to adjust the compensation and benefits of MBNAs
executives to conform to the compensation and benefit programs
provided by Bank of America to similarly situated employees.
Such adjustments might have resulted in good reason
as set forth in the MBNA change of control agreements, which
would therefore have allowed the executives to resign at any
time within three years after the merger and collect severance
benefits as provided by the change of control agreements. To
reduce the incentive of MBNA executives to resign so as to
collect such severance benefits, to better preserve management
continuity and to align the interests of the executives with
Bank of Americas overall business strategy, Bank of
America commenced discussions with certain of the executives in
August 2005 regarding
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retention agreements. As a result of these discussions, Bank of
America has entered into retention agreements, effective on
consummation of the merger, with certain of such executives
(including Messrs. Cochran, Hammonds, Struthers and Weaver) that
replace the change of control agreements (or in the case of one
other executive officer, coverage under the MBNA change of
control severance pay plan).
Each retention agreement provides for the establishment of an
unfunded retention account for the executive in an amount equal
to the portion of the cash severance the executive would have
received under the change of control agreement if the executive
had resigned for good reason immediately following the merger
based on the applicable multiple of annual base salary and
highest bonus. The retention account is payable to the executive
in cash in two equal installments on each of the first and
second anniversaries of the completion of the merger (or, if
earlier, the date that the executive resigns or is terminated),
with interest credited each month through the date of payment at
a rate based on one year treasury bill yields; provided that if
prior to the second anniversary of the merger the executive
(i) is terminated for cause (as defined in the
retention agreement), the unpaid balance of the retention
account will be forfeited, or (ii) resigns without
good reason (which is limited to a post-merger
reduction in base salary or office relocation), all unpaid
interest will be forfeited. MBNA currently provides its
executive officers with access to aircraft for personal travel.
In order to provide a transition from this current practice, the
retention agreements for Messrs. Cochran, Hammonds,
Struthers and Weaver also provide the executive with a specified
number of hours of access to aircraft for personal travel to be
used by such executive during a seven-year period. To the extent
Bank of America is required to impute any income to the
executive for use of aircraft in excess of any expenses paid by
the executive for such use, the executive will receive a tax
gross up. The aircraft benefits will continue for the stated
period after termination of employment, but will cease in the
event the executive is terminated for cause or violates any of
the applicable post-termination covenants. Further, if during
the three-year period following the merger Bank of America
terminates the executives employment without cause or the
executive resigns for good reason, the executive would receive
accrued obligations, matching contribution enhancements and
continuation of welfare benefits substantially the same as
provided under the executives change of control agreement.
The executive would not, however, have the right to receive
special vesting for post-merger equity awards as otherwise
provided by the change of control agreement in connection with
such a termination or resignation. The retention agreements
provide for gross-up payments for any excise taxes imposed under
Section 4999 of the Code to the same extent provided under
the change of control agreements and executives remain subject
to the same post-termination covenants regarding non-competition
and non-solicitation of employees as provided under the change
of control agreements.
Assuming that the merger is completed on January 1, 2006,
the amount (based upon recent base salaries and recent bonus
amounts but excluding income, employment and excise tax
gross-ups and interest) that would be payable under the
retention agreements to each of Messrs. Cochran, Hammonds,
Struthers and Weaver and one other executive officer, including
the estimated total gross incremental cost to Bank of America of
the applicable aircraft benefit, respectively, is $22,736,000,
$23,016,000, $17,025,000, $17,025,000 and $784,615.
For each of the executives of MBNA who has not entered into a
retention agreement, assuming that the merger is completed on
January 1, 2006 and the executive experiences a qualifying
termination of employment immediately thereafter, the amount of
cash severance (based upon recent base salaries and recent bonus
amounts but excluding excise tax gross-ups) that would be
payable to Mr. Vecchione and the remaining such executives
as a group, respectively, is $5,810,500 and $31,310,896.
Protection of MBNA Directors and Officers Against Claims.
Bank of America has agreed to indemnify and hold harmless each
present and former director, officer and employee of MBNA from
liability and exculpation for matters arising at or prior to the
completion of the merger to the fullest extent provided by
applicable law, the MBNA articles of incorporation and the MBNA
bylaws. Bank of America also has agreed that it will maintain in
place existing indemnification and exculpation rights in favor
of MBNA directors, officers and employees for six years after
the merger and that it will maintain MBNAs current policy
of directors and officers liability insurance
coverage, or an equivalent replacement policy for the benefit of
MBNA directors and officers, for six years following completion
of the merger, except that Bank of America is not required to
incur annual premium expense greater than 250% of MBNAs
current annual directors and officers liability
insurance premium.
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THE MERGER AGREEMENT
The following describes certain aspects of the merger,
including material provisions of the merger agreement. The
following description of the merger agreement is subject to, and
qualified in its entirety by reference to, the merger agreement,
which is attached to this document as Appendix A and is
incorporated by reference in this document. We urge you to read
the merger agreement carefully and in its entirety, as it is the
legal document governing this merger.
Terms of the Merger
Each of the MBNA board of directors and the Bank of America
board of directors has approved the merger agreement, which
provides for the merger of MBNA with and into Bank of America.
Bank of America will be the surviving corporation in the merger.
Each share of Bank of America common or preferred stock issued
and outstanding immediately prior to completion of the merger
will remain issued and outstanding as one share of common or
preferred stock of Bank of America, and each share of MBNA
common stock issued and outstanding immediately prior to the
completion of the merger, except for specified shares of MBNA
common stock held by MBNA and Bank of America, will be converted
into the right to receive 0.5009 of a share of Bank of America
common stock and $4.125 in cash, without interest. If the number
of shares of common stock of Bank of America changes before the
merger is completed because of a reorganization,
recapitalization, reclassification, stock dividend, stock split,
reverse stock split, or other similar event, then an appropriate
and proportionate adjustment will be made to the number of
shares of Bank of America common stock into which each share of
MBNA common stock will be converted.
Bank of America will not issue any fractional shares of Bank of
America common stock in the merger. Instead, an MBNA stockholder
who otherwise would have received a fraction of a share of Bank
of America common stock will receive an amount in cash rounded
to the nearest cent. This cash amount will be determined by
multiplying the fraction of a share of Bank of America common
stock to which the holder would otherwise be entitled by the
average closing price of Bank of America common stock over the
five trading days immediately prior to the date on which the
merger is completed.
The Bank of America certificate of incorporation will be the
certificate of incorporation, and the Bank of America bylaws
will be the bylaws, of the combined company after completion of
the merger. The merger agreement provides that Bank of America
may change the structure of the merger if consented to by MBNA
(but MBNAs consent cannot be unreasonably withheld or
delayed). No such change will alter the amount or kind of merger
consideration to be provided under the merger agreement,
adversely affect the tax consequences to MBNA stockholders in
the merger, or materially impede or delay completion of the
merger.
Treatment of MBNA Stock Options and Other Equity-Based
Awards
Each outstanding option to acquire MBNA common stock granted
under MBNAs stock incentive plans will be converted
automatically at the effective time of the merger into an option
to purchase Bank of America common stock and will continue to be
governed by the terms of the MBNA stock plan and related grant
agreements under which it was granted, except that:
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the number of shares of Bank of America common stock subject to
the new Bank of America stock option will be equal to the
product of the number of shares of MBNA common stock subject to
the MBNA stock option and the award exchange ratio, rounded down
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the exercise price per share of Bank of America common stock
subject to the new Bank of America stock option will be equal to
the exercise price per share of MBNA common stock under the MBNA
stock option divided by the award exchange ratio, rounded up to
the nearest cent. |
The award exchange ratio will be the sum of (a) 0.5009 and
(b) $4.125 divided by the average closing price of Bank of
America common stock over the five trading days immediately
prior to the date on which the merger is completed.
Restricted share units in respect of MBNA common stock
outstanding immediately prior to the merger will be converted
automatically at the effective time of the merger into
restricted share units in respect of shares of Bank of America
common stock (except that restricted share units that vest upon
the
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change of control will instead be converted into the right to
receive the merger consideration). The number of shares of Bank
of America common stock subject to each converted restricted
share unit will be equal to the product of the number of shares
of MBNA common stock subject to the MBNA restricted share unit
and the award exchange ratio, rounded down to the nearest whole
share. It is expected that there will be no restricted share
units in respect of MBNA common stock outstanding immediately
prior to the merger, as all restricted share units will vest
immediately prior to the merger and will be converted
automatically at the effective time of the merger into the right
to receive the merger consideration, subject to Bank of
Americas right to deduct and withhold any amounts required
under the Code or applicable state or local tax law when the
restrictions on such rights lapse.
Each outstanding restricted share of MBNA common stock will be
converted automatically at the effective time of the merger into
the right to receive, on the same terms and conditions as
applied to such restricted shares immediately prior to the
effective time of the merger (including transfer restrictions on
the stock consideration to the extent such shares do not vest
and transfer restrictions do not lapse on the change of
control), the merger consideration, subject to Bank of
Americas right to deduct and withhold any amounts required
under the Code or applicable state or local tax law when the
restrictions on such rights lapse.
Bank of America has agreed to reserve additional shares of Bank
of America common stock to satisfy its obligations under the
converted stock options and other equity-based awards and file a
registration statement with the SEC on an appropriate form to
the extent necessary to register Bank of America common stock
subject to the converted stock options and other equity-based
awards.
Closing and Effective Time of the Merger
The merger will be completed only if all of the following occur:
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the merger is approved by MBNA stockholders; |
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we obtain all required governmental and regulatory consents and
approvals without a condition or restriction that would have a
material adverse effect on either MBNA or Bank of America,
measured on a scale relative to MBNA; and |
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all other conditions to the merger discussed in this document
and the merger agreement are either satisfied or waived. |
The merger will become effective when articles of merger are
filed with the State Department of Assessments and Taxation of
the State of Maryland and a certificate of merger is filed with
the Secretary of State of the State of Delaware. However, we may
agree to a later time for completion of the merger and specify
that time in the articles of merger and certificate of merger in
accordance with Maryland and Delaware law. In the merger
agreement, we have agreed to cause the completion of the merger
to occur no later than the fifth business day following the
satisfaction or waiver of the last of the conditions specified
in the merger agreement, or on another mutually agreed date. If
these conditions are satisfied or waived during the two weeks
immediately prior to the end of a fiscal quarter of Bank of
America, then Bank of America may postpone the closing until the
first full week after the end of that quarter. It currently is
anticipated that the effective time of the merger will occur
prior to the end of 2005, but we cannot guarantee when or if the
merger will be completed.
Board of Directors of the Surviving Corporation
Before completion of the merger, Bank of America will take such
actions as may be reasonably required to appoint Frank P.
Bramble, Sr., who was until December 2004 a Vice Chairman
of MBNA and who currently serves as Senior Advisor to the Chief
Executive Officer of MBNA, to its board of directors upon
completion of the merger and, if necessary, will increase the
size of the board of directors to permit this appointment.
Conversion of Shares; Exchange of Certificates
The conversion of MBNA common stock into the right to receive
the merger consideration will occur automatically at the
effective time of the merger. As soon as reasonably practicable
after completion of the merger, the exchange agent will exchange
certificates representing shares of MBNA common stock for
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merger consideration to be received pursuant to the terms of the
merger agreement. Prior to the completion of the merger, Bank of
America will select a bank or trust company subsidiary of Bank
of America or another bank or trust company reasonably
acceptable to MBNA to be the exchange agent, who will exchange
certificates for the merger consideration and perform other
duties as explained in the merger agreement.
Soon after the completion of the merger, the exchange agent will
mail a letter of transmittal to each holder of an MBNA common
stock certificate at the effective time of the merger. This
mailing will contain instructions on how to surrender MBNA
common stock certificates in exchange for statements indicating
book-entry ownership of Bank of America common stock and a check
in the appropriate amount of the cash portion of the merger
consideration. If a holder of an MBNA common stock certificate
makes a special request, however, Bank of America will issue to
the requesting holder a Bank of America stock certificate in
lieu of book-entry shares. When you deliver your MBNA stock
certificates to the exchange agent along with a properly
executed letter of transmittal and any other required documents,
your MBNA stock certificates will be cancelled and you will
receive statements indicating book-entry ownership of Bank of
America common stock, or, if requested, stock certificates
representing the number of full shares of Bank of America common
stock to which you are entitled under the merger agreement. You
will receive payment in cash, without interest, for the cash
portion of the merger consideration and additional cash payment
instead of any fractional shares of Bank of America common stock
that would have been otherwise issuable to you as a result of
the merger.
Holders of MBNA common stock should not submit their MBNA stock
certificates for exchange until they receive the transmittal
instructions and a form of letter of transmittal from the
exchange agent.
If a certificate for MBNA common stock has been lost, stolen or
destroyed, the exchange agent will issue the consideration
properly payable under the merger agreement upon receipt of
appropriate evidence as to that loss, theft or destruction,
appropriate evidence as to the ownership of that certificate by
the claimant, and appropriate and customary indemnification.
After completion of the merger, there will be no further
transfers on the stock transfer books of MBNA, except as
required to settle trades executed prior to completion of the
merger.
The exchange agent will be entitled to deduct and withhold from
the cash consideration or cash in lieu of fractional shares
payable to any MBNA stockholder the amounts it is required to
deduct and withhold under any federal, state, local or foreign
tax law. If the exchange agent withholds any amounts, these
amounts will be treated for all purposes of the merger as having
been paid to the stockholders from whom they were withheld.
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Dividends and Distributions |
Until MBNA common stock certificates are surrendered for
exchange, any dividends or other distributions declared after
the effective time with respect to Bank of America common stock
into which shares of MBNA common stock may have been converted
will accrue but will not be paid. Bank of America will pay to
former MBNA stockholders any unpaid dividends or other
distributions, without interest, only after they have duly
surrendered their MBNA stock certificates.
Prior to the effective time of the merger, MBNA and its
subsidiaries may not declare or pay any dividend or distribution
on its capital stock or repurchase any shares of its capital
stock, other than:
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regular quarterly cash dividends at a rate not to exceed
$0.14 per share of MBNA common stock with record dates and
payment dates consistent with the prior year; |
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dividends paid by any subsidiary of MBNA to MBNA or to any of
its wholly-owned subsidiaries; and |
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the acceptance of shares of MBNA common stock in payment of the
exercise of a stock option or the vesting of restricted shares
of MBNA common stock granted under an MBNA stock plan, in each
case in accordance with past practice. |
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MBNA and Bank of America have agreed to coordinate declaration
of dividends so that holders of MBNA common stock will not
receive two dividends, or fail to receive one dividend, for any
quarter with respect to their MBNA common stock and any Bank of
America common stock any holder receives in the merger.
Representations and Warranties
The merger agreement contains customary representations and
warranties of MBNA and Bank of America relating to their
respective businesses. With the exception of certain
representations that must be true and correct in all material
respects (or, in the case of specific representations and
warranties regarding the capitalization of our companies, true
and correct except to a de minimis extent), no representation or
warranty will be deemed untrue or incorrect as a consequence of
the existence or absence of any fact, circumstance or event
unless that fact, circumstance or event, individually or when
taken together with all other facts, circumstances or events,
has had or is reasonably likely to have a material adverse
effect on the company making the representation. In determining
whether a material adverse effect has occurred or is reasonably
likely, the parties will disregard any effects resulting from
(1) changes in generally accepted accounting principles or
regulatory accounting requirements applicable to banks or
savings associations and their holding companies, or to credit
card companies, generally, (2) changes in laws, rules or
regulations of general applicability to banks or savings
associations, and their holding companies, or to credit card
companies, generally, or their interpretations by courts or
governmental entities, (3) changes in global or national
political conditions or in general economic or market conditions
affecting banks, credit card companies, savings associations or
their holding companies generally, except to the extent that
such changes in general or market conditions have a materially
disproportionate adverse effect on such party, or
(4) completion or public disclosure of the merger. The
representations and warranties in the merger agreement do not
survive the effective time of the merger.
Each of Bank of America and MBNA has made representations and
warranties to the other regarding, among other things:
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corporate matters, including due organization and qualification; |
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capitalization; |
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authority relative to execution and delivery of the merger
agreement and the absence of conflicts with, or violations of,
organizational documents or other obligations as a result of the
merger; |
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required governmental filings and consents; |
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the timely filing of reports with governmental entities, and the
absence of investigations by regulatory agencies; |
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financial statements, internal controls and accounting; |
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brokers fees payable in connection with the merger; |
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the absence of material adverse changes; |
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legal proceedings; |
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tax matters; |
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compliance with applicable laws; |
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tax treatment of the merger; and |
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the accuracy of information supplied for inclusion in this
document and other similar documents. |
In addition, MBNA has made other representations and warranties
about itself to Bank of America as to:
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employee matters, including employee benefit plans; |
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material contracts; |
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risk management instruments and derivatives; |
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investment and loan portfolios; |
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real property and intellectual property; |
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environmental liabilities; |
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credit card operations and securitizations; |
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the inapplicability of state takeover laws; and |
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the receipt of a financial advisors opinion. |
Bank of America also has made a representation and warranty to
MBNA regarding the availability of cash to pay the cash portion
of the merger consideration.
The representations and warranties described above and included
in the merger agreement were made by each of Bank of America and
MBNA to the other. These representations and warranties were
made as of specific dates, may be subject to important
qualifications and limitations agreed to by Bank of America and
MBNA in connection with negotiating the terms of the merger
agreement, and may have been included in the merger agreement
for the purpose of allocating risk between Bank of America and
MBNA rather than to establish matters as facts. The merger
agreement is described in, and included as an appendix to, this
document only to provide you with information regarding its
terms and conditions, and not to provide any other factual
information regarding MBNA, Bank of America or their respective
businesses. Accordingly, the representations and warranties and
other provisions of the merger agreement should not be read
alone, but instead should be read only in conjunction with the
information provided elsewhere in this document and in the
documents incorporated by reference into this document. See
Where You Can Find More Information on page 64.
Covenants and Agreements
Each of MBNA and Bank of America has undertaken customary
covenants that place restrictions on it and its subsidiaries
until the effective time of the merger. In general, each of Bank
of America and MBNA agreed to (1) conduct its business in
the ordinary course in all material respects, (2) use
reasonable best efforts to maintain and preserve intact its
business organization and advantageous business relationships,
including retaining the services of key officers and employees,
and (3) take no action that is intended to or would
reasonably be expected to adversely affect or materially delay
its respective ability to obtain any necessary regulatory
approvals, perform its covenants or complete the merger. MBNA
further agrees that, with certain exceptions and except with
Bank of Americas prior written consent, MBNA will not, and
will not permit any of its subsidiaries to, among other things,
undertake the following extraordinary actions:
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incur indebtedness or in any way assume the indebtedness of
another person, except in the ordinary course of business; |
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adjust, split, combine or reclassify any of its capital stock; |
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make, declare or pay any dividends or other distributions on any
shares of its capital stock, except as set forth above in
Conversion of Shares; Exchange of
CertificatesDividends and Distributions (Bank of
America has agreed to allow MBNA to repurchase up to a certain
number of shares of MBNA common stock in connection with the
issuance of shares under MBNAs stock incentive plans); |
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issue shares, stock options or other equity-based awards outside
the parameters set forth in the merger agreement; |
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except as contemplated by the merger agreement and except as in
the ordinary course of business, (1) increase wages,
salaries or incentive compensation, (2) pay or provide, or
increase or accelerate the accrual rate, vesting or timing or
payment or funding of, any compensation or benefit to employees
of MBNA and its subsidiaries, or (3) establish, adopt or
become a party to any new employee benefit or compensation plan
or agreement or amend any existing plan; |
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other than in the ordinary course of business, sell, transfer,
mortgage, encumber or otherwise dispose of any material assets
or properties, or cancel, release or assign any material
indebtedness; |
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enter into any new line of business or change in any material
respect its lending, investment, underwriting, risk and asset
liability management and other banking, operating,
securitization and servicing policies other than as required by
applicable law; |
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make any material investment either by purchase of securities,
capital contributions, property transfers or purchase of
property or assets; |
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take any action or knowingly fail to take any action reasonably
likely to prevent the merger from qualifying as a reorganization
for federal income tax purposes; |
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amend any charter documents, take any action to exempt another
person from any applicable takeover law or defensive charter or
terminate, amend or waive any provisions of any confidentiality
or standstill agreements in place with third parties; |
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restructure or materially change its investment securities
portfolio or its gap position; |
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materially change MBNAs existing policies and procedures
concerning credit card accounts; |
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commence or settle any material claim; |
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take or fail to take any action that is intended, or may be
reasonably expected, to cause any of the conditions to the
merger to fail to be satisfied; |
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change its tax accounting or financial accounting methods,
except as required by applicable law or generally accepted or
regulatory accounting principles; |
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file or amend any tax return other than in the ordinary course
of business, make or change any material tax election or settle
or compromise any material tax liability; or |
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agree to take or adopt any resolutions by the board of directors
in support of any of the actions prohibited by the preceding
bullets. |
Bank of America agrees that, except with MBNAs prior
written consent, Bank of America will not, among other things,
undertake the following extraordinary actions:
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amend any charter documents in a manner that would adversely
affect MBNA or its stockholders or the transactions contemplated
by the merger agreement; |
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take any action or knowingly fail to take any action reasonably
likely to prevent the merger from qualifying as a reorganization
for federal income tax purposes; |
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take any action that is intended, or may be reasonably expected,
to result in any of the conditions to the merger failing to be
satisfied; |
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take any action that would reasonably be expected to prevent,
materially impede or materially delay completion of the
merger; or |
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agree to take or adopt any resolutions by the board of directors
in support of any of the actions prohibited by the preceding
bullets. |
The merger agreement also contains mutual covenants relating to
the preparation of this document and the holding of the special
meeting of MBNA stockholders, access to information of the other
company and public announcements with respect to the
transactions contemplated by the merger agreement.
In addition, MBNA has agreed to redeem, as of or prior to
completion of the merger, all shares of its
71/2%
Series A Cumulative Preferred Stock and Series B
Adjustable Rate Cumulative Preferred Stock.
Reasonable Best Efforts of MBNA to Obtain the Required
Stockholder Vote
MBNA has agreed to hold a meeting of its stockholders as soon as
is reasonably practicable for the purpose of obtaining
stockholder approval of the merger. MBNA will use its reasonable
best efforts to obtain such approval. The merger agreement
requires MBNA to submit the merger agreement to a stockholder
vote even if its board of directors no longer recommends
approval of the merger agreement.
MBNA and Bank of America have also agreed in good faith to use
their reasonable best efforts to negotiate a restructuring of
the merger if MBNAs stockholders do not approve the merger
agreement at the special meeting and to resubmit the transaction
to MBNAs stockholders for approval. However, in any
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restructuring neither party has any obligation to change the
amount or kind of the merger consideration in a manner adverse
to that party or its stockholders.
Agreement Not to Solicit Other Offers
MBNA also has agreed that it, its subsidiaries and their
officers, directors, employees, agents and representatives will
not, directly or indirectly:
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initiate, solicit, encourage or facilitate any inquiries or
proposals for any Alternative Proposal
(as defined below); or |
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participate in any discussions or negotiations, or enter into
any agreement, regarding any Alternative Transaction
(as defined below). |
However, prior to the special meeting, MBNA may consider and
participate in discussions and negotiations with respect to a
bona fide Alternative Proposal if (1) it has first
entered into a confidentiality agreement with the party
proposing the Alternative Proposal on terms comparable to the
confidentiality agreement with Bank of America and (2) the
MBNA board of directors determines reasonably in good faith
(after consultation with outside legal counsel) that failure to
take these actions would cause it to violate its fiduciary
duties.
MBNA has agreed:
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to notify Bank of America promptly (but in no event later than
24 hours) after it receives any Alternative Proposal, or
any material change to any Alternative Proposal, or any request
for nonpublic information relating to MBNA or any of its
subsidiaries, and to provide Bank of America with relevant
information regarding the Alternative Proposal or request; |
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to keep Bank of America fully informed, on a current basis, of
any material changes in the status and any material changes in
the terms of any such Alternative Proposal; and |
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to cease any existing discussions or negotiations with any
persons with respect to any Alternative Proposal, and to use
reasonable best efforts to cause all persons other than Bank of
America who have been furnished with confidential information in
connection with an Alternative Proposal within the
12 months prior to the date of the merger agreement to
return or destroy such information. |
As used in the merger agreement, an Alternative
Proposal means any inquiry or proposal regarding any
merger, share exchange, consolidation, sale of assets, sale of
shares of capital stock (including by way of a tender offer) or
similar transactions involving MBNA or any of its subsidiaries
that, if completed, would constitute an Alternative Transaction.
As used in the merger agreement, Alternative
Transaction means any of the following:
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a transaction pursuant to which any person (or group of persons)
other than Bank of America or its affiliates, directly or
indirectly, acquires or would acquire more than 25% of the
outstanding shares of MBNA common stock or outstanding voting
power or of any new series or new class of MBNA preferred stock
that would be entitled to a class or series vote with respect to
the merger, whether from MBNA or pursuant to a tender offer or
exchange offer or otherwise; |
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a merger, share exchange, consolidation or other business
combination involving MBNA (other than the merger being
described here); |
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any transaction pursuant to which any person (or group of
persons) other than Bank of America or its affiliates acquires
or would acquire control of assets (including, for this purpose,
the outstanding equity securities of subsidiaries of MBNA and
securities of the entity surviving any merger or business
combination including any of MBNAs subsidiaries) of MBNA,
or any of its subsidiaries representing more than 25% of the
fair market value of all the assets, net revenues or net income
of MBNA and its subsidiaries, taken as a whole, immediately
prior to such transaction; or |
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any other consolidation, business combination, recapitalization
or similar transaction involving MBNA or any of its
subsidiaries, other than the transactions contemplated by the
merger agreement, as a result of which the holders of shares of
MBNA common stock immediately prior to the transaction do not,
in the aggregate, own at least 75% of each of the outstanding
shares of common stock and the outstanding voting power of the
surviving or resulting entity in the |
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transaction immediately after the completion of the transaction
in substantially the same proportion as the holders held the
shares of MBNA common stock immediately prior to the completion
of the transaction. |
Expenses and Fees
In general, each of Bank of America and MBNA will be responsible
for all expenses incurred by it in connection with the
negotiation and completion of the transactions contemplated by
the merger agreement. However, the costs and expenses of
printing and mailing this document, and all filing and other
fees paid to the SEC in connection with the merger, shall be
borne equally by MBNA and Bank of America.
Employee Matters
Bank of America has agreed that for a period of one year
following the closing of the merger, with respect to the
employees of MBNA and its subsidiaries at the effective time, it
will provide such employees in the aggregate with employee
benefits, rates of base salary or hourly wage and annual bonus
opportunities that are substantially similar in the aggregate to
the aggregate employee benefits, rates of base salary or hourly
wage and annual bonus opportunities provided to such employees
pursuant to MBNAs benefit plans as in effect immediately
prior to the merger.
In addition, Bank of America has agreed, to the extent any MBNA
employee becomes eligible to participate in Bank of America
benefit plans following the merger:
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generally to recognize each employees service with MBNA
prior to the completion of the merger for purposes of
eligibility to participate, vesting credits and, except under
defined benefit pension plans, benefit accruals, in each case
under the Bank of America plans to the same extent such service
was recognized under comparable MBNA plans prior to completion
of the merger; and |
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to waive any exclusion for pre-existing conditions under any
Bank of America health, dental or vision plans, to the extent
such limitation would have been waived or satisfied under a
corresponding MBNA plan in which such employee participated
immediately prior to the effective time, and recognize any
medical or health expenses incurred in the year in which the
merger closes for purposes of applicable deductible and annual
out-of-pocket expense requirements under any health, dental or
vision plan of Bank of America. |
However, Bank of America has no obligation to continue the
employment of any MBNA employee for any period following the
merger.
Indemnification and Insurance
The merger agreement requires Bank of America to maintain in
effect for six years after completion of the merger the current
rights of MBNA directors, officers and employees to
indemnification under the MBNA articles of incorporation or the
MBNA bylaws or disclosed agreements of MBNA. The merger
agreement also provides that, upon completion of the merger,
Bank of America will indemnify and hold harmless, and provide
advancement of expenses to, all past and present officers,
directors and employees of MBNA and its subsidiaries in their
capacities as such against all losses, claims, damages, costs,
expenses, liabilities, judgments or amounts paid in settlement
to the fullest extent permitted by applicable laws.
The merger agreement provides that Bank of America will maintain
for a period of six years after completion of the merger
MBNAs current directors and officers liability
insurance policies, or policies of at least the same coverage
and amount and containing terms and conditions that are not less
advantageous than the current policy, with respect to acts or
omissions occurring prior to the effective time of the merger,
except that Bank of America is not required to incur annual
premium expense greater than 250% of MBNAs current annual
directors and officers liability insurance premium.
Conditions to Complete the Merger
Our respective obligations to complete the merger are subject to
the fulfillment or waiver of certain conditions, including:
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the approval of the merger by MBNA stockholders; |
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the approval of the listing of Bank of America common stock to
be issued in the merger on the NYSE, subject to official notice
of issuance; |
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the effectiveness of the registration statement of which this
document is a part with respect to the Bank of America common
stock to be issued in the merger under the Securities Act and
the absence of any stop order or proceedings initiated or
threatened by the SEC for that purpose; and |
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the absence of any law, statute, regulation, judgment, decree,
injunction or other order in effect by any court or other
governmental entity that prohibits completion of the
transactions contemplated by the merger agreement. |
Each of Bank of Americas and MBNAs obligations to
complete the merger is also separately subject to the
satisfaction or waiver of a number of conditions including:
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the receipt by each of Bank of America and MBNA of a legal
opinion with respect to certain federal income tax consequences
of the merger; |
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the receipt and effectiveness of all governmental and other
approvals, registrations and consents, and the expiration of all
related waiting periods required to complete the merger (in the
case of the conditions to Bank of Americas obligation to
complete the merger, without any conditions or restrictions that
would have a material adverse effect on either MBNA or Bank of
America, measured on a scale relative to MBNA); and |
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the truth and correctness of the representations and warranties
of each other party in the merger agreement, subject to the
materiality standard provided in the merger agreement, and the
performance by each other party in all material respects of
their obligations under the merger agreement and the receipt by
each party of certificates from the other party to that effect. |
We cannot provide assurance as to when or if all of the
conditions to the merger can or will be satisfied or waived by
the appropriate party. As of the date of this document, we have
no reason to believe that any of these conditions will not be
satisfied.
Termination of the Merger Agreement
The merger agreement can be terminated at any time prior to
completion by mutual consent, if authorized by each of our
boards of directors, or by either party in the following
circumstances:
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if any of the required regulatory approvals are denied (and the
denial is final and nonappealable); |
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if the merger has not been completed by June 30, 2006,
unless the failure to complete the merger by that date is due to
the terminating partys failure to abide by the merger
agreement; |
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if there is a breach by the other party that would cause the
failure of the closing conditions described above, unless the
breach is capable of being, and is, cured within 45 days of
notice of the breach; or |
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if the other party has committed a substantial, bad faith breach
of its obligation to use reasonable best efforts to negotiate a
restructuring of the transaction and to resubmit the transaction
to MBNAs stockholders for approval, if MBNA stockholders
fail to approve the merger. |
In addition, Bank of America may terminate the merger agreement
if the MBNA Board of Directors fails to recommend that MBNA
stockholders approve the merger, withdraws or modifies in a
manner adverse to Bank of America, or makes public statements
inconsistent with, its recommendation of the merger to
stockholders, or recommends a competing merger proposal.
Effect of Termination. If the merger agreement is
terminated, it will become void, and there will be no liability
on the part of Bank of America or MBNA, except that
(1) both Bank of America and MBNA will remain liable for
any willful breach of the merger agreement and
(2) designated provisions of the merger agreement,
including the payment of fees and expenses, the confidential
treatment of information and publicity restrictions, will
survive the termination. In addition, if the merger agreement is
terminated, the stock option agreement will remain in effect in
accordance with its terms.
45
Amendment, Waiver and Extension of the Merger Agreement
Subject to applicable law, the parties may amend the merger
agreement by action taken or authorized by their boards of
directors or by written agreement. However, after any approval
of the transactions contemplated by the merger agreement by the
MBNA stockholders, there may not be, without further approval of
those stockholders, any amendment of the merger agreement that
(1) changes the amount or the form of the consideration to
be delivered to the holders of MBNA common stock,
(2) changes any term of the certificate of incorporation of
the combined company, or (3) changes any of the terms and
conditions of the merger agreement if such change would
adversely affect the holders of any MBNA securities, in each
case other than as contemplated by the merger agreement.
At any time prior to the completion of the merger, each of us,
by action taken or authorized by our respective board of
directors, to the extent legally allowed, may:
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extend the time for the performance of any of the obligations or
other acts of the other party; |
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waive any inaccuracies in the representations and warranties of
the other party; or |
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waive compliance by the other party with any of the other
agreements or conditions contained in the merger agreement. |
Resales of Bank of America Stock by Affiliates
Shares of Bank of America common stock to be issued to MBNA
stockholders in the merger have been registered under the
Securities Act, and may be traded freely and without restriction
by those stockholders not deemed to be affiliates (as that term
is defined under the Securities Act) of MBNA. Any subsequent
transfers of shares, however, by any person who is an affiliate
of MBNA at the time the merger is submitted for a vote of the
MBNA stockholders will, under existing law, require:
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the further registration under the Securities Act of the Bank of
America stock to be transferred; |
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compliance with Rule 145 promulgated under the Securities
Act, which permits limited sales under certain
circumstances; or |
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the availability of another exemption from registration. |
An affiliate of MBNA is a person who directly, or
indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, MBNA. These
restrictions are expected to apply to the directors and
executive officers of MBNA and the holders of 10% or more of the
outstanding MBNA common stock. The same restrictions apply to
the spouses and certain relatives of those persons and any
trusts, estates, corporations or other entities in which those
persons have a 10% or greater beneficial or equity interest.
Bank of America will give stop transfer instructions to the
exchange agent with respect to the shares of Bank of America
common stock to be received by persons subject to these
restrictions, and the certificates for their shares will be
appropriately legended.
MBNA has agreed in the merger agreement to use its reasonable
best efforts to cause each person who is an affiliate of MBNA
for purposes of Rule 145 under the Securities Act to
deliver to Bank of America a written agreement intended to
ensure compliance with the Securities Act.
46
THE STOCK OPTION AGREEMENT
The following description, which sets forth the material
provisions of the stock option agreement under which MBNA has
granted an option to Bank of America to purchase shares of MBNA
common stock in specified circumstances, is subject to the full
text of, and qualified in its entirety by reference to, the
stock option agreement, which is attached to this document as
Appendix B and which is incorporated by reference in this
document. We urge you to read the stock option agreement
carefully and in its entirety, as it is the legal document
governing the stock option.
The Stock Option
When we entered into the merger agreement, we also entered into
a stock option agreement. Under the terms of the stock option
granted by MBNA to Bank of America, Bank of America may purchase
up to 249,764,005 shares of MBNA common stock at an
exercise price of $21.30 per share. However, the number of
shares issuable upon exercise of the option cannot exceed 19.9%
of MBNA common stock outstanding without giving effect to any
shares issued under the option. In the event that any additional
shares of common stock are either issued or redeemed after the
date of the stock option agreement, the number of shares of
common stock subject to the option will be adjusted so that such
number equals 19.9% of the number of shares of common stock then
issued and outstanding without giving effect to any shares of
common stock subject to or issued under the option. This
exercise price represents MBNAs closing common stock price
on June 28, 2005, the business day prior to the date our
boards of directors approved the merger agreement. The terms of
the stock option agreement are summarized below.
Purpose of the Stock Option Agreement
The stock option agreement may have the effect of making an
acquisition or other business combination of MBNA by a third
party more costly because of the need in any transaction to
acquire any shares of common stock issued under the stock option
agreement or because of any cash payments made under the stock
option agreement. The stock option agreement may, therefore,
discourage third parties from proposing an alternative
transaction to the merger, including one that might be more
favorable, from a financial point of view, to MBNA stockholders
than the merger.
To our knowledge, no event giving rise to the right to exercise
the stock option has occurred as of the date of this document.
Exercise; Expiration
Bank of America may exercise its option in whole or in part if
both an Initial Triggering Event and a Subsequent Triggering
Event occur prior to the occurrence of an Exercise Termination
Event, as these terms are described below. The purchase of any
shares of MBNA common stock under the option is subject to
compliance with applicable law, which may require regulatory
approval.
The term Initial Triggering Event generally means
the following:
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MBNA or any of its subsidiaries, without Bank of Americas
prior written consent, enters into an agreement to engage in an
Acquisition Transaction (as defined below) with a
third party or MBNAs board of directors recommends that
its stockholders approve or accept any Acquisition Transaction
with any person other than Bank of America; |
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the MBNA board of directors has failed to recommend in this
document the approval and adoption of the merger agreement, or,
in a manner adverse to Bank of America, withdraws, modifies or
qualifies, or proposes to withdraw, modify or qualify, the
recommendation by the MBNA board of directors of the merger
agreement or the merger to MBNAs stockholders, takes any
public action or makes any public statement in connection with
the meeting of MBNAs stockholders to approve the merger
inconsistent with the recommendation of the MBNA board of
directors, or recommends any Alternative Proposal (as defined
above); |
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any third party acquires beneficial ownership or the right to
acquire beneficial ownership of 10% or more of the outstanding
shares of MBNA common stock; |
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any person, other than Bank of America, publicly makes a bona
fide proposal to MBNA or MBNAs stockholders to engage
in an Acquisition Transaction; |
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after the receipt by MBNA or its stockholders of any bona
fide inquiry or proposal from a third party to MBNA or any
of its subsidiaries to engage in an Acquisition Transaction,
MBNA breaches any covenant or obligation contained in the merger
agreement, the breach entitles Bank of America to terminate the
merger agreement and the breach has not been cured prior to the
date of written notice of the option holders intention to
exercise the option; or |
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any third person, without the written consent of Bank of
America, files an application or notice with the Federal Reserve
Board or other federal or state bank regulatory authority, which
application or notice has been accepted for processing, for
approval to engage in an Acquisition Transaction. |
As used in the stock option agreement, the term
Acquisition Transaction means:
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a merger, consolidation or share exchange, or any similar
transaction, involving MBNA or any of its significant
subsidiaries; |
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a purchase, lease or other acquisition or assumption of all or a
substantial portion of the assets or deposits of MBNA or any of
its significant subsidiaries; |
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a purchase or other acquisition of securities representing 10%
or more of the voting power of MBNA; or |
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any substantially similar transaction, except that any
substantially similar transaction involving only MBNA and one or
more of its subsidiaries or involving only any two or more of
these subsidiaries will not be deemed to be an Acquisition
Transaction, provided that it is not entered into in violation
of the merger agreement. |
The stock option agreement generally defines the term
Subsequent Triggering Event to mean any of the
following events or transactions:
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the acquisition by a third party of beneficial ownership of 20%
or more of the outstanding MBNA common stock; or |
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MBNA enters into an agreement to engage in an Acquisition
Transaction with a third party or its board of directors
recommends that its stockholders approve or accept any
Acquisition Transaction or proposed Acquisition Transaction
other than the merger agreement. For this purpose, the
percentage referred to in the definition of Acquisition
Transaction is 20% instead of 10%. |
The stock option agreement defines the term Exercise
Termination Event to mean any of the following:
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completion of the merger; |
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termination of the merger agreement in accordance with its terms
before an Initial Triggering Event, except a termination of the
merger agreement by Bank of America based on a breach by MBNA of
a representation, warranty, covenant or other agreement
contained in the merger agreement (unless the breach is
non-volitional) or a termination based on MBNA modifying its
recommendation of the merger in a manner adverse to Bank of
America; or |
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the passage of 18 months, subject to the extension
described below, after termination of the merger agreement, if
the termination follows the occurrence of an Initial Triggering
Event or is a termination of the merger agreement by Bank of
America based on a breach by MBNA of a representation, warranty,
covenant or other agreement contained in the merger agreement
(unless the breach is non-volitional) or based on MBNA modifying
its recommendation of the merger in a manner adverse to Bank of
America. |
If the option becomes exercisable, it may be exercised, in whole
or in part, within 180 days following the Subsequent
Triggering Event. Bank of Americas right to exercise its
option and certain other rights under the stock option agreement
are subject to an extension in order to obtain required
regulatory approvals and comply with applicable regulatory
waiting periods and to avoid liability under the short-swing
trading restrictions contained in Section 16(b) of the
Exchange Act. The option is exercisable for shares of MBNA
common stock. MBNA has agreed that, if it does not have
sufficient shares of common stock available under its articles
of incorporation to issue to Bank of America in the event the
option becomes exercisable and cannot obtain stockholder
approval to increase its authorized shares of common
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stock in a reasonable time, it will issue in lieu of shares of
MBNA common stock shares of a voting participating preferred
stock with terms intended to make a share of the stock
substantially economically equivalent to a share (or shares) of
MBNA common stock.
Rights Under the Stock Option Agreement
Immediately prior to or after a Repurchase Event (as defined
below), and prior to an Exercise Termination Event subject to
extension as described above, following a request of Bank of
America, MBNA may be required to repurchase the option and all
or any part of the shares issued under the option. The
repurchase of the option will be at a price equal to the number
of shares for which the option may be exercised multiplied by
the amount by which the market/offer price, as that term is
defined in the stock option agreement, exceeds the option price.
At the request of the owner of option shares from time to time,
MBNA may be required to repurchase such number of the option
shares from the owner as designated by the owner at a price
equal to the market/offer price, as that term is defined in the
stock option agreement, multiplied by the number of option
shares so designated. The term Repurchase Event is
defined to mean:
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completion of an Acquisition Transaction involving MBNA, except
that for this purpose the reference to 10% in the definition of
Acquisition Transaction is deemed to be 50%; or |
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acquisition by any person of beneficial ownership of 50% or more
of the then-outstanding shares of common stock of MBNA. |
The stock option agreement also provides that Bank of America
may, at any time during which MBNA would be required to
repurchase the option or any option shares upon proper request
or notice, subject to extension as described above, surrender
the option and any shares issued under the option held by Bank
of America to MBNA for a cash payment equal to
$1.0559 billion, adjusted for the aggregate purchase price
previously paid by Bank of America with respect to any option
shares and gains on sales of stock purchased under the option.
However, Bank of America may not exercise its surrender right if
MBNA repurchases the option, or a portion of the option, in
accordance with MBNAs repurchase obligations described
above.
If, prior to an Exercise Termination Event, MBNA enters into
certain mergers, consolidations or other transactions, certain
fundamental changes in its capital stock occur, or it sells all
or substantially all of its assets to any person other than Bank
of America or one of Bank of Americas subsidiaries, the
option will be converted into, or be exchanged for, a substitute
option, at Bank of Americas election, of:
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the continuing or surviving corporation of a consolidation or
merger with MBNA; |
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MBNA in a merger in which it is the continuing or surviving
person; |
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the transferee of all or substantially all of the assets of
MBNA; or |
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any person that controls any of these entities, as the case may
be. |
The substitute option will have the same terms as the original
option (including a repurchase right, but based on the closing
price of the common stock of the substitute issuer). However,
if, because of legal reasons, the terms of the substitute option
cannot be the same as those of the original option, the terms of
the substitute option will be as similar as possible and at
least as advantageous to Bank of America. Also, the number of
shares exercisable under the substitute option is capped at
19.9% of the shares of common stock outstanding prior to
exercise. In the event this cap would be exceeded, the issuer of
the substitute option will pay Bank of America the difference
between the value of a capped and non-capped option.
The stock option agreement provides that the total profit
realized by Bank of America as a result of a stock option
agreement may in no event exceed $1.4078 billion.
49
ACCOUNTING TREATMENT
The merger will be accounted for as a purchase, as
that term is used under generally accepted accounting
principles, for accounting and financial reporting purposes.
Under purchase accounting, the assets (including identifiable
intangible assets) and liabilities (including executory
contracts and other commitments) of MBNA as of the effective
time of the merger will be recorded at their respective fair
values and added to those of Bank of America. Any excess of
purchase price over the fair values is recorded as goodwill.
Financial statements of Bank of America issued after the merger
would reflect these fair values and would not be restated
retroactively to reflect the historical financial position or
results of operations of MBNA.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following general discussion sets forth the anticipated
material United States federal income tax consequences of the
merger to U.S. holders (as defined below) of MBNA common
stock that exchange their shares of MBNA common stock for shares
of Bank of America common stock and cash in the merger. This
discussion does not address any tax consequences arising under
the laws of any state, local or foreign jurisdiction, or under
any United States federal laws other than those pertaining to
income tax. This discussion is based upon the Code, the
regulations promulgated under the Code and court and
administrative rulings and decisions in effect on the date of
this document. These laws may change, possibly retroactively,
and any change could affect the continuing validity of this
discussion.
This discussion addresses only those MBNA stockholders that hold
their shares of MBNA common stock as a capital asset within the
meaning of Section 1221 of the Code. Further, this
discussion does not address all aspects of United States federal
income taxation that may be relevant to you in light of your
particular circumstances or that may be applicable to you if you
are subject to special treatment under the United States federal
income tax laws, including if you are:
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a financial institution; |
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a tax-exempt organization; |
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an S corporation or other pass-through entity (or an
investor in an S corporation or other pass-through entity); |
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an insurance company; |
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a mutual fund; |
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a dealer in stocks and securities, or foreign currencies; |
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a trader in securities that elects the mark-to-market method of
accounting for your securities; |
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a holder of MBNA common stock subject to the alternative minimum
tax provisions of the Code; |
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a holder of MBNA common stock that received MBNA common stock
through the exercise of an employee stock option, through a tax
qualified retirement plan or otherwise as compensation; |
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a person that is not a U.S. holder (as defined below); |
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a person that has a functional currency other than the
U.S. dollar; or |
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a holder of MBNA common stock that holds MBNA common stock as
part of a hedge, straddle, constructive sale or conversion
transaction. |
Determining the actual tax consequences of the merger to you
may be complex. They will depend on your specific situation and
on factors that are not within our control. You should consult
with your own tax advisor as to the tax consequences of the
merger in your particular circumstances, including the
applicability and effect of the alternative minimum tax and any
state, local, foreign or other tax laws and of changes in those
laws.
For purposes of this discussion, the term
U.S. holder means a beneficial owner of MBNA
common stock that is (i) an individual citizen or resident
of the United States, (ii) a corporation organized in or
under the laws of the United States or any state thereof or the
District of Columbia or (iii) otherwise subject to
U.S. federal income taxation on a net income basis in
respect of the MBNA common stock.
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Tax Consequences of the Merger Generally
The parties intend for the merger to qualify as a reorganization
for United States federal income tax purposes. In connection
with the filing of the registration statement of which this
document forms a part, Cleary Gottlieb Steen & Hamilton
LLP has delivered an opinion to Bank of America to the effect
that the merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code, and Wachtell,
Lipton, Rosen & Katz has delivered an opinion to MBNA
to the effect that (1) the merger will be treated as a
reorganization within the meaning of Section 368(a) of the
Code and (2) except to the extent of any cash consideration
received in the merger and except with respect to cash received
in lieu of fractional share interests in Bank of America common
stock, no gain or loss will be recognized by holders of MBNA
common stock in the merger. It is a condition to Bank of
Americas obligation to complete the merger that Bank of
America receive an opinion from Cleary Gottlieb Steen &
Hamilton LLP, dated the closing date of the merger, to the same
effect as the opinion from that firm described above. It is a
condition to MBNAs obligation to complete the merger that
MBNA receive an opinion from Wachtell, Lipton, Rosen &
Katz, dated the closing date of the merger, to the same effect
as the opinion from that firm described above. These opinions
will be based on representation letters provided by Bank of
America and MBNA and on customary factual assumptions, all of
which must continue to be true and accurate in all material
respects as of the effective time of the merger. None of the
opinions described above will be binding on the Internal Revenue
Service. Bank of America and MBNA have not sought and will not
seek any ruling from the Internal Revenue Service regarding any
matters relating to the merger, and as a result, there can be no
assurance that the Internal Revenue Service will not disagree
with or challenge any of the conclusions described herein.
As a result of the merger qualifying as a reorganization within
the meaning of Section 368(a) of the Code, upon exchanging
your MBNA common stock for a combination of Bank of America
common stock and cash, you will generally recognize gain (but
not loss) in an amount equal to the lesser of:
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the amount of gain realized (i.e., the excess, if any, of the
sum of the cash and the fair market value of the Bank of America
common stock you receive over your tax basis in the MBNA common
stock surrendered in the merger); and |
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the amount of cash that you receive in the merger. |
For this purpose, gain or loss must be calculated separately for
each identifiable block of shares surrendered in the exchange,
and a loss realized on one block of shares may not be used to
offset a gain realized on another block of shares. If you have
different bases or holding periods in respect of shares of MBNA
common stock, you should consult your tax advisor prior to the
exchange with regard to identifying the bases or holding periods
of the particular shares of Bank of America common stock
received in the merger.
Any recognized gain will generally be long-term capital gain if
your holding period with respect to the MBNA common stock
surrendered is more than one year at the effective time of the
merger. In some cases, where you actually or constructively own
Bank of America common stock immediately before the merger, such
cash received in the merger could be treated as having the
effect of the distribution of a dividend, under the tests set
forth in Section 302 of the Code, in which case such cash
received would be treated as ordinary dividend income. These
rules are complex and dependent upon the specific factual
circumstances particular to you. Consequently, if you may be
subject to those rules, you should consult your tax advisor as
to the application of these rules to the particular facts
relevant to you.
The aggregate tax basis in the shares of Bank of America common
stock that you receive in the merger, including any fractional
share interests deemed received by you under the treatment
described below, will equal your aggregate adjusted tax basis in
the MBNA common stock you surrender, increased by the amount of
taxable gain, if any, that you recognize on the exchange
(including any portion of the gain that is treated as a dividend
but excluding any gain or loss resulting from the deemed receipt
and redemption of a fractional share interest described below)
and decreased by the amount of any cash received by you in the
merger (excluding any cash received in lieu of a fractional
share interest). Your holding period for the shares of Bank of
America common stock that you receive in the merger (including a
fractional share interest deemed received and redeemed as
described below) will include your holding period for the shares
of MBNA common stock that you surrender in the exchange.
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Cash in Lieu of a Fractional Share
If you receive cash in lieu of a fractional share of Bank of
America common stock, you will be treated as having received the
fractional share of Bank of America common stock pursuant to the
merger and then as having exchanged the fractional share of Bank
of America common stock for cash in a redemption by Bank of
America. As a result, assuming that the redemption of a
fractional share of Bank of America common stock is treated as a
sale or exchange and not as a dividend, you generally will
recognize gain or loss equal to the difference between the
amount of cash received and the basis in its fractional share of
Bank of America common stock as set forth above. This gain or
loss generally will be capital gain or loss, and will be
long-term capital gain or loss if, as of the effective date of
the merger, the holding period for the shares is greater than
one year. The deductibility of capital losses is subject to
limitations.
Backup Withholding
If you are a non-corporate holder of MBNA common stock you may
be subject to information reporting and backup withholding at a
rate of 28% on any cash payments you receive. You generally will
not be subject to backup withholding, however, if you:
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furnish a correct taxpayer identification number and certify
that you are not subject to backup withholding on the substitute
Form W-9 or successor form included in the election
form/letter of transmittal you will receive; or |
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are otherwise exempt from backup withholding. |
Any amounts withheld under the backup withholding rules will
generally be allowed as a refund or credit against your United
States federal income tax liability, provided you timely furnish
the required information to the Internal Revenue Service.
Reporting Requirements
If you receive shares of Bank of America common stock as a
result of the merger, you will be required to retain records
pertaining to the merger and you will be required to file with
your United States federal income tax return for the year in
which the merger takes place a statement setting forth certain
facts relating to the merger.
52
COMPARISON OF STOCKHOLDERS RIGHTS
Bank of America is incorporated in Delaware and MBNA is
incorporated in Maryland. Your rights as an MBNA stockholder are
governed by the Maryland General Corporation Law, the MBNA
articles of incorporation and the MBNA bylaws. Upon completion
of the merger, you will exchange your shares of MBNA common
stock for cash and shares of Bank of America common stock, and
as Bank of America stockholders your rights will be governed by
the Delaware General Corporation Law, the Bank of America
certificate of incorporation and the Bank of America bylaws.
The following is a summary of the material differences between
the rights of holders of Bank of America common stock and the
rights of holders of MBNA common stock, but does not purport to
be a complete description of those differences. These
differences may be determined in full by reference to the
Delaware General Corporation Law, the Maryland General
Corporation Law, the Bank of America certificate of
incorporation, the MBNA articles of incorporation, the Bank of
America bylaws and the MBNA bylaws. The Bank of America
certificate of incorporation, the MBNA articles of incorporation
and the Bank of America and MBNA bylaws are subject to amendment
in accordance with their terms. Copies of the governing
corporate instruments are available, without charge, to any
person, including any beneficial owner to whom this document is
delivered, by following the instructions listed under
Where You Can Find More Information on page 64.
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MBNA |
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AUTHORIZED CAPITAL STOCK |
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Authorized Shares. MBNA is authorized under its articles
of incorporation to issue 1,520,000,000 shares, consisting
of 1,500,000,000 shares of common stock, par value
$0.01 per share, and 20,000,000 shares of preferred
stock, par value $0.01 per share. |
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Authorized Shares. Bank of America is authorized under
its certificate of incorporation to issue
7,600,000,000 shares, consisting of
7,500,000,000 shares of common stock, par value
$0.01 per share, and 100,000,000 shares of preferred
stock, par value $0.01 per share. |
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Preferred Stock. MBNAs articles of incorporation
provide that shares of preferred stock may be issued from time
to time in one or more series by the board of directors. The
board can fix the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of each
series of preferred stock. The rights of preferred stockholders
may supersede the rights of common stockholders. Currently,
(1) 6 million shares are authorized as MBNA
71/2%
Series A Cumulative Preferred Stock and
(2) 6 million shares are authorized as Series B
Adjustable Rate Cumulative Preferred Stock. Under the merger
agreement, MBNA has agreed to redeem all outstanding shares of
its
71/2%
Series A Cumulative Preferred Stock and Series B
Adjustable Rate Cumulative Preferred Stock prior to completion
of the merger. |
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Preferred Stock. Bank of Americas certificate of
incorporation provides that shares of preferred stock may be
issued from time to time in one or more series by the board of
directors. The board can fix the designations, preference,
limitations and relative rights of each series of preferred
stock. The rights of preferred stockholders may supersede the
rights of common stockholders. Currently, (1) 35,045 shares
are authorized as Bank of America Series B 7% Cumulative
Redeemable Preferred Stock, (2) 690,000 shares are
authorized as Bank of America Series VI 6.75% Perpetual
Preferred Stock, and (3) 805,000 shares are authorized
as Bank of America Series VII 6.60% Cumulative Preferred
Stock. |
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VOTING RIGHTS IN AN EXTRAORDINARY TRANSACTION |
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The Maryland General Corporation Law generally requires approval
of a consolidation, merger, share exchange or transfer by the
affirmative vote of two- thirds of all votes entitled to be cast
on the matter. |
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The Delaware General Corporation Law generally requires that any
merger, consolidation or sale of substantially all the assets of
a corporation be approved by a vote of a majority of all
outstanding shares entitled to vote thereon. Although a Delaware
corporations certificate of incorporation |
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MBNA |
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However, a Maryland corporations articles of incorporation
may provide for a greater or lesser vote (but not less than a
majority). The MBNA articles of incorporation provide that,
notwithstanding any provision of the Maryland General
Corporation Law requiring any action to be taken or authorized
by the affirmative vote of the holders of more than a majority
of the votes of all classes or any class of stock of MBNA, the
action will be effective and valid if taken or authorized by the
affirmative vote of a majority of the total number of votes
entitled to be cast thereon, unless otherwise specified in the
MBNA articles of incorporation. Approval of the merger requires
the affirmative vote of the holders of a majority of the
outstanding shares of MBNA common stock entitled to vote at the
MBNA special meeting.
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may provide for
a greater vote, the Bank of America certificate of incorporation
does not require a greater vote. |
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AMENDMENT TO THE ARTICLES/CERTIFICATE OF INCORPORATION |
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The Maryland General Corporation Law generally provides that an
amendment to a corporations articles of incorporation
requires (1) adoption by the board of directors of a
resolution submitting the proposed amendment to the
stockholders, and (2) approval by the affirmative vote of
the holders of two-thirds of all the votes entitled to be cast
on the matter. However, a Maryland corporations articles
of incorporation may provide for a greater or lesser vote (but
not less than a majority).
The MBNA articles of incorporation provide that, notwithstanding
any provision of the Maryland General Corporation Law requiring
any action to be taken or authorized by the affirmative vote of
the holders of more than a majority of the votes of all classes
or any class of stock of MBNA, such action will be effective and
valid if taken or authorized by the affirmative vote of a
majority of the total number of votes entitled to be cast
thereon, unless otherwise specified in the MBNA articles of
incorporation. Amendments to the MBNA articles of incorporation
generally require the affirmative vote of the holders of at
least a majority of the outstanding shares of MBNA common stock
entitled to vote on such matter. The MBNA articles of
incorporation specifically require a different standard with
respect to control share acquisitions, as discussed below. |
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Under the Delaware General Corporation Law, an amendment to the
certificate of incorporation requires (1) the approval of
the board of directors, (2) the approval of the holders of
a majority of the outstanding stock entitled to vote upon the
proposed amendment, and (3) the approval of the holders of
a majority of the outstanding stock of each class entitled to
vote thereon as a class. The Bank of America certificate of
incorporation provides that Bank of America reserves the right
at any time to amend or repeal any provision of the Bank of
America certificate of incorporation and that all rights
conferred thereby are granted subject to such right of Bank of
America, but does not contain any provisions altering the
standards for amendment. |
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The MBNA articles of incorporation provide that MBNA reserves
the right to make, from time to time, any amendments of its
articles of incorporation which are authorized by law, including any
amendments which alter the contract |
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rights of outstanding stock
as expressly set forth in the articles of incorporation.
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AMENDMENT TO THE BYLAWS |
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Under the Maryland General Corporation Law the power to adopt,
alter and repeal a corporations bylaws is vested in the
stockholders, except to the extent that the articles of
incorporation or bylaws vest it in the board of directors. The
MBNA bylaws specify that the bylaws may be altered, amended or
repealed, and new bylaws may be adopted, by the MBNA board of
directors and that the MBNA stockholders have no power to make,
amend or repeal any bylaw. |
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Under the Delaware General Corporation Law, bylaws may be
adopted, amended or repealed by the stockholders entitled to
vote, and by the board of directors if the corporations
certificate of incorporation confers the power to adopt, amend
or repeal the corporations bylaws upon the directors. The
Bank of America certificate of incorporation confers the power
to adopt, amend or repeal the Bank of America bylaws upon the
Bank of America board of directors, subject to the power of the
Bank of America stockholders to alter or repeal any bylaws made
by the Bank of America board of directors. |
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APPRAISAL RIGHTS |
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Under the Maryland General Corporation Law, appraisal rights are
available only in connection with (1) a consolidation
or merger with another corporation, (2) acquisitions
of the stockholders stock in a share
exchange, (3) a transfer of assets requiring
stockholder approval, (4) an amendment of a
companys articles of incorporation in a way that alters
the contract rights, as expressly set forth in the articles of
incorporation, of any outstanding stock and substantially
adversely affects the stockholders rights, unless the
right to do so is reserved by the articles of incorporation, or
(5) transactions governed by the voting requirements
section related to transactions with interested stockholders, or
is exempt from such voting requirements in certain
circumstances.
However, no appraisal rights are available to holders of shares
of any class of stock if:
the stock is listed on a national
securities exchange, is designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc., or is designated for
trading on the NASDAQ Small Cap Market;
the stock is that of the successor
in a merger, unless (1) the merger alters the contract
rights of the stock as expressly set forth in the articles of
incorporation (or other organizational document of the
successor), and such document does not reserve the right to do
so, or (2) the stock is to be changed or converted into something other than either stock in the successor or cash,
scrip or other |
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Under the Delaware General Corporation Law, a stockholder of a
Delaware corporation such as Bank of America who has not voted
in favor of, nor consented in writing to, a merger or
consolidation in which the corporation is participating
generally has the right to an appraisal of the fair value of the
stockholders shares of stock, subject to specified
procedural requirements. The Delaware General Corporation Law
does not confer appraisal rights, however, if the
corporations stock is either (1) listed on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or (2) held of
record by more than 2,000 holders.
Even if a corporations stock meets the foregoing
requirements, however, the Delaware General Corporation Law
provides that appraisal rights generally will be permitted if
stockholders of the corporation are required to accept for their
stock in any merger, consolidation or similar transaction
anything other than (1) shares of the corporation surviving
or resulting from the transaction, or depository receipts
representing shares of the surviving or resulting corporation,
or those shares or depository receipts plus cash in lieu of
fractional interests, (2) shares of any other corporation,
or depository receipts representing shares of the other
corporation, or those shares or depository receipts plus cash in
lieu of fractional interests, which shares or depository
receipts are listed on a national securities exchange or
designated as a national market system security on an interdealer quotation system by the
National Association of Securities |
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rights or interests arising out of the provisions
for the treatment of fractional shares of stock in the
successor;
the stock is generally not entitled
to be voted on the transaction or the stockholder did not own
the shares on the record date;
the articles of incorporation
provide that the holders of stock are not entitled to exercise
appraisal rights; or
the stock is that of an open-ended
investment company.
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Dealers, Inc. or held of
record by more than 2,000 holders, or (3) any
combination of the foregoing.
Under the Delaware General Corporation Law, appraisal rights are
not available in the merger for Bank of America stockholders. |
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Holders of MBNA common stock do not have any appraisal rights
because the outstanding shares of MBNA common stock are listed
on The New York Stock Exchange and because the MBNA articles of
incorporation do not otherwise provide. See the discussion in
the The MergerMBNA Stockholders Do Not Have
Dissenters Appraisal Rights in the Merger on
page 31. |
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SPECIAL MEETINGS OF STOCKHOLDERS |
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The Maryland General Corporation Law provides that a special
meeting of stockholders may be called by a corporations
president, board of directors or any other person specified in a
corporations articles of incorporation or bylaws. The MBNA
bylaws permit special meetings of stockholders to be called by
the chief executive officer, the president or the MBNA board of
directors, as well as the secretary upon the written request of
stockholders entitled to cast at least 25% of all votes entitled
to be cast at the meeting. The MBNA bylaws also provide that
unless the special meeting is requested by stockholders entitled
to vote at least a majority of all 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. |
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Under the Delaware General Corporation Law, special stockholder
meetings of a corporation may be called by the
corporations board of directors, or by any person or
persons authorized to do so by the corporations
certificate of incorporation or bylaws. The Bank of America
bylaws provide that a special meeting of stockholders may be
called for any purpose by the board of directors, the chairman
of the board of directors, the chief executive officer or the
president, or the secretary acting under instructions of any of
the foregoing. |
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STOCKHOLDER PROPOSALS AND NOMINATIONS |
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Holders of MBNA common stock may nominate individuals for
election to the MBNA board of directors or submit proposals for
consideration at meetings of stockholders as specified in the
MBNA bylaws. The MBNA bylaws provide that with respect to any
stockholder proposals, no business, including a nomination for
election as a director, may be brought before an annual meeting
of stockholders by any stockholder unless the stockholder has given
written notice of the business |
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The Delaware General Corporation Law does not contain any
specific provisions regarding notice of stockholders
proposals or nominations for directors. The Bank of America
bylaws specify that nominations of individuals for election as
directors and stockholder proposals may be made pursuant to Bank
of Americas notice of meeting, by or at the direction of
the Bank of America board of directors or by any holder of Bank of America stock entitled to vote on
the election of directors who complies |
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to MBNAs secretary not
later than 90 days prior to the anniversary date of the
previous years annual meeting. In the event of a special
meeting of MBNA stockholders at which directors are to be
elected, a nomination of an individual for election as a
director may be made pursuant to MBNAs notice of meeting
by or at the direction of the MBNA board of directors or by an
MBNA stockholder who complies with the notice procedure. A
stockholder may nominate a director for election as specified in
the notice of meeting so long as the notice is received by the
secretary of MBNA 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 public announcement of the special meeting.
The notice must include certain information concerning the
stockholder, the business the stockholder proposes to bring
before the meeting and, in the case of a nomination for
director, the nominee.
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with the requisite notice
procedure. The notice procedure requires that a
stockholders proposal or nomination of an individual for
election as a director must be made in writing and received by
the secretary of Bank of America not later than the close of
business on the 75th day nor earlier than the close of business
on the 120th day prior to the first anniversary of the date Bank
of America commenced mailing its proxy materials for the
preceding years annual meeting. In the event of a special
meeting of Bank of America stockholders at which directors are
to be elected, any Bank of America stockholder entitled to vote
may nominate an individual for election as director if the
stockholders notice is received by the secretary of Bank
of America not later than the close of business on the 15th day
following the day on which notice of the meeting is first mailed
to Bank of America stockholders. The notice must include certain
information concerning the stockholder, the matter the
stockholder proposes to bring before the meeting and, in the
case of a nomination for director, the nominee. |
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BOARD OF DIRECTORS
Number of Directors |
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Under the Maryland General Corporation Law, a corporation must
have a board of directors consisting of at least one director.
The MBNA articles of incorporation provide that the MBNA board
of directors is to initially consist of four members and that
the number of directors may be increased or decreased as
provided in the bylaws. The MBNA bylaws provide that the number
of directors must not be less than the lesser of three (or the
number of stockholders) or more than 20. Pursuant to the bylaws,
the board of directors may fix the number of directors from time
to time by resolution of the board of directors. Currently, the
number of members of the MBNA board of directors is nine. |
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Under Delaware General Corporation Law, the board of directors
of a corporation must consist of one or more members, each of
whom must be a natural person. The Bank of America bylaws
provide that the Bank of America board of directors is to
consist of not less than five nor more than 30 members, which
number may be changed from time to time within such range by the
Bank of America board of directors. Currently, the number of
members of the Bank of America board of directors is 17. |
Classification |
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The Maryland General Corporation Law permits classification of a
Maryland corporations board of directors if the
corporations articles of incorporation or bylaws so
provide. The MBNA articles of incorporation and the MBNA bylaws
do not provide for classification of the MBNA board of directors. |
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The Delaware General Corporation Law permits classification of a
Delaware corporations board of directors if the
corporations certificate of incorporation, an initial
bylaw or a bylaw approved by the stockholders so provides. The
Bank of America certificate of incorporation and the Bank of
America bylaws do not provide for classification of the Bank of
America board of directors. |
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Removal |
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Under the Maryland General Corporation Law, the stockholders of
a corporation may remove any director, with or without cause, by
the affirmative vote of a majority of all votes entitled to be
cast generally for the election of directors, except in certain
circumstances including election of directors by a separate
class or series, cumulative voting, a classified board or as
otherwise provided in the articles of incorporation. Since the
MBNA articles of incorporation do not include this limitation,
MBNA stockholders may remove one or all of the MBNA directors
with or without cause by the affirmative vote of a majority of
all votes entitled to be cast generally for the election of
directors. |
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The Delaware General Corporation Law provides that, in the
absence of cumulative voting or a classified board, any director
or the entire board of directors may be removed, with or without
cause, by the holders of a majority of the shares then entitled
to vote in an election of directors. Bank of America
stockholders may remove one or all of the Bank of America
directors with or without cause. |
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Vacancies |
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Under the Maryland General Corporation Law, stockholders may
elect a successor to fill a vacancy on the board of directors
which results from the removal of a director. In addition, a
majority of the remaining members of the board of directors may
fill a vacancy, unless it results from an increase in the size
of the board, in which case the vacancy may be filled by a
majority of the entire board.
Under the MBNA bylaws, a majority of the remaining members of
the MBNA board of directors may fill a vacancy, unless it
results from an increase in the size of the board, in which case
the vacancy may be filled by a majority of the entire board. |
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Under the Delaware General Corporation Law, vacancies and newly
created directorships may be filled by a majority of the
directors then in office, even though less than a quorum, or by
a sole remaining director unless otherwise provided in the
certificate of incorporation or bylaws.
Under the Bank of America bylaws, vacancies on the board of
directors may be filled by the vote of a majority of the
remaining directors, even if such remaining directors constitute
less than a quorum. |
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Special Meetings of the Board |
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Special meetings of the board of directors may be called by the
chairman of the board, the chief executive officer or by a
majority of the board. |
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Special meetings of the board of directors may be called by the
chairman of the board, the chief executive officer, the
president, or the secretary acting under instructions from any
of the foregoing persons, or upon the call of any three
directors. |
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Director Liability and Indemnification |
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The Maryland General Corporation Law permits a Maryland
corporation to indemnify any director or officer made a party to
any proceeding by reason of service in that capacity unless it
is established that (1) the act or omission of the director
or officer was material to the matter giving rise to the
proceeding and (a) was committed in bad faith or
(b) was the result of active and deliberate dishonesty,
(2) the director or officer actually received an improper
personal benefit in money, property or services, or (3) in
the case of any criminal proceeding, the director or officer had |
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The Delaware General Corporation Law provides that a corporation
may indemnify a director or officer against expenses actually
and reasonably incurred by him in association with any action,
suit or proceeding in which he is involved by reason of his
service to the corporation, if the director or officer acted in
good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and
with respect to a criminal proceeding, the director or officer
had no reason to believe that the act was unlawful. |
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reasonable cause to believe that the act or omission was
unlawful.
The Maryland General Corporation Law requires a corporation
(unless its articles of incorporation provide otherwise) to
indemnify reasonable expenses for a director or officer who has
been successful, on the merits or otherwise, in the defense of
any proceeding to which he is made a party by reason of his
service in that capacity. The MBNA articles of incorporation
provide that directors and officers shall have no liability to
the corporation or its stockholders for damages, and that MBNA
shall indemnify and advance expenses to directors and officers,
in each case to the fullest extent permitted by the Maryland
General Corporation Law.
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The Delaware General Corporation Law requires a corporation to
indemnify a director or officer who successfully defends himself
in such a proceeding.
The Bank of America certificate of incorporation provides that
directors shall not be personally liable for breaches of their
duties as directors, to the fullest extent allowed under the
Delaware General Corporation Law. The Bank of America bylaws
provide that directors and officers shall be indemnified to the
fullest extent permitted by the Delaware General Corporation Law. |
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STOCKHOLDER RIGHTS PLAN |
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MBNA currently does not have a stockholder rights plan in
effect.
The Maryland General Corporation Law expressly authorizes a
corporations board of directors to adopt stockholder
rights plans, which may include slow hand and dead hand
stockholder rights plans, without stockholder approval. |
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Bank of America currently does not have a stockholder rights
plan in effect, but under Delaware law the Bank of America board
of directors could adopt such a plan without stockholder
approval.
The Delaware General Corporation Law does not include a
statutory provision expressly validating stockholder rights
plans; however, such plans have generally been upheld by
decision of courts applying Delaware law. Dead hand stockholder
rights plans are not permitted under Delaware law. |
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The Bank of America board of directors has adopted a policy of
requiring stockholder approval prior to the adoption of any
stockholder rights plan. |
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STATE ANTI-TAKEOVER STATUTES
Business Combinations |
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Pursuant to the Maryland General Corporation Law, a corporation
may not engage in any business combination with an
interested stockholder (generally, one who
beneficially owns 10% or more of the voting power) for a period
of five years after the interested stockholder first becomes an
interested stockholder, unless the transaction has been approved
by the board of directors before the interested stockholder
became an interested stockholder or the corporation has exempted
itself from the statute pursuant to a provision in its articles
of incorporation. After the five-year period has elapsed, a
corporation subject to the statute may not consummate a business
combination with an interested stockholder unless (1) the
transaction has been recommended by the board of directors and (2) the transaction has been |
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The Delaware General Corporation Law generally prohibits a
corporation from engaging in a business combination
with an interested stockholder (generally, one who
beneficially owns 15% or more of the voting power) for a period
of three years following the date that the stockholder became an
interested stockholder unless:
prior to that time the
corporations board of directors approved either the
business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
upon completion of the transaction
that resulted in the stockholder becoming an interested stockholder, the interested |
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approved by (a) 80% of the outstanding shares entitled to
be cast and (b) two-thirds of the votes entitled to be cast
other than shares owned by the interested stockholder. This
approval requirement need not be met if certain fair price and
terms criteria have been satisfied.
The term business combination is defined to include
a wide variety of transactions, including mergers,
consolidations, share exchanges, sales or other dispositions of
10% or more of a corporations assets and various other
transactions that may benefit an interest stockholder.
The MBNA articles of incorporation do not contain any provisions
opting out of the restrictions prescribed by the above statute.
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stockholder owned
at least 85% of the voting stock of the corporation outstanding
at the time the transaction commenced, subject to specified
adjustments; or
at or subsequent to that time, the
business combination is approved by the corporations board
of directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least
662/3%
of the outstanding voting stock that is not owned by the
interested stockholder.
The three-year prohibition on business combinations with an
interested stockholder does not apply under certain
circumstances, including business combinations with a
corporation that does not have a class of voting stock that
is:
listed on a national security
exchange;
authorized for quotation on the
Nasdaq Stock Market; or |
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held of record by more than 2,000
stockholders; |
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unless, in each case, this result was directly or indirectly
caused by the interested stockholder or from a
transaction in which a person became an interested
stockholder. |
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The term business combination is defined to include
a wide variety of transactions, including mergers,
consolidations, sales or other dispositions of 10% or more of a
corporations assets and various other transactions that
may benefit an interested stockholder. |
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The Bank of America certificate of incorporation and the Bank of
America bylaws do not contain any provisions opting out of the
restrictions prescribed by this section of the Delaware General
Corporation Law. The merger does not constitute a prohibited
business combination under this statute. |
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Control Share Acquisition |
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The Maryland General Corporation Law provides that control
shares acquired in a control share acquisition have no voting
rights except to the extent approved by the stockholders at a
special meeting of the stockholders by the affirmative vote of
two-thirds of all the votes entitled to be cast on the matter,
excluding all interested shares, or as exempted by a provision
contained in the articles of incorporation or bylaws and adopted
at any time before the acquisition of the shares. The MBNA |
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The Delaware General Corporation Law does not contain a control
share acquisition statute. |
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articles of
incorporation and bylaws exempt Alfred Lerner and The
Progressive Corporation and their successors in interest or
their affiliates or associates from statutory limitations on the
voting rights of control shares.
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The special meeting of stockholders to consider the voting
rights to be accorded the shares acquired or to be acquired in
the control share acquisition is to be held within 50 days
after the date on which the corporation receives a request and a
written undertaking to pay the corporations expenses of
the special meeting delivered by the acquiring person. If the
acquiring person does not request a special meeting, the issue
of the voting rights to be accorded the shares acquired in the
control share acquisition may be presented for consideration at
any meeting of stockholders. |
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If voting rights have not been approved for control shares, the
corporation may redeem any or all of the control shares within
certain periods. In addition, stockholders may be entitled to
appraisal rights, as described above in Appraisal
Rights, for certain control share acquisitions. |
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Control shares means shares of stock that would, if
aggregated with all other shares of stock of the corporation
owned by a person or in respect of which that person is entitled
to exercise voting power (except by a revocable proxy), entitle
that person, directly or indirectly, to exercise the voting
power of shares of stock of the corporation in the election of
directors within any of the following ranges of voting power:
one-tenth or more, but less than one-third of all voting power;
one-third or more, but less than a majority of all voting power;
or a majority or more of all voting power. |
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Control Share Acquisition means the acquisition,
directly or indirectly, by any person, of ownership of, or the
power to direct the exercise of voting power with respect to,
issued and outstanding control shares. Certain transactions are
excluded from the definition of control share acquisition,
including the acquisition of shares under a merger,
consolidation or share exchange effected under the portions of
the Maryland General Corporation Law that govern mergers and
require board and stockholder approval, if the corporation is a
party to the merger, consolidation or share exchange. |
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STOCKHOLDER APPROVALS
BOARD POLICIES |
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The MBNA board of directors has not adopted any specific
policies requiring stockholder approval prior to actions by the
board. |
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The Bank of America board of directors has adopted a policy of
requiring stockholder approval for severance agreements with
senior executives that provide severance benefits in amounts
exceeding two times the sum of any senior executives base
salary and bonus.
In addition, the Bank of America board of directors has adopted
a policy of requiring stockholder approval prior to the adoption
of any stockholder rights plan. |
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DUTIES OF DIRECTORS |
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Under the Maryland General Corporation Law, the standard of
conduct for directors is governed by statute. The Maryland
General Corporation Law requires that a director of a Maryland
corporation perform his or her duties: (1) in good faith,
(2) in a manner he or she reasonably believes to be in the
best interests of the corporation, and (3) with the care
that an ordinarily prudent person in a like position would use
under similar circumstances. A directors acts are presumed
to satisfy this standard of conduct. In addition, under the
Maryland General Corporation law, the acts of directors of a
Maryland corporation relating to or affecting an acquisition or
potential acquisition of control of a corporation are not
subject to any higher duty or greater scrutiny than is applied
to any other act of a director. |
|
Under Delaware law, the standards of conduct for directors have
developed through Delaware court case law. Generally, directors
of Delaware corporations are subject to a duty of loyalty and a
duty of care. The duty of loyalty requires directors to refrain
from self-dealing and the duty of care requires directors in
managing the corporate affairs to use that level of care which
ordinarily careful and prudent persons would use in similar
circumstances. When directors act consistently with their duties
of loyalty and care, their decisions generally are presumed to
be valid under the business judgment rule. |
|
A directors duty does not require him or her to
(1) accept, recommend or respond to any proposal by a
person seeking to acquire control of the corporation,
(2) authorize the corporation to redeem any rights under,
or modify or render inapplicable, any stockholders rights plan,
(3) make a determination under the Maryland Business
Combination Act or the Maryland Control Share Acquisition Act,
or (4) act or fail to act solely because of the effect the
act or failure to act may have on an acquisition or potential
acquisition of control of the corporation or the amount or type
of consideration that may be offered or paid to the stockholders
in an acquisition. |
|
|
62
COMPARATIVE MARKET PRICES AND DIVIDENDS
Each of Bank of America common stock and MBNA common stock is
listed on the NYSE, among other stock exchanges. The following
table sets forth the high and low sales prices of shares of Bank
of America common stock and MBNA common stock as reported on the
NYSE, and the quarterly cash dividends declared per share for
the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank of America Common Stock | |
|
MBNA Common Stock | |
|
|
| |
|
| |
|
|
High | |
|
Low | |
|
Dividend(1) | |
|
High | |
|
Low | |
|
Dividend | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$ |
36.25 |
|
|
$ |
32.13 |
|
|
$ |
0.32 |
|
|
$ |
21.20 |
|
|
$ |
11.96 |
|
|
$ |
0.08 |
|
|
Second Quarter
|
|
|
40.00 |
|
|
|
33.60 |
|
|
|
0.32 |
|
|
|
22.60 |
|
|
|
14.52 |
|
|
|
0.08 |
|
|
Third Quarter
|
|
|
42.45 |
|
|
|
37.29 |
|
|
|
0.40 |
|
|
|
25.07 |
|
|
|
20.15 |
|
|
|
0.10 |
|
|
Fourth Quarter
|
|
|
41.38 |
|
|
|
36.25 |
|
|
|
0.40 |
|
|
|
25.50 |
|
|
|
23.00 |
|
|
|
0.10 |
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
41.50 |
|
|
|
38.81 |
|
|
|
0.40 |
|
|
|
29.05 |
|
|
|
24.52 |
|
|
|
0.12 |
|
|
Second Quarter
|
|
|
42.83 |
|
|
|
38.52 |
|
|
|
0.40 |
|
|
|
28.40 |
|
|
|
23.12 |
|
|
|
0.12 |
|
|
Third Quarter
|
|
|
44.99 |
|
|
|
41.77 |
|
|
|
0.45 |
|
|
|
26.35 |
|
|
|
22.35 |
|
|
|
0.12 |
|
|
Fourth Quarter
|
|
|
47.47 |
|
|
|
42.94 |
|
|
|
0.45 |
|
|
|
28.39 |
|
|
|
23.50 |
|
|
|
0.12 |
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
47.20 |
|
|
|
43.43 |
|
|
|
0.45 |
|
|
|
29.01 |
|
|
|
24.09 |
|
|
|
0.14 |
|
|
Second Quarter
|
|
|
47.42 |
|
|
|
43.47 |
|
|
|
0.45 |
|
|
|
26.70 |
|
|
|
18.29 |
|
|
|
0.14 |
|
|
Third Quarter (through September 16, 2005)
|
|
|
46.05 |
|
|
|
42.45 |
|
|
|
0.50 |
|
|
|
26.30 |
|
|
|
24.63 |
|
|
|
0.14 |
|
|
|
(1) |
The above table has been adjusted to reflect an August 27,
2004 two for one stock split of Bank of Americas common
stock. |
On June 29, 2005, the last full trading day before the
public announcement of the merger agreement, the high and low
sales prices of shares of Bank of America common stock as
reported on the New York Stock Exchange were $47.08 and $46.73,
respectively. On September 16, 2005, the last full trading
day before the date of this document, the high and low sale
prices of shares of Bank of America common stock as reported on
the New York Stock Exchange were $43.68 and $42.88, respectively.
On June 29, 2005, the last full trading day before the
public announcement of the merger agreement, the high and low
sales prices of shares of MBNA common stock as reported on the
New York Stock Exchange were $21.29 and $21.03, respectively. On
September 16, 2005, the last full trading day before the
date of this document, the high and low sale prices of shares of
MBNA common stock as reported on the New York Stock Exchange
were $25.40 and $25.02, respectively.
As of September 16, 2005, the last date prior to printing
this document for which it was practicable to obtain this
information, there were approximately 278,489 registered
holders of Bank of America common stock and approximately 2,903
registered holders of MBNA common stock.
Bank of America stockholders and MBNA stockholders are advised
to obtain current market quotations for Bank of America common
stock and MBNA common stock. The market price of Bank of America
common stock and MBNA common stock will fluctuate between the
date of this document and the completion of the merger. No
assurance can be given concerning the market price of Bank of
America common stock or MBNA common stock before or after the
effective date of the merger.
LEGAL MATTERS
The validity of the Bank of America common stock to be issued in
connection with the merger will be passed upon for Bank of
America by Timothy J. Mayopoulos, Executive Vice President and
General Counsel of Bank of America.
63
EXPERTS
The consolidated financial statements and managements
assessment of the effectiveness of internal control over
financial reporting (which is included in the Report of
Management on Internal Control over Financial Reporting) of Bank
of America and its subsidiaries incorporated in this document by
reference to Bank of Americas Current Report on
Form 8-K filed on July 12, 2005, have been so
incorporated in reliance on the report of PricewaterhouseCoopers
LLP, an independent registered public accounting firm, given on
the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of MBNA Corporation
incorporated by reference in MBNA Corporations Annual
Report (Form 10-K) for the year ended December 31,
2004, and MBNA Corporation managements assessment of the
effectiveness of internal control over financial reporting as of
December 31, 2004 incorporated by reference therein, have
been audited by Ernst & Young LLP, independent
registered public accounting firm, as set forth in their reports
thereon, incorporated by reference therein, and incorporated
herein by reference. Such consolidated financial statements and
managements assessment are incorporated herein by
reference in reliance upon such reports given on the authority
of such firm as experts in accounting and auditing.
MBNA expects representatives of Ernst & Young LLP to
attend the special meeting. These representatives will have an
opportunity to make a statement if they desire to do so, and we
expect that they will be available to respond to any appropriate
questions you may have.
OTHER MATTERS
According to the MBNA bylaws, business to be conducted at a
special meeting of stockholders may only be brought before the
meeting pursuant to a notice of meeting. Accordingly, no matters
other than the matters described in this document will be
presented for action at the special meeting or at any
adjournment or postponement of the special meeting.
MBNA 2006 Annual Meeting Stockholder Proposals
MBNA will hold a 2006 annual meeting of stockholders only if the
merger is not completed before the time it is required to hold
its 2006 annual meeting under its bylaws. For a stockholder
proposal to be considered for inclusion in MBNAs proxy
statement and form of proxy relating to the MBNA 2006 annual
meeting of stockholders (in the event this meeting is held), the
proposal must be received at MBNAs principal executive
offices not later than November 18, 2005. Any stockholder
proposals will be subject to Rule 14a-8 under the Exchange
Act.
With respect to any other stockholder proposals, one of
MBNAs bylaws provides that no business, including a
nomination for election as a director, may be brought before an
annual meeting of stockholders by any stockholder unless the
stockholder has given written notice of the business to the
Secretary of MBNA not later than 90 days prior to the
anniversary date of the previous years annual meeting. For
the 2006 Annual Meeting of Stockholders, should it be held, this
deadline is February 1, 2006. The notice must include
certain information concerning the stockholder, the business the
stockholder proposes to bring before the meeting and, in the
case of a nomination for director, the nominee. A copy of
MBNAs bylaws is available on its website
(http://www.mbna.com/investor) and may be obtained from
the Secretary of MBNA at 1100 North King Street, Wilmington,
Delaware 19884.
WHERE YOU CAN FIND MORE INFORMATION
Bank of America has filed with the SEC a registration statement
under the Securities Act that registers the distribution to MBNA
stockholders of the shares of Bank of America common stock to be
issued in connection with the merger. The registration
statement, including the attached exhibits and schedules,
contains additional relevant information about Bank of America
and Bank of America stock. The rules and regulations of the SEC
allow us to omit certain information included in the
registration statement from this document.
You may read and copy this information at the Public Reference
Room of the SEC at 100 F Street, NE, Room 1580,
Washington, D.C. 20549. You may obtain information on the
operation of the SECs Public Reference Room by calling the
SEC at 1-800-SEC-0330. The SEC also maintains an internet
website that contains reports, proxy statements and other
information about issuers, like Bank of America and MBNA, who
file electronically with the SEC. The address of the site is
http://www.sec.gov. The
64
reports and other information filed by Bank of America with the
SEC are also available at Bank of Americas internet
website. The address of the site is
http://www.bankofamerica.com. The reports and other
information filed by MBNA with the SEC are also available at
MBNAs internet website. The address of the site is
http://www.mbna.com/investor. We have included the web
addresses of the SEC, Bank of America, and MBNA as inactive
textual references only. Except as specifically incorporated by
reference into this document, information on those web sites is
not part of this document.
The SEC allows Bank of America and MBNA to incorporate by
reference information in this document. This means that Bank of
America and MBNA can disclose important information to you by
referring you to another document filed separately with the SEC.
The information incorporated by reference is considered to be a
part of this document, except for any information that is
superseded by information that is included directly in this
document.
This document incorporates by reference the documents listed
below that Bank of America and MBNA previously filed with the
SEC. They contain important information about the companies and
their financial condition.
|
|
|
Bank of America SEC Filings |
|
|
(SEC File No. 001-06523; CIK No. 0000070858) |
|
Period or Date Filed |
|
|
|
Annual Report on Form 10-K except for Part II,
Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations; and Part II,
Item 8. Consolidated Financial Statements and Supplementary
Data. The information included in Part II Item 7 and
Item 8 was updated in the Current Report on Form 8-K
filed on July 12, 2005, which is incorporated herein by
reference.
|
|
Year ended December 31, 2004 |
Quarterly Report on Form 10-Q
|
|
Quarters ended March 31, 2005 and June 30, 2005 |
Current Reports on Form 8-K
|
|
Filed on January 7, 2005, January 18, 2005 (2),
January 26, 2005, February 10, 2005, February 24,
2005, March 3, 2005, March 9, 2005, March 14,
2005, March 22, 2005, March 23, 2005, April 18,
2005, May 6, 2005, May 19, 2005, June 30, 2005,
July 6, 2005, July 12, 2005, July 18, 2005,
July 26, 2005, August 9, 2005, August 11, 2005,
August 16, 2005, August 26, 2005, September 2,
2005 and September 12, 2005 (other than the portions of
those documents not deemed to be filed) |
The description of Bank of America common stock set forth in a
registration statement filed pursuant to Section 12 of the
Exchange Act and any amendment or report filed for the purpose
of updating those descriptions |
|
|
|
|
|
MBNA SEC Filings |
|
|
(SEC File No. 001-10683; CIK No. 0000870517) |
|
Period or Date Filed |
|
|
|
Annual Report on Form 10-K
|
|
Year ended December 31, 2004 |
Quarterly Report on Form 10-Q
|
|
Quarters ended March 31, 2005 and June 30, 2005 |
Current Reports on Form 8-K
|
|
Filed on January 20, 2005 (3), January 21, 2005,
February 1, 2005, February 10, 2005, February 15,
2005, February 28, 2005, March 15, 2005, April 6,
2005, April 20, 2005 (2), April 21, 2005 (2),
May 6, 2005, May 16, 2005 (2), May 19, 2005,
June 1, 2005, June 14, 2005, June 15, 2005,
June 22, 2005, June 30, 2005, July 6, 2005,
July 7, 2005, July 18, 2005 (2), August 11, 2005
(2), August 15, 2005, August 16, 2005 (2),
August 25, 2005, September 12, 2005,
September 15, 2005 and September 16, 2005 (other than
the portions of those documents not deemed to be filed) |
65
In addition, Bank of America and MBNA also incorporate by
reference additional documents that either company files with
the SEC under Sections 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, as amended, between the date of
this document and the date of the MBNA special meeting. These
documents include periodic reports, such as Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, as well as proxy statements.
Bank of America has supplied all information contained or
incorporated by reference in this document relating to Bank of
America, as well as all pro forma financial information, and
MBNA has supplied all information relating to MBNA.
Documents incorporated by reference are available from Bank of
America and MBNA without charge, excluding any exhibits to those
documents unless the exhibit is specifically incorporated by
reference as an exhibit in this document. You can obtain
documents incorporated by reference in this document by
requesting them in writing or by telephone from the appropriate
company at the following addresses:
|
|
|
Bank of America Corporation
|
|
MBNA Corporation |
Bank of America Corporate Center
|
|
MBNA Corporation |
100 N. Tryon Street
|
|
1100 North King Street |
Charlotte, North Carolina 28255
|
|
Wilmington, Delaware 19884 |
Investor Relations
|
|
Attention: Investor Relations |
Telephone: (704) 386-5667
|
|
Telephone: (800) 362-6255 |
MBNA stockholders requesting documents should do so by
October 27, 2005 to receive them before the special
meeting. You will not be charged for any of these documents
that you request. If you request any incorporated documents from
Bank of America or MBNA, MBNA will mail them to you by first
class mail, or another equally prompt means, within one business
day after it receives your request.
Neither Bank of America nor MBNA has authorized anyone to
give any information or make any representation about the merger
or our companies that is different from, or in addition to, that
contained in this document or in any of the materials that have
been incorporated in this document. Therefore, if anyone does
give you information of this sort, you should not rely on it. If
you are in a jurisdiction where offers to exchange or sell, or
solicitations of offers to exchange or purchase, the securities
offered by this document or the solicitation of proxies is
unlawful, or if you are a person to whom it is unlawful to
direct these types of activities, then the offer presented in
this document does not extend to you. The information contained
in this document speaks only as of the date of this document
unless the information specifically indicates that another date
applies.
This document contains a description of the representations
and warranties that each of Bank of America and MBNA made to the
other in the merger agreement. Representations and warranties
made by Bank of America, MBNA and other applicable parties are
also set forth in contracts and other documents (including the
merger agreement and option agreement) that are attached or
filed as exhibits to this document or are incorporated by
reference into this document. These representations and
warranties were made as of specific dates, may be subject to
important qualifications and limitations agreed to between the
parties in connection with negotiating the terms of the
agreement, and may have been included in the agreement for the
purpose of allocating risk between the parties rather than to
establish matters as facts. These materials are included or
incorporated by reference only to provide you with information
regarding the terms and conditions of the agreements, and not to
provide any other factual information regarding MBNA, Bank of
America or their respective businesses. Accordingly, the
representations and warranties and other provisions of the
agreements (including the merger agreement and the stock option
agreement) should not be read alone, but instead should be read
only in conjunction with the other information provided
elsewhere in this document or incorporated by reference into
this document.
66
APPENDIX A
AGREEMENT AND PLAN OF MERGER
by and between
MBNA CORPORATION
and
BANK OF AMERICA CORPORATION
DATED AS OF
JUNE 30, 2005
TABLE OF CONTENTS
|
|
|
|
|
|
|
ARTICLE I
THE MERGER |
1.1
|
|
The Merger |
|
|
1 |
|
1.2
|
|
Effective Time |
|
|
2 |
|
1.3
|
|
Effects of the Merger |
|
|
2 |
|
1.4
|
|
Conversion of MBNA Common Stock |
|
|
2 |
|
1.5
|
|
Stock Options and Other Stock-Based Awards |
|
|
3 |
|
1.6
|
|
Certificate of Incorporation of Bank of America |
|
|
5 |
|
1.7
|
|
Bylaws of Bank of America |
|
|
5 |
|
1.8
|
|
Tax Consequences |
|
|
5 |
|
ARTICLE II
DELIVERY OF MERGER CONSIDERATION |
2.1
|
|
Exchange Agent |
|
|
5 |
|
2.2
|
|
Deposit of Merger Consideration |
|
|
5 |
|
2.3
|
|
Delivery of Merger Consideration |
|
|
6 |
|
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MBNA |
3.1
|
|
Corporate Organization |
|
|
8 |
|
3.2
|
|
Capitalization |
|
|
9 |
|
3.3
|
|
Authority; No Violation |
|
|
10 |
|
3.4
|
|
Consents and Approvals |
|
|
11 |
|
3.5
|
|
Reports; Regulatory Matters |
|
|
12 |
|
3.6
|
|
Financial Statements |
|
|
13 |
|
3.7
|
|
Brokers Fees |
|
|
15 |
|
3.8
|
|
Absence of Certain Changes or Events |
|
|
15 |
|
3.9
|
|
Legal Proceedings |
|
|
16 |
|
3.10
|
|
Taxes and Tax Returns |
|
|
16 |
|
3.11
|
|
Employee Matters |
|
|
17 |
|
3.12
|
|
Compliance with Applicable Law |
|
|
19 |
|
3.13
|
|
Certain Contracts |
|
|
19 |
|
3.14
|
|
Risk Management Instruments |
|
|
20 |
|
3.15
|
|
Investment Securities and Commodities |
|
|
20 |
|
3.16
|
|
Loan Portfolio |
|
|
21 |
|
3.17
|
|
Property |
|
|
21 |
|
3.18
|
|
Intellectual Property |
|
|
22 |
|
3.19
|
|
Environmental Liability |
|
|
22 |
|
A-i
|
|
|
|
|
|
|
3.20
|
|
Credit Card Operations |
|
|
23 |
|
3.21
|
|
Securitization |
|
|
24 |
|
3.22
|
|
State Takeover Laws |
|
|
27 |
|
3.23
|
|
Reorganization; Approvals |
|
|
28 |
|
3.24
|
|
Opinion |
|
|
28 |
|
3.25
|
|
MBNA Information |
|
|
28 |
|
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BANK OF AMERICA |
4.1
|
|
Corporate Organization |
|
|
28 |
|
4.2
|
|
Capitalization |
|
|
29 |
|
4.3
|
|
Authority; No Violation |
|
|
30 |
|
4.4
|
|
Consents and Approvals |
|
|
31 |
|
4.5
|
|
Reports; Regulatory Matters |
|
|
31 |
|
4.6
|
|
Financial Statements |
|
|
32 |
|
4.7
|
|
Brokers Fees |
|
|
34 |
|
4.8
|
|
Absence of Certain Changes or Events |
|
|
34 |
|
4.9
|
|
Legal Proceedings |
|
|
34 |
|
4.10
|
|
Taxes and Tax Returns |
|
|
34 |
|
4.11
|
|
Compliance with Applicable Law |
|
|
35 |
|
4.12
|
|
Reorganization; Approvals |
|
|
35 |
|
4.13
|
|
Aggregate Cash Consideration |
|
|
35 |
|
4.14
|
|
Bank of America Information |
|
|
35 |
|
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS |
5.1
|
|
Conduct of Businesses Prior to the Effective Time |
|
|
35 |
|
5.2
|
|
MBNA Forbearances |
|
|
36 |
|
5.3
|
|
Bank of America Forbearances |
|
|
38 |
|
ARTICLE VI
ADDITIONAL AGREEMENTS |
6.1
|
|
Regulatory Matters |
|
|
38 |
|
6.2
|
|
Access to Information |
|
|
39 |
|
6.3
|
|
Stockholder Approval |
|
|
40 |
|
6.4
|
|
Affiliates |
|
|
40 |
|
6.5
|
|
NYSE Listing |
|
|
40 |
|
6.6
|
|
Employee Matters |
|
|
40 |
|
6.7
|
|
Indemnification; Directors and Officers Insurance |
|
|
41 |
|
6.8
|
|
Additional Agreements |
|
|
43 |
|
6.9
|
|
Advice of Changes |
|
|
43 |
|
6.10
|
|
Exemption from Liability Under Section 16(b) |
|
|
43 |
|
A-ii
|
|
|
|
|
|
|
6.11
|
|
No Solicitation |
|
|
43 |
|
6.12
|
|
Directorship |
|
|
45 |
|
6.13
|
|
Restructuring Efforts |
|
|
45 |
|
6.14
|
|
MBNA Cumulative Preferred Stock |
|
|
46 |
|
6.15
|
|
Dividends |
|
|
46 |
|
ARTICLE VII
CONDITIONS PRECEDENT |
7.1
|
|
Conditions to Each Partys Obligation To Effect the Merger |
|
|
46 |
|
7.2
|
|
Conditions to Obligations of Bank of America |
|
|
46 |
|
7.3
|
|
Conditions to Obligations of MBNA |
|
|
47 |
|
ARTICLE VIII
TERMINATION AND AMENDMENT |
8.1
|
|
Termination |
|
|
48 |
|
8.2
|
|
Effect of Termination |
|
|
49 |
|
8.3
|
|
Fees and Expenses |
|
|
49 |
|
8.4
|
|
Amendment |
|
|
49 |
|
8.5
|
|
Extension; Waiver |
|
|
50 |
|
ARTICLE IX
GENERAL PROVISIONS |
9.1
|
|
Closing |
|
|
50 |
|
9.2
|
|
Standard |
|
|
50 |
|
9.3
|
|
Nonsurvival of Representations, Warranties and Agreements |
|
|
51 |
|
9.4
|
|
Notices |
|
|
51 |
|
9.5
|
|
Interpretation |
|
|
52 |
|
9.6
|
|
Counterparts |
|
|
52 |
|
9.7
|
|
Entire Agreement |
|
|
52 |
|
9.8
|
|
Governing Law; Jurisdiction |
|
|
52 |
|
9.9
|
|
Publicity |
|
|
52 |
|
9.10
|
|
Assignment; Third Party Beneficiaries |
|
|
53 |
|
Exhibit A Stock Option Agreement |
Exhibit B Form of Affiliate Letter |
A-iii
INDEX OF DEFINED TERMS
|
|
|
|
|
|
|
Section | |
|
|
| |
Account Agreement
|
|
|
3.20(h)(i) |
|
Accounts
|
|
|
3.20(h)(ii) |
|
Adjusted Option
|
|
|
1.5(a) |
|
Adverse Development
|
|
|
3.21(f) |
|
Agreement
|
|
|
Preamble |
|
Alternative Proposal
|
|
|
6.11(a) |
|
Alternative Transaction
|
|
|
6.11(a) |
|
Articles of Merger
|
|
|
1.2 |
|
Bank of America
|
|
|
Preamble |
|
Bank of America Bylaws
|
|
|
4.1(a) |
|
Bank of America Capitalization Date
|
|
|
4.2(a) |
|
Bank of America Certificate
|
|
|
4.1(a) |
|
Bank of America Closing Price
|
|
|
1.5(a) |
|
Bank of America Common Stock
|
|
|
1.4(a) |
|
Bank of America Disclosure Schedule
|
|
|
Art. IV |
|
Bank of America Preferred Stock
|
|
|
4.2(a) |
|
Bank of America Regulatory Agreement
|
|
|
4.5(b) |
|
Bank of America Requisite Regulatory Approvals
|
|
|
7.2(d) |
|
Bank of America Restricted Share Right
|
|
|
1.5(b) |
|
Bank of America RSU
|
|
|
1.5(c) |
|
Bank of America SEC Reports
|
|
|
4.5(c) |
|
Bank of America Stock Plans
|
|
|
4.2(a) |
|
Bank of America Subsidiary
|
|
|
3.1(c) |
|
BHC Act
|
|
|
3.1(b) |
|
Cardholder
|
|
|
3.20(h)(iii) |
|
Cash Consideration
|
|
|
1.4(c)(ii) |
|
Certificate
|
|
|
1.4(d) |
|
Certificate of Merger
|
|
|
1.2 |
|
Claim
|
|
|
6.7(a) |
|
Closing
|
|
|
9.1 |
|
Closing Date
|
|
|
9.1 |
|
Code
|
|
|
Recitals |
|
Confidentiality Agreement
|
|
|
6.2(b) |
|
Convertible Note Agreement
|
|
|
4.2(a) |
|
Covered Employees
|
|
|
6.6(a) |
|
Credit Card
|
|
|
3.20(h)(iv) |
|
Credit Card Associations
|
|
|
3.20(h)(v) |
|
Criticized Assets
|
|
|
3.16(a) |
|
Derivative Transactions
|
|
|
3.14(a) |
|
DGCL
|
|
|
1.1(a) |
|
DPC Common Shares
|
|
|
1.4(b) |
|
Effective Time
|
|
|
1.2 |
|
ERISA
|
|
|
3.11(a) |
|
A-iv
|
|
|
|
|
|
|
Section | |
|
|
| |
Exchange Act
|
|
|
3.5(c) |
|
Exchange Agent
|
|
|
2.1 |
|
Exchange Agent Agreement
|
|
|
2.1 |
|
Exchange Fund
|
|
|
2.2 |
|
Exchange Ratio
|
|
|
1.5(a) |
|
FDIC
|
|
|
3.1(d) |
|
Federal Reserve Board
|
|
|
3.4 |
|
Form S-4
|
|
|
3.4 |
|
FSA
|
|
|
3.4 |
|
GAAP
|
|
|
3.1(c) |
|
Governmental Entity
|
|
|
3.4 |
|
Indemnified Parties
|
|
|
6.7(a) |
|
Indenture
|
|
|
3.21(o)(i) |
|
Injunction
|
|
|
7.1(d) |
|
Insurance Amount
|
|
|
6.7(c) |
|
Intellectual Property
|
|
|
3.18 |
|
IRS
|
|
|
3.10(a) |
|
Leased Properties
|
|
|
3.17 |
|
Letter of Transmittal
|
|
|
2.3(a) |
|
Liens
|
|
|
3.2(b) |
|
Loans
|
|
|
3.16(a) |
|
Material Adverse Effect
|
|
|
3.8(a) |
|
Materially Burdensome Regulatory Condition
|
|
|
6.1(b) |
|
MBNA
|
|
|
Preamble |
|
MBNA Benefit Plans
|
|
|
3.11(a) |
|
MBNA By-laws
|
|
|
3.1(b) |
|
MBNA Capitalization Date
|
|
|
3.2(a) |
|
MBNA Charter
|
|
|
3.1(b) |
|
MBNA Common Stock
|
|
|
1.4(b) |
|
MBNA Contract
|
|
|
3.13(a) |
|
MBNA Disclosure Schedule
|
|
|
Art. III |
|
MBNA Master Trust
|
|
|
3.21(o)(ii) |
|
MBNA Options
|
|
|
1.5(a) |
|
MBNA Owner Trust
|
|
|
3.21(o)(iii) |
|
MBNA Preferred Stock
|
|
|
3.2(a) |
|
MBNA Regulatory Agreement
|
|
|
3.5(b) |
|
MBNA Requisite Regulatory Approvals
|
|
|
7.3(d) |
|
MBNA Restricted Shares
|
|
|
1.5(b) |
|
MBNA RSUs
|
|
|
1.5(c) |
|
MBNA SEC Reports
|
|
|
3.5(c) |
|
MBNA Securitization Documents
|
|
|
3.21(o)(iv) |
|
MBNA Securitization Interests
|
|
|
3.21(o)(v) |
|
MBNA Securitization Receivable
|
|
|
3.21(o)(vi) |
|
MBNA Securitization Reports
|
|
|
3.21(m) |
|
MBNA Securitization Transaction
|
|
|
3.21(o)(vii) |
|
MBNA Stock Plans
|
|
|
1.5(a) |
|
A-v
|
|
|
|
|
|
|
Section | |
|
|
| |
MBNA Subsidiary
|
|
|
3.1(c) |
|
Merger
|
|
|
Recitals |
|
Merger Consideration
|
|
|
1.4(c) |
|
MGCL
|
|
|
1.1(a) |
|
NYSE
|
|
|
1.5(a) |
|
OSFI
|
|
|
3.4 |
|
Other Regulatory Approvals
|
|
|
3.4 |
|
Owned Properties
|
|
|
3.17 |
|
Permitted Encumbrances
|
|
|
3.17 |
|
Policies, Practices and Procedures
|
|
|
3.15(b) |
|
Pooling and Servicing Agreement
|
|
|
3.21(o)(viii) |
|
Proxy Statement
|
|
|
3.4 |
|
Real Property
|
|
|
3.17 |
|
Regulatory Agencies
|
|
|
3.5(a) |
|
Retained Interest
|
|
|
3.21(o)(ix) |
|
Sarbanes-Oxley Act
|
|
|
3.5(c) |
|
SBA
|
|
|
3.4 |
|
SEC
|
|
|
3.4 |
|
Securities Act
|
|
|
3.2(a) |
|
Servicer Default
|
|
|
3.21(o)(x) |
|
Servicer Default or Termination
|
|
|
3.21(g) |
|
SRO
|
|
|
3.4 |
|
Stock Consideration
|
|
|
1.4(c)(i) |
|
Stock Option Agreement
|
|
|
Recitals |
|
Subsidiary
|
|
|
3.1(c) |
|
Surviving Corporation
|
|
|
Recitals |
|
Takeover Statutes
|
|
|
3.22 |
|
Tax(es)
|
|
|
3.10(b) |
|
Tax Return
|
|
|
3.10(c) |
|
Trust Account Common Shares
|
|
|
1.4(b) |
|
Voting Debt
|
|
|
3.2(a) |
|
A-vi
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 30, 2005
(this Agreement), by and between MBNA
CORPORATION, a Maryland corporation (MBNA),
and BANK OF AMERICA CORPORATION, a Delaware corporation
(Bank of America).
W I T N E S S E T H:
WHEREAS, the Boards of Directors of MBNA and Bank of America
have determined that it is in the best interests of their
respective companies and their stockholders to consummate the
strategic business combination transaction provided for in this
Agreement in which MBNA will, on the terms and subject to the
conditions set forth in this Agreement, merge with and into Bank
of America (the Merger), so that Bank of
America is the surviving corporation in the Merger (sometimes
referred to in such capacity as the Surviving
Corporation);
WHEREAS, for federal income Tax purposes, it is intended that
the Merger shall qualify as a reorganization under the
provisions of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the Code), and this
Agreement is intended to be and is adopted as a plan of
reorganization for purposes of Sections 354 and 361
of the Code;
WHEREAS, as an inducement and condition to the entrance of Bank
of America into this Agreement, MBNA is granting to Bank of
America an option pursuant to a stock option agreement in the
form set forth in Exhibit A (the Stock Option
Agreement); and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Merger and also
to prescribe certain conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained in this
Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the parties agree as
follows:
ARTICLE I
The Merger
1.1 The Merger.
(a) Subject to the terms and conditions of this Agreement,
in accordance with the Delaware General Corporation Law (the
DGCL) and the Maryland General Corporation
Law (the MGCL), at the Effective Time MBNA
shall merge with and into Bank of America. Bank of America shall
be the Surviving Corporation in the Merger and shall continue
its corporate existence under the laws of the State of Delaware.
As of the Effective Time, the separate corporate existence of
MBNA shall cease.
(b) Bank of America may at any time
change the method of effecting the combination (including by
providing for the merger of MBNA and a wholly owned subsidiary of
A-1
Bank of America) if and to the extent requested by Bank of
America and consented to by MBNA (such consent not to be
unreasonably withheld or delayed); provided,
however, that no such change shall (i) alter or
change the amount or kind of the Merger Consideration provided
for in this Agreement, (ii) adversely affect the Tax
treatment of MBNAs stockholders as a result of receiving
the Merger Consideration or the Tax treatment of either party
pursuant to this Agreement or (iii) materially impede or
delay consummation of the transactions contemplated by this
Agreement.
1.2 Effective Time.
The Merger shall become effective as set forth in the
certificate of merger (the Certificate of
Merger) that shall be filed with the Secretary of
State of the State of Delaware and the articles of merger (the
Articles of Merger) that shall be filed with
the Maryland State Department of Assessments and Taxation on the
Closing Date. The term Effective Time shall
be the date and time when the Merger becomes effective as set
forth in the Certificate of Merger and the Articles of Merger.
1.3 Effects of the
Merger. At and after the Effective Time, the Merger
shall have the effects set forth in Section 259 of the DGCL
and in Section 3-114 of the MGCL.
1.4 Conversion of MBNA Common
Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of Bank of America, MBNA or
the holder of any of the following securities:
(a) Each share of common stock, par
value $0.01 per share, of Bank of America (the
Bank of America Common Stock) and each share
of Bank of America Preferred Stock (as defined in
Section 4.2(a)) issued and outstanding immediately prior to
the Effective Time shall remain issued and outstanding and shall
not be affected by the Merger.
(b) All shares of common stock, par
value $0.01 per share, of MBNA issued and outstanding
immediately prior to the Effective Time (the MBNA
Common Stock) that are owned by MBNA or Bank of
America (other than shares of MBNA Common Stock held in trust
accounts, managed accounts and the like, or otherwise held in a
fiduciary or agency capacity, that are beneficially owned by
third parties (any such shares, Trust Account Common
Shares) and other than shares of MBNA Common Stock
held, directly or indirectly, by MBNA or Bank of America in
respect of a debt previously contracted (any such shares,
DPC Common Shares)) shall be cancelled and
shall cease to exist and no stock of Bank of America or other
consideration shall be delivered in exchange therefor.
(c) Subject to Section 1.4(e), each share of the MBNA
Common Stock, except for shares of MBNA Common Stock owned by
MBNA or Bank of America (other than Trust Account Common Shares
and DPC Common Shares), shall be converted, in accordance with
the procedures set forth in Article II, into the right to
receive, (i) 0.5009 of a share of Bank of America Common
Stock (the Stock Consideration) and
(ii) an amount in cash equal to $4.125, without interest
(the Cash Consideration). The Cash
Consideration and the Stock Consideration are sometimes referred
to herein collectively as the Merger
Consideration.
(d) All of the shares of MBNA Common Stock converted into
the right to receive the Merger Consideration pursuant to this
Article I shall no longer be outstanding and
A-2
shall automatically be cancelled and shall cease to exist as of
the Effective Time, and each certificate previously representing
any such shares of MBNA Common Stock (each, a
Certificate) shall thereafter represent only
the right to receive the Merger Consideration and/or cash in
lieu of fractional shares, into which the shares of MBNA Common
Stock represented by such Certificate have been converted
pursuant to this Section 1.4 and Section 2.3(f), as
well as any dividends to which holders of MBNA Common Stock
become entitled in accordance with Section 2.3(c).
(e) If, between the date of this
Agreement and the Effective Time, the outstanding shares of Bank
of America Common Stock shall have been increased, decreased,
changed into or exchanged for a different number or kind of
shares or securities as a result of a reorganization,
recapitalization, reclassification, stock dividend, stock split,
reverse stock split, or other similar change in capitalization,
an appropriate and proportionate adjustment shall be made to the
Stock Consideration.
1.5 Stock Options and Other
Stock-Based Awards.
(a) As of the Effective Time, by
virtue of the Merger and without any action on the part of the
holders thereof, each option to purchase shares of MBNA Common
Stock granted to employees or directors of MBNA or any of its
Subsidiaries under either of the 1991 Long Term Incentive Plan
or the 1997 Long Term Incentive Compensation Plan of MBNA
(collectively, the MBNA Stock Plans) that is
outstanding immediately prior to the Effective Time
(collectively, the MBNA Options) shall be
converted into an option (an Adjusted Option)
to purchase, on the same terms and conditions as applied to each
such MBNA Option immediately prior to the Effective Time (taking
into account any accelerated vesting of such MBNA Options in
accordance with the terms thereof), the number of whole shares
of Bank of America Common Stock that is equal to the number of
shares of MBNA Common Stock subject to such MBNA Option
immediately prior to the Effective Time multiplied by the
Exchange Ratio (rounded down to the nearest whole share), at an
exercise price per share of Bank of America Common Stock
(rounded up to the nearest whole penny) equal to the exercise
price for each such share of MBNA Common Stock subject to such
MBNA Option immediately prior to the Effective Time divided by
the Exchange Ratio; provided, however, that, in the case
of any MBNA Option, the exercise price and the number of shares
of Bank of America Common Stock subject to such option shall be
determined in a manner consistent with the requirements of
Section 409A of the Code; provided, further,
that, in the case of any MBNA Option to which Section 421
of the Code applies as of the Effective Time (after taking into
account the effect of any accelerated vesting thereof) by reason
of its qualification under Section 422 of the Code, the
exercise price, the number of shares of Bank of America Common
Stock subject to such option and the terms and conditions of
exercise of such option shall be determined in a manner
consistent with the requirements of Section 424(a) of the
Code.
Exchange Ratio shall mean the sum of
(x) the Stock Consideration and (y) the quotient of
the Cash Consideration divided by the Bank of America Closing
Price, rounded to the nearest one ten thousandth.
Bank of America Closing Price shall mean the
average, rounded to the nearest one ten thousandth, of the
closing sale prices of Bank of America Common Stock on the New
York
A-3
Stock Exchange (the NYSE) as reported by The
Wall Street Journal for the five trading days immediately
preceding the date of the Effective Time.
(b) As of the Effective Time, each
restricted share of MBNA Common Stock granted to any employee or
director of MBNA or any of its Subsidiaries under an MBNA Stock
Plan that is outstanding immediately prior to the Effective Time
(collectively, the MBNA Restricted Shares)
shall, by virtue of the Merger and without any action on the
part of the holder thereof, be cancelled and converted into the
right to receive (the Bank of America Restricted Share
Right), on the same terms and conditions as applied to
each such MBNA Restricted Share immediately prior to the
Effective Time (including, in the case of Stock Consideration
received in respect of each MBNA Restricted Share, the same
transfer restrictions taking into account any accelerated
vesting of such MBNA Restricted Share in accordance with the
terms thereof), the Merger Consideration; provided,
however, that, upon the lapsing of restrictions with
respect to each such Bank of America Restricted Share Right in
accordance with the terms applicable to the corresponding MBNA
Restricted Share immediately prior to the Effective Time, Bank
of America shall be entitled to deduct and withhold such amounts
as may be required to be deducted and withheld under the Code
and any applicable state or local tax law with respect to the
lapsing of such restrictions.
(c) As of the Effective Time, each
restricted share unit with respect to shares of MBNA Common
Stock granted to any employee or director of MBNA or any of its
Subsidiaries under an MBNA Stock Plan that is outstanding
immediately prior to the Effective Time (collectively, the
MBNA RSUs) shall, by virtue of the Merger and
without any action on the part of the holder thereof, be
converted into a restricted share unit, on the same terms and
conditions as applied to each such MBNA RSU immediately prior to
the Effective Time (taking into account any accelerated vesting
of such MBNA RSU in accordance with the terms thereof), with
respect to the number of shares of Bank of America Common Stock
that is equal to the number of shares of MBNA Common Stock
subject to the MBNA RSU immediately prior to the Effective Time
multiplied by the Exchange Ratio (rounded down to the nearest
whole share) (a Bank of America RSU);
provided, however, that, in the case of any MBNA
RSU, the number of shares of Bank of America Common Stock
subject to such award shall be determined in a manner consistent
with the requirements of Section 409A of the Code.
(d) As of the Effective Time, Bank
of America shall assume the obligations and succeed to the
rights of MBNA under the MBNA Stock Plans with respect to the
Adjusted Options, the Bank of America RSUs and Bank of America
Restricted Share Rights. MBNA and Bank of America agree that
prior to the Effective Time each of the MBNA Stock Plans shall
be amended, to the extent possible without requiring stockholder
approval of such amendments, (i) if and to the extent
necessary and practicable, to reflect the transactions
contemplated by this Agreement, including the conversion of the
MBNA Options, MBNA Restricted Shares and MBNA RSUs pursuant to
paragraphs (a), (b) and (c) above and the substitution of
Bank of America for MBNA thereunder to the extent appropriate to
effectuate the assumption of such MBNA Stock Plans by Bank of
America, (ii) to preclude any automatic or formulaic grant
of options, restricted shares or other awards thereunder on or
after the date hereof and (iii) to the extent requested by
Bank of America in a timely manner and subject to compliance
with applicable law and the terms of the plan, to terminate the
MBNA Europe Share Incentive Plan effective immediately prior to
the Effective Time. From and after the Effective Time, all
A-4
references to MBNA (other than any references relating to a
Change in Control of MBNA) in each MBNA Stock Plan
and in each agreement evidencing any award of MBNA Options or
MBNA Restricted Shares shall be deemed to refer to Bank of
America, unless Bank of America determines otherwise.
(e) Bank of America shall take all
action necessary or appropriate to have available for issuance
or transfer a sufficient number of shares of Bank of America
Common Stock for delivery upon exercise of the Adjusted Options
or settlement of the MBNA RSUs. Promptly after the Effective
Time, Bank of America shall prepare and file with the SEC a
post-effective amendment converting the Form S-4 to a
Form S-8 (or file such other appropriate form) registering
a number of shares of Bank of America Common Stock necessary to
fulfill Bank of Americas obligations under this
paragraph (e).
1.6 Certificate of
Incorporation of Bank of America. At the Effective Time,
the Bank of America Certificate shall be the certificate of
incorporation of the Surviving Corporation until thereafter
amended in accordance with applicable law.
1.7 Bylaws of Bank of
America. At the Effective Time, the Bank of America
Bylaws shall be the Bylaws of the Surviving Corporation until
thereafter amended in accordance with applicable law.
1.8 Tax Consequences.
It is intended that the Merger shall constitute a
reorganization within the meaning of
Section 368(a) of the Code, and that this Agreement shall
constitute a plan of reorganization for purposes of
Sections 354 and 361 of the Code.
ARTICLE II
Delivery of Merger Consideration
2.1 Exchange Agent.
Prior to the Effective Time Bank of America shall appoint a bank
or trust company Subsidiary of Bank of America or another bank
or trust company reasonably acceptable to MBNA, or Bank of
Americas transfer agent, pursuant to an agreement (the
Exchange Agent Agreement) to act as exchange
agent (the Exchange Agent) hereunder.
2.2 Deposit of Merger
Consideration. At or prior to the Effective Time, Bank
of America shall deposit, or shall cause to be deposited, with
the Exchange Agent (i) certificates representing the number
of shares of Bank of America Common Stock sufficient to deliver,
and Bank of America shall instruct the Exchange Agent to timely
deliver, the aggregate Stock Consideration, and
(ii) immediately available funds equal to the aggregate
Cash Consideration (together with, to the extent then
determinable, any cash payable in lieu of fractional shares
pursuant to Section 2.3(f)) (collectively, the
Exchange Fund) and Bank of America shall
instruct the Exchange Agent to timely pay the Cash
Consideration, and such cash in lieu of fractional shares, in
accordance with this Agreement.
A-5
2.3 Delivery of Merger
Consideration.
(a) As soon as reasonably
practicable after the Effective Time, the Exchange Agent shall
mail to each holder of record of Certificate(s) which
immediately prior to the Effective Time represented outstanding
shares of MBNA Common Stock whose shares were converted into the
right to receive the Merger Consideration pursuant to
Section 1.4 and any cash in lieu of fractional shares of
Bank of America Common Stock to be issued or paid in
consideration therefor (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss
and title to Certificate(s) shall pass, only upon delivery of
Certificate(s) (or affidavits of loss in lieu of such
Certificates) to the Exchange Agent and shall be substantially
in such form and have such other provisions as shall be
prescribed by the Exchange Agent Agreement (the Letter
of Transmittal) and (ii) instructions for use in
surrendering Certificate(s) in exchange for the Merger
Consideration and any cash in lieu of fractional shares of Bank
of America Common Stock to be issued or paid in consideration
therefor in accordance with Section 2.3(f) upon surrender
of such Certificate and any dividends or distributions to which
such holder is entitled pursuant to Section 2.3(c).
(b) Upon surrender to the Exchange
Agent of its Certificate or Certificates, accompanied by a
properly completed Letter of Transmittal, a holder of MBNA
Common Stock will be entitled to receive promptly after the
Effective Time the Merger Consideration (with the aggregate Cash
Consideration paid to each such holder rounded to the nearest
whole cent) and any cash in lieu of fractional shares of Bank of
America Common Stock to be issued or paid in consideration
therefor in respect of the shares of MBNA Common Stock
represented by its Certificate or Certificates. Until so
surrendered, each such Certificate shall represent after the
Effective Time, for all purposes, only the right to receive the
Merger Consideration and any cash in lieu of fractional shares
of Bank of America Common Stock to be issued or paid in
consideration therefor upon surrender of such Certificate in
accordance with, and any dividends or distributions to which
such holder is entitled pursuant to, this Article II.
(c) No dividends or other
distributions with respect to Bank of America Common Stock shall
be paid to the holder of any unsurrendered Certificate with
respect to the shares of Bank of America Common Stock
represented thereby, in each case until the surrender of such
Certificate in accordance with this Article II. Subject to
the effect of applicable abandoned property, escheat or similar
laws, following surrender of any such Certificate in accordance
with this Article II, the record holder thereof shall be
entitled to receive, without interest, (i) the amount of
dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to the whole
shares of Bank of America Common Stock represented by such
Certificate and not paid and/or (ii) at the appropriate
payment date, the amount of dividends or other distributions
payable with respect to shares of Bank of America Common Stock
represented by such Certificate with a record date after the
Effective Time (but before such surrender date) and with a
payment date subsequent to the issuance of the Bank of America
Common Stock issuable with respect to such Certificate.
(d) In the event of a transfer of
ownership of a Certificate representing MBNA Common Stock that
is not registered in the stock transfer records of MBNA, the
proper amount of cash and/or shares of Bank of America Common
Stock shall be paid or issued in exchange
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therefor to a person other than the person in whose name the
Certificate so surrendered is registered if the Certificate
formerly representing such MBNA Common Stock shall be properly
endorsed or otherwise be in proper form for transfer and the
person requesting such payment or issuance shall pay any
transfer or other similar Taxes required by reason of the
payment or issuance to a person other than the registered holder
of the Certificate or establish to the satisfaction of Bank of
America that the Tax has been paid or is not applicable. The
Exchange Agent (or, subsequent to the first anniversary of the
Effective Time, Bank of America) shall be entitled to deduct and
withhold from the cash portion of the Merger Consideration and
any cash in lieu of fractional shares of Bank of America Common
Stock otherwise payable pursuant to this Agreement to any holder
of MBNA Common Stock such amounts as the Exchange Agent or Bank
of America, as the case may be, is required to deduct and
withhold under the Code, or any provision of state, local or
foreign Tax law, with respect to the making of such payment. To
the extent the amounts are so withheld by the Exchange Agent or
Bank of America, as the case may be, such withheld amounts shall
be treated for all purposes of this Agreement as having been
paid to the holder of shares of MBNA Common Stock in respect of
whom such deduction and withholding was made by the Exchange
Agent or Bank of America, as the case may be.
(e) After the Effective Time, there
shall be no transfers on the stock transfer books of MBNA of the
shares of MBNA Common Stock that were issued and outstanding
immediately prior to the Effective Time other than to settle
transfers of MBNA Common Stock that occurred prior to the
Effective Time. If, after the Effective Time, Certificates
representing such shares are presented for transfer to the
Exchange Agent, they shall be cancelled and exchanged for the
Merger Consideration and any cash in lieu of fractional shares
of Bank of America Common Stock to be issued or paid in
consideration therefor in accordance with the procedures set
forth in this Article II.
(f) Notwithstanding anything to the
contrary contained in this Agreement, no certificates or scrip
representing fractional shares of Bank of America Common Stock
shall be issued upon the surrender of Certificates for exchange,
no dividend or distribution with respect to Bank of America
Common Stock shall be payable on or with respect to any
fractional share, and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a
stockholder of Bank of America. In lieu of the issuance of any
such fractional share, Bank of America shall pay to each former
stockholder of MBNA who otherwise would be entitled to receive
such fractional share an amount in cash (rounded to the nearest
cent) determined by multiplying (i) the Bank of America
Closing Price by (ii) the fraction of a share (after taking
into account all shares of MBNA Common Stock held by such holder
at the Effective Time and rounded to the nearest thousandth when
expressed in decimal form) of Bank of America Common Stock to
which such holder would otherwise be entitled to receive
pursuant to Section 1.4.
(g) Any portion of the Exchange
Fund that remains unclaimed by the stockholders of MBNA as of
the first anniversary of the Effective Time may be paid to Bank
of America. In such event, any former stockholders of MBNA who
have not theretofore complied with this Article II shall
thereafter look only to Bank of America with respect to the
Merger Consideration, any cash in lieu of any fractional shares
and any unpaid dividends and distributions on the Bank of
America Common Stock deliverable in respect of each share of
MBNA Common Stock such stockholder holds as determined pursuant
to this Agreement, in
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each case, without any interest thereon. Notwithstanding the
foregoing, none of Bank of America, MBNA, the Exchange Agent or
any other person shall be liable to any former holder of shares
of MBNA Common Stock for any amount delivered in good faith to a
public official pursuant to applicable abandoned property,
escheat or similar laws.
(h) In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Certificate to be lost, stolen
or destroyed and, if reasonably required by Bank of America or
the Exchange Agent, the posting by such person of a bond in such
amount as Bank of America may determine is reasonably necessary
as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the
Merger Consideration deliverable in respect thereof pursuant to
this Agreement.
ARTICLE III
Representations and Warranties of MBNA
Except as disclosed in the disclosure schedule (the
MBNA Disclosure Schedule) delivered by MBNA
to Bank of America prior to the execution of this Agreement
(which schedule sets forth, among other things, items the
disclosure of which is necessary or appropriate either in
response to an express disclosure requirement contained in a
provision hereof or as an exception to one or more
representations or warranties contained in this
Article III, or to one or more of MBNAs covenants
contained herein, provided, however, that
notwithstanding anything in this Agreement to the contrary,
(i) no such item is required to be set forth in such
schedule as an exception to a representation or warranty if its
absence would not result in the related representation or
warranty being deemed untrue or incorrect under the standard
established by Section 9.2, and (ii) the mere
inclusion of an item in such schedule as an exception to a
representation or warranty shall not be deemed an admission that
such item represents a material exception or material fact,
event or circumstance or that such item has had or would be
reasonably likely to have a Material Adverse Effect (as defined
in Section 3.8) on MBNA), MBNA hereby represents and
warrants to Bank of America as follows:
3.1 Corporate
Organization.
(a) MBNA is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Maryland. MBNA has the corporate power and authority to own or
lease all of its properties and assets and to carry on its
business as it is now being conducted, and is duly licensed or
qualified to do business in each jurisdiction in which the
nature of the business conducted by it or the character or
location of the properties and assets owned or leased by it
makes such licensing or qualification necessary.
(b) MBNA is duly registered as a bank holding company under
the Bank Holding Company Act of 1956, as amended (the
BHC Act). True, complete and correct copies
of the Charter of MBNA, as amended (the MBNA
Charter), and the By-laws of MBNA (the MBNA
By-laws), as in effect as of the date of this
Agreement, have previously been made available to Bank of
America.
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(c) Each of MBNAs
Subsidiaries (i) is duly incorporated or duly formed, as
applicable to each such Subsidiary, and validly existing under
the laws of its jurisdiction of organization, (ii) is duly
licensed or qualified to do business and in good standing in all
jurisdictions (whether federal, state, local or foreign) where
its ownership or leasing of property or the conduct of its
business requires it to be so licensed or qualified and
(iii) has all requisite corporate power or other power and
authority to own or lease its properties and assets and to carry
on its business as now conducted. The articles of incorporation,
by-laws and similar governing documents of each MBNA Subsidiary,
copies of which have previously been made available to Bank of
America, are true, complete and correct copies of such documents
as of the date of this Agreement. As used in this Agreement, the
word Subsidiary, when used with respect to
either party, means any bank, corporation, partnership, limited
liability company or other organization, whether incorporated or
unincorporated, that is consolidated with such party for
financial reporting purposes under U.S. generally accepted
accounting principles (GAAP), and the terms
MBNA Subsidiary and Bank of America
Subsidiary shall mean any direct or indirect
Subsidiary of MBNA or Bank of America, respectively.
(d) The deposit accounts of MBNA America Bank, N.A. and
MBNA America (Delaware), N.A. are insured by the Federal Deposit
Insurance Corporation (the FDIC) through the
Bank Insurance Fund to the fullest extent permitted by law, and
all premiums and assessments required to be paid in connection
therewith have been paid when due.
(e) The minute books of MBNA and each of its Subsidiaries
previously made available to Bank of America contain true,
complete and correct records of all meetings and other corporate
actions held or taken since December 31, 2002 of their
respective stockholders and Boards of Directors (including
committees of their respective Boards of Directors).
3.2 Capitalization.
(a) The authorized capital stock of MBNA consists of
1,500,000,000 shares of MBNA Common Stock, of which, as of
May 31, 2005 (the MBNA Capitalization
Date), 1,255,095,505 shares were issued and
outstanding, which includes all of the MBNA Restricted Shares
outstanding as of the MBNA Capitalization Date, and
20,000,000 shares of preferred stock, par value
$0.01 per share (MBNA Preferred Stock),
of which, as of the MBNA Capitalization Date,
(i) 6,000,000 shares were authorized and
4,547,882 shares were issued and outstanding as
71/2%
Series A Cumulative Preferred Stock and
(ii) 6,000,000 shares were authorized and
4,026,000 shares were issued and outstanding as
Series B Adjustable Rate Cumulative Preferred Stock. As of
the MBNA Capitalization Date, no shares of MBNA Common Stock or
MBNA Preferred Stock were reserved for issuance except for
(x) shares of MBNA Common Stock reserved for issuance in
connection with stock options under the MBNA Stock Plans to
purchase 73,840,838 shares of MBNA Common Stock
outstanding as of the MBNA Capitalization Date, (y) in
connection with 94,000 shares of MBNA Common Stock issuable
upon settlement of the MBNA RSUs outstanding as of the MBNA
Capitalization Date and (z) shares of MBNA Common Stock
reserved for issuance pursuant to the Stock Option Agreement.
All of the issued and outstanding shares of MBNA Common Stock
have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. As of the date of
this Agreement, no bonds, debentures, notes or other
indebtedness having the right to vote on any matters on which
shareholders may vote (Voting Debt) of MBNA
are issued or outstanding. As of the date of this Agreement,
except pursuant to this Agreement and the Stock Option Agreement,
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including with respect to the MBNA Stock Plans as set forth
herein, MBNA does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, rights, commitments or
agreements of any character calling for the purchase or issuance
of, or the payment of any amount based on, any shares of MBNA
Common Stock, MBNA Preferred Stock, Voting Debt or any other
equity securities of MBNA or any securities representing the
right to purchase or otherwise receive any shares of MBNA Common
Stock, MBNA Preferred Stock, Voting Debt or other equity
securities of MBNA. As of the date of this Agreement, there are
no contractual obligations of MBNA or any of its Subsidiaries
(I) to repurchase, redeem or otherwise acquire any shares
of capital stock of MBNA or any equity security of MBNA or its
Subsidiaries or any securities representing the right to
purchase or otherwise receive any shares of capital stock or any
other equity security of MBNA or its Subsidiaries or
(II) pursuant to which MBNA or any of its Subsidiaries is
or could be required to register shares of MBNA capital stock or
other securities under the Securities Act of 1933, as amended
(the Securities Act). MBNA has provided Bank
of America with a true, complete and correct list of the
aggregate number of shares of MBNA Common Stock issuable upon
the exercise of each stock option and settlement of each MBNA
RSU granted under the MBNA Stock Plans that was outstanding as
of the MBNA Capitalization Date and the exercise price for each
such MBNA stock option. Other than the MBNA Options, MBNA
Restricted Shares and MBNA RSUs, no other equity-based awards
are outstanding as of the MBNA Capitalization Date. Since the
MBNA Capitalization Date through the date hereof, MBNA has not
(A) issued or repurchased any shares of MBNA Common Stock,
MBNA Preferred Stock, Voting Debt or other equity securities of
MBNA other than the issuance of shares of MBNA Common Stock in
connection with the exercise of stock options to purchase MBNA
Common Stock granted under the MBNA Stock Plans that were
outstanding on the MBNA Capitalization D ate or (B) issued
or awarded any options, restricted shares or any other
equity-based awards under any of the MBNA Stock Plans.
(b) Except for any director qualifying shares, all of the
issued and outstanding shares of capital stock or other equity
ownership interests of each Subsidiary of MBNA are owned by
MBNA, directly or indirectly, free and clear of any material
liens, pledges, charges and security interests and similar
encumbrances (Liens), and all of such shares
or equity ownership interests are duly authorized and validly
issued and are fully paid, nonassessable (subject to
12 U.S.C. § 55) and free of preemptive rights. No
such MBNA Subsidiary has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance
of any shares of capital stock or any other equity security of
such Subsidiary or any securities representing the right to
purchase or otherwise receive any shares of capital stock or any
other equity security of such Subsidiary.
3.3 Authority; No
Violation. (a) MBNA has full corporate power and
authority to execute and deliver this Agreement and the Stock
Option Agreement and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement
and the Stock Option Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly,
validly and unanimously approved by the Board of Directors of
MBNA. The Board of Directors of MBNA has determined that the
Merger, on substantially the terms and conditions set forth in
this Agreement, is advisable and in the best interests of MBNA
and its stockholders and has directed that the Merger, on
substantially the terms and conditions set forth in this
Agreement, be submitted to MBNAs stockholders for
consideration at a duly held meeting of such stockholders and,
except for the
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approval of this Agreement by the affirmative vote of the
holders of a majority of the outstanding shares of
MBNA Common Stock entitled to vote at such meeting, no
other corporate proceedings on the part of MBNA are necessary to
approve this Agreement or the Stock Option Agreement or to
consummate the transactions contemplated hereby or thereby. This
Agreement and the Stock Option Agreement have been duly and
validly executed and delivered by MBNA and (assuming due
authorization, execution and delivery by Bank of America)
constitute the valid and binding obligation of MBNA, enforceable
against MBNA in accordance with their terms (except as may be
limited by bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the rights of creditors generally and
subject to general principles of equity).
(b) Neither the execution and delivery of this Agreement or
the Stock Option Agreement by MBNA nor the consummation by MBNA
of the transactions contemplated hereby or thereby, nor
compliance by MBNA with any of the terms or provisions of this
Agreement or the Stock Option Agreement, will (i) violate
any provision of the MBNA Charter or the MBNA By-laws or
(ii) assuming that the consents, approvals and filings
referred to in Section 3.4 are duly obtained and/or made,
(A) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or Injunction applicable to MBNA,
any of its Subsidiaries or any of their respective properties or
assets or (B) violate, conflict with, result in a breach of
any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the
creation of any Lien upon any of the respective properties or
assets of MBNA or any of its Subsidiaries under, any of the
terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, MBNA Securitization
Document, affinity or other partnership or joint marketing
agreement, agreement, by-law, rule or regulation of any Credit
Card Association, agreement with the American Express Company,
other agreement or other instrument or obligation to which MBNA
or any of its Subsidiaries is a party or by which any of them or
any of their respective properties or assets is bound.
3.4 Consents and
Approvals. Except for (i) the filing of
applications and notices, as applicable, with the Board of
Governors of the Federal Reserve System (the Federal
Reserve Board) under the BHC Act and approval of such
applications and notices, (ii) the filing of any required
applications, filings or notices with the United Kingdom
Financial Services Authority (the FSA), the
Canadian Office of the Superintendent of Financial Institutions
(the OSFI) and any other foreign, federal or
state banking, insurance or other regulatory or self-regulatory
authorities or any courts, administrative agencies or
commissions or other governmental authorities or
instrumentalities (each a Governmental
Entity) and approval of such applications, filings and
notices (the Other Regulatory Approvals),
(iii) the filing with the Securities and Exchange
Commission (the SEC) of a Proxy Statement in
definitive form relating to the meeting of MBNAs
stockholders to be held in connection with this Agreement and
the transactions contemplated by this Agreement (the
Proxy Statement) and of a registration
statement on Form S-4 (the
Form S-4) in which the Proxy Statement
will be included as a prospectus, and declaration of
effectiveness of the Form S-4 and the filing and
effectiveness of the registration statement contemplated by
Section 1.5(e), (iv) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware
pursuant to the DGCL and the filing of the Articles of Merger
with the Maryland State Department of Assessments and
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Taxation pursuant to the MGCL, (v) any notices to or
filings with the Small Business Administration (the
SBA), (vi) any consents, authorizations,
approvals, filings or exemptions in connection with compliance
with the rules and regulations of any applicable industry
self-regulatory organization (SRO), and the
rules of the NYSE, or that are required under consumer finance,
mortgage banking and other similar laws, and (vii) such
filings and approvals as are required to be made or obtained
under the securities or Blue Sky laws of various
states in connection with the issuance of the shares of Bank of
America Common Stock pursuant to this Agreement and approval of
listing of such Bank of America Common Stock on the NYSE, no
consents or approvals of or filings or registrations with any
Governmental Entity are necessary in connection with the
consummation by MBNA of the Merger and the other transactions
contemplated by this Agreement or the Stock Option Agreement. No
consents or approvals of or filings or registrations with any
Governmental Entity are necessary in connection with the
execution and delivery by MBNA of this Agreement or the Stock
Option Agreement.
3.5 Reports; Regulatory
Matters.
(a) MBNA and each of its Subsidiaries have timely filed all
reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they
were required to file since January 1, 2002 with
(i) the Federal Reserve Board, (ii) the FDIC,
(iii) the Office of the Comptroller of the Currency,
(iv) any state insurance commission or other state
regulatory authority, (v) the SEC, (vi) the FSA, the
OSFI and any other foreign regulatory authority and
(vii) any SRO (collectively, Regulatory
Agencies) and with each other applicable Governmental
Entity, and all other reports and statements required to be
filed by them since January 1, 2002, including any report
or statement required to be filed pursuant to the laws, rules or
regulations of the United States, any state, any foreign entity,
or any Regulatory Agency or Governmental Entity, and have paid
all fees and assessments due and payable in connection
therewith. Except for normal examinations conducted by a
Regulatory Agency or Governmental Entity in the ordinary course
of the business of MBNA and its Subsidiaries, no Regulatory
Agency or Governmental Entity has initiated since
January 1, 2002 or has pending any proceeding, enforcement
action or, to the knowledge of MBNA, investigation into the
business, disclosures or operations of MBNA or any of its
Subsidiaries. Since January 1, 2002, no Regulatory Agency
or Governmental Entity has resolved any proceeding, enforcement
action or, to the knowledge of MBNA, investigation into the
business, disclosures or operations of MBNA or any of its
Subsidiaries. There is no unresolved violation, criticism,
comment or exception by any Regulatory Agency or Governmental
Entity with respect to any report or statement relating to any
examinations or inspections of MBNA or any of its Subsidiaries.
Since January 1, 2002, there has been no formal or informal
inquiries by, or disagreements or disputes with, any Regulatory
Agency or Governmental Entity with respect to the business,
operations, policies or procedures of MBNA or any of its
Subsidiaries (other than normal examinations conducted by a
Regulatory Agency or Governmental Entity in MBNAs ordinary
course of business).
(b) Neither MBNA nor any of its Subsidiaries is subject to
any cease-and-desist or other order or enforcement action issued
by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any
commitment letter or similar undertaking to, or is subject to
any order or directive by, or has been ordered to pay any civil
money penalty by, or has been since January 1, 2002 a
recipient of any supervisory
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letter from, or since January 1, 2002 has adopted any
policies, procedures or board resolutions at the request or
suggestion of, any Regulatory Agency or other Governmental
Entity that currently restricts in any material respect the
conduct of its business or that in any material manner relates
to its capital adequacy, its ability to pay dividends, its
credit, risk management or compliance policies, its internal
controls, its management or its business (or, as applicable, its
operations as a financial subsidiary of a national bank under
the Gramm-Leach-Bliley Act of 1999), other than those of general
application that apply to similarly situated bank holding
companies or their Subsidiaries (each item in this sentence, a
MBNA Regulatory Agreement), nor has MBNA or
any of its Subsidiaries been advised since January 1, 2002
by any Regulatory Agency or other Governmental Entity that it is
considering issuing, initiating, ordering, or requesting any
such MBNA Regulatory Agreement. To the knowledge of MBNA there
has not been any event or occurrence since January 1, 2002
that would result in a determination that either MBNA America
Bank, N.A. or MBNA America (Delaware), N.A. is not well
capitalized and well managed as a matter of
U.S. federal banking law.
(c) MBNA has previously made available to Bank of America
an accurate and complete copy of each (i) final
registration statement, prospectus, report, schedule and
definitive proxy statement filed with or furnished to the SEC by
MBNA since January 1, 2002 pursuant to the Securities Act
or the Securities Exchange Act of 1934, as amended (the
Exchange Act), and prior to the date of this
Agreement (the MBNA SEC Reports) and
(ii) communication mailed by MBNA to its stockholders since
January 1, 2002 and prior to the date of this Agreement. No
such MBNA SEC Report or communication, at the time filed,
furnished or communicated (and, in the case of registration
statements and proxy statements, on the dates of effectiveness
and the dates of the relevant meetings, respectively), contained
any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except
that information as of a later date (but before the date of this
Agreement) shall be deemed to modify information as of an
earlier date. As of their respective dates, all MBNA SEC
Reports complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto.
No executive officer of MBNA has failed in any respect to make
the certifications required of him or her under Section 302
or 906 of the Sarbanes-Oxley Act of 2002 (the
Sarbanes-Oxley Act).
3.6 Financial
Statements.
(a) The financial statements of MBNA and its Subsidiaries
included (or incorporated by reference) in the MBNA SEC Reports
(including the related notes, where applicable) (i) have
been prepared from, and are in accordance with, the books and
records of MBNA and its Subsidiaries, (ii) fairly present
in all material respects the consolidated results of operations,
cash flows, changes in stockholders equity and
consolidated financial position of MBNA and its Subsidiaries for
the respective fiscal periods or as of the respective dates
therein set forth (subject in the case of unaudited statements
to recurring year-end audit adjustments normal in nature and
amount), (iii) complied as to form, as of their respective
dates of filing with the SEC, in all material respects with
applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, and
(iv) have been prepared in accordance with GAAP
consistently applied during the periods involved, except, in
each case, as indicated in such statements or in the notes
thereto. The books and records of MBNA and its Subsidiaries
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have been, and are being, maintained in all material respects in
accordance with GAAP and any other applicable legal and
accounting requirements and reflect only actual transactions.
Ernst & Young LLP has not resigned or been dismissed as
independent public accountants of MBNA as a result of or in
connection with any disagreements with MBNA on a matter of
accounting principles or practices, financial statement
disclosure or auditing scope or procedure.
(b) Neither MBNA nor any of its Subsidiaries has any
material liability of any nature whatsoever (whether absolute,
accrued, contingent or otherwise and whether due or to become
due), except for those liabilities that are reflected or
reserved against on the consolidated balance sheet of MBNA
included in its Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 2005 (including any notes
thereto) and for liabilities incurred in the ordinary course of
business consistent with past practice since March 31, 2005
or in connection with this Agreement and the transactions
contemplated hereby.
(c) The records, systems, controls, data and information of
MBNA and its Subsidiaries are recorded, stored, maintained and
operated under means (including any electronic, mechanical or
photographic process, whether computerized or not) that are
under the exclusive ownership and direct control of MBNA or its
Subsidiaries or accountants (including all means of access
thereto and therefrom), except for any non-exclusive ownership
and non-direct control that would not reasonably be expected to
have a material adverse effect on the system of internal
accounting controls described below in this Section 3.6(c).
MBNA (x) has implemented and maintains disclosure controls
and procedures (as defined in Rule 13a-15(e) of the
Exchange Act) to ensure that material information relating to
MBNA, including its consolidated Subsidiaries, is made known to
the chief executive officer and the chief financial officer of
MBNA by others within those entities, and (y) has
disclosed, based on its most recent evaluation prior to the date
hereof, to MBNAs outside auditors and the audit committee
of MBNAs Board of Directors (i) any significant
deficiencies and material weaknesses in the design or operation
of internal controls over financial reporting (as defined in
Rule 13a-15(f) of the Exchange Act) which are reasonably
likely to adversely affect MBNAs ability to record,
process, summarize and report financial information and
(ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in
MBNAs internal controls over financial reporting. These
disclosures were made in writing by management to MBNAs
auditors and audit committee and a copy has previously been made
available to Bank of America. As of the date hereof, there is no
reason to believe that its outside auditors and its chief
executive officer and chief financial officer will not be able
to give the certifications and attestations required pursuant to
the rules and regulations adopted pursuant to Section 404
of the Sarbanes-Oxley Act, without qualification, when next due.
(d) Since December 31, 2004, (i) through the date
hereof, neither MBNA nor any of its Subsidiaries nor, to the
knowledge of the officers of MBNA, any director, officer,
employee, auditor, accountant or representative of MBNA or any
of its Subsidiaries has received or otherwise had or obtained
knowledge of any material complaint, allegation, assertion or
claim, whether written or oral, regarding the accounting or
auditing practices, procedures, methodologies or methods of MBNA
or any of its Subsidiaries or their respective internal
accounting controls, including any material complaint,
allegation, assertion or claim that MBNA or any of its
Subsidiaries has engaged in questionable accounting or auditing
practices, and (ii) no attorney representing MBNA or any of
its Subsidiaries, whether or not employed by MBNA
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or any of its Subsidiaries, has reported evidence of a material
violation of securities laws, breach of fiduciary duty or
similar violation by MBNA or any of its officers, directors,
employees or agents to the Board of Directors of MBNA or any
committee thereof or to any director or officer of MBNA.
3.7 Brokers
Fees. Neither MBNA nor any MBNA Subsidiary nor any of
their respective officers or directors has employed any broker
or finder or incurred any liability for any brokers fees,
commissions or finders fees in connection with the Merger
or related transactions contemplated by this Agreement, other
than as set forth on Section 3.7 of the MBNA Disclosure
Schedule and pursuant to letter agreements, true, complete and
correct copies of which have been previously delivered to Bank
of America.
3.8 Absence of Certain
Changes or Events. (a) Since December 31,
2004, no event or events have occurred that have had or are
reasonably likely to have, either individually or in the
aggregate, a Material Adverse Effect on MBNA. As used in this
Agreement, the term Material Adverse Effect
means, with respect to Bank of America, MBNA or the Surviving
Corporation, as the case may be, a material adverse effect on
(i) the business, results of operations or financial
condition of such party and its Subsidiaries taken as a whole
(provided, however, that, with respect to this
clause (i), Material Adverse Effect shall not be deemed to
include effects to the extent resulting from (A) changes,
after the date hereof, in generally accepted accounting
principles or regulatory accounting requirements applicable to
banks or savings associations and their holding companies, or to
credit card companies, generally, (B) changes, after the
date hereof, in laws, rules or regulations of general
applicability to banks or savings associations and their holding
companies, or to credit card companies, generally, or
interpretations thereof by courts or Governmental Entities,
(C) changes, after the date hereof, in global or national
political conditions (including the outbreak of war or acts of
terrorism) or in general economic or market conditions affecting
banks, credit card companies, savings associations or their
holding companies generally except to the extent that such
changes in general economic or market conditions have a
materially disproportionate adverse effect on such party or
(D) consummation or public disclosure of this Agreement or
the transactions contemplated hereby), or (ii) the ability
of such party to timely consummate the transactions contemplated
by this Agreement.
(b) Since December 31, 2004 through and including the
date of this Agreement, MBNA and its Subsidiaries have carried
on their respective businesses in all material respects in the
ordinary course of business consistent with their past practice.
(c) Since December 31, 2004, neither MBNA nor any of
its Subsidiaries has (i) except for (A) normal
increases for employees (other than officers subject to the
reporting requirements of Section 16(a) of the Exchange
Act) made in the ordinary course of business consistent with
past practice or (B) as required by applicable law or
pre-existing contractual obligations, increased the wages,
salaries, compensation, pension, or other fringe benefits or
perquisites payable to any executive officer, employee, or
director from the amount thereof in effect as of
December 31, 2004, granted any severance or termination
pay, entered into any contract to make or grant any severance or
termination pay (in each case, except as required under the
terms of agreements or severance plans listed on
Section 3.11 of the MBNA Disclosure Schedule, as in effect
as of the date hereof ), or paid any bonus other than the
customary year-
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end bonuses in amounts consistent with past practice,
(ii) granted any options to purchase shares of
MBNA Common Stock, any restricted shares of
MBNA Common Stock or any right to acquire any shares of its
capital stock to any executive officer, director or employee
other than grants to employees (other than officers subject to
the reporting requirements of Section 16(a) of the Exchange
Act) made in the ordinary course of business consistent with
past practice under the MBNA Stock Plans, (iii) changed any
accounting methods, principles or practices of MBNA or its
Subsidiaries affecting its assets, liabilities or businesses,
including any reserving, renewal or residual method, practice or
policy or (iv) suffered any strike, work stoppage,
slow-down, or other labor disturbance.
3.9 Legal
Proceedings. (a) Neither MBNA nor any of its
Subsidiaries is a party to any, and there are no pending or, to
the best of MBNAs knowledge, threatened, material legal,
administrative, arbitral or other material proceedings, claims,
actions or governmental or regulatory investigations of any
nature against MBNA or any of its Subsidiaries. None of the
proceedings, claims, actions or governmental or regulatory
investigations set forth on Section 3.9 of the MBNA
Disclosure Schedules would reasonably be expected to have a
Material Adverse Effect on MBNA.
(b) There is no Injunction, judgment, or regulatory
restriction (other than those of general application that apply
to similarly situated bank holding companies or their
Subsidiaries) imposed upon MBNA, any of its Subsidiaries or the
assets of MBNA or any of its Subsidiaries.
3.10 Taxes and Tax
Returns. (a) Each of MBNA and its Subsidiaries has
duly and timely filed (including all applicable extensions) all
material Tax Returns required to be filed by it on or prior to
the date of this Agreement (all such returns being accurate and
complete in all material respects), has paid all Taxes shown
thereon as arising and has duly paid or made provision for the
payment of all material Taxes that have been incurred or are due
or claimed to be due from it by federal, state, foreign or local
taxing authorities other than Taxes that are not yet delinquent
or are being contested in good faith, have not been finally
determined and have been adequately reserved against. The
federal income Tax returns of MBNA and its Subsidiaries have
been examined by the Internal Revenue Service (the
IRS) for all years to and including 2000 and
any liability with respect thereto has been satisfied or any
liability with respect to deficiencies asserted as a result of
such examination is covered by reserves that are adequate under
GAAP. There are no material disputes pending, or claims
asserted, for Taxes or assessments upon MBNA or any of its
Subsidiaries for which MBNA does not have reserves that are
adequate under GAAP. Neither MBNA nor any of its Subsidiaries is
a party to or is bound by any Tax sharing, allocation or
indemnification agreement or arrangement (other than such an
agreement or arrangement exclusively between or among MBNA and
its Subsidiaries). Within the past five years, neither MBNA nor
any of its Subsidiaries has been a distributing
corporation or a controlled corporation in a
distribution intended to qualify under Section 355(a) of
the Code. Neither MBNA nor any of its Subsidiaries is required
to include in income any adjustment pursuant to
Section 481(a) of the Code, no such adjustment has been
proposed by the IRS and no pending request for permission to
change any accounting method has been submitted by MBNA or any
of its Subsidiaries. Neither MBNA nor any of its Subsidiaries
has participated in a reportable transaction within
the meaning of Treasury Regulation section 1.6011-4(b)(1).
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(b) As used in this Agreement, the term
Tax or Taxes means
(i) all federal, state, local, and foreign income, excise,
gross receipts, gross income, ad valorem, profits, gains,
property, capital, sales, transfer, use, payroll, employment,
severance, withholding, duties, intangibles, franchise, backup
withholding, value added and other taxes, charges, levies or
like assessments together with all penalties and additions to
tax and interest thereon and (ii) any liability for Taxes
described in clause (i) above under Treasury
Regulation Section 1.1502-6 (or any similar provision
of state, local or foreign law).
(c) As used in this Agreement, the term Tax
Return means a report, return or other information
(including any amendments) required to be supplied to a
governmental entity with respect to Taxes including, where
permitted or required, combined or consolidated returns for any
group of entities that includes MBNA or any of its Subsidiaries.
3.11 Employee Matters.
(a) Section 3.11 of the MBNA Disclosure Schedule sets
forth a true, complete and correct list of each employee
benefit plan as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended
(ERISA), whether or not subject to ERISA, and
each employment, consulting, bonus, incentive or deferred
compensation, vacation, stock option or other equity-based,
severance, termination, retention, change of control,
profit-sharing, fringe benefit or other similar plan, program,
agreement or commitment for the benefit of any employee, former
employee, director or former director of MBNA or any of its
Subsidiaries entered into, maintained or contributed to by MBNA
or any of its Subsidiaries or to which MBNA or any of its
Subsidiaries is obligated to contribute (such plans, programs,
agreements and commitments, herein referred to as the
MBNA Benefit Plans).
(b) With respect to each MBNA Benefit Plan, MBNA has made
available to Bank of America true, complete and correct copies
of the following (as applicable): (i) the written document
evidencing such MBNA Benefit Plan or, with respect to any such
plan that is not in writing, a written description thereof;
(ii) the summary plan description; (iii) the most
recent annual report, financial statement and/or actuarial
report; (iv) the most recent determination letter from the
IRS; (v) the most recent Form 5500 required to have
been filed with the IRS, including all schedules thereto;
(vi) any related trust agreements, insurance contracts or
documents of any other funding arrangements; (vii) any
notices to or from the IRS or any office or representative of
the Department of Labor relating to any compliance issues in
respect of any such MBNA Benefit Plan; and (viii) all
amendments, modifications or supplements to any such document.
(c) MBNA and each of its Subsidiaries have operated and
administered each MBNA Benefit Plan in compliance with all
applicable laws and the terms of each such plan. The terms of
each MBNA Benefit Plan are in compliance with all applicable
laws. Each MBNA Benefit Plan that is intended to be
qualified under Section 401 and/or 409 of the
Code has received a favorable determination letter from the IRS
to such effect and, to the knowledge of MBNA, no fact,
circumstance or event has occurred or exists since the date of
such determination letter that would reasonably be expected to
adversely affect the qualified status of any such MBNA Benefit
Plan. There are no pending or, to the knowledge of MBNA,
threatened or anticipated claims by, on behalf of or against any
of the MBNA Benefit Plans or any assets
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thereof (other than routine claims for benefits). All
contributions, premiums and other payments required to be made
with respect to any MBNA Benefit Plan have been made on or
before their due dates under applicable law and the terms of
such MBNA Benefit Plan, and with respect to any such
contributions, premiums or other payments required to be made
with respect to any MBNA Benefit Plan that are not yet due, to
the extent required by GAAP, adequate reserves are reflected on
the consolidated balance sheet of MBNA included in the Quarterly
Report on Form 10-Q for the fiscal quarter ended
March 31, 2005 (including any notes thereto) or liability
therefor was incurred in the ordinary course of business
consistent with past practice since March 31, 2005.
(d) No MBNA Benefit Plan is subject to Section 412 of
the Code or Section 302 or Title IV of ERISA or is a
multiemployer plan or multiple employer plan within the meaning
of Sections 4001(a)(3) or 4063/4064 of ERISA, respectively.
Neither MBNA nor any of its Subsidiaries has incurred, either
directly or indirectly (including as a result of any
indemnification or joint and several liability obligation), any
liability pursuant to Title I or IV of ERISA or the
penalty tax, excise tax or joint and several liability
provisions of the Code relating to employee benefit plans, in
each case, with respect to the MBNA Benefit Plans and no event,
transaction or condition has occurred or exists that could
reasonably be expected to result in any such liability to MBNA
or any of its Subsidiaries.
(e) Neither the execution or delivery of this Agreement nor
the consummation of the transactions contemplated by this
Agreement will, either alone or in conjunction with any other
event, (i) result in any payment or benefit becoming due or
payable, or required to be provided, to any director, employee
or independent contractor of MBNA or any of its Subsidiaries,
(ii) increase the amount or value of any benefit or
compensation otherwise payable or required to be provided to any
such director, employee or independent contractor,
(iii) result in the acceleration of the time of payment,
vesting or funding of any such benefit or compensation or
(iv) result in any amount failing to be deductible by
reason of Section 280G of the Code.
(f) No payment made or to be made in respect of any
employee or former employee of MBNA or any of its Subsidiaries
is or will be nondeductible by reason of Section 162(m) of
the Code.
(g) Neither MBNA nor any of its Subsidiaries is a party to
or bound by any labor or collective bargaining agreement and
there are no organizational campaigns, petitions or other
unionization activities seeking recognition of a collective
bargaining unit with respect to, or otherwise attempting to
represent, any of the employees of MBNA or any of its
Subsidiaries. There are no labor related controversies, strikes,
slowdowns, walkouts or other work stoppages pending or, to the
knowledge of MBNA, threatened and neither MBNA nor any of its
Subsidiaries has experienced any such labor related controversy,
strike, slowdown, walkout or other work stoppage within the past
three years. Neither MBNA nor any of its Subsidiaries is a party
to, or otherwise bound by, any consent decree with, or citation
by, any Governmental Entity relating to employees or employment
practices. Each of MBNA and its Subsidiaries are in compliance
with all applicable laws, statutes, orders, rules, regulations,
policies or guidelines of any Governmental Entity relating to
labor, employment, termination of employment or similar matters
and have not engaged in any unfair labor practices or similar
prohibited practices.
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3.12 Compliance with
Applicable Law. (a) MBNA and each of its
Subsidiaries hold all material licenses, franchises, permits and
authorizations necessary for the lawful conduct of their
respective businesses under and pursuant to each, and have
complied in all respects with and are not in default in any
material respect under any, applicable law, statute, order,
rule, regulation, policy or guideline of any Governmental Entity
relating to MBNA or any of its Subsidiaries. Other than as
required by (and in conformity with) law, neither MBNA nor any
MBNA Subsidiary acts as a fiduciary for any Person, or
administers any account for which it acts as a fiduciary,
including as a trustee, agent, custodian, personal
representative, guardian, conservator or investment advisor.
(b) Since the enactment of the Sarbanes-Oxley Act, MBNA has
been and is in compliance in all material respects with
(i) the applicable provisions of the Sarbanes-Oxley Act and
(ii) the applicable listing and corporate governance rules
and regulations of the NYSE. Section 3.12(b) of the MBNA
Disclosure Schedule sets forth, as of the date hereof, a
schedule of all officers and directors of MBNA who have
outstanding loans from MBNA or its Subsidiaries, and there has
been no default on, or forgiveness or waiver of, in whole or in
part, any such loan during the two years immediately preceding
the date hereof.
3.13 Certain
Contracts. (a) Neither MBNA nor any of its
Subsidiaries is a party to or bound by any contract,
arrangement, commitment or understanding (whether written or
oral) (i) with respect to the employment of any directors,
officers, employees or consultants, other than in the ordinary
course of business consistent with past practice,
(ii) which, upon execution of this Agreement or
consummation or stockholder approval of the transactions
contemplated by this Agreement will (either alone or upon the
occurrence of any additional acts or events) result in any
payment or benefits (whether of severance pay or otherwise)
becoming due from Bank of America, MBNA, the Surviving
Corporation, or any of their respective Subsidiaries to any
officer or employee of MBNA or any Subsidiary thereof,
(iii) that is a material contract (as such term
is defined in Item 601(b)(10) of Regulation S-K of the
SEC) to be performed after the date of this Agreement that has
not been filed or incorporated by reference in the MBNA SEC
Reports filed prior to the date hereof, (iv) that
materially restricts the conduct of any line of business by MBNA
or, to the knowledge of MBNA, upon consummation of the Merger
will materially restrict the ability of the Surviving
Corporation to engage in any line of business in which a bank
holding company may lawfully engage, (v) with or to a labor
union or guild (including any collective bargaining agreement)
or (vi) including any stock option plan, stock appreciation
rights plan, restricted stock plan or stock purchase plan, any
of the benefits of which will be increased, or the vesting of
the benefits of which will be accelerated, by the execution of
this Agreement, the occurrence of any stockholder approval or
the consummation of any of the transactions contemplated by this
Agreement, or the value of any of the benefits of which will be
calculated on the basis of or affected by any of the
transactions contemplated by this Agreement. Each contract,
arrangement, commitment or understanding of the type described
in this Section 3.13(a), whether or not set forth in the
MBNA Disclosure Schedule, is referred to as an MBNA
Contract, and neither MBNA nor any of its Subsidiaries
knows of, or has received notice of, any violation of any MBNA
Contract by any of the other parties thereto.
(b) (i) Each MBNA Contract is valid and binding on
MBNA or its applicable Subsidiary and is in full force and
effect, (ii) MBNA and each of its Subsidiaries has in all
material respects performed all obligations required to be
performed by it to date under each
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MBNA Contract, and (iii) no event or condition exists that
constitutes or, after notice or lapse of time or both, will
constitute, a material default on the part of MBNA or any of its
Subsidiaries under any such MBNA Contract.
3.14 Risk Management
Instruments. (a) Derivative
Transactions means any swap transaction, option, warrant,
forward purchase or sale transaction, futures transaction, cap
transaction, floor transaction or collar transaction relating to
one or more currencies, commodities, bonds, equity securities,
loans, interest rates, prices, values, or other financial or
non-financial assets, credit-related events or conditions or any
indexes, or any other similar transaction or combination of any
of these transactions, including collateralized mortgage
obligations or other similar instruments or any debt or equity
instruments evidencing or embedding any such types of
transactions, and any related credit support, collateral or
other similar arrangements related to such transactions;
provided that, for the avoidance of doubt, the term
Derivative Transactions shall not include any
MBNA Stock Option.
(b) All Derivative Transactions, whether entered into for
the account of MBNA or any of its Subsidiaries or for the
account of a customer of MBNA or any of its Subsidiaries, were
entered into in the ordinary course of business consistent with
past practice and in accordance with prudent banking practice
and applicable laws, rules, regulations and policies of any
Regulatory Authority and in accordance with the investment,
securities, commodities, risk management and other policies,
practices and procedures employed by MBNA and its Subsidiaries,
and with counterparties believed at the time to be financially
responsible and able to understand (either alone or in
consultation with their advisers) and to bear the risks of such
Derivative Transactions. All of such Derivative Transactions are
legal, valid and binding obligations of MBNA or one of its
Subsidiaries enforceable against it in accordance with their
terms (except as may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights
of creditors generally and subject to general principles of
equity), and are in full force and effect. MBNA and its
Subsidiaries have duly performed their obligations under the
Derivative Transactions to the extent that such obligations to
perform have accrued and, to MBNAs knowledge, there are no
breaches, violations or defaults or allegations or assertions of
such by any party thereunder.
3.15 Investment Securities
and Commodities. (a) Except as would not reasonably
be expected to have a Material Adverse Effect on MBNA, each of
MBNA and its Subsidiaries has good title to all securities and
commodities owned by it (except those sold under repurchase
agreements or held in any fiduciary or agency capacity), free
and clear of any Liens, except to the extent such securities or
commodities are pledged in the ordinary course of business to
secure obligations of MBNA or its Subsidiaries. Such securities
and commodities are valued on the books of MBNA in accordance
with GAAP in all material respects.
(b) MBNA and its Subsidiaries and their respective
businesses employ investment, securities, commodities, risk
management and other policies, practices and procedures (the
Policies, Practices and Procedures) which
MBNA believes are prudent and reasonable in the context of such
businesses. Prior to the date hereof, MBNA has made available to
Bank of America in writing the material Policies, Practices and
Procedures.
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3.16 Loan Portfolio.
(a) Section 3.16(a) of the MBNA Disclosure Schedule
sets forth (i) the aggregate outstanding principal amount,
as of March 31, 2005, of all loan agreements, notes or
borrowing arrangements (including leases, credit enhancements,
commitments, guarantees and interest-bearing assets) payable to
MBNA or its Subsidiaries (collectively,
Loans), other than non-accrual
Loans, and (ii) the aggregate outstanding principal amount,
as of March 31, 2005, of all non-accrual Loans.
As of March 31, 2005, MBNA and its Subsidiaries, taken as a
whole, did not have outstanding Loans and assets classified as
Other Real Estate Owned with an aggregate then
outstanding, fully committed principal amount in excess of that
amount set forth on Section 3.16(a) of the MBNA Disclosure
Schedule, net of specific reserves with respect to such Loans
and assets, that were designated as of such date by MBNA as
Special Mention, Substandard,
Doubtful, Loss, or words of similar
import (Criticized Assets).
Section 3.16(a) of the MBNA Disclosure Schedule sets forth
(A) a summary of Criticized Assets as of March 31,
2005, by category of Loan (e.g., commercial, consumer, etc.),
together with the aggregate principal amount of such Loans by
category and the amount of specific reserves with respect to
each such category of Loans and (B) each asset of MBNA or
any of its Subsidiaries that, as of March 31, 2005, is
classified as Other Real Estate Owned and the book
value thereof.
(b) Each Loan (i) is evidenced by notes, agreements or
other evidences of indebtedness which are true, genuine and what
they purport to be, (ii) to the extent secured, has been
secured by valid liens and security interests which have been
perfected and (iii) is the legal, valid and binding
obligation of the obligor named therein, enforceable in
accordance with its terms (except as may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar
laws affecting the rights of creditors generally and subject to
general principles of equity). All Loans originated by MBNA or
its Subsidiaries, and all such Loans purchased by MBNA or its
Subsidiaries, were made or purchased in accordance with
customary lending standards of MBNA or its Subsidiaries, as
applicable. All such Loans (and any related guarantees) and
payments due thereunder are, and on the Closing Date will be,
free and clear of any Lien, and MBNA or its Subsidiaries has
complied in all material respects, and on the Closing Date will
have complied in all material respects, with all laws and
regulations relating to such Loans.
3.17 Property. MBNA or one of its
Subsidiaries (a) has good and marketable title to all the
properties and assets reflected in the latest audited balance
sheet included in such MBNA SEC Reports as being owned by MBNA
or one of its Subsidiaries or acquired after the date thereof
(except properties sold or otherwise disposed of since the date
thereof in the ordinary course of business) (the Owned
Properties), free and clear of all Liens of any nature
whatsoever, except (i) statutory Liens securing payments
not yet due, (ii) Liens for real property taxes not yet due
and payable, (iii) easements, rights of way, and other
similar encumbrances that do not materially affect the use of
the properties or assets subject thereto or affected thereby or
otherwise materially impair business operations at such
properties and (iv) such imperfections or irregularities of
title or Liens as do not materially affect the use of the
properties or assets subject thereto or affected thereby or
otherwise materially impair business operations at such
properties (collectively, Permitted
Encumbrances), and (b) is the lessee of all
leasehold estates reflected in the latest audited financial
statements included in such MBNA SEC Reports or acquired after
the date thereof (except for leases that have expired by their
terms since the date thereof) (the Leased
Properties and, collectively with the Owned
Properties, the Real Property), free and
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clear of all Liens of any nature whatsoever, except for
Permitted Encumbrances, and is in possession of the properties
purported to be leased thereunder, and each such lease is valid
without default thereunder by the lessee or, to MBNAs
knowledge, the lessor. The Real Property is in material
compliance with all applicable zoning laws and building codes,
and the buildings and improvements located on the Real Property
are in good operating condition and in a state of good working
order, ordinary wear and tear excepted. There are no pending or,
to the knowledge of MBNA, threatened condemnation proceedings
against the Real Property. MBNA and its Subsidiaries are in
compliance with all applicable health and safety related
requirements for the Real Property, including those under the
Americans with Disabilities Act of 1990 and the Occupational
Health and Safety Act of 1970.
3.18 Intellectual Property. MBNA and each of
its Subsidiaries owns, or is licensed to use (in each case, free
and clear of any Liens), all Intellectual Property used in or
necessary for the conduct of its business as currently
conducted. The use of any Intellectual Property by MBNA and its
Subsidiaries does not, to the knowledge of MBNA, infringe on or
otherwise violate the rights of any person and is in accordance
with any applicable license pursuant to which MBNA or any
Subsidiary acquired the right to use any Intellectual Property.
No person is challenging, infringing on or otherwise violating
any right of MBNA or any of its Subsidiaries with respect to any
Intellectual Property owned by and/or licensed to MBNA or its
Subsidiaries. Neither MBNA nor any of its Subsidiaries has
received any written notice of any pending claim with respect to
any Intellectual Property used by MBNA and its Subsidiaries and
no Intellectual Property owned and/or licensed by MBNA or its
Subsidiaries is being used or enforced in a manner that would
result in the abandonment, cancellation or unenforceability of
such Intellectual Property. For purposes of this Agreement,
Intellectual Property means trademarks,
service marks, brand names, certification marks, trade dress and
other indications of origin, the goodwill associated with the
foregoing and registrations in any jurisdiction of, and
applications in any jurisdiction to register, the foregoing,
including any extension, modification or renewal of any such
registration or application; inventions, discoveries and ideas,
whether patentable or not, in any jurisdiction; patents,
applications for patents (including divisions, continuations,
continuations in part and renewal applications), and any
renewals, extensions or reissues thereof, in any jurisdiction;
nonpublic information, trade secrets and confidential
information and rights in any jurisdiction to limit the use or
disclosure thereof by any person; writings and other works,
whether copyrightable or not, in any jurisdiction; and
registrations or applications for registration of copyrights in
any jurisdiction, and any renewals or extensions thereof; and
any similar intellectual property or proprietary rights.
3.19 Environmental Liability. There are no
legal, administrative, arbitral or other proceedings, claims,
actions, causes of action or notices with respect to any
environmental, health or safety matters or any private or
governmental environmental, health or safety investigations or
remediation activities of any nature seeking to impose, or that
are reasonably likely to result in, any liability or obligation
of MBNA or any of its Subsidiaries arising under common law or
under any local, state or federal environmental, health or
safety statute, regulation or ordinance, including the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, pending or threatened against MBNA or
any of its Subsidiaries. To the knowledge of MBNA, there is no
reasonable basis for, or circumstances that are reasonably
likely to give rise to, any such proceeding, claim, action,
investigation or remediation by any Governmental Entity or any
third party that would give rise to any liability or
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obligation on the part of MBNA or any of its Subsidiaries.
Neither MBNA nor any of its Subsidiaries is subject to any
agreement, order, judgment, decree, letter or memorandum by or
with any Governmental Entity or third party imposing any
liability or obligation with respect to any of the foregoing.
3.20 Credit Card Operations.
(a) Since January 1, 2002, all of the Accounts have
been solicited, originated, maintained and serviced in
compliance with all applicable policies, practices and
procedures of MBNA and its Subsidiaries, all applicable legal
and regulatory requirements and all applicable by-laws, rules
and regulations of the relevant Credit Card Associations or the
terms of the network card license arrangement with American
Express Company; and none of the Accounts have been re-aged
except in accordance with the re-aging policies referred to
above as in effect at the time of re-aging.
(b) All Accounts are governed by Account Agreements in one
of the representative forms made available to Bank of America
prior to the date hereof. Since January 1, 2002, none of
the terms of those Account Agreements have been waived or
altered, modified or impaired (other than on a case-by-case
basis consistent with MBNAs applicable policies in effect
at the time and as reflected in the books and records of MBNA
and its Subsidiaries), and each Account has complied with the
applicable Account Agreement.
(c) All Account Agreements are valid and legally binding
obligations of the obligors thereon, including any co-signer,
guarantor or surety, in the full amount thereof set forth in the
books and records of MBNA and its Subsidiaries, are enforceable
against such obligors in accordance with their respective terms
(subject to applicable bankruptcy, insolvency, moratorium,
reorganization, fraudulent transfer and other laws relating to
or affecting creditors rights generally, to general
equitable principles and to the Servicemembers Civil Relief Act)
and are not subject to any claim or defense by such obligors of
fraud or usury against MBNA or its Subsidiaries. To MBNAs
knowledge, each of the receivables relating to or arising under
the Accounts arose from or in connection with a bona fide sale
or loan transaction (including any amounts in respect of finance
charges, annual fees and similar fees and charges assessed on
the Accounts), and none of such Accounts is subject to offset,
recoupment, adjustment or any other valid and cognizable claim
or defense of any obligor other than as may be permitted by the
Fair Credit Billing Act, as amended, and the regulations
thereunder.
(d) Since January 1, 2002, all disclosures
attributable to MBNA or its Subsidiaries made in connection with
the opening, servicing and collection of the Accounts complied
with all applicable laws and regulations at the time made.
(e) Each Account relates to the extension of credit and the
advancement of money on a revolving basis and would be
considered a credit or charge card account under
Regulation Z of the Federal Reserve Board. No Account is
secured by any collateral whatsoever, except to the extent
arising in connection with Accounts under collection and except
for accounts secured or partially secured by deposits at MBNA
America Bank, N.A. or MBNA America (Delaware), N.A. in
compliance with all legal and regulatory requirements and the
bylaws, rules and regulations of the relevant Credit Card
Associations, for each of which
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Accounts there exists a valid, binding and enforceable first
priority lien on any funds in the deposit account related to
such Account. The contractual and other arrangements for such
secured or partially secured Accounts are not subject to any
investigation, inquiry, claim, or challenge by any Regulatory
Agency or other Governmental Entity. No Account may be accessed
by a debit card.
(f) The interest rates, fees and charges applicable to the
Accounts comply with the applicable Account Agreements and all
legal and regulatory requirements and the by-laws, rules and
regulations of the relevant Credit Card Associations or the
terms of the network card license arrangement with American
Express Company
(g) Except in connection with its partnership and
co-branding marketing programs or its membership product
vendors, neither MBNA nor any of its Subsidiaries has
transferred, delivered or granted access to its list of
Cardholders, or any part thereof, to any person engaged,
directly or indirectly, in the marketing or distribution of any
Credit Card or other service or product.
(h) For purposes of this Agreement, the following terms
shall have the meanings assigned below:
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(i) Account Agreement means an agreement
(including related disclosure) between MBNA or one of its
Subsidiaries and a person or persons under which the Accounts
are established and Credit Cards are issued to or on behalf of
such person or persons. |
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(ii) Accounts means all accounts under
which a purchase, cash advance or credit transaction may be or
has been made by a Cardholder by means of a Credit Card. |
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(iii) Cardholder means a person or
persons in whose name(s) an Account has been established in
connection with a Credit Card pursuant to an Account Agreement. |
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(iv) Credit Card means a card that may
be used by the holder to purchase goods and services and to
obtain cash advances through open-end revolving credit, commonly
known as a credit or charge card. |
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(v) Credit Card Associations means
VISA U.S.A., Inc., VISA International Inc. and MasterCard
International Incorporated. |
3.21 Securitizations.
(a) Each of MBNA or its applicable Subsidiary and, to the
knowledge of MBNA, each other party thereto has performed in all
material respects the obligations to be performed by it under
each of the MBNA Securitization Documents, including the filing
of any financing statements, continuation statements or
amendments under the Uniform Commercial Code of each applicable
jurisdiction with the appropriate filing offices.
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(b) Each of the MBNA Securitization Interests, each series
of certificates or other securities issued by any MBNA Master
Trust, each series of notes or other securities issued by any
MBNA Owner Trust and each of the MBNA Securitization Documents
to which MBNA, any of its Subsidiaries, MBNA Owner Trust or any
MBNA Master Trust, as the case may be, is a party is in full
force and effect and is a valid, binding and enforceable
obligation of MBNA or such Subsidiary, MBNA Owner Trust or any
MBNA Master Trust, as the case may be, and, to the knowledge of
MBNA, of the other parties thereto, subject to applicable
bankruptcy, insolvency, moratorium, reorganization, fraudulent
transfer and other laws affecting creditors rights
generally and to general equitable principles.
(c) True and complete copies of the MBNA Securitization
Documents in full force and effect as of the date hereof have
been made available to Bank of America.
(d) All MBNA Securitization Documents required to be
qualified under the Trust Indenture Act of 1939, as amended,
have been so qualified and neither any MBNA Master Trust nor any
MBNA Owner Trust is required to be registered under the
Investment Company Act of 1940, as amended, or the Financial
Services and Markets Act 2000. The sale of all securities issued
by any MBNA Master Trust and any MBNA Owner Trust was either
duly registered under, or exempt from the registration
requirements of, the Securities Act or the Financial Services
and Markets Act 2000, as applicable.
(e) MBNA America Bank, N.A. is the sole owner of the
Retained Interest that is the Seller Interest (as defined in the
Pooling and Servicing Agreement) and any other comparable
interest under any other MBNA Securitization Document and MBNA
or an MBNA Subsidiary is the sole owner of all other MBNA
Securitization Interests.
(f) No event or condition exists which is or with either
notice or the passage of time would (A) constitute a
default, event of default, early redemption event, payout event
or early amortization event under any MBNA Securitization
Document, (B) require any accelerated application of cash
flows received in respect of the MBNA Securitization
Receivables, or (C) trigger any requirement under any MBNA
Securitization Document to (x) fund an increase in any
spread account or similar account (other than with respect to
spread accounts that have already been funded), (y) draw on
any such account under the terms of any MBNA Securitization
Document or (z) otherwise increase any credit enhancement
required under the MBNA Securitization Documents (each, an
Adverse Development).
(g) No event or condition exists which constitutes a
Servicer Default or other similar event permitting the
termination of the servicer under any of the MBNA Securitization
Documents (a Servicer Default or Termination).
(h) Since January 1, 2002, on a consolidated basis,
MBNA has properly accounted for the sale of the MBNA
Securitization Receivables under GAAP, including Statement of
Financial Accounting Standards No. 140, and including in
respect of the reporting of income arising from the sale of such
MBNA Securitization Receivables. Certain securitizations have
been structured as financings and are not treated as a sale.
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(i) The consummation of the transactions contemplated
hereby (including the Merger) shall not cause the occurrence of
an Adverse Development or a Servicer Default or Termination.
(j) On a consolidated basis, MBNA is not required to
consolidate any variable interest entity under GAAP, including
FIN 46 and FIN 46R, as in effect as of the date hereof
in connection with any transaction related to an MBNA Owner
Trust or MBNA Master Trust.
(k) Since January 1, 2002, neither MBNA nor any of its
Subsidiaries owns or has owned any security issued by an MBNA
Owner Trust or MBNA Master Trust that includes an embedded
derivative under GAAP.
(l) Each MBNA Subsidiary which acts as a servicer or
trustee and, to the knowledge of MBNA, each other party which
acts as servicer or trustee under the MBNA Securitization
Documents have properly administered all accounts in accordance
with the terms of the governing documents and applicable common
law and the accountings for each such account are true and
correct and accurately reflect the assets of such account.
(m) MBNA has previously made available to Bank of America
an accurate and complete copy of each final registration
statement, prospectus, prospectus supplement, report and
schedule filed with or furnished to the SEC by any entity
relating to any MBNA Securitization Transaction since
January 1, 2002 pursuant to the Securities Act, the
Exchange Act, the Investment Company Act of 1940, as amended, or
the Financial Services and Markets Act 2000, as applicable, and
prior to the date of this Agreement (the MBNA
Securitization Reports). No such MBNA Securitization
Report, at the time dated, filed or furnished (and, in the case
of registration statements, on the dates of effectiveness),
contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or
necessary in order to make the statements made therein not
misleading. As of their respective dates, all MBNA
Securitization Reports complied as to form in all material
respects with the published rules and regulations of the SEC and
the Financial Services Authority, as applicable, with respect
thereto. All reports (including required certifications)
required to be filed with the SEC or the Financial Services
Authority relating to the MBNA Securitization Transactions have
been filed on a timely basis.
(n) MBNA or its applicable Subsidiary has made all
reasonably necessary plans and preparations in order to comply
in a timely manner with all requirements of Regulation AB
promulgated by the SEC.
(o) For purposes of this Agreement, the following terms
shall have the meanings assigned below:
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(i) Indenture means that certain
indenture dated as of May 24, 2001, as amended, by and
between MBNA Credit Card Master Note Trust and the Bank of New
York as indenture trustee. |
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(ii) MBNA Master Trust means the MBNA
Master Credit Card Trust II created pursuant to the Pooling
and Servicing Agreement or any other trust or similar special
purpose entity created to hold and securitize any |
A-26
receivables relating to Accounts or other receivables of MBNA or
any MBNA Subsidiary.
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(iii) MBNA Owner Trust means the MBNA
Credit Card Master Note Trust and any other trust or other
similar special purpose entity created to hold one or more
securities issued by MBNA Master Trust and issue notes or other
securities backed by such securities. |
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(iv) MBNA Securitization Documents means
the Pooling and Servicing Agreement, the Indenture, each
security issued by any MBNA Master Trust, each security issued
by any MBNA Owner Trust, and each prospectus, offering circular,
underwriting agreement and purchase agreement related to any
such security and each supplement, terms or pricing agreement or
derivative or other agreement relating to the foregoing and each
document required to be delivered in connection therewith. |
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(v) MBNA Securitization Interests means
any securities, any Retained Interest, any spread account, cash
collateral account or other residual or servicing interest (in
each case whether or not certificated) owned by MBNA or any
Subsidiary created pursuant to any MBNA Securitization Document. |
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(vi) MBNA Securitization Receivable
means a receivable related to an Account or other receivable of
MBNA or any MBNA Subsidiary that MBNA or any MBNA Subsidiary has
designated to an MBNA Master Trust. |
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(vii) MBNA Securitization Transaction
means any transaction contemplated by the MBNA Securitization
Documents. |
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(viii) Pooling and Servicing Agreement
means that certain Pooling and Servicing Agreement, dated as of
August 4, 1994, as amended, by and between MBNA America
Bank, N.A., as seller and servicer, and The Bank of New York, as
trustee. |
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(ix) Retained Interest means an interest
retained by MBNA or any MBNA Subsidiary pursuant to the MBNA
Securitization Documents in any MBNA Securitization Receivable. |
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(x) Servicer Default means a servicer
default or similar event, as specified in the relevant Pooling
and Servicing Agreement, Indenture or other MBNA Securitization
Document, as the case may be. |
3.22 State Takeover Laws. The Board of
Directors of MBNA has unanimously approved this Agreement and
the Stock Option Agreement and the transactions contemplated
hereby and thereby as required to render inapplicable to such
agreements and transactions Sections 3-601 to 3-604 and
3-701 to 3-709 of the MGCL and, to the knowledge of MBNA, any
similar moratorium, control share,
fair price, takeover or interested
stockholder law (any such laws, Takeover
Statutes).
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3.23 Reorganization; Approvals. As of the
date of this Agreement, MBNA (a) is not aware of any fact
or circumstance that could reasonably be expected to prevent the
Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Code, and
(b) knows of no reason why all regulatory approvals from
any Governmental Entity required for the consummation of the
transactions contemplated by this Agreement should not be
obtained on a timely basis.
3.24 Opinion. Prior to the execution of this
Agreement, the MBNA Board of Directors has received an opinion
from UBS Securities to the effect that as of the date thereof
and based upon and subject to the matters set forth therein, the
Merger Consideration is fair to the stockholders of MBNA from a
financial point of view. Such opinion has not been amended or
rescinded as of the date of this Agreement.
3.25 MBNA Information. The information
relating to MBNA and its Subsidiaries that is provided by MBNA
or its representatives for inclusion in the Proxy Statement and
the Form S-4, or in any application, notification or other
document filed with any other Regulatory Agency or other
Governmental Entity in connection with the transactions
contemplated by this Agreement, will not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading. The
portions of the Proxy Statement relating to MBNA and other
portions within the reasonable control of MBNA will comply in
all material respects with the provisions of the Exchange Act
and the rules and regulations thereunder.
ARTICLE IV
Representations and Warranties of Bank of America
Except as disclosed in the disclosure schedule (the
Bank of America Disclosure Schedule)
delivered by Bank of America to MBNA prior to the execution of
this Agreement (which schedule sets forth, among other things,
items the disclosure of which is necessary or appropriate either
in response to an express disclosure requirement contained in a
provision hereof or as an exception to one or more
representations or warranties contained in this Article IV,
or to one or more of Bank of Americas covenants contained
herein, provided, however, that notwithstanding
anything in this Agreement to the contrary, (i) no such
item is required to be set forth in such schedule as an
exception to a representation or warranty if its absence would
not result in the related representation or warranty being
deemed untrue or incorrect under the standard established by
Section 9.2, and (ii) the mere inclusion of an item in
such schedule as an exception to a representation or warranty
shall not be deemed an admission that such item represents a
material exception or material fact, event or circumstance or
that such item has had or would be reasonably likely to have a
Material Adverse Effect on Bank of America), Bank of America
hereby represents and warrants to MBNA as follows:
4.1 Corporate Organization. (a) Bank of
America is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware. Bank
of America has the corporate power and authority to own or lease
all of its properties and assets and to carry on its business as
it is now being conducted, and is duly licensed or qualified
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to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing
or qualification necessary. Bank of America is duly registered
as a bank holding company under the BHC Act and is a financial
holding company pursuant to Section 4(1) of the BHC Act and
meets the applicable requirements for qualification as such.
True, complete and correct copies of the Amended and Restated
Certificate of Incorporation, as amended (the Bank of
America Certificate), and Bylaws of Bank of America
(the Bank of America Bylaws), as in effect as
of the date of this Agreement, have previously been made
available to MBNA.
(b) Each Bank of America Subsidiary (i) is duly
incorporated or duly formed, as applicable to each such
Subsidiary, and validly existing under the laws of its
jurisdiction of organization, (ii) is duly qualified to do
business and in good standing in all jurisdictions (whether
federal, state, local or foreign) where its ownership or leasing
of property or the conduct of its business requires it to be so
qualified, and (iii) has all requisite corporate power or
other power and authority to own or lease its properties and
assets and to carry on its business as now conducted.
4.2 Capitalization. (a) The authorized
capital stock of Bank of America consists of
7,500,000,000 shares of Bank of America Common Stock, of
which, as of June 24, 2005 (the Bank of America
Capitalization Date), 4,025,666,601 shares were
issued and outstanding, and 100,000,000 shares of preferred
stock, $0.01 par value (the Bank of America
Preferred Stock), of which, as of the Bank of America
Capitalization Date, (x) 35,045 shares were authorized
and 7,739 shares were issued and outstanding as Bank of
America Series B 7% Cumulative Redeemable Preferred Stock,
(y) 690,000 shares were authorized and
382,450 shares were issued and outstanding as Bank of
America Series VI 6.75% Perpetual Preferred Stock and
(z) 805,000 shares were authorized and
700,000 shares were issued and outstanding as Bank of
America Series VII 6.60% Cumulative Preferred Stock. As of
the Bank of America Capitalization Date, no shares of Bank of
America Common Stock were held in Bank of Americas
treasury. As of the Bank of America Capitalization Date, no
shares of Bank of America Common Stock or Bank of America
Preferred Stock were reserved for issuance, except for
(i) 718,265,197 shares of Bank of America Common Stock
reserved for issuance upon exercise of options issued pursuant
to employee and director stock plans of Bank of America or a
Subsidiary of Bank of America in effect as of the date of this
Agreement (the Bank of America Stock Plans),
(ii) 11,183,732 shares of Bank of America Common Stock
reserved for issuance pursuant to Bank of Americas
dividend reinvestment plan and (iii) 159,954 shares of
Bank of America Common Stock reserved for issuance pursuant to a
convertible note agreement (the Convertible Note
Agreement). All of the issued and outstanding shares
of Bank of America Common Stock have been duly authorized and
validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the
ownership thereof. As of the date of this Agreement, no Voting
Debt of Bank of America is issued or outstanding. As of the Bank
of America Capitalization Date, except pursuant to this
Agreement, the Bank of America Stock Plans, the Convertible Note
Agreement, Bank of Americas dividend reinvestment plan and
stock repurchase plans entered into by Bank of America from time
to time, Bank of America does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, rights,
commitments or agreements of any character calling for the
purchase or issuance of any shares of Bank of America Common
Stock, Bank of America Preferred Stock, Voting Debt of Bank of
America or any other equity securities of Bank of America or any
A-29
securities representing the right to purchase or otherwise
receive any shares of Bank of America Common Stock, Bank of
America Preferred Stock, Voting Debt of Bank of America or other
equity securities of Bank of America. The shares of Bank of
America Common Stock to be issued pursuant to the Merger will be
duly authorized and validly issued and, at the Effective Time,
all such shares will be fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the
ownership thereof.
(b) Except for director qualifying shares, all of the
issued and outstanding shares of capital stock or other equity
ownership interests of each Subsidiary of Bank of America are
owned by Bank of America, directly or indirectly, free and clear
of any Liens, and all of such shares or equity ownership
interests are duly authorized and validly issued and are fully
paid, nonassessable (subject to 12 U.S.C. § 55)
and free of preemptive rights. No such Bank of America
Subsidiary has or is bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of
capital stock or any other equity security of such Subsidiary or
any securities representing the right to purchase or otherwise
receive any shares of capital stock or any other equity security
of such Subsidiary.
4.3 Authority; No Violation. (a) Bank of
America has full corporate power and authority to execute and
deliver this Agreement and the Stock Option Agreement and to
consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Stock Option
Agreement and the consummation of the transactions contemplated
hereby and thereby have been duly and validly approved by the
Board of Directors of Bank of America (by the unanimous vote of
all directors present) and no other corporate proceedings on the
part of Bank of America are necessary to approve this Agreement
and the Stock Option Agreement or to consummate the transactions
contemplated hereby or thereby. This Agreement and the Stock
Option Agreement have been duly and validly executed and
delivered by Bank of America and (assuming due authorization,
execution and delivery by MBNA) constitute the valid and binding
obligations of Bank of America, enforceable against Bank of
America in accordance with their terms (except as may be limited
by bankruptcy, insolvency, moratorium, reorganization or similar
laws affecting the rights of creditors generally and subject to
general principles of equity).
(b) Neither the execution and delivery of this Agreement or
the Stock Option Agreement by Bank of America, nor the
consummation by Bank of America of the transactions contemplated
hereby or thereby, nor compliance by Bank of America with any of
the terms or provisions of this Agreement or the Stock Option
Agreement, will (i) violate any provision of the Bank of
America Certificate or the Bank of America Bylaws, or
(ii) assuming that the consents, approvals and filings
referred to in Section 4.4 are duly obtained and/or made,
(A) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or Injunction applicable to Bank
of America, any of its Subsidiaries or any of their respective
properties or assets or (B) violate, conflict with, result
in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under,
result in the termination of or a right of termination or
cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective
properties or assets of Bank of America or any of its
Subsidiaries under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust, license,
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lease, agreement or other instrument or obligation to which Bank
of America or any of its Subsidiaries is a party or by which any
of them or any of their respective properties or assets is
bound. Neither Bank of America nor any of its Subsidiaries is a
party to or bound by any contract, arrangement, commitment or
understanding (whether written or oral) that, to the knowledge
of Bank of America, upon consummation of the Merger will
materially restrict the ability of the Surviving Corporation to
engage in any line of business currently conducted by MBNA or
its Subsidiaries.
4.4 Consents and Approvals. Except for
(i) the filing of applications and notices, as applicable,
with the Federal Reserve Board under the BHC Act and approval of
such applications and notices, (ii) the Other Regulatory
Approvals, (iii) the filing with the SEC of the Proxy
Statement and the filing and declaration of effectiveness of the
Form S-4 and the filing and effectiveness of the
registration statement contemplated by Section 1.5(e),
(iv) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware pursuant to the DGCL
and the filing of the Articles of Merger with the Maryland State
Department of Assessments and Taxation pursuant to the MGCL,
(v) any notices to or filings with the SBA, (vi) any
consents, authorizations, approvals, filings or exemptions in
connection with compliance with the rules and regulations of any
applicable SRO, and the rules of the NYSE, or that are required
under consumer finance, mortgage banking and other similar laws,
and (vii) such filings and approvals as are required to be
made or obtained under the securities or Blue Sky
laws of various states in connection with the issuance of the
shares of Bank of America Common Stock pursuant to this
Agreement and approval of listing of such Bank of America Common
Stock on the NYSE, no consents or approvals of or filings or
registrations with any Governmental Entity are necessary in
connection with the consummation by Bank of America of the
Merger and the other transactions contemplated by this Agreement
or the Stock Option Agreement. No consents or approvals of or
filings or registrations with any Governmental Entity are
necessary in connection with the execution and delivery by Bank
of America of this Agreement and the Stock Option Agreement.
4.5 Reports; Regulatory Matters.
(a) Bank of America and each of its Subsidiaries have
timely filed all reports, registrations and statements, together
with any amendments required to be made with respect thereto,
that they were required to file since January 1, 2002 with
the Regulatory Agencies and each other applicable Governmental
Entity, and all other reports and statements required to be
filed by them since January 1, 2002, including any report
or statement required to be filed pursuant to the laws, rules or
regulations of the United States, any state, any foreign entity,
or any Regulatory Agency, and have paid all fees and assessments
due and payable in connection therewith. Except for normal
examinations conducted by a Regulatory Agency or Governmental
Entity in the ordinary course of the business of Bank of America
and its Subsidiaries, no Regulatory Agency or Governmental
Entity has initiated since January 1, 2002 or has pending
any proceeding, enforcement action or, to the knowledge of Bank
of America, investigation into the business, disclosures or
operations of Bank of America or any of its Subsidiaries. Since
January 1, 2002, no Regulatory Agency or Governmental
Entity has resolved any proceeding, enforcement action or, to
the knowledge of Bank of America, investigation into the
business, disclosures or operations of Bank of America or any of
its Subsidiaries. There is no unresolved violation, criticism,
or exception by any Regulatory Agency or Governmental Entity
with respect
A-31
to any report or statement relating to any examinations or
inspections of Bank of America or any of its Subsidiaries. Since
January 1, 2002 there has been no formal or informal
inquiries by, or disagreements or disputes with, any Regulatory
Agency or Governmental Entity with respect to the business,
operations, policies or procedures of Bank of America or any of
its Subsidiaries (other than normal examinations conducted by a
Regulatory Agency or Governmental Entity in Bank of
Americas ordinary course of business).
(b) Neither Bank of America nor any of its Subsidiaries is
subject to any cease-and-desist or other order or enforcement
action issued by, or is a party to any written agreement,
consent agreement or memorandum of understanding with, or is a
party to any commitment letter or similar undertaking to, or is
subject to any order or directive by, or has been since
January 1, 2002 a recipient of any supervisory letter from,
or has been ordered to pay any civil money penalty by, or since
January 1, 2002 has adopted any policies, procedures or
board resolutions at the request or suggestion of, any
Regulatory Agency or other Governmental Entity that currently
restricts in any material respect the conduct of its business or
that in any material manner relates to its capital adequacy, its
ability to pay dividends, its credit, risk management or
compliance policies, its internal controls, its management or
its business, other than those of general application that apply
to bank holding companies or their Subsidiaries (each, a
Bank of America Regulatory Agreement), nor
has Bank of America or any of its Subsidiaries been advised
since January 1, 2002 by any Regulatory Agency or other
Governmental Entity that it is considering issuing, initiating,
ordering or requesting any such Bank of America Regulatory
Agreement.
(c) Bank of America has previously made available to MBNA
an accurate and complete copy of each (i) final
registration statement, prospectus, report, schedule and
definitive proxy statement filed with or furnished to the SEC by
Bank of America pursuant to the Securities Act or the Exchange
Act and prior to the date of this Agreement (the Bank
of America SEC Reports) and (ii) communication
mailed by Bank of America to its stockholders since
January 1, 2002 and prior to the date of this Agreement. No
such Bank of America SEC Report or communication, at the time
filed, furnished or communicated (and, in the case of
registration statements and proxy statements, on the dates of
effectiveness and the dates of the relevant meetings,
respectively), contained any untrue statement of a material fact
or omitted to state any material fact required to be stated
therein or necessary in order to make the statements made
therein, in light of the circumstances in which they were made,
not misleading, except that information as of a later date (but
before the date of this Agreement) shall be deemed to modify
information as of an earlier date. As of their respective dates,
all Bank of America SEC Reports complied as to form in all
material respects with the published rules and regulations of
the SEC with respect thereto. No executive officer of Bank of
America has failed in any respect to make the certifications
required of him or her under Section 302 or 906 of the
Sarbanes-Oxley Act.
4.6 Financial Statements.
(a) The financial statements of Bank of America and its
Subsidiaries included (or incorporated by reference) in the Bank
of America SEC Reports (including the related notes, where
applicable) (i) have been prepared from, and are in
accordance with, the books and records of Bank of America and
its Subsidiaries; (ii) fairly present in all material
respects the consolidated results of operations, cash flows,
changes in stockholders equity and consolidated
A-32
financial position of Bank of America and its Subsidiaries for
the respective fiscal periods or as of the respective dates
therein set forth (subject in the case of unaudited statements
to recurring year-end audit adjustments normal in nature and
amount); (iii) complied as to form, as of their respective
dates of filing with the SEC, in all material respects with
applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto; and
(iv) have been prepared in accordance with GAAP
consistently applied during the periods involved, except, in
each case, as indicated in such statements or in the notes
thereto. The books and records of Bank of America and its
Subsidiaries have been, and are being, maintained in all
material respects in accordance with GAAP and any other
applicable legal and accounting requirements and reflect only
actual transactions. PricewaterhouseCoopers LLP has not resigned
or been dismissed as independent public accountants of Bank of
America as a result of or in connection with any disagreements
with Bank of America on a matter of accounting principles or
practices, financial statement disclosure or auditing scope or
procedure.
(b) Neither Bank of America nor any of its Subsidiaries has
any material liability of any nature whatsoever (whether
absolute, accrued, contingent or otherwise and whether due or to
become due), except for those liabilities that are reflected or
reserved against on the consolidated balance sheet of Bank of
America included in its Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 2005 (including any
notes thereto) and for liabilities incurred in the ordinary
course of business consistent with past practice since
March 31, 2005 or in connection with this Agreement and the
transactions contemplated hereby.
(c) The records, systems, controls, data and information of
Bank of America and its Subsidiaries are recorded, stored,
maintained and operated under means (including any electronic,
mechanical or photographic process, whether computerized or not)
that are under the exclusive ownership and direct control of
Bank of America or its Subsidiaries or accountants (including
all means of access thereto and therefrom), except for any
non-exclusive ownership and non-direct control that would not
reasonably be expected to have a material adverse effect on the
system of internal accounting controls described below in this
Section 4.6(c). Bank of America (x) has implemented
and maintains disclosure controls and procedures (as defined in
Rule 13a-15(e) of the Exchange Act) to ensure that material
information relating to Bank of America, including its
consolidated Subsidiaries, is made known to the chief executive
officer and the chief financial officer of Bank of America by
others within those entities, and (y) has disclosed, based
on its most recent evaluation prior to the date hereof, to Bank
of Americas outside auditors and the audit committee of
Bank of Americas Board of Directors (i) any
significant deficiencies and material weaknesses in the design
or operation of internal controls over financial reporting (as
defined in Rule 13a-15(f) of the Exchange Act) which are
reasonably likely to adversely affect Bank of Americas
ability to record, process, summarize and report financial
information and (ii) any fraud, whether or not material,
that involves management or other employees who have a
significant role in Bank of Americas internal controls
over financial reporting. These disclosures were made in writing
by management to Bank of Americas auditors and audit
committee and a copy has previously been made available to MBNA.
As of the date hereof, there is no reason to believe that its
outside auditors and its chief executive officer and chief
financial officer will not be able to give the certifications
and attestations required pursuant to the rules and regulations
adopted pursuant to Section 404 of the Sarbanes-Oxley Act,
without qualification, when next due.
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(d) Since December 31, 2004, (x) through the date
hereof, neither Bank of America nor any of its Subsidiaries nor,
to the knowledge of the officers of Bank of America, any
director, officer, employee, auditor, accountant or
representative of Bank of America or any of its Subsidiaries has
received or otherwise had or obtained knowledge of any material
complaint, allegation, assertion or claim, whether written or
oral, regarding the accounting or auditing practices,
procedures, methodologies or methods of Bank of America or any
of its Subsidiaries or their respective internal accounting
controls, including any material complaint, allegation,
assertion or claim that Bank of America or any of its
Subsidiaries has engaged in questionable accounting or auditing
practices, and (y) no attorney representing Bank of America
or any of its Subsidiaries, whether or not employed by Bank of
America or any of its Subsidiaries, has reported evidence of a
material violation of securities laws, breach of fiduciary duty
or similar violation by Bank of America or any of its officers,
directors, employees or agents to the Board of Directors of Bank
of America or any committee thereof or to any director or
officer of Bank of America.
4.7 Brokers Fees. Neither Bank of
America nor any Bank of America Subsidiary nor any of their
respective officers or directors has employed any broker or
finder or incurred any liability for any brokers fees,
commissions or finders fees in connection with the Merger
or related transactions contemplated by this Agreement, other
than as set forth on Section 4.7 of the Bank of America
Disclosure Schedule.
4.8 Absence of Certain Changes or Events.
(a) Since December 31, 2004, no event or events have
occurred that have had or are reasonably likely to have a
Material Adverse Effect on Bank of America.
(b) Since December 31, 2004 through and including the
date of this Agreement, Bank of America and its Subsidiaries
have carried on their respective businesses in all material
respects in the ordinary course of business consistent with
their past practice.
4.9 Legal Proceedings. (a) None of Bank
of America or any of its Subsidiaries is a party to any, and
there are no pending or, to the best of Bank of Americas
knowledge, threatened, material legal, administrative, arbitral
or other material proceedings, claims, actions or governmental
or regulatory investigations of any nature against Bank of
America or any of its Subsidiaries.
(b) There is no Injunction, judgment, or regulatory
restriction (other than those of general application that apply
to similarly situated bank holding companies or their
Subsidiaries) imposed upon Bank of America, any of its
Subsidiaries or the assets of Bank of America or any of its
Subsidiaries.
4.10 Taxes and Tax Returns. Each of Bank of
America and its Subsidiaries has duly and timely filed
(including all applicable extensions) all material Tax Returns
required to be filed by it on or prior to the date of this
Agreement (all such returns being accurate and complete in all
material respects), has paid all Taxes shown thereon as arising
and has duly paid or made provision for the payment of all
material Taxes that have been incurred or are due or claimed to
be due from it by federal, state, foreign or local taxing
authorities other than Taxes that are not yet delinquent or are
being contested in good faith, have not been finally determined
and have
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been adequately reserved against. There are no material disputes
pending, or claims asserted, for Taxes or assessments upon Bank
of America or any of its Subsidiaries for which Bank of America
does not have reserves that are adequate under GAAP.
4.11 Compliance with Applicable Law.
(a) Bank of America and each of its Subsidiaries hold all
material licenses, franchises, permits and authorizations
necessary for the lawful conduct of their respective businesses
under and pursuant to each, and have complied in all respects
with and are not in default in any material respect under any,
applicable law, statute, order, rule, regulation, policy or
guideline of any Governmental Entity relating to Bank of America
or any of its Subsidiaries.
(b) Since the enactment of the Sarbanes-Oxley Act, Bank of
America has been and is in compliance in all material respects
with (i) the applicable provisions of the Sarbanes-Oxley
Act and (ii) the applicable listing and corporate
governance rules and regulations of the NYSE.
4.12 Reorganization; Approvals. As of the
date of this Agreement, Bank of America (a) is not aware of
any fact or circumstance that could reasonably be expected to
prevent the Merger from qualifying as a
reorganization within the meaning of
Section 368(a) of the Code, and (b) knows of no reason
why all regulatory approvals from any Governmental Entity
required for the consummation of the transactions contemplated
by this Agreement should not be obtained on a timely basis.
4.13 Aggregate Cash Consideration. Bank of
America has available to it sufficient funds to deliver the
aggregate Cash Consideration.
4.14 Bank of America Information. The
information relating to Bank of America and its Subsidiaries
that is provided by Bank of America or its representatives for
inclusion in the Proxy Statement and the Form S-4, or in
any application, notification or other document filed with any
other Regulatory Agency or other Governmental Entity in
connection with the transactions contemplated by this Agreement,
will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements
therein, in light of the circumstances in which they are made,
not misleading. The portions of the Proxy Statement relating to
Bank of America and other portions within the reasonable control
of Bank of America will comply in all material respects with the
provisions of the Exchange Act and the rules and regulations
thereunder. The Form S-4 will comply in all material
respects with the provisions of the Securities Act and the rules
and regulations thereunder.
ARTICLE V
Covenants Relating to Conduct of Business
5.1 Conduct of Businesses Prior to the Effective
Time. Except as expressly contemplated by or permitted
by this Agreement or with the prior written consent of the other
party, during the period from the date of this Agreement to the
Effective Time, each of MBNA and Bank of America shall, and
shall cause each of its respective Subsidiaries to,
(a) conduct its business in the ordinary course in all
material respects, (b) use reasonable best efforts to
maintain
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and preserve intact its business organization and advantageous
business relationships and retain the services of its key
officers and key employees and (c) take no action that is
intended to or would reasonably be expected to adversely affect
or materially delay the ability of either MBNA or Bank of
America to obtain any necessary approvals of any Regulatory
Agency or other Governmental Entity required for the
transactions contemplated hereby or to perform its covenants and
agreements under this Agreement or to consummate the
transactions contemplated hereby or thereby.
5.2 MBNA Forbearances. During the period from
the date of this Agreement to the Effective Time, except as set
forth in the MBNA Disclosure Schedule and except as expressly
contemplated or permitted by this Agreement, MBNA shall not, and
shall not permit any of its Subsidiaries to, without the prior
written consent of Bank of America:
(a) other than in the ordinary course of business
consistent with past practice, incur any indebtedness for
borrowed money, assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any
other individual, corporation or other entity, or make any loan
or advance or capital contribution to, or investment in, any
person (it being understood and agreed that incurrence of
indebtedness in the ordinary course of business consistent with
past practice shall include the creation of deposit liabilities,
purchases of Federal funds, securitizations, sales of
certificates of deposit and entering into repurchase agreements);
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(b) (i) adjust, split, combine or reclassify any of
its capital stock; |
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(ii) make, declare or pay any dividend, or make any other
distribution on, or directly or indirectly redeem, purchase or
otherwise acquire, any shares of its capital stock or any
securities or obligations convertible (whether currently
convertible or convertible only after the passage of time or the
occurrence of certain events) into or exchangeable for any
shares of its capital stock (except (A) for regular
quarterly cash dividends at a rate not in excess of
$0.14 per share of MBNA Common Stock with record dates and
payment dates consistent with the prior year, (B) dividends
paid by any of the Subsidiaries of MBNA to MBNA or to any of its
wholly-owned Subsidiaries, and (C) the acceptance of shares
of MBNA Common Stock in payment of the exercise price or
withholding taxes incurred by any employee or director in
connection with the exercise of stock options or the vesting of
restricted shares of (or settlement of other equity-based awards
in respect of) MBNA Common Stock granted under an MBNA Stock
Plan, in each case in accordance with past practice and the
terms of the applicable MBNA Stock Plan and related award
agreements); |
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(iii) grant any stock options, restricted shares or other
equity-based award with respect to shares of MBNA Common Stock
under any of the MBNA Stock Plans or otherwise, or grant any
individual, corporation or other entity any right to acquire any
shares of its capital stock; or |
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(iv) issue any additional shares of capital stock or other
securities except pursuant to the exercise of stock options or
the settlement of other equity- |
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based awards granted under an MBNA Stock Plan that are
outstanding as of the date of this Agreement and except pursuant
to the Stock Option Agreement; |
(c) except as required by applicable law or the terms of
any MBNA Benefit Plan as in effect on the date of this Agreement
and, solely with respect to employees that are not executive
officers or directors of MBNA, except for normal increases made
in the ordinary course of business consistent with past
practice, (i) increase the wages, salaries, or incentive
compensation or incentive compensation opportunities of any
employee of MBNA or any of its Subsidiaries, or, except for
payments in the ordinary course of business consistent with past
practice, pay or provide, or increase or accelerate the accrual
rate, vesting or timing of payment or funding of, any
compensation, benefits or other rights of any employee of MBNA
or any of its Subsidiaries or (ii) establish, adopt, or
become a party to any new employee benefit or compensation plan,
program, commitment or agreement or amend any MBNA Benefit Plan;
(d) sell, transfer, mortgage, encumber or otherwise dispose
of any material amount of its properties or assets to any
individual, corporation or other entity other than a Subsidiary
or cancel, release or assign any material amount of indebtedness
to any such person or any claims held by any such person, in
each case other than in the ordinary course of business
consistent with past practice or pursuant to contracts in force
at the date of this Agreement;
(e) enter into any new line of business or change in any
material respect its lending, investment, underwriting, risk and
asset liability management and other banking, operating,
securitization and servicing policies, except as required by
applicable law, regulation or policies imposed by any
Governmental Entity;
(f) make any material investment either by purchase of
stock or securities, contributions to capital, property
transfers, or purchase of any property or assets of any other
individual, corporation or other entity;
(g) take any action, or knowingly fail to take any action,
which action or failure to act is reasonably likely to prevent
the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code;
(h) amend its charter or bylaws, or otherwise take any
action to exempt any person or entity (other than Bank of
America or its Subsidiaries) or any action taken by any person
or entity from any Takeover Statute or similarly restrictive
provisions of its organizational documents or terminate, amend
or waive any provisions of any confidentiality or standstill
agreements in place with any third parties;
(i) other than in prior consultation with Bank of America,
restructure or materially change its investment securities
portfolio or its gap position, through purchases, sales or
otherwise, or the manner in which the portfolio is classified or
reported;
(j) change in any material respect the policies, practices
and procedures governing Credit Card operations of MBNA and its
Subsidiaries, including the policies, practices and procedures
governing credit and collection matters, related to the
solicitation, origination, maintenance and servicing of Accounts;
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(k) commence or settle any material claim, action or
proceeding;
(l) take any action or fail to take any action that is
intended or may reasonably be expected to result in any of the
conditions to the Merger set forth in Article VII not being
satisfied;
(m) implement or adopt any material change in its tax
accounting or financial accounting principles, practices or
methods, other than as may be required by applicable law, GAAP
or regulatory guidelines;
(n) file or amend any Tax Return other than in the ordinary
course of business, make or change any material Tax election, or
settle or compromise any material Tax liability; or
(o) agree to take, make any commitment to take, or adopt
any resolutions of its board of directors in support of, any of
the actions prohibited by this Section 5.2.
5.3 Bank of America Forbearances. Except as
expressly permitted by this Agreement or with the prior written
consent of MBNA, during the period from the date of this
Agreement to the Effective Time, Bank of America shall not, and
shall not permit any of its Subsidiaries to, (a) amend,
repeal or otherwise modify any provision of the Bank of America
Certificate or the Bank of America Bylaws in a manner that would
adversely effect MBNA, the stockholders of MBNA or the
transactions contemplated by this Agreement; (b) take any
action, or knowingly fail to take any action, which action or
failure to act is reasonably likely to prevent the Merger from
qualifying as a reorganization within the meaning of
Section 368(a) of the Code; (c) take any action that
is intended or may reasonably be expected to result in any of
the conditions to the Merger set forth in Article VII not
being satisfied; (d) take any action that would be
reasonably expected to prevent, materially impede or materially
delay the consummation of the transactions contemplated by this
Agreement; or (e) agree to take, make any commitment to
take, or adopt any resolutions of its board of directors in
support of, any of the actions prohibited by this
Section 5.3.
ARTICLE VI
Additional Agreements
6.1 Regulatory Matters. (a) Bank of
America and MBNA shall promptly prepare and file with the SEC
the Form S-4, in which the Proxy Statement will be included
as a prospectus. Each of Bank of America and MBNA shall use its
reasonable best efforts to have the Form S-4 declared
effective under the Securities Act as promptly as practicable
after such filing, and MBNA shall thereafter mail or deliver the
Proxy Statement to its stockholders. Bank of America shall also
use its reasonable best efforts to obtain all necessary state
securities law or Blue Sky permits and approvals
required to carry out the transactions contemplated by this
Agreement, and MBNA shall furnish all information concerning
MBNA and the holders of MBNA Common Stock as may be reasonably
requested in connection with any such action.
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(b) The parties shall cooperate with each other and use
their respective reasonable best efforts to promptly prepare and
file all necessary documentation, to effect all applications,
notices, petitions and filings, to obtain as promptly as
practicable all permits, consents, approvals and authorizations
of all third parties and Governmental Entities that are
necessary or advisable to consummate the transactions
contemplated by this Agreement (including the Merger), and to
comply with the terms and conditions of all such permits,
consents, approvals and authorizations of all such third parties
or Governmental Entities. MBNA and Bank of America shall have
the right to review in advance, and, to the extent practicable,
each will consult the other on, in each case subject to
applicable laws relating to the confidentiality of information,
all the information relating to MBNA or Bank of America, as the
case may be, and any of their respective Subsidiaries, which
appear in any filing made with, or written materials submitted
to, any third party or any Governmental Entity in connection
with the transactions contemplated by this Agreement. In
exercising the foregoing right, each of the parties shall act
reasonably and as promptly as practicable. The parties shall
consult with each other with respect to the obtaining of all
permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to
consummate the transactions contemplated by this Agreement and
each party will keep the other apprised of the status of matters
relating to completion of the transactions contemplated by this
Agreement. Notwithstanding the foregoing, nothing contained
herein shall be deemed to require Bank of America to take any
action, or commit to take any action, or agree to any condition
or restriction, in connection with obtaining the foregoing
permits, consents, approvals and authorizations of third parties
or Governmental Entities, that would reasonably be expected to
have a material adverse effect (measured on a scale relative to
MBNA) on either Bank of America or MBNA (a Materially
Burdensome Regulatory Condition).
(c) Each of Bank of America and MBNA shall, upon request,
furnish to the other all information concerning itself, its
Subsidiaries, directors, officers and stockholders and such
other matters as may be reasonably necessary or advisable in
connection with the Proxy Statement, the Form S-4 or any
other statement, filing, notice or application made by or on
behalf of Bank of America, MBNA or any of their respective
Subsidiaries to any Governmental Entity in connection with the
Merger and the other transactions contemplated by this Agreement.
(d) Each of Bank of America and MBNA shall promptly advise
the other upon receiving any communication from any Governmental
Entity the consent or approval of which is required for
consummation of the transactions contemplated by this Agreement
that causes such party to believe that there is a reasonable
likelihood that any Bank of America Requisite Regulatory
Approval or MBNA Requisite Regulatory Approval, respectively,
will not be obtained or that the receipt of any such approval
may be materially delayed.
6.2 Access to Information. (a) Upon
reasonable notice and subject to applicable laws relating to the
confidentiality of information, each of MBNA and Bank of America
shall, and shall cause each of its Subsidiaries to, afford to
the officers, employees, accountants, counsel, advisors, agents
and other representatives of the other party, reasonable access,
during normal business hours during the period prior to the
Effective Time, to all its properties, books, contracts,
commitments and records, and, during such period, such party
shall, and shall cause its Subsidiaries to, make available to
the other party (i) a copy of each report, schedule,
registration statement and other document filed or received by
it during such period
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pursuant to the requirements of federal securities laws or
federal or state banking or insurance laws (other than reports
or documents that such party is not permitted to disclose under
applicable law) and (ii) all other information concerning
its business, properties and personnel as the other party may
reasonably request (in the case of a request by MBNA,
information concerning Bank of America that is reasonably
related to the prospective value of Bank of America Common Stock
or to Bank of Americas ability to consummate the
transactions contemplated hereby). Neither MBNA nor Bank of
America, nor any of their Subsidiaries, shall be required to
provide access to or to disclose information where such access
or disclosure would jeopardize the attorney-client privilege of
such party or its Subsidiaries or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding
agreement entered into prior to the date of this Agreement. The
parties shall make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of
the preceding sentence apply.
(b) All information and materials provided pursuant to this
Agreement shall be subject to the provisions of the
Confidentiality Agreement entered into between the parties as of
June 24, 2005 (the Confidentiality
Agreement).
(c) No investigation by a party hereto or its
representatives shall affect the representations and warranties
of the other party set forth in this Agreement.
6.3 Stockholder
Approval. MBNA shall call a meeting of its stockholders
to be held as soon as reasonably practicable for the purpose of
obtaining the requisite stockholder approval required in
connection with the Merger, on substantially the terms and
conditions set forth in this Agreement, and shall use its
reasonable best efforts to cause such meeting to occur as soon
as reasonably practicable. The Board of Directors of MBNA shall
use its reasonable best efforts to obtain from its stockholders
the stockholder vote approving the Merger, on substantially the
terms and conditions set forth in this Agreement, required to
consummate the transactions contemplated by this Agreement. MBNA
shall submit this Agreement to its stockholders at the
stockholder meeting even if its Board of Directors shall have
withdrawn, modified or qualified its recommendation. The Board
of Directors of MBNA has adopted resolutions approving the
Merger, on substantially the terms and conditions set forth in
this Agreement, and directing that the Merger, on such terms and
conditions, be submitted to MBNAs stockholders for their
consideration.
6.4 Affiliates. MBNA
shall use its reasonable best efforts to cause each director,
executive officer and other person who is an
affiliate (for purposes of Rule 145 under the
Securities Act) of MBNA to deliver to Bank of America, as soon
as practicable after the date of this Agreement, and prior to
the date of the meeting of the MBNA stockholders to be held
pursuant to Section 6.3, a written agreement, in the form
of Exhibit B.
6.5 NYSE Listing.
Bank of America shall cause the shares of Bank of America Common
Stock to be issued in the Merger to be approved for listing on
the NYSE, subject to official notice of issuance, prior to the
Effective Time.
6.6 Employee Matters.
(a) For the one-year period following the Effective Time,
Bank of America shall, or shall cause its applicable
Subsidiaries to, provide to those individuals actively employed
by MBNA or one of its Subsidiaries as of the Effective Time
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(collectively, the Covered Employees) with
employee benefits, rates of base salary or hourly wage and
annual bonus opportunities that are substantially similar, in
the aggregate, to the aggregate rates of base salary or hourly
wage provided to such Covered Employees and the aggregate
employee benefits and annual bonus opportunities provided to
such Covered Employees under the MBNA Benefit Plans as in effect
immediately prior to the Effective Time; provided that
nothing herein shall limit the right of Bank of America or any
of its Subsidiaries to terminate the employment of any Covered
Employee at any time or require Bank of America or any of its
Subsidiaries to provide any such employee benefits, rates of
base salary or hourly wage or annual bonus opportunities for any
period following any such termination.
(b) To the extent that a Covered Employee becomes eligible
to participate in an employee benefit plan maintained by Bank of
America or any of its Subsidiaries, other than MBNA or its
Subsidiaries, Bank of America shall cause such employee benefit
plan to (i) recognize the service of such Covered Employee
with MBNA or its Subsidiaries for purposes of eligibility and
vesting and, except under defined benefit pension plans, benefit
accrual under such employee benefit plan of Bank of America or
any of its Subsidiaries to the same extent such service was
recognized immediately prior to the Effective Time under a
comparable MBNA Benefit Plan in which such Covered Employee was
a participant immediately prior to the Effective Time or, if
there is no such comparable benefit plan, to the same extent
such service was recognized under the MBNA 401(k) Plus Savings
Plan immediately prior to the Effective Time; provided
that such recognition of service shall not operate to duplicate
any benefits with respect to the Covered Employee, and
(ii) with respect to any health, dental or vision plan of
Bank of America or any of its Subsidiaries (other than MBNA and
its Subsidiaries) in which any Covered Employee is eligible to
participate in the plan year that includes the year in which
such Covered Employee is eligible to participate, (x) cause
any pre-existing condition limitations under such Bank of
America or Subsidiary plan to be waived with respect to such
Covered Employee to the extent such limitation would have been
waived or satisfied under the MBNA Benefit Plan in which such
Covered Employee participated immediately prior to the Effective
Time, and (y) recognize any medical or other health
expenses incurred by such Covered Employee in the year that
includes the Closing Date for purposes of any applicable
deductible and annual out-of-pocket expense requirements under
any such health, dental or vision plan of Bank of America or any
of its Subsidiaries.
(c) From and after the Effective Time, Bank of America
shall, or shall cause its Subsidiaries to, honor, in accordance
with the terms thereof as in effect as of the date hereof or as
may be amended after the date hereof with the prior written
consent of Bank of America, each employment agreement and change
in control agreement listed on Section 3.11 of the MBNA
Disclosure Schedule and the obligations of MBNA and its
Subsidiaries as of the Effective Time under each deferred
compensation plan or agreement listed on Section 3.11 of
the MBNA Disclosure Schedule. Bank of America agrees to take all
action necessary to effectuate and satisfy the obligations set
forth in Section 6.6(c) of the MBNA Disclosure Schedule.
6.7 Indemnification;
Directors and Officers Insurance.
(a) In the event of any threatened or actual claim, action,
suit, proceeding or investigation, whether civil, criminal or
administrative (a Claim), including any such
Claim in which any individual who is now, or has been at any
time prior to the date of this Agreement, or
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who becomes prior to the Effective Time, a director, officer or
employee of MBNA or any of its Subsidiaries or who is or was
serving at the request of MBNA or any of its Subsidiaries as a
director, officer or employee of another person (the
Indemnified Parties), is, or is threatened to
be, made a party based in whole or in part on, or arising in
whole or in part out of, or pertaining to (i) the fact that
he is or was a director, officer or employee of MBNA or any of
its Subsidiaries prior to the Effective Time or (ii) this
Agreement or any of the transactions contemplated by this
Agreement, whether asserted or arising before or after the
Effective Time, the parties shall cooperate and use their best
efforts to defend against and respond thereto. All rights to
indemnification and exculpation from liabilities for acts or
omissions occurring at or prior to the Effective Time now
existing in favor of any Indemnified Party as provided in their
respective certificates or articles of incorporation or by-laws
(or comparable organizational documents), and any existing
indemnification agreements set forth in Section 6.7 of the
MBNA Disclosure Schedule, shall survive the Merger and shall
continue in full force and effect in accordance with their
terms, and shall not be amended, repealed or otherwise modified
for a period of six years after the Effective Time in any manner
that would adversely affect the rights thereunder of such
individuals for acts or omissions occurring at or prior to the
Effective Time or taken at the request of Bank of America
pursuant to Section 6.8 hereof, it being understood that
nothing in this sentence shall require any amendment to the
certificate of incorporation or by-laws of the Surviving
Corporation.
(b) From and after the Effective Time, the Surviving
Corporation shall, to the fullest extent permitted by applicable
law, indemnify, defend and hold harmless, and provide
advancement of expenses to, each Indemnified Party against all
losses, claims, damages, costs, expenses, liabilities or
judgments or amounts that are paid in settlement of or in
connection with any Claim based in whole or in part on or
arising in whole or in part out of the fact that such person is
or was a director, officer or employee of MBNA or any Subsidiary
of MBNA, and pertaining to any matter existing or occurring, or
any acts or omissions occurring, at or prior to the Effective
Time, whether asserted or claimed prior to, or at or after, the
Effective Time (including matters, acts or omissions occurring
in connection with the approval of this Agreement and the
consummation of the transactions contemplated hereby) or taken
at the request of Bank of America pursuant to Section 6.8
hereof.
(c) Bank of America shall cause the individuals serving as
officers and directors of MBNA or any of its Subsidiaries
immediately prior to the Effective Time to be covered for a
period of six years from the Effective Time by the
directors and officers liability insurance policy
maintained by MBNA (provided that Bank of America may
substitute therefor policies of at least the same coverage and
amounts containing terms and conditions that are not less
advantageous than such policy) with respect to acts or omissions
occurring prior to the Effective Time that were committed by
such officers and directors in their capacity as such;
provided that in no event shall Bank of America be
required to expend annually in the aggregate an amount in excess
of 250% of the annual premiums currently paid by MBNA (which
current amount is set forth in Section 6.7 of the MBNA
Disclosure Schedule) for such insurance (the Insurance
Amount), and provided further that if Bank of
America is unable to maintain such policy (or such substitute
policy) as a result of the preceding proviso, Bank of America
shall obtain as much comparable insurance as is available for
the Insurance Amount.
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(d) The provisions of this Section 6.7 shall survive
the Effective Time and are intended to be for the benefit of,
and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
6.8 Additional
Agreements. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the
purposes of this Agreement (including any merger between a
Subsidiary of Bank of America, on the one hand, and a Subsidiary
of MBNA, on the other) or to vest the Surviving Corporation with
full title to all properties, assets, rights, approvals,
immunities and franchises of either party to the Merger, the
proper officers and directors of each party and their respective
Subsidiaries shall, at Bank of Americas sole expense, take
all such necessary action as may be reasonably requested by Bank
of America.
6.9 Advice of
Changes. Each of Bank of America and MBNA shall promptly
advise the other of any change or event (i) having or
reasonably likely to have a Material Adverse Effect on it or
(ii) that it believes would or would be reasonably likely
to cause or constitute a material breach of any of its
representations, warranties or covenants contained in this
Agreement; provided, however, that no such notification
shall affect the representations, warranties, covenants or
agreements of the parties (or remedies with respect thereto) or
the conditions to the obligations of the parties under this
Agreement; and provided further that a failure to comply with
this Section 6.9 shall not constitute a breach of this
Agreement or the failure of any condition set forth in
Article VII to be satisfied unless the underlying Material
Adverse Effect or material breach would independently result in
the failure of a condition set forth in Article VII to be
satisfied.
6.10 Exemption from Liability
Under Section 16(b). Prior to the Effective Time,
Bank of America and MBNA shall each take all such steps as may
be necessary or appropriate to cause any disposition of shares
of MBNA Common Stock or conversion of any derivative securities
in respect of such shares of MBNA Common Stock in connection
with the consummation of the transactions contemplated by this
Agreement to be exempt under Rule 16b-3 promulgated under
the Exchange Act, including any such actions specified in the
No-Action Letter dated January 12, 1999, issued by the SEC
to Skadden, Arps, Slate, Meagher & Flom, LLP.
6.11 No Solicitation.
(a) None of MBNA, its Subsidiaries or any officer,
director, employee, agent or representative (including any
investment banker, financial advisor, attorney, accountant or
other retained representative) of MBNA or any of its
Subsidiaries shall directly or indirectly (i) solicit,
initiate, encourage, facilitate (including by way of furnishing
information) or take any other action designed to facilitate any
inquiries or proposals regarding any merger, share exchange,
consolidation, sale of assets, sale of shares of capital stock
(including by way of a tender offer) or similar transactions
involving MBNA or any of its Subsidiaries that, if consummated,
would constitute an Alternative Transaction (any of the
foregoing inquiries or proposals being referred to herein as an
Alternative Proposal), (ii) participate
in any discussions or negotiations regarding an Alternative
Transaction or (iii) enter into any agreement regarding any
Alternative Transaction. Notwithstanding the foregoing, the
Board of Directors of MBNA shall be permitted, prior to the
meeting of MBNA stockholders to be held pursuant to
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Section 6.3, and subject to compliance with the other terms
of this Section 6.11 and to first entering into a
confidentiality agreement with the person proposing such
Alternative Proposal on terms substantially similar to, and no
less favorable to MBNA than, those contained in the
Confidentiality Agreement, to consider and participate in
discussions and negotiations with respect to a bona fide
Alternative Proposal received by MBNA, if and only to the extent
that and so long as the Board of Directors of MBNA reasonably
determines in good faith (after consultation with outside legal
counsel) that failure to do so would cause it to violate its
fiduciary duties.
As used in this Agreement, Alternative
Transaction means any of (i) a transaction
pursuant to which any person (or group of persons) (other than
Bank of America or its affiliates), directly or indirectly,
acquires or would acquire more than 25% of the outstanding
shares of MBNA Common Stock or outstanding voting power or of
any new series or new class of preferred stock that would be
entitled to a class or series vote with respect to the Merger,
whether from MBNA or pursuant to a tender offer or exchange
offer or otherwise, (ii) a merger, share exchange,
consolidation or other business combination involving MBNA
(other than the Merger), (iii) any transaction pursuant to
which any person (or group of persons) (other than Bank of
America or its affiliates) acquires or would acquire control of
assets (including for this purpose the outstanding equity
securities of subsidiaries of MBNA and securities of the entity
surviving any merger or business combination including any of
MBNAs Subsidiaries) of MBNA, or any of its Subsidiaries
representing more than 25% of the fair market value of all the
assets, net revenues or net income of MBNA and its Subsidiaries,
taken as a whole, immediately prior to such transaction, or
(iv) any other consolidation, business combination,
recapitalization or similar transaction involving MBNA or any of
its Subsidiaries, other than the transactions contemplated by
this Agreement, as a result of which the holders of shares of
MBNA immediately prior to such transactions do not, in the
aggregate, own at least 75% of the outstanding shares of common
stock and the outstanding voting power of the surviving or
resulting entity in such transaction immediately after the
consummation thereof in substantially the same proportion as
such holders held the shares of MBNA Common Stock immediately
prior to the consummation thereof.
(b) MBNA shall notify Bank of America promptly (but in no
event later than 24 hours) after receipt of any Alternative
Proposal, or any material modification of or material amendment
to any Alternative Proposal, or any request for nonpublic
information relating to MBNA or any of its Subsidiaries or for
access to the properties, books or records of MBNA or any
Subsidiary by any Person or entity that informs the Board of
Directors of MBNA or any Subsidiary that it is considering
making, or has made, an Alternative Proposal. Such notice to
Bank of America shall be made orally and in writing, and shall
indicate the identity of the Person making the Alternative
Proposal or intending to make or considering making an
Alternative Proposal or requesting non-public information or
access to the books and records of MBNA or any Subsidiary, and
the material terms of any such Alternative Proposal or
modification or amendment to an Alternative Proposal. MBNA shall
keep Bank of America fully informed, on a current basis, of any
material changes in the status and any material changes or
modifications in the terms of any such Alternative Proposal,
indication or request. MBNA shall also promptly, and in any
event within 24 hours, notify Bank of America, orally and
in writing, if it enters into discussions or negotiations
concerning any Alternative Proposal in accordance with
Section 6.11(a).
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(c) MBNA and its Subsidiaries shall immediately cease and
cause to be terminated any existing discussions or negotiations
with any Persons (other than Bank of America) conducted
heretofore with respect to any of the foregoing, and shall use
reasonable best efforts to cause all Persons other than Bank of
America who have been furnished confidential information
regarding MBNA in connection with the solicitation of or
discussions regarding an Alternative Proposal within the
12 months prior to the date hereof promptly to return or
destroy such information. MBNA agrees not to, and to cause its
Subsidiaries not to, release any third party from the
confidentiality and standstill provisions of any agreement to
which MBNA or its Subsidiaries is or may become a party, and
shall immediately take all steps necessary to terminate any
approval that may have been heretofore given under any such
provisions authorizing any person to make an Alternative
Proposal. Neither MBNA nor the Board of Directors of MBNA shall
approve or take any action to render inapplicable to any
Alternative Proposal or Alternative Transaction
Sections 3-601 to 3-604 and 3-701 to 3-709 of the MGCL and
any similar Takeover Statutes.
(d) MBNA shall ensure that the officers, directors and all
employees, agents and representatives (including any investment
bankers, financial advisors, attorneys, accountants or other
retained representatives) of MBNA or its Subsidiaries are aware
of the restrictions described in this Section 6.11 as
reasonably necessary to avoid violations thereof. It is
understood that any violation of the restrictions set forth in
this Section 6.11 by any officer, director, employee, agent
or representative (including any investment banker, financial
advisor, attorney, accountant or other retained representative)
of MBNA or its Subsidiaries, at the direction or with the
consent of MBNA or its Subsidiaries, shall be deemed to be a
breach of this Section 6.11 by MBNA.
(e) Nothing contained in this Section 6.11 shall
prohibit MBNA or its Subsidiaries from taking and disclosing to
its stockholders a position required by Rule 14e-2(a) or
Rule 14d-9 promulgated under the Exchange Act.
6.12 Directorship.
Bank of America shall, prior to the Effective Time, take such
actions as may be required to appoint an individual mutually
agreed by MBNA and Bank of America to the Board of Directors of
the Surviving Corporation as of the Effective Time, and, to the
extent so required, shall increase the size of the Bank of
America Board of Directors to permit the foregoing.
6.13 Restructuring
Efforts. If MBNA shall have failed to obtain the
requisite vote or votes of its stockholders for the consummation
of the transactions contemplated by this Agreement at a duly
held meeting of its stockholders or at any adjournment or
postponement thereof, then, unless this Agreement shall have
been terminated pursuant to its terms, each of the parties shall
in good faith use its reasonable best efforts to negotiate a
restructuring of the transaction provided for herein (it being
understood that neither party shall have any obligation to alter
or change the amount or kind of the Merger Consideration in a
manner adverse to such party or its stockholders) and to
resubmit the transaction to MBNAs stockholders for
approval, with the timing of such resubmission to be determined
at the request of Bank of America.
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6.14 MBNA Cumulative
Preferred Stock. MBNA shall redeem all shares of its
71/2%
Series A Cumulative Preferred Stock and Series B
Adjustable Rate Cumulative Preferred Stock, in each case in
accordance with the terms thereof, at or prior to the Closing.
6.15 Dividends. After
the date of this Agreement, each of Bank of America and MBNA
shall coordinate with the other the declaration of any dividends
in respect of Bank of America Common Stock and MBNA Common Stock
and the record dates and payment dates relating thereto, it
being the intention of the parties that holders of MBNA Common
Stock shall not receive two dividends, or fail to receive one
dividend, for any quarter with respect to their shares of MBNA
Common Stock and any shares of Bank of America Common Stock any
such holder receives in exchange therefor in the Merger.
ARTICLE VII
Conditions Precedent
7.1 Conditions to Each
Partys Obligation To Effect the Merger. The
respective obligations of the parties to effect the Merger shall
be subject to the satisfaction at or prior to the Effective Time
of the following conditions:
(a) Stockholder Approval. The Merger, on
substantially the terms and conditions set forth in this
Agreement, shall have been approved by the requisite affirmative
vote of the holders of MBNA Common Stock entitled to vote
thereon.
(b) NYSE Listing. The shares of Bank of
America Common Stock to be issued to the holders of MBNA Common
Stock upon consummation of the Merger shall have been authorized
for listing on the NYSE, subject to official notice of issuance.
(c) Form S-4. The Form S-4 shall
have become effective under the Securities Act and no stop order
suspending the effectiveness of the Form S-4 shall have
been issued and no proceedings for that purpose shall have been
initiated or threatened by the SEC.
(d) No Injunctions or Restraints; Illegality.
No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition
(an Injunction) preventing the consummation
of the Merger or any of the other transactions contemplated by
this Agreement shall be in effect. No statute, rule, regulation,
order, Injunction or decree shall have been enacted, entered,
promulgated or enforced by any Governmental Entity that
prohibits or makes illegal consummation of the Merger.
7.2 Conditions to Obligations
of Bank of America. The obligation of Bank of America to
effect the Merger is also subject to the satisfaction, or waiver
by Bank of America, at or prior to the Effective Time, of the
following conditions:
(a) Representations and Warranties. Subject
to the standard set forth in Section 9.2, the
representations and warranties of MBNA set forth in this
Agreement shall be true and correct as of the date of this
Agreement and as of the Effective Time as though made on and as
of the Effective Time (except that representations and
warranties that by their terms speak
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specifically as of the date of this Agreement or another date
shall be true and correct as of such date); and Bank of America
shall have received a certificate signed on behalf of MBNA by
the Chief Executive Officer or the Chief Financial Officer of
MBNA to the foregoing effect.
(b) Performance of Obligations of MBNA. MBNA
shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior
to the Effective Time; and Bank of America shall have received a
certificate signed on behalf of MBNA by the Chief Executive
Officer or the Chief Financial Officer of MBNA to such effect.
(c) Federal Tax Opinion. Bank of America
shall have received the opinion of its counsel, Cleary Gottlieb
Steen & Hamilton LLP, in form and substance reasonably
satisfactory to Bank of America, dated the Closing Date,
substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion that
are consistent with the state of facts existing at the Effective
Time, the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code. In rendering such
opinion, counsel may require and rely upon customary
representations contained in certificates of officers of MBNA
and Bank of America.
(d) Regulatory Approvals. All regulatory
approvals set forth in Section 4.4 required to consummate
the transactions contemplated by this Agreement, including the
Merger, shall have been obtained and shall remain in full force
and effect and all statutory waiting periods in respect thereof
shall have expired (all such approvals and the expiration of all
such waiting periods being referred as the Bank of
America Requisite Regulatory Approvals), and no such
regulatory approval shall have resulted in the imposition of any
Materially Burdensome Regulatory Condition.
7.3 Conditions to Obligations
of MBNA. The obligation of MBNA to effect the Merger is
also subject to the satisfaction or waiver by MBNA at or prior
to the Effective Time of the following conditions:
(a) Representations and Warranties. Subject
to the standard set forth in Section 9.2, the
representations and warranties of Bank of America set forth in
this Agreement shall be true and correct as of the date of this
Agreement and as of the Effective Time as though made on and as
of the Effective Time (except that representations and
warranties that by their terms speak specifically as of the date
of this Agreement or another date shall be true and correct as
of such date); and MBNA shall have received a certificate signed
on behalf of Bank of America by the Chief Executive Officer or
the Chief Financial Officer of Bank of America to the foregoing
effect.
(b) Performance of Obligations of Bank of
America. Bank of America shall have performed in all
material respects all obligations required to be performed by it
under this Agreement at or prior to the Effective Time, and MBNA
shall have received a certificate signed on behalf of Bank of
America by the Chief Executive Officer or the Chief Financial
Officer of Bank of America to such effect.
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(c) Federal Tax Opinion. MBNA shall have
received the opinion of its counsel, Wachtell, Lipton,
Rosen & Katz, in form and substance reasonably
satisfactory to MBNA, dated the Closing Date, substantially to
the effect that, on the basis of facts, representations and
assumptions set forth in such opinion that are consistent with
the state of facts existing at the Effective Time, (i) the
Merger will be treated as a reorganization within the meaning of
Section 368(a) of the Code and (ii) except to the
extent of any cash consideration received in the Merger and
except with respect to cash received in lieu of fractional share
interests in Bank of America Common Stock, no gain or loss will
be recognized by any of the holders of MBNA Common Stock in the
Merger. In rendering such opinion, counsel may require and rely
upon customary representations contained in certificates of
officers of MBNA and Bank of America.
(d) Regulatory Approvals. All regulatory
approvals set forth in Section 3.4 required to consummate
the transactions contemplated by this Agreement, including the
Merger, shall have been obtained and shall remain in full force
and effect and all statutory waiting periods in respect thereof
shall have expired (all such approvals and the expiration of all
such waiting periods being referred as the MBNA
Requisite Regulatory Approvals).
ARTICLE VIII
Termination and Amendment
8.1 Termination. This
Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the matters presented
in connection with the Merger by the stockholders of MBNA or
Bank of America:
(a) by mutual consent of MBNA and Bank of America in a
written instrument authorized by the boards of directors of MBNA
and Bank of America;
(b) by either MBNA or Bank of America, if any Governmental
Entity that must grant a Bank of America Requisite Regulatory
Approval or an MBNA Requisite Regulatory Approval has denied
approval of the Merger and such denial has become final and
nonappealable or any Governmental Entity of competent
jurisdiction shall have issued a final and nonappealable order
permanently enjoining or otherwise prohibiting the consummation
of the transactions contemplated by this Agreement;
(c) by either MBNA or Bank of America, if the Merger shall
not have been consummated on or before the first anniversary of
the date of this Agreement unless the failure of the Closing to
occur by such date shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe the
covenants and agreements of such party set forth in this
Agreement;
(d) by either Bank of America or MBNA (provided that the
terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained
herein), if there shall have been a breach of any of the
covenants or agreements or any of the representations or
warranties set forth in this Agreement on the part of MBNA, in
the case of a termination by Bank of America, or Bank of
America, in the case of a termination by
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MBNA, which breach, either individually or in the aggregate,
would result in, if occurring or continuing on the Closing Date,
the failure of the conditions set forth in Section 7.2 or
7.3, as the case may be, and which is not cured within
45 days following written notice to the party committing
such breach or by its nature or timing cannot be cured within
such time period;
(e) by Bank of America, if the Board of Directors of MBNA
shall have (i) failed to recommend in the Proxy Statement
the approval and adoption of this Agreement, or (ii) in a
manner adverse to Bank of America, (x) withdrawn, modified
or qualified, or proposed to withdraw, modify or qualify, the
recommendation by such Board of Directors of this Agreement
and/or the Merger to MBNAs stockholders, (y) taken
any public action or made any public statement in connection
with the meeting of MBNA stockholders to be held pursuant to
Section 6.3 inconsistent with such recommendation or
(z) recommended any Alternative Proposal (or, in the case
of clause (ii), resolved to take any such action), whether
or not permitted by the terms hereof; or
(f) by either Bank of America or MBNA, if its Board of
Directors determines in good faith by a majority vote that the
other party has substantially engaged in bad faith in breach of
its obligations under Section 6.13 of this Agreement.
The party desiring to terminate this Agreement pursuant to
clause (b), (c), (d), (e) or (f) of this
Section 8.1 shall give written notice of such termination
to the other party in accordance with Section 9.4,
specifying the provision or provisions hereof pursuant to which
such termination is effected.
8.2 Effect of
Termination. In the event of termination of this
Agreement by either MBNA or Bank of America as provided in
Section 8.1, this Agreement shall forthwith become void and
have no effect, and none of MBNA, Bank of America, any of their
respective Subsidiaries or any of the officers or directors of
any of them shall have any liability of any nature whatsoever
under this Agreement, or in connection with the transactions
contemplated by this Agreement, except that
(i) Sections 6.2(b), 8.2, 8.3, 9.3, 9.8 and 9.9 shall
survive any termination of this Agreement, and (ii) neither
MBNA nor Bank of America shall be relieved or released from any
liabilities or damages arising out of its willful breach of any
provision of this Agreement. Notwithstanding the foregoing, in
the event of any termination of this Agreement, the Stock Option
Agreement shall remain in full force and effect in accordance
with its terms.
8.3 Fees and
Expenses. Except with respect to costs and expenses of
printing and mailing the Proxy Statement and all filing and
other fees paid to the SEC in connection with the Merger, which
shall be borne equally by MBNA and Bank of America, all fees and
expenses incurred in connection with the Merger, this Agreement,
and the transactions contemplated by this Agreement shall be
paid by the party incurring such fees or expenses, whether or
not the Merger is consummated.
8.4 Amendment. This
Agreement may be amended by the parties, by action taken or
authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection
with Merger by the stockholders of MBNA; provided,
however, that after any approval of the transactions
contemplated by this Agreement by the stockholders of MBNA,
there may not be, without further approval of such stockholders,
any
A-49
amendment of this Agreement that (a) alters or changes the
amount or the form of the consideration to be delivered under
this Agreement to the holders of MBNA Common Stock,
(b) alters or changes any term of the certificate of
incorporation of the Surviving Corporation or (c) alters or
changes any of the terms and conditions of this Agreement if
such alteration or change would adversely affect the holders of
any securities of MBNA, in each case other than as contemplated
by this Agreement. This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties.
8.5 Extension;
Waiver. At any time prior to the Effective Time, the
parties, by action taken or authorized by their respective Board
of Directors, may, to the extent legally allowed,
(a) extend the time for the performance of any of the
obligations or other acts of the other party, (b) waive any
inaccuracies in the representations and warranties contained in
this Agreement or (c) waive compliance with any of the
agreements or conditions contained in this Agreement. Any
agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in a written instrument signed
on behalf of such party, but such extension or waiver or failure
to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure.
ARTICLE IX
General Provisions
9.1 Closing. On the
terms and subject to conditions set forth in this Agreement, the
closing of the Merger (the Closing) shall
take place at 10:00 a.m. on a date and at a place to be
specified by the parties, which date shall be no later than five
business days after the satisfaction or waiver (subject to
applicable law) of the latest to occur of the conditions set
forth in Article VII (other than those conditions that by
their nature are to be satisfied or waived at the Closing),
unless extended by mutual agreement of the parties (the
Closing Date). If the conditions set forth in
Article VII are satisfied or waived during the two weeks
immediately prior to the end of a fiscal quarter of Bank of
America, then Bank of America may postpone the Closing until the
first full week after the end of that fiscal quarter.
9.2 Standard. No
representation or warranty of MBNA contained in Article III
or of Bank of America contained in Article IV shall be
deemed untrue or incorrect for any purpose under this Agreement,
and no party hereto shall be deemed to have breached a
representation or warranty for any purpose under this Agreement,
in any case as a consequence of the existence or absence of any
fact, circumstance or event unless such fact, circumstance or
event, individually or when taken together with all other facts,
circumstances or events inconsistent with any representations or
warranties contained in Article III, in the case of MBNA,
or Article IV, in the case of Bank of America, has had or
would be reasonably likely to have a Material Adverse Effect
with respect to MBNA or Bank of America, respectively
(disregarding for purposes of this Section 9.2 any
materiality or Material Adverse Effect qualification contained
in any representations or warranties). Notwithstanding the
immediately preceding sentence, the representations and
warranties contained in (x) Section 3.2(a) shall be
deemed untrue and incorrect if not true and correct except to a
de minimus extent (relative to
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Section 3.2(a) taken as a whole),
(y) Sections 3.2(b), 3.3(a), 3.3(b)(i), 3.7 and 3.24,
in the case of MBNA, and Sections 4.2, 4.3(a), 4.3(b)(i)
and 4.7, in the case of Bank of America, shall be deemed untrue
and incorrect if not true and correct in all material respects
and (z) Section 3.8(a), in the case of MBNA, and
Section 4.8(a), in the case of Bank of America, shall be
deemed untrue and incorrect if not true and correct in all
respects.
9.3 Nonsurvival of
Representations, Warranties and Agreements. None of the
representations, warranties, covenants and agreements set forth
in this Agreement or in any instrument delivered pursuant to
this Agreement shall survive the Effective Time, except for
Section 6.8 and for those other covenants and agreements
contained in this Agreement that by their terms apply or are to
be performed in whole or in part after the Effective Time.
9.4 Notices. All
notices and other communications in connection with this
Agreement shall be in writing and shall be deemed given if
delivered personally, sent via facsimile (with confirmation),
mailed by registered or certified mail (return receipt
requested) or delivered by an express courier (with
confirmation) to the parties at the following addresses (or at
such other address for a party as shall be specified by like
notice):
(a) if to MBNA, to:
MBNA
Corporation
1100
North King Street
Wilmington,
Delaware 19884
Attention:
General Counsel
Facsimile:
(302) 453-9930
with a copy to:
Wachtell,
Lipton, Rosen & Katz
51 W. 52nd Street,
New York, New York 10019
Attention:
Edward D. Herlihy, Esq.
Facsimile:
(212) 403-2000
and
(b) if to Bank of America, to:
Bank
of America Corporation
Bank
of America Corporate Center
100 N. Tryon
Street
Charlotte,
North Carolina 28255
Attention:
Timothy J. Mayopoulos,
Executive
Vice President and General Counsel
Facsimile:
(704) 370-3515
with a copy to:
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Cleary
Gottlieb Steen & Hamilton LLP
2000
Pennsylvania Ave., NW
Washington,
DC 20006
Attention:
John C. Murphy, Jr., Esq. and Christopher E.
Austin, Esq.
Facsimile:
(202) 974-1999
9.5 Interpretation.
When a reference is made in this Agreement to Articles,
Sections, Exhibits or Schedules, such reference shall be to a
Article or Section of or Exhibit or Schedule to this Agreement
unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words include,
includes or including are used in this
Agreement, they shall be deemed to be followed by the words
without limitation. The MBNA Disclosure Schedule and
the Bank of America Disclosure Schedule, as well as all other
schedules and all exhibits hereto, shall be deemed part of this
Agreement and included in any reference to this Agreement. This
Agreement shall not be interpreted or construed to require any
person to take any action, or fail to take any action, if to do
so would violate any applicable law.
9.6 Counterparts.
This Agreement may be executed in two or more counterparts, all
of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by
each of the parties and delivered to the other party, it being
understood that each party need not sign the same counterpart.
9.7 Entire Agreement.
This Agreement (including the documents and the instruments
referred to in this Agreement), together with the
Confidentiality Agreement and the Stock Option Agreement,
constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between
the parties with respect to the subject matter of this
Agreement, other than the Confidentiality Agreement and the
Stock Option Agreement.
9.8 Governing Law;
Jurisdiction. This Agreement shall be governed and
construed in accordance with the internal laws of the State of
New York applicable to contracts made and wholly-performed
within such state, without regard to any applicable conflicts of
law principles, except to the extent that the DGCL or the MGCL
applies. The parties hereto agree that any suit, action or
proceeding brought by either party to enforce any provision of,
or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated hereby shall be
brought in any federal or state court located in New York
County, New York. Each of the parties hereto submits to the
jurisdiction of any such court in any suit, action or proceeding
seeking to enforce any provision of, or based on any matter
arising out of, or in connection with, this Agreement or the
transactions contemplated hereby and hereby irrevocably waives
the benefit of jurisdiction derived from present or future
domicile or otherwise in such action or proceeding. Each party
hereto irrevocably waives, to the fullest extent permitted by
law, any objection that it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in
any such court or that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient
forum.
9.9 Publicity.
Neither MBNA nor Bank of America shall, and neither MBNA nor
Bank of America shall permit any of its Subsidiaries to, issue
or cause the publication of any
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press release or other public announcement with respect to, or
otherwise make any public statement concerning, the transactions
contemplated by this Agreement without the prior consent (which
consent shall not be unreasonably withheld) of Bank of America,
in the case of a proposed announcement or statement by MBNA, or
MBNA, in the case of a proposed announcement or statement by
Bank of America; provided, however, that either party
may, without the prior consent of the other party (but after
prior consultation with the other party to the extent
practicable under the circumstances) issue or cause the
publication of any press release or other public announcement to
the extent required by law or by the rules and regulations of
the NYSE.
9.10 Assignment; Third Party
Beneficiaries. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be
assigned by either of the parties (whether by operation of law
or otherwise) without the prior written consent of the other
party. Subject to the preceding sentence, this Agreement shall
be binding upon, inure to the benefit of and be enforceable by
each of the parties and their respective successors and assigns.
Except as otherwise specifically provided in Section 6.7,
this Agreement (including the documents and instruments referred
to in this Agreement) is not intended to and does not confer
upon any person other than the parties hereto any rights or
remedies under this Agreement.
Remainder of Page Intentionally Left Blank
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IN WITNESS WHEREOF, MBNA and Bank of America have caused this
Agreement to be executed by their respective officers thereunto
duly authorized as of the date first above written.
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MBNA CORPORATION |
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By: /s/ Bruce L. Hammonds |
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Name: Bruce L. Hammonds |
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Title: Chairman and Chief Executive
Officer |
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BANK OF AMERICA CORPORATION |
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By: /s/ Kenneth D. Lewis |
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Name: Kenneth D. Lewis |
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Title: Chairman and Chief Executive
Officer |
Signature Page to Agreement and Plan of Merger
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EXHIBIT B
FORM OF AFFILIATE LETTER
Bank of America Corporation
Ladies and Gentlemen:
I have been advised that as of the date hereof I may be deemed
to be an affiliate of MBNA Corporation, a Maryland
corporation (MBNA), as the term
affiliate is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the
rules and regulations (the Rules and
Regulations) of the Securities and Exchange Commission
(the Commission) under the Securities Act of
1933, as amended (the Act). I have been
further advised that pursuant to the terms of the Agreement and
Plan of Merger dated as of June 30, 2005 (the
Merger Agreement), by and between Bank of
America Corporation, a Delaware corporation (Bank of
America), and MBNA, MBNA shall be merged with and into
Bank of America (the Merger). All terms used
in this letter but not defined herein shall have the meanings
ascribed thereto in the Merger Agreement.
I represent, warrant and covenant to Bank of America that in the
event I receive any Bank of America Common Stock as a result of
the Merger:
(a) I shall not make any sale, transfer or other
disposition of Bank of America Common Stock in violation of the
Act or the Rules and Regulations.
(b) I have carefully read this letter and the Merger
Agreement and discussed its requirements and other applicable
limitations upon my ability to sell, transfer or otherwise
dispose of Bank of America Common Stock to the extent I believed
necessary with my counsel or counsel for MBNA.
(c) I have been advised that the issuance of Bank of
America Common Stock to me pursuant to the Merger will be
registered with the Commission under the Act on a Registration
Statement on Form S-4. However, I have also been advised
that, since at the time the Merger will be submitted for a vote
of the stockholders of MBNA I may be deemed to have been an
affiliate of MBNA and the distribution by me of Bank of America
Common Stock has not been registered under the Act, I may not
sell, transfer or otherwise dispose of Bank of America Common
Stock issued to me in the Merger unless (i) such sale,
transfer or other disposition has been registered under the Act,
(ii) such sale, transfer or other disposition is made in
conformity with the volume and other limitations of
Rule 145 promulgated by the Commission under the Act, or
(iii) in the opinion of counsel reasonably acceptable to
Bank of America, such sale, transfer or other disposition is
otherwise exempt from registration under the Act.
(d) I understand that Bank of America is under no
obligation to register the sale, transfer or other disposition
of Bank of America Common Stock by me or on my behalf under the
Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.
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(e) I also understand that stop transfer instructions will
be given to Bank of Americas transfer agents with respect
to Bank of America Common Stock and that there will be placed on
the certificates for Bank of America Common Stock issued to me,
or any substitutions therefor, a legend stating in substance:
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The securities represented by this certificate have been
issued in a transaction to which Rule 145 promulgated under
the Securities Act of 1933 applies and may only be sold or
otherwise transferred in compliance with the requirements of
Rule 145 or pursuant to a registration statement under said
act or an exemption from such registration. |
(f) I also understand that unless the transfer by me of my
Bank of America Common Stock has been registered under the Act
or is a sale made in conformity with the provisions of
Rule 145, Bank of America reserves the right to put the
following legend on the certificates issued to my transferee:
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The shares represented by this certificate have not been
registered under the Securities Act of 1933 and were acquired
from a person who received such shares in a transaction to which
Rule 145 promulgated under the Securities Act of 1933
applies. The shares have been acquired by the holder not with a
view to, or for resale in connection with, any distribution
thereof within the meaning of the Securities Act of 1933 and may
not be sold, pledged or otherwise transferred except in
accordance with an exemption from the registration requirements
of the Securities Act of 1933. |
It is understood and agreed that the legends set forth above
shall be removed by delivery of substitute certificates without
such legend, and/or the issuance of a letter to Bank of
Americas transfer agent removing such stop transfer
instructions, and the above restrictions on sale will cease to
apply, if (A) one year (or such other period as may be
required by Rule 145(d)(2) under the Securities Act or any
successor thereto) shall have elapsed from the Closing Date and
the provisions of such Rule are then available to me; or
(B) if two years (or such other period as may be required
by Rule 145(d)(3) under the Securities Act or any successor
thereto) shall have elapsed from the Effective Date and the
provisions of such Rule are then available to me; or (C) I
shall have delivered to Bank of America (i) a copy of a
letter from the staff of the Commission, or an opinion of
counsel in form and substance reasonably satisfactory to Bank of
America, or other evidence reasonably satisfactory to Bank of
America, to the effect that such legend and/or stop transfer
instructions are not required for purposes of the Securities Act
or (ii) reasonably satisfactory evidence or representations
that the securities represented by such certificates are being
or have been transferred in a transaction made in conformity
with the provisions of Rule 145 under the Securities Act or
pursuant to an effective registration under the Securities Act.
I recognize and agree that the foregoing provisions also apply
to (i) my spouse, (ii) any relative of mine or my
spouse occupying my home, (iii) any trust or estate in
which I, my spouse or any such relative owns at least 10%
beneficial interest or of which any of us serves as
A-56
trustee, executor or in any similar capacity and (iv) any
corporate or other organization in which I, my spouse or any
such relative owns at least 10% of any class of equity
securities or of the equity interest.
It is understood and agreed that this Letter Agreement shall
terminate and be of no further force and effect if the Merger
Agreement is terminated in accordance with its terms.
Execution of this letter should not be construed as an admission
on my part that I am an affiliate of MBNA as
described in the first paragraph of this letter or as a waiver
of any rights I may have to object to any claim that I am such
an affiliate on or after the date of this letter.
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Very truly yours, |
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By: |
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Name: |
Accepted this [ ] day of
[ ],
2005
Bank of America Corporation
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APPENDIX B
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated June 30, 2005, between MBNA
Corporation, a Maryland corporation (Issuer), and
Bank of America Corporation, a Delaware corporation
(Grantee).
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and
Plan of Merger of even date herewith (the Merger
Agreement), which agreement has been executed by the
parties hereto in connection with this Stock Option Agreement
(the Agreement); and
WHEREAS, as a condition to Grantees entering into the
Merger Agreement and in consideration therefor, Issuer has
agreed to grant Grantee the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger
Agreement, the parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an
unconditional, irrevocable option (the Option) to
purchase, subject to the terms hereof, up to 249,764,005 fully
paid and nonassessable shares of Issuers Common Stock, par
value $0.01 per share (Common Stock), at a
price of $21.30 per share (the Option Price);
provided, however, that in no event shall the
number of shares of Common Stock for which this Option is
exercisable exceed 19.9% of the Issuers issued and
outstanding shares of Common Stock without giving effect to any
shares subject to or issued pursuant to the Option. The number
of shares of Common Stock that may be received upon the exercise
of the Option and the Option Price are subject to adjustment as
herein set forth.
(b) In the event that any additional shares of Common Stock
are either (i) issued or otherwise become outstanding after
the date of this Agreement (other than pursuant to this
Agreement) or (ii) redeemed, repurchased, retired or
otherwise cease to be outstanding after the date of this
Agreement, the number of shares of Common Stock subject to the
Option shall be increased or decreased, as appropriate, so that,
after such issuance, such number equals 19.9% of the number of
shares of Common Stock then issued and outstanding without
giving effect to any shares subject or issued pursuant to the
Option. Nothing contained in this Section 1(b) or elsewhere
in this Agreement shall be deemed to authorize Issuer or Grantee
to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may
exercise the Option, in whole or part, and from time to time,
if, but only if, both an Initial Triggering Event (as
hereinafter defined) and a Subsequent Triggering Event (as
hereinafter defined) shall have occurred prior to the occurrence
of an Exercise Termination Event (as
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hereinafter defined), provided that the Holder shall have
sent the written notice of such exercise (as provided in
subsection (e) of this Section 2) within
180 days following such Subsequent Triggering Event. Each
of the following shall be an Exercise Termination
Event: (i) the Effective Time (as defined in the
Merger Agreement) of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if
such termination occurs prior to the occurrence of an Initial
Triggering Event except a termination by Grantee pursuant to
Section 8.1(d) (unless the breach by Issuer giving rise to
such right of termination is non-volitional) or
Section 8.1(e) of the Merger Agreement; or (iii) the
passage of 18 months after termination of the Merger
Agreement if such termination follows the occurrence of an
Initial Triggering Event or is a termination by Grantee pursuant
to Section 8.1(d) (unless the breach by Issuer giving rise
to such right of termination is non-volitional) or
Section 8.1(e) of the Merger Agreement. The term
Holder shall mean the holder or holders of the
Option.
(b) The term Initial Triggering Event shall
mean any of the following events or transactions occurring after
the date hereof:
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(i) Issuer or any of its Subsidiaries (each an Issuer
Subsidiary), without having received Grantees prior
written consent, shall have entered into an agreement to engage
in an Acquisition Transaction (as hereinafter defined) with any
person (the term person for purposes of this
Agreement having the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange
Act of 1934, as amended (the 1934 Act), and the
rules and regulations thereunder) other than Grantee or any of
its Subsidiaries (each a Grantee Subsidiary) or the
Board of Directors of Issuer shall have recommended that the
stockholders of Issuer approve or accept any Acquisition
Transaction with any person other than Grantee or a Subsidiary
of Grantee. For purposes of this Agreement, Acquisition
Transaction shall mean (w) a merger, consolidation or
share exchange, or any similar transaction, involving Issuer or
any Significant Subsidiary (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange
Commission (the SEC)) of Issuer, (x) a
purchase, lease or other acquisition or assumption of all or a
substantial portion of the assets or deposits of Issuer or any
Significant Subsidiary of Issuer, (y) a purchase or other
acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 10% or more of
the voting power of Issuer, or (z) any substantially
similar transaction; provided, however, that in no
event shall any merger, consolidation, purchase or similar
transaction involving only the Issuer and one or more of its
Subsidiaries or involving only any two or more of such
Subsidiaries, be deemed to be an Acquisition Transaction,
provided that any such transaction is not entered into in
violation of the terms of the Merger Agreement; |
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(ii) Any event set forth in Section 8.1(e) of the
Merger Agreement shall have occurred; |
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(iii) Any person other than Grantee, any Grantee Subsidiary
or any Issuer Subsidiary acting in a fiduciary capacity in the
ordinary course of its business shall have acquired beneficial
ownership or the right to acquire beneficial ownership of 10% or |
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more of the outstanding shares of Common Stock (the term
beneficial ownership for purposes of this Agreement
having the meaning assigned thereto in Section 13(d) of the
1934 Act, and the rules and regulations thereunder); |
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(iv) Any person other than Grantee or any Grantee
Subsidiary shall have made a bona fide proposal to Issuer
or its stockholders that is public or becomes the subject of
public disclosure to engage in an Acquisition Transaction; |
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(v) After the receipt by Issuer or its stockholders of any
bona fide inquiry or proposal (or the bona fide
indication of any intention to propose) from a third party
to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger
Agreement and such breach (x) would entitle Grantee to
terminate the Merger Agreement and (y) shall not have been
cured prior to the Notice Date (as defined below); or |
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(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to which
Grantee has given its prior written consent, shall have filed an
application or notice with the Federal Reserve Board, or other
federal or state bank regulatory authority, which application or
notice has been accepted for processing, for approval to engage
in an Acquisition Transaction. |
(c) The term Subsequent Triggering Event shall
mean either of the following events or transactions occurring
after the date hereof:
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(i) The acquisition by any person of beneficial ownership
of 20% or more of the then outstanding Common Stock; or |
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(ii) The occurrence of the Initial Triggering Event
described in paragraph (i) of
subsection (b) of this Section 2, except that the
percentage referred to in clause (y) shall be 20%. |
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent
Triggering Event (together, a Triggering Event) of
which it has knowledge, it being understood that the giving of
such notice by Issuer shall not be a condition to the right of
the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice
(the date of which being herein referred to as the Notice
Date) specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place
and date not earlier than three business days nor later than 60
business days from the Notice Date for the closing of such
purchase (the Closing Date); provided that if
prior notification to or approval of the Federal Reserve Board
or any other regulatory agency is required in connection with
such purchase, the Holder shall as soon as reasonably
practicable file the required notice or application for approval
and shall expeditiously process the same and the period of time
that otherwise would run pursuant to this sentence shall run
instead from the date on which any required notification periods
have expired or been terminated or such approvals
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have been obtained and any requisite waiting period or periods
shall have passed. Any exercise of the Option shall be deemed to
occur on the Notice Date relating thereto.
(f) At the closing referred to in
subsection (e) of this Section 2, the Holder
shall pay to Issuer the aggregate purchase price for the shares
of Common Stock purchased pursuant to the exercise of the Option
in immediately available funds by wire transfer to a bank
account designated by Issuer, provided that failure or
refusal of Issuer to designate such a bank account shall not
preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in
subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing
the number of shares of Common Stock purchased by the Holder
and, if the Option should be exercised in part only, a new
Option evidencing the rights of the Holder thereof to purchase
the balance of the shares purchasable hereunder, and the Holder
shall deliver to Issuer this Agreement and a letter agreeing
that the Holder will not offer to sell or otherwise dispose of
such shares in violation of applicable law or the provisions of
this Agreement.
(h) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall
read substantially as follows:
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The transfer of the shares represented by this certificate
is subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy of
such agreement is on file at the principal office of Issuer and
will be provided to the holder hereof without charge upon
receipt by Issuer of a written request therefor. |
It is understood and agreed that: (i) the reference to the
resale restrictions of the Securities Act of 1933, as amended
(the 1933 Act), in the above legend shall be
removed by delivery of substitute certificate(s) without such
reference if the Holder shall have delivered to Issuer a copy of
a letter from the staff of the SEC, or an opinion of counsel, in
form and substance reasonably satisfactory to Issuer, to the
effect that such legend is not required for purposes of the
1933 Act; (ii) the reference to the provisions of this
Agreement in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the shares
have been sold or transferred in compliance with the provisions
of this Agreement and under circumstances that do not require
the retention of such reference; and (iii) the legend shall
be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition,
such certificates shall bear any other legend as may be required
by law.
(i) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for under
subsection (e) of this Section 2 and the tender
of the applicable purchase price in immediately available funds,
the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall
then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder.
Issuer shall pay all expenses, and any and all United States
federal, state and local taxes and other charges that may be
payable
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in connection with the preparation, issuance and delivery of
stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) subject to the proviso at the
end of this clause, that it shall at all times maintain, free
from preemptive rights, sufficient authorized but unissued
shares of Common Stock so that the Option may be exercised
without additional authorization of Common Stock after giving
effect to all other options, warrants, convertible securities
and other rights to purchase Common Stock; provided that,
if on the Notice Date Issuer does not have sufficient authorized
but unissued shares of Common Stock so that the Option may be
exercised without additional authorization of Common Stock,
Issuer shall promptly take the necessary corporate actions
(including seeking the requisite stockholder approval) to
authorize the necessary number of additional shares of Common
Stock (or, if such corporate action is not or cannot be taken
within a reasonable amount of time, Issuer shall take all
required action to authorize for issuance under this Option, in
lieu of such additional shares of Common Stock, shares of a
series of voting participating preferred stock of Issuer
providing substantially equivalent economic and voting rights in
the aggregate to the holder thereof as such shares of Common
Stock, in which case all references in this Agreement to Common
Stock shall be deemed to include, to the extent appropriate,
such shares of voting participating preferred stock);
(ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of
assets, or by any other voluntary act, avoid or seek to avoid
the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder
by Issuer; (iii) promptly to take all action as may from
time to time be required (including (x) complying with all
premerger notification, reporting and waiting period
requirements specified in 15 U.S.C. § 18a and
regulations promulgated thereunder and (y) in the event,
under the Bank Holding Company Act of 1956, as amended (the
BHCA), or the Change in Bank Control Act of 1978, as
amended, or any state banking law, prior approval of or notice
to the Federal Reserve Board or to any state or other regulatory
authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications
or notices and providing such information to the Federal Reserve
Board or such other regulatory authority as they may require) in
order to permit the Holder to exercise the Option and Issuer
duly and effectively to issue shares of Common Stock pursuant
hereto; and (iv) promptly to take all action provided
herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal
office of Issuer, for other Agreements providing for Options of
different denominations entitling the holder thereof to
purchase, on the same terms and subject to the same conditions
as are set forth herein, in the aggregate the same number of
shares of Common Stock purchasable hereunder. The terms
Agreement and Option as used herein
include any Stock Option Agreements and related Options for
which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated,
Issuer will execute and deliver a new Agreement of like tenor
and date. Any such new Agreement executed and delivered shall
constitute an additional contractual
B-5
obligation on the part of Issuer, whether or not the Agreement
so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of
Common Stock that are purchasable upon exercise of the Option
pursuant to Section 1 of this Agreement, the number of
shares of Common Stock purchasable upon the exercise of the
Option and the Option Price shall be subject to adjustment from
time to time as provided in this Section 5. In the event of
any change in, or distributions in respect of, the Common Stock
by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions,
exchanges of shares, distributions on or in respect of the
Common Stock that would be prohibited under the terms of the
Merger Agreement, or the like, the type and number of shares of
Common Stock purchasable upon exercise hereof and the Option
Price shall be appropriately adjusted in such manner as shall
fully preserve the economic benefits provided hereunder and
proper provision shall be made in any agreement governing any
such transaction to provide for such proper adjustment and the
full satisfaction of the Issuers obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event
that occurs prior to an Exercise Termination Event, Issuer
shall, at the request of Grantee delivered within 180 days
of such Subsequent Triggering Event (whether on its own behalf
or on behalf of any subsequent holder of this Option (or part
thereof) or any of the shares of Common Stock issued pursuant
hereto), promptly prepare, file and keep current a shelf
registration statement under the 1933 Act covering this
Option and any shares issued and issuable pursuant to this
Option and shall use its reasonable best efforts to cause such
registration statement to become effective and remain current in
order to permit the sale or other disposition of this Option and
any shares of Common Stock (and/or shares of voting
participating preferred stock of Issuer) issued upon total or
partial exercise of this Option (Option Shares) in
accordance with any plan of disposition requested by Grantee.
Issuer will use its reasonable best efforts to cause such
registration statement first to become effective and then to
remain effective for such period not in excess of 180 days
from the day such registration statement first becomes effective
or such shorter time as may be reasonably necessary to effect
such sales or other dispositions. Grantee shall have the right
to demand two such registrations. The foregoing notwithstanding,
if, at the time of any request by Grantee for registration of
the Option or Option Shares as provided above, Issuer is in
registration with respect to an underwritten public offering of
shares of Common Stock, and if in the good faith judgment of the
managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the inclusion
of the Holders Option or Option Shares would interfere
with the successful marketing of the shares of Common Stock
offered by Issuer, the number of Option Shares otherwise to be
covered in the registration statement contemplated hereby may be
reduced; provided, however, that after any such
required reduction the number of Option Shares to be included in
such offering for the account of the Holder shall constitute at
least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and provided further,
however, that if such reduction occurs, then the Issuer
shall file a registration statement for the balance as promptly
as practicable and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested
by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection
with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of
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representations, warranties, indemnities and other agreements
customarily included in secondary offering underwriting
agreements for the Issuer. Upon receiving any request under this
Section 6 from any Holder, Issuer agrees to send a copy
thereof to any other person known to Issuer to be entitled to
registration rights under this Section 6, in each case by
promptly mailing the same, postage prepaid, to the address of
record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no
event shall Issuer be obligated to effect more than two
registrations pursuant to this Section 6 by reason of the
fact that there shall be more than one Grantee as a result of
any assignment or division of this Agreement.
7. (a) Immediately prior to, or after, the occurrence
of a Repurchase Event (as defined below), (i) following a
request of the Holder, delivered prior to an Exercise
Termination Event, Issuer (or any successor thereto) shall
repurchase the Option from the Holder immediately prior to the
Repurchase Event (or, as requested by the Holder, after the
Repurchase Event) at a price (the Option Repurchase
Price) equal to the product of the number of shares for
which this Option may then be exercised multiplied by the amount
by which (A) the Market/ Offer Price (as defined below)
exceeds (B) the Option Price, and (ii) at the request
of the owner of Option Shares from time to time (the
Owner), delivered prior to an Exercise Termination
Event and within 90 days of the occurrence of a Repurchase
Event (or such later period as provided in Section 10),
Issuer shall repurchase such number of the Option Shares from
the Owner as the Owner shall designate at a price (the
Option Share Repurchase Price) equal to the Market/
Offer Price multiplied by the number of Option Shares so
designated. The term Market/ Offer Price shall mean
the highest of (i) the price per share of Common Stock at
which a tender offer or exchange offer therefor has been made,
(ii) the price per share of Common Stock to be paid by any
third party pursuant to an agreement with Issuer, (iii) the
highest closing price for shares of Common Stock within the
six-month period immediately preceding the date the Holder gives
notice of the required repurchase of this Option or the Owner
gives notice of the required repurchase of Option Shares, as the
case may be, or (iv) in the event of a sale of all or a
substantial portion of Issuers assets, the sum of the
price paid in such sale for such assets and the current market
value of the remaining assets of Issuer as determined by a
nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, and reasonably
acceptable to the Issuer, divided by the number of shares of
Common Stock of Issuer outstanding at the time of such sale. In
determining the Market/ Offer Price, the value of consideration
other than cash shall be determined by a nationally recognized
investment banking firm selected by the Holder or Owner, as the
case may be, and reasonably acceptable to the Issuer.
(b) The Holder and the Owner, as the case may be, may
exercise its right to require Issuer to repurchase the Option
and any Option Shares pursuant to this Section 7 by
surrendering for such purpose to Issuer, at its principal
office, this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating
that the Holder or the Owner, as the case may be, elects to
require Issuer to repurchase this Option and/or the Option
Shares in accordance with the provisions of this Section 7.
Within the latter to occur of (x) five business days after
the surrender of the Option and/or certificates representing
Option Shares and the receipt of such notice or notices relating
thereto and (y) the time that is immediately prior to the
occurrence of a Repurchase Event, Issuer shall deliver or cause
to be delivered to the Holder the Option Repurchase Price and/or
to the Owner the Option Share
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Repurchase Price therefor or the portion thereof, if any, that
Issuer is not then prohibited under applicable law and
regulation from so delivering.
(c) To the extent that Issuer is prohibited under
applicable law or regulation from repurchasing the Option and/or
the Option Shares in full, Issuer shall immediately so notify
the Holder and/or the Owner and thereafter deliver or cause to
be delivered, from time to time, to the Holder and/or the Owner,
as appropriate, the portion of the Option Repurchase Price and
the Option Share Repurchase Price, respectively, that it is no
longer prohibited from delivering, within five business days
after the date on which Issuer is no longer so prohibited;
provided, however, that if Issuer at any time
after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited
under applicable law or regulation from delivering to the Holder
and/or the Owner, as appropriate, the Option Repurchase Price
and the Option Share Repurchase Price, respectively, in full
(and Issuer hereby undertakes to use its best efforts to obtain
all required regulatory and legal approvals and to file any
required notices, in each case as promptly as practicable in
order to accomplish such repurchase), the Holder or Owner may
revoke its notice of repurchase of the Option or the Option
Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, Issuer shall promptly
(i) deliver to the Holder and/or the Owner, as appropriate,
that portion of the Option Repurchase Price or the Option Share
Repurchase Price that Issuer is not prohibited from delivering;
and (ii) deliver, as appropriate, either (A) to the
Holder, a new Stock Option Agreement evidencing the right of the
Holder to purchase that number of shares of Common Stock
obtained by multiplying the number of shares of Common Stock for
which the surrendered Stock Option Agreement was exercisable at
the time of delivery of the notice of repurchase by a fraction,
the numerator of which is the Option Repurchase Price less the
portion thereof theretofore delivered to the Holder and the
denominator of which is the Option Repurchase Price, or
(B) to the Owner, a certificate for the Option Shares it is
then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event
shall be deemed to have occurred (i) upon the consummation
of an Acquisition Transaction with respect to Issuer (and not
solely involving one or more subsidiaries of Issuer) (except
that the percentage referred to in clause (y) of the
definition thereof shall be 50%) or (ii) upon the
acquisition by any person of beneficial ownership of 50% or more
of the then outstanding shares of Common Stock.
8. (a) In the event that prior to an Exercise
Termination Event, Issuer shall enter into an agreement
(i) to consolidate with or merge into any person, other
than Grantee or one of its Subsidiaries, and shall not be the
continuing or surviving corporation of such consolidation or
merger, (ii) to permit any person, other than Grantee or
one of its Subsidiaries, to merge into Issuer and Issuer shall
be the continuing or surviving corporation, but, in connection
with such merger, the then outstanding shares of Common Stock
shall be changed into or exchanged for stock or other securities
of any other person or cash or any other property or the then
outstanding shares of Common Stock shall after such merger
represent less than 50% of the outstanding voting shares and
voting share equivalents of the merged company, or (iii) to
sell or otherwise transfer all or substantially all of its
assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case, the agreement
governing such transaction shall make proper provision so that
the Option shall, upon the consummation of any such transaction
and upon the terms and conditions set forth herein, be converted
into, or exchanged
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for, an option (the Substitute Option), at the
election of the Holder, of either (x) the Acquiring
Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
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(A) Acquiring Corporation shall mean
(i) the continuing or surviving corporation of a
consolidation or merger with Issuer (if other than Issuer),
(ii) Issuer in a merger in which Issuer is the continuing
or surviving person, and (iii) the transferee of all or
substantially all of Issuers assets. |
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(B) Substitute Common Stock shall mean the
common stock issued by the issuer of the Substitute Option upon
exercise of the Substitute Option. |
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(C) Assigned Value shall mean the Market/ Offer
Price, as defined in Section 7. |
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(D) Average Price shall mean the average
closing price of a share of the Substitute Common Stock for the
one year immediately preceding the consolidation, merger or sale
in question, but in no event higher than the closing price of
the shares of Substitute Common Stock on the day preceding such
consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall be
computed with respect to a share of common stock issued by the
person merging into Issuer or by any company which controls or
is controlled by such person, as the Holder may elect. |
(c) The Substitute Option shall have the same terms as the
Option, provided, that if the terms of the Substitute
Option cannot, for legal reasons, be the same as the Option,
such terms shall be as similar as possible and in no event less
advantageous to the Holder. The issuer of the Substitute Option
shall also enter into an agreement with the then Holder or
Holders of the Substitute Option in substantially the same form
as this Agreement, which shall be applicable to the Substitute
Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common Stock as is equal to the
Assigned Value multiplied by the number of shares of Common
Stock for which the Option is then exercisable, divided by the
Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the
Option Price multiplied by a fraction, the numerator of which
shall be the number of shares of Common Stock for which the
Option is then exercisable and the denominator of which shall be
the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 19.9% of the shares of Substitute Common Stock outstanding
prior to exercise of the Substitute Option. In the event that
the Substitute Option would be exercisable for more than 19.9%
of the shares of Substitute Common Stock outstanding prior to
exercise but for this clause (e), the issuer of the
Substitute Option (the
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Substitute Option Issuer) shall make a cash payment
to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in
this clause (e) over (ii) the value of the Substitute
Option after giving effect to the limitation in this
clause (e). This difference in value shall be determined by
a nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, and reasonably
acceptable to the Acquiring Corporation.
(f) Issuer shall not enter into any transaction described
in subsection (a) of this Section 8 unless the
Acquiring Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer
hereunder.
9. (a) At the request of the holder of the Substitute
Option (the Substitute Option Holder), the
Substitute Option Issuer shall repurchase the Substitute Option
from the Substitute Option Holder at a price (the
Substitute Option Repurchase Price) equal to the
amount by which (i) the Highest Closing Price (as
hereinafter defined) exceeds (ii) the exercise price of the
Substitute Option, multiplied by the number of shares of
Substitute Common Stock for which the Substitute Option may then
be exercised, and at the request of the owner (the
Substitute Share Owner) of shares of Substitute
Common Stock (the Substitute Shares), the Substitute
Option Issuer shall repurchase the Substitute Shares at a price
(the Substitute Share Repurchase Price) equal to the
Highest Closing Price multiplied by the number of Substitute
Shares so designated. The term Highest Closing Price
shall mean the highest closing price for shares of Substitute
Common Stock within the six-month period immediately preceding
the date the Substitute Option Holder gives notice of the
required repurchase of the Substitute Option or the Substitute
Share Owner gives notice of the required repurchase of the
Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share
Owner, as the case may be, may exercise its respective right to
require the Substitute Option Issuer to repurchase the
Substitute Option and the Substitute Shares pursuant to this
Section 9 by surrendering for such purpose to the
Substitute Option Issuer, at its principal office, the agreement
for such Substitute Option (or, in the absence of such an
agreement, a copy of this Agreement) and certificates for
Substitute Shares accompanied by a written notice or notices
stating that the Substitute Option Holder or the Substitute
Share Owner, as the case may be, elects to require the
Substitute Option Issuer to repurchase the Substitute Option
and/or the Substitute Shares in accordance with the provisions
of this Section 9. As promptly as practicable, and in any
event within five business days after the surrender of the
Substitute Option and/or certificates representing Substitute
Shares and the receipt of such notice or notices relating
thereto, the Substitute Option Issuer shall deliver or cause to
be delivered to the Substitute Option Holder the Substitute
Option Repurchase Price and/or to the Substitute Share Owner the
Substitute Share Repurchase Price therefor or, in either case,
the portion thereof which the Substitute Option Issuer is not
then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation from repurchasing
the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer following a request for
repurchase pursuant to this Section 9 shall immediately so
notify the Substitute Option Holder and/or the Substitute Share
Owner and thereafter deliver or cause to be delivered, from time
to time, to the Substitute Option
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Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within five
business days after the date on which the Substitute Option
Issuer is no longer so prohibited; provided,
however, that if the Substitute Option Issuer is at any
time after delivery of a notice of repurchase pursuant to
subsection (b) of this Section 9 prohibited under
applicable law or regulation from delivering to the Substitute
Option Holder and/or the Substitute Share Owner, as appropriate,
the Substitute Option Repurchase Price and the Substitute Share
Repurchase Price, respectively, in full (and the Substitute
Option Issuer shall use its best efforts to obtain all required
regulatory and legal approvals, in each case as promptly as
practicable, in order to accomplish such repurchase), the
Substitute Option Holder or Substitute Share Owner may revoke
its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of the
prohibition, whereupon, in the latter case, the Substitute
Option Issuer shall promptly (i) deliver to the Substitute
Option Holder or Substitute Share Owner, as appropriate, that
portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option
Issuer is not prohibited from delivering; and (ii) deliver,
as appropriate, either (A) to the Substitute Option Holder,
a new Substitute Option evidencing the right of the Substitute
Option Holder to purchase that number of shares of the
Substitute Common Stock obtained by multiplying the number of
shares of the Substitute Common Stock for which the surrendered
Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is
the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the
denominator of which is the Substitute Option Repurchase Price,
or (B) to the Substitute Share Owner, a certificate for the
Substitute Common Shares it is then so prohibited from
repurchasing.
10. The 90-day or 180-day periods for exercise of certain
rights under Sections 2, 6, 7 and 13 shall be extended:
(i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights and for the expiration
of all statutory waiting periods; and (ii) to the extent
necessary to avoid liability under Section 16(b) of the
1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings
on the part of Issuer are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by
Issuer.
(b) Subject to the proviso at the end of this sentence,
Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the
date hereof through the termination of this Agreement in
accordance with its terms will have reserved for issuance upon
the exercise of the Option, that number of shares of Common
Stock equal to the maximum number of shares of Common Stock at
any time and from time to time issuable hereunder, and all such
shares, upon issuance
B-11
pursuant hereto, will be duly authorized, validly issued, fully
paid, nonassessable, and will be delivered free and clear of all
claims, liens, encumbrance and security interests and not
subject to any preemptive rights; provided that, if on
the Notice Date Issuer does not have sufficient authorized but
unissued shares of Common Stock so that the Option may be
exercised without additional authorization of Common Stock,
Issuer shall promptly take the necessary corporate actions
(including seeking the requisite stockholder approval) to
authorize the necessary number of additional shares of Common
Stock (or, if such corporate action is not or cannot be taken
within a reasonable amount of time, Issuer shall take all
required action to authorize for issuance under this Option, in
lieu of such additional shares of Common Stock, shares of a
series of voting participating preferred stock of Issuer
providing substantially equivalent economic and voting rights in
the aggregate to the holder thereof as such shares of Common
Stock, in which case all references in this Agreement to Common
Stock shall be deemed to include, to the extent appropriate,
such shares of voting participating preferred stock).
(c) The Board of Directors of Issuer has unanimously
approved this Agreement and the transactions contemplated hereby
and taken any other action as required to render inapplicable to
such agreement and transactions Sections 3-601 to 3-604 and
3-701 to 3-709 of the MGCL and, to the knowledge of Issuer, any
similar Takeover Statutes.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority
to enter into this Agreement and, subject to any approvals or
consents referred to herein, to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate
action on the part of Grantee. This Agreement has been duly
executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock
or other securities acquired by Grantee upon exercise of the
Option will not be, acquired with a view to the public
distribution thereof and will not be transferred or otherwise
disposed of except in a transaction registered or exempt from
registration under the 1933 Act.
13. Neither of the parties hereto may assign any of its
rights or obligations under this Agreement or the Option created
hereunder to any other person, without the express written
consent of the other party, except that in the event a
Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express
provisions hereof, may assign in whole or in part its rights and
obligations hereunder within 180 days following such
Subsequent Triggering Event (or such later period as provided in
Section 10); provided, however, that until
the date 15 days following the date on which the Federal
Reserve Board approves an application by Grantee under the BHCA
to acquire the shares of Common Stock subject to the Option,
Grantee may not assign its rights under the Option except in
(i) a widely dispersed public distribution, (ii) a
private placement in which no one party acquires the right to
purchase in excess of 2% of the voting shares of Issuer,
(iii) an assignment to a single party (e.g., a
broker or investment banker) for the purpose of conducting a
widely dispersed
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public distribution on Grantees behalf, or (iv) any
other manner approved by the Federal Reserve Board.
14. Each of Grantee and Issuer will use its best efforts to
make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the
consummation of the transactions contemplated by this Agreement,
including without limitation making application to list the
shares of Common Stock issuable hereunder on the New York Stock
Exchange upon official notice of issuance and applying to the
Federal Reserve Board under the BHCA for approval to acquire the
shares issuable hereunder, but Grantee shall not be obligated to
apply to state banking authorities for approval to acquire the
shares of Common Stock issuable hereunder until such time, if
ever, as it deems appropriate to do so.
15. (a) Grantee may, at any time during which Issuer
would be required to repurchase the Option or any Option Shares
pursuant to Section 7 upon proper request or notice,
surrender the Option (together with any Option Shares issued to
and then owned by Grantee) to Issuer in exchange for a cash fee
equal to the Surrender Price (as defined below);
provided, however, that Grantee may not exercise
its rights pursuant to this Section 15 if Issuer has
repurchased the Option (or any portion thereof) or any Option
Shares pursuant to Section 7. The Surrender
Price shall be equal to (i) $1.0559 billion,
plus (ii) if applicable, the aggregate purchase price
previously paid pursuant hereto by Grantee with respect to any
Option Shares, minus (iii) if applicable, the sum of
(A) the excess of (1) the net cash amounts, if any,
received by Grantee pursuant to the arms length sale of
Option Shares (or any other securities into which such Option
Shares were converted or exchanged) to any party not affiliated
with Grantee, over (2) the aggregate purchase price
previously paid pursuant hereto by Grantee with respect to such
Option Shares and (B) the net cash amounts, if any,
received by Grantee pursuant to an arms length sale of a
portion of the Option to any party not affiliated with Grantee.
(b) Grantee may exercise its right to surrender the Option
and any Option Shares pursuant to this Section 15 by
surrendering to Issuer, at its principal office, this Agreement
together with certificates for Option Shares, if any,
accompanied by a written notice stating (i) that Grantee
elects to surrender the Option and Option Shares, if any, in
accordance with the provisions of this Section 15 and
(ii) the Surrender Price. The Surrender Price shall be
payable in immediately available funds on or before the second
business day following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under
applicable law or regulation from paying the Surrender Price to
Grantee in full, Issuer shall immediately so notify Grantee and
thereafter deliver or cause to be delivered, from time to time,
to Grantee, the portion of the Surrender Price that Issuer is no
longer prohibited from paying, within five business days after
the date on which Issuer is no longer so prohibited,
provided, however, that if Issuer at any time
after delivery of a notice of surrender pursuant to
paragraph (b) of this Section 15 is prohibited under
applicable law or regulation from paying to Grantee the
Surrender Price in full (i) Issuer shall (A) use its
reasonable best efforts to obtain all required regulatory and
legal approvals and to file any required notices as promptly as
practicable in order to make such payments, (B) within five
days of the submission or receipt of any documents relating to
any such regulatory and legal approvals, provide Grantee with
copies of the same, and (C) keep Grantee advised of both
the status of any such request for regulatory and legal
approvals, as well as any discussions
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with any relevant regulatory or other third party reasonably
related to the same and (ii) Grantee may revoke such notice
of surrender by delivery of a notice of revocation to Issuer
and, upon delivery of such notice of revocation, the Exercise
Termination Date shall be extended to a date six months from the
date on which the Exercise Termination Date would have occurred
if not for the provisions of this Section 15(c) (during
which period Grantee may exercise any of its rights hereunder,
including any and all rights pursuant to this Section 15).
(d) Grantee shall have rights substantially identical to
those set forth in paragraphs (a), (b) and (c) of
this Section 15 with respect to the Substitute Option and
the Substitute Option Issuer during any period in which the
Substitute Option Issuer would be required to repurchase the
Substitute Option pursuant to Section 9.
16. (a) Notwithstanding any other provision of this
Agreement, in no event shall the Grantees Total Profit (as
hereinafter defined) exceed $1.4078 billion and, if it
otherwise would exceed such amount, the Grantee, at its sole
election, shall either (i) reduce the number of shares of
Common Stock subject to this Option, (ii) deliver to Issuer
for cancellation Option Shares previously purchased by Grantee,
(iii) pay cash to Issuer, or (iv) any combination
thereof, so that Grantees actually realized Total Profit
shall not exceed $1.4078 billion after taking into account
the foregoing actions.
(b) Notwithstanding any other provision of this Agreement,
this Option may not be exercised for a number of shares as
would, as of the date of exercise, result in a Notional Total
Profit (as defined below) of more than $1.4078 billion;
provided that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date.
(c) As used herein, the term Total Profit shall
mean the aggregate amount (before taxes) of the following:
(i) the amount received by Grantee pursuant to
Issuers repurchase of the Option (or any portion thereof)
pursuant to Section 7, (ii) (x) the amount
received by Grantee pursuant to Issuers repurchase of
Option Shares pursuant to Section 7, less (y) the
Grantees purchase price for such Option Shares,
(iii) (x) the net cash amounts received by Grantee
pursuant to the sale of Option Shares (or any other securities
into which such Option Shares are converted or exchanged) to any
unaffiliated party, less (y) the Grantees purchase
price of such Option Shares, (iv) any amounts received by
Grantee on the transfer of the Option (or any portion thereof)
to any unaffiliated party, and (v) any amount equivalent to
the foregoing with respect to the Substitute Option.
(d) As used herein, the term Notional Total
Profit with respect to any number of shares as to which
Grantee may propose to exercise this Option shall be the Total
Profit determined as of the date of such proposed exercise
assuming that this Option were exercised on such date for such
number of shares and assuming that such shares, together with
all other Option Shares held by Grantee and its affiliates as of
such date, were sold for cash at the closing market price for
the Common Stock as of the close of business on the preceding
trading day (less customary brokerage commissions).
17. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party
hereto and that the obligations of the
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parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
18. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or
state regulatory agency of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions
and covenants and restrictions contained in this Agreement shall
remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court
or regulatory agency determines that the Holder is not permitted
to acquire, or Issuer is not permitted to repurchase pursuant to
Section 7, the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to
Section 1(b) or 5 hereof), it is the express intention of
Issuer to allow the Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible,
without any amendment or modification hereof.
19. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given
when delivered in person, by cable, telegram, telecopy or telex,
or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
20. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles
of conflicts of laws thereof (except to the extent that
mandatory provisions of federal or state law apply).
21. This Agreement may be executed in two counterparts,
each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
22. Except as otherwise expressly provided herein, each of
the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses
of its own financial consultants, investment bankers,
accountants and counsel.
23. Except as otherwise expressly provided herein or in the
Merger Agreement, this Agreement contains the entire agreement
between the parties with respect to the transactions
contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party,
other than the parties hereto, and their respective successors
and permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as
expressly provided herein.
24. Capitalized terms used in this Agreement and not
defined herein shall have the meanings assigned thereto in the
Merger Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto
duly authorized, all as of the date first above written.
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MBNA CORPORATION (Issuer) |
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/s/ Bruce L. Hammonds |
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Name: Bruce L. Hammonds
Title: Chairman and Chief Executive Officer |
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BANK OF AMERICA CORPORATION (Grantee) |
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By: |
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/s/ Kenneth D. Lewis |
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Name: Kenneth D. Lewis
Title: Chairman and Chief Executive Officer |
Signature Page to Stock Option Agreement
B-16
APPENDIX C
OPINION OF UBS SECURITIES LLC
June 29, 2005
The Board of Directors
MBNA Corporation
1100 North King Street
Wilmington, Delaware 19884
Dear Members of the Board:
We understand that MBNA Corporation (MBNA) proposes
to enter into an Agreement and Plan of Merger between Bank of
America Corporation (Bank of America) and MBNA (such
agreement, the Agreement) pursuant to which, among
other things, (i) MBNA will merge with and into Bank of
America (the Merger) and (ii) each outstanding
share of the common stock, par value $0.01 per share, of
MBNA (MBNA Common Stock) will be converted into the
right to receive (x) 0.5009 of a share of the common stock,
par value $0.01 per share, of Bank of America (Bank
of America Common Stock and, such fraction of a share of
Bank of America Common Stock so issuable, the Stock
Consideration) and (y) $4.125 in cash, without
interest (such cash amount, the Cash Consideration
and, together with the Stock Consideration, the Merger
Consideration). The terms and conditions of the Merger are
more fully set forth in the Agreement.
You have requested our opinion as to the fairness, from a
financial point of view, of the Merger Consideration to the
holders of MBNA Common Stock.
UBS Securities LLC (UBS) has acted as financial
advisor to MBNA in connection with the Merger and will receive a
fee for its services, a portion of which is payable in
connection with this opinion and a significant portion of which
is contingent upon the consummation of the Merger. UBS and its
affiliates in the past have provided services to MBNA and Bank
of America unrelated to the proposed Merger, for which services
UBS and its affiliates have received compensation, including
having participated in certain bank financings for MBNA and
various equity and debt financings for Bank of America. As you
are aware, an affiliate of UBS is currently a lender under an
existing credit facility of MBNA, for which services such
affiliate has received and will receive compensation. In the
ordinary course of business, UBS, its successors and affiliates
may hold or trade, for their own accounts and accounts of
customers, securities of MBNA and Bank of America and,
accordingly, may at any time hold a long or short position in
such securities.
Our opinion does not address the relative merits of the Merger
as compared to other business strategies or transactions that
might be available with respect to MBNA or the underlying
business decision of MBNA to effect the Merger. Our opinion does
not constitute a recommendation to any stockholder as to how
such stockholder should vote or act with respect to any matters
relating to the Merger. Our opinion as expressed herein relates
solely to the fairness, from a financial point of view, of the
Merger Consideration and does not address any other terms or
aspects of the Merger. We express no opinion as to what the
value of Bank of America Common Stock will be when issued
pursuant to the Merger or the
C-1
The Board of Directors
MBNA Corporation
June 29, 2005
Page 2
prices at which Bank of America Common Stock or MBNA Common
Stock will trade at any time. In rendering this opinion, we have
assumed, with your consent, that the Merger will qualify for
federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of
1986, as amended. We also have assumed, with your consent, that
each of MBNA and Bank of America will comply with all material
terms of the Agreement and that the Merger will be consummated
in accordance with its terms without waiver, modification or
amendment of any material term, condition or agreement. We
further have assumed, with your consent, that all governmental,
regulatory or other consents and approvals necessary for the
consummation of the Merger will be obtained without any material
adverse effect on MBNA, Bank of America or the contemplated
benefits of the Merger. In addition, we have assumed, with your
consent, that the final executed form of the Agreement will not
differ in any material respect from the draft that we have
reviewed.
In arriving at our opinion, we have, among other things:
(i) reviewed certain publicly available business and
historical financial information relating to MBNA and Bank of
America, including publicly available financial forecasts and
estimates relating to Bank of America that were reviewed and
discussed with us by the management of Bank of America;
(ii) reviewed certain internal financial information and
other data relating to the businesses and financial prospects of
MBNA and Bank of America that were provided to us by the
respective managements of MBNA and Bank of America and not
publicly available, including financial forecasts and estimates
relating to MBNA prepared by the management of MBNA and certain
financial estimates relating to Bank of America prepared by the
management of Bank of America; (iii) conducted discussions
with members of the senior managements of MBNA and Bank of
America concerning the businesses and financial prospects of
MBNA and Bank of America; (iv) reviewed current and
historical market prices of MBNA Common Stock and Bank of
America Common Stock; (v) reviewed publicly available
financial and stock market data with respect to certain
companies in lines of business we believe to be generally
comparable to those of MBNA and Bank of America;
(vi) compared the financial terms of the Merger with
publicly available financial terms of certain other transactions
we believe to be generally relevant; (vii) reviewed certain
estimates prepared by the managements of MBNA and Bank of
America as to the potential cost savings, revenue enhancements
and other synergies anticipated to result from the Merger;
(viii) reviewed the potential pro forma financial effect of
the Merger, including potential cost savings, revenue
enhancements and other synergies, on the estimated earnings per
share of Bank of America based on financial forecasts and
estimates prepared by the management of MBNA and publicly
available financial forecasts and estimates relating to Bank of
America that were reviewed and discussed with us by the
management of Bank of America; (ix) reviewed a draft dated
June 29, 2005 of the Agreement; and (x) conducted such
other financial studies, analyses and investigations, and
considered such other information, as we deemed necessary or
appropriate.
In connection with our review, with your consent, we have not
assumed any responsibility for independent verification of any
of the information provided to or reviewed by us for the purpose
of this opinion and have, with your consent, relied on such
information being complete and accurate in all material
respects. In addition, at your direction, we have not made any
independent evaluation or appraisal of any of the assets or
liabilities (contingent or otherwise) of MBNA or Bank of
America, nor have we been furnished with any such evaluation or
appraisal. With respect to the publicly available financial
forecasts and estimates relating to Bank of America referred to
above, we were advised by the management of Bank of America and
we have assumed, with your consent, that such
C-2
The Board of Directors
MBNA Corporation
June 29, 2005
Page 3
forecasts and estimates represent reasonable estimates and
judgments as to the future financial performance of Bank of
America. With respect to internal financial forecasts and
estimates, pro forma effects and calculation of cost savings,
revenue enhancements and other synergies referred to above, we
have assumed, at your direction, that they have been reasonably
prepared on a basis reflecting the best currently available
estimates and judgments of the managements of MBNA and Bank of
America, as the case may be, as to the future financial
performance of MBNA and the other matters covered thereby. In
addition, we have assumed that the future financial results and
potential cost savings, revenue enhancements and other synergies
reflected in such forecasts and estimates referred to above will
be achieved at the times and in the amounts projected. Our
opinion is necessarily based on economic, monetary, market and
other conditions as in effect on, and the information available
to us as of, the date of this opinion.
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Merger Consideration is fair, from a
financial point of view, to the holders of MBNA Common Stock.
|
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|
Very truly yours,
/s/ UBS Securities LLC
UBS SECURITIES LLC |
C-3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
|
|
Item 20. |
Indemnification of Directors and Officers. |
Section 145(a) of the General Corporation Law of the State
of Delaware (Delaware Corporation Law) provides, in
general, that a corporation shall have the power to indemnify
any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation), because the person is or was a director, officer,
employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or
agent of any other enterprise. Such indemnity may be against
expenses (including attorneys fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
the person in connection with such action, suit or proceeding,
if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best
interests of the corporation and if, with respect to any
criminal action or proceeding, the person did not have
reasonable cause to believe the persons conduct was
unlawful.
Section 145(b) of the Delaware Corporation Law provides, in
general, that a corporation shall have the power to indemnify
any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by
or in the right of the corporation to procure a judgment in its
favor because the person is or was a director, officer, employee
or agent of the corporation or is or was serving at the request
of the corporation as a director, officer, employee or agent of
any other enterprise, against any expenses (including
attorneys fees) actually and reasonably incurred by the
person in connection with the defense or settlement of such
action or suit if the person acted in good faith and in a manner
the person reasonably believed to be in or not opposed to the
best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 145(g) of the Delaware Corporation Law provides, in
general, that a corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a
director or officer of the corporation against any liability
asserted against the person in any such capacity, or arising out
of the persons status as such, regardless of whether the
corporation would have the power to indemnify the person against
such liability under the provisions of the law.
Article VIII of the Registrants bylaws provides for
indemnification to the fullest extent authorized by Delaware law
for any person who is or was a director or officer of the
Registrant who is or was involved or threatened to be made so
involved in any proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such
person is or was serving as a director, officer, manager or
employee of the Registrant or was serving at the request of the
Registrant as a director, officer, manager or employee of any
other enterprise. Such indemnification is provided only if the
director, officer, manager or employee acted in good faith and
in a manner that the director, officer, manager or employee
reasonably believed to be in, or not opposed to, the best
interests of the Registrant, and with respect to any criminal
proceeding, had no reasonable cause to believe that the conduct
was unlawful.
The foregoing is only a general summary of certain aspects of
Delaware law and the Registrants bylaws dealing with
indemnification of directors and officers, and does not purport
to be complete. It is qualified in its entirety by reference to
the detailed provisions of Section 145 of the Delaware
Corporation Law and Article VIII of the bylaws of the
Registrant.
Pursuant to the Registrants bylaws, the Registrant also
maintains a directors and officers insurance policy
which insures the directors and officers of the Registrant
against liability asserted against such
II-1
persons in such capacity whether or not such directors or
officers have the right to indemnification pursuant to the
bylaws or otherwise.
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|
Item 21. |
Exhibits and Financial Statement Schedules. |
(a) Exhibits. The following is a list of Exhibits to this
Registration Statement:
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Exhibit |
|
|
No. |
|
Description |
|
|
|
|
2(a) |
|
|
Agreement and Plan of Merger, dated as of June 30, 2005, by
and between MBNA Corporation and Bank of America Corporation
(included in Part I as Appendix A to the document
included in this Registration Statement) |
|
3(a) |
|
|
Amended and Restated Certificate of Incorporation of Registrant,
as in effect on the date hereof, incorporated by reference to
Exhibit 99.1 of Registrants Current Report on
Form 8-K filed May 7, 1999 |
|
3(b) |
|
|
Certificate of Amendment of Amended and Restated Certificate of
Incorporation of Registrant, incorporated by reference to
Exhibit 3.1 of Registrants Current Report on
Form 8-K filed March 30, 2004 |
|
3(c) |
|
|
Amended and Restated Bylaws of Registrant, as in effect on the
date hereof, incorporated by reference to Exhibit 99.1 of
Registrants Current Report on Form 8-K filed
October 14, 2003 |
|
4(c) |
|
|
Specimen Certificate of Registrants common stock* |
|
5(a) |
|
|
Opinion of Timothy J. Mayopoulos, Executive Vice President and
General Counsel of Bank of America, as to the validity of the
shares of Bank of America common stock |
|
8(a) |
|
|
Opinion of Cleary Gottlieb Steen & Hamilton LLP as to
tax matters |
|
8(b) |
|
|
Opinion of Wachtell, Lipton, Rosen & Katz as to tax
matters |
|
23(a) |
|
|
Consent of Timothy J. Mayopoulos, Executive Vice President and
General Counsel of Bank of America (included in
Exhibit 5(a) to this Registration Statement) |
|
23(b) |
|
|
Consent of PricewaterhouseCoopers LLP |
|
23(c) |
|
|
Consent of Ernst & Young LLP |
|
23(d) |
|
|
Consent of Cleary Gottlieb Steen & Hamilton LLP
(included in Exhibit 8(a) to this Registration Statement) |
|
23(e) |
|
|
Consent of Wachtell, Lipton, Rosen & Katz (included in
Exhibit 8(b) to this Registration Statement) |
|
24(a) |
|
|
Power of Attorney* |
|
24(b) |
|
|
Power of Attorney of Alvaro G. de Molina |
|
99(a) |
|
|
Stock Option Agreement, dated as of June 30, 2005, by and
between MBNA Corporation (as issuer) and Bank of America
Corporation (as grantee) (included as Appendix B to the
document included in this Registration Statement) |
|
99(b) |
|
|
Notice of Special Meeting of Stockholders of MBNA Corporation
(included in the document included in this Registration
Statement) |
|
99(c) |
|
|
Form of Proxy Card for Special Meeting of Stockholders of MBNA
Corporation* |
|
99(d) |
|
|
Consent of UBS Securities LLC* |
The undersigned Registrant hereby undertakes:
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|
|
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement: (i) to include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933, as amended
(the Securities Act); (ii) to reflect in the
prospectus any |
II-2
|
|
|
facts or events arising after the effective date of the
registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in
the registration statement (notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum
aggregate offering price set forth in the Calculation of
Registration Fee table in the effective registration
statement); and (iii) to include any material information
with respect to the plan of distribution not previously
disclosed in the registration statement or any material change
to such information in the registration statement. |
|
|
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof. |
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|
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering. |
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|
(4) That, for purposes of determining any liability under
the Securities Act, each filing of the Registrants annual
report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (and, where applicable, each
filing of an employee benefit plans annual report pursuant
to Section 15(d) of the Securities Exchange Act of 1934, as
amended) that is incorporated by reference in this registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof. |
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|
(5) That prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part
of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of
Rule 145(c), the Registrant undertakes that such reoffering
prospectus will contain the information called for by the
applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form. |
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|
(6) That every prospectus (i) that is filed pursuant
to paragraph (5) above, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities
Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an
amendment to this registration statement and will not be used
until such amendment has become effective, and that for the
purpose of determining liabilities under the Securities Act,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof. |
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|
(7) To respond to requests for information that is
incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business
day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means.
This includes information contained in documents filed
subsequent to the effective date of the registration statement
through the date of responding to the request. |
|
|
(8) To supply by means of a post-effective amendment all
information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and
included in this registration statement when it became effective. |
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(9) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act |
II-3
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|
of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer, or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act of 1933 and will be governed by the final
adjudication of such issue. |
[Remainder of Page Intentionally Left Blank]
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Amendment
No. 1 to Form S-4 Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in
the city of Charlotte, state of North Carolina, on
September 19, 2005.
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BANK OF AMERICA CORPORATION |
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Kenneth D. Lewis |
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President and Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment No. 1 to Form S-4 Registration
Statement has been signed by the following persons in the
capacities and on the dates indicated.
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|
Signature |
|
Title |
|
Date |
|
|
|
|
|
|
*
Kenneth
D. Lewis |
|
Chairman, President, Chief Executive Officer and Director
(Principal Executive Officer) |
|
|
|
*
Alvaro
G. de Molina |
|
Chief Financial Officer
(Principal Financial Officer) |
|
|
|
*
Neil
A. Cotty |
|
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer) |
|
|
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*
William
Barnet, III |
|
Director |
|
|
|
*
Charles
W. Coker |
|
Director |
|
|
|
*
John
T. Collins |
|
Director |
|
|
|
*
Gary
L. Countryman |
|
Director |
|
|
|
*
Paul
Fulton |
|
Director |
|
|
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*
Charles
K. Gifford |
|
Director |
|
|
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*
W.
Steven Jones |
|
Director |
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|
II-5
|
|
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
|
*
Walter
E. Massey |
|
Director |
|
|
|
*
Thomas
J. May |
|
Director |
|
|
|
*
Patricia
E. Mitchell |
|
Director |
|
|
|
*
Edward
L. Romero |
|
Director |
|
|
|
*
Thomas
M. Ryan |
|
Director |
|
|
|
*
O.
Temple Sloan, Jr. |
|
Director |
|
|
|
*
Meredith
R. Spangler |
|
Director |
|
|
|
*
Robert
L. Tillman |
|
Director |
|
|
|
*
Jackie
M. Ward |
|
Director |
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|
|
*By: |
|
/s/ Teresa M. Brenner
Teresa
M. Brenner
Attorney-in-Fact |
|
|
|
September 19, 2005 |
II-6
EXHIBIT INDEX
|
|
|
|
|
Exhibit |
|
|
No. |
|
Description |
|
|
|
|
2(a) |
|
|
Agreement and Plan of Merger, dated as of June 30, 2005, by
and between MBNA Corporation and Bank of America Corporation
(included in Part I as Appendix A to the document
included in this Registration Statement) |
|
3(a) |
|
|
Amended and Restated Certificate of Incorporation of Registrant,
as in effect on the date hereof, incorporated by reference to
Exhibit 99.1 of Registrants Current Report on
Form 8-K filed May 7, 1999 |
|
3(b) |
|
|
Certificate of Amendment of Amended and Restated Certificate of
Incorporation of Registrant, incorporated by reference to
Exhibit 3.1 of Registrants Current Report on
Form 8-K filed March 30, 2004 |
|
3(c) |
|
|
Amended and Restated Bylaws of Registrant, as in effect on the
date hereof, incorporated by reference to Exhibit 99.1 of
Registrants Current Report on Form 8-K filed
October 14, 2003 |
|
4(c) |
|
|
Specimen Certificate of Registrants common stock* |
|
5(a) |
|
|
Opinion of Timothy J. Mayopoulos, Executive Vice President and
General Counsel of Bank of America, as to the validity of the
shares of Bank of America common stock |
|
8(a) |
|
|
Opinion of Cleary Gottlieb Steen & Hamilton LLP as to
tax matters |
|
8(b) |
|
|
Opinion of Wachtell, Lipton, Rosen & Katz as to tax
matters |
|
23(a) |
|
|
Consent of Timothy J. Mayopoulos, Executive Vice President and
General Counsel of Bank of America (included in
Exhibit 5(a) to this Registration Statement) |
|
23(b) |
|
|
Consent of PricewaterhouseCoopers LLP |
|
23(c) |
|
|
Consent of Ernst & Young LLP |
|
23(d) |
|
|
Consent of Cleary Gottlieb Steen & Hamilton LLP
(included in Exhibit 8(a) to this Registration Statement) |
|
23(e) |
|
|
Consent of Wachtell, Lipton, Rosen & Katz (included in
Exhibit 8(b) to this Registration Statement) |
|
24(a) |
|
|
Power of Attorney* |
|
24(b) |
|
|
Power of Attorney of Alvaro G. de Molina |
|
99(a) |
|
|
Stock Option Agreement, dated as of June 30, 2005, by and
between MBNA Corporation (as issuer) and Bank of America
Corporation (as grantee) (included as Appendix B to the
document included in this Registration Statement) |
|
99(b) |
|
|
Notice of Special Meeting of Stockholders of MBNA Corporation
(included in the document included in this Registration
Statement) |
|
99(c) |
|
|
Form of Proxy Card for Special Meeting of Stockholders of MBNA
Corporation* |
|
99(d) |
|
|
Consent of UBS Securities LLC* |