<PAGE>
Filed Pursuant to Rule 424(b)(4)
Registration Number: 333-86943
[LOGO]
MBNK CAPITAL TRUST I
$10,000,000
9.625% PREFERRED SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED
BY
MAIN STREET BANCORP, INC.
MBNK CAPITAL TRUST I:
- will sell preferred securities to the public;
- will sell common securities to Main Street Bancorp, Inc;
- will use the proceeds to buy Main Street junior subordinated debentures
due December 31, 2029; and
- will distribute the payments it receives on Main Street's junior
subordinated debentures to holders of the preferred and common securities.
QUARTERLY DISTRIBUTIONS:
- MBNK Capital Trust will pay you quarterly cumulative cash distributions on
the preferred securities at an annual rate equal to 9.625% beginning
December 31, 1999.
- Main Street can defer interest payments on the junior subordinated
debentures for up to 20 consecutive quarterly periods. If Main Street
defers interest payments, MBNK Capital Trust also will defer distribution
payments.
REDEMPTION:
- MBNK Capital Trust may redeem the preferred securities on or after
December 31, 2004.
- MBNK Capital Trust may redeem the preferred securities before
December 31, 2004 if there is a change in existing laws or regulations as
described on page 20.
The preferred securities have been approved for listing, subject to official
notice of issuance, on the American Stock Exchange, Inc. under the trading
symbol "MST.PR".
WE URGE YOU TO CAREFULLY READ THE "RISK FACTORS" SECTION BEGINNING ON
PAGE 10, BEFORE YOU MAKE YOUR INVESTMENT DECISION.
THESE SECURITIES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OBLIGATIONS OF ANY
BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL AGENCY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PER PREFERRED SECURITY
----------------------
<S> <C>
Public Offering Price....................................... $10.00
Proceeds to MBNK Capital Trust.............................. 10.00
Underwriting commission to be paid by Main
Street Bancorp, Inc. ....................................... .325
</TABLE>
The underwriters are offering the preferred securities to you. The
underwriters will only sell the preferred securities after they have purchased
the preferred securities from MBNK Capital Trust. The underwriters
<PAGE>
entirely or partially may reject any order for preferred securities and they may
withdraw, cancel or modify the offering without giving you any notice.
------------------------
Wheat First Securities Janney Montgomery Scott LLC
THE DATE OF THIS PROSPECTUS IS DECEMBER 3, 1999
<PAGE>
[LOGO]
[Map of the locations of the banking facilities of Main Street Bank superimposed
over a diagram of the Commonwealth of Pennsylvania indicating the locations of
the banking facilities.]
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
Because this is a summary, it may not contain all of the information that is
important to you. To understand the offering fully, you should read the entire
prospectus, including the financial statements and related notes, before making
a decision to invest in the preferred securities.
MAIN STREET BANCORP, INC.
We are a bank holding company headquartered in Reading, Pennsylvania. We
were formed on May 1, 1998, through the consolidation of BCB Financial Services
Corporation and Heritage Bancorp, Inc. BCB Financial Services Corporation was
the holding company for Berks County Bank, which was formed in 1987 and was
headquartered in Reading, Pennsylvania. Heritage Bancorp, Inc. was the holding
company for Heritage National Bank, which was formed in 1828 and was
headquartered in Pottsville, Pennsylvania. Effective on January 1, 1999, Berks
County Bank and Heritage National Bank merged and changed the name of the
resulting entity to Main Street Bank. Our bank operates under the names Berks
County Bank, Heritage Bank and Main Street Bank.
At January 1, 1999, Main Street Bank operated twenty-two full service
branches in Berks, Dauphin, Montgomery and Schuylkill Counties in Pennsylvania
as well as eight loan production offices in Berks, Bucks, Chester, Lancaster,
Lehigh, Montgomery, and Schuylkill Counties. In December 1998, we announced
plans to open 23 new branch offices, more than doubling the number of
full-service community banking offices from 22 to 45. As of September 30, 1999,
we have opened 17 of the new branches. We anticipate opening the six remaining
new branches by the end of March 2000. The majority of these new branches are
located in Chester, Lehigh and Montgomery counties. According to the United
States Census Bureau, these counties are three of the fastest growing counties
in Pennsylvania. Based on data from SNL Securities LC these counties have some
of the highest average household incomes in the state. SNL Securities LC is a
research firm that collects and distributes data about the financial services
industry.
To finance our branch expansion program, we have borrowed funds from the
Federal Home Loan Bank and other sources. We have invested these funds in
corporate and government securities, which yield a higher return than the cost
of the borrowed funds. As our new branches mature, we plan to repay the borrowed
funds and replace the securities with the new deposits and loans that these new
branches attract. By using this leverage as part of our expansion strategy, we
hope to provide ourselves with greater flexibility and mitigate the costs
related to the strategy.
Main Street Bank offers a range of commercial and retail banking services to
our customers, including personal and business checking and savings accounts,
certificates of deposit, residential mortgage, consumer and commercial loans,
and private banking services. We also perform personal, corporate, pension, and
other fiduciary services. In addition, we provide safe deposit boxes, traveler's
checks, credit cards, wire transfer of funds, Automated Clearing House
origination and other typical banking services. We are a member of the MAC/Plus
network.
To expand our product offerings, in 1999 we began to offer title insurance.
We intend to offer discount brokerage services, on-line home banking, 401(k) and
employee benefit plans, alternate investments services and general insurance
products in the next six to twelve months.
We are committed to building a strong, customer-friendly community bank. As
a community bank, we believe we respond quickly to our customers through local
decision-making and tailoring our products and services to meet their needs. We
believe this customer-friendly approach provides us with a competitive advantage
over many of the larger financial institutions in our market area. In addition,
we believe that we have benefitted from recent acquisitions of locally
headquartered financial institutions by larger regional or national out-of-town
financial institutions.
Our management team possesses extensive banking experience and has worked
together for many years. Our Chief Executive Officer and Chief Financial Officer
have been with Main Street Bank and its predecessor since 1987.
3
<PAGE>
As of September 30, 1999, we had, on a consolidated basis, total assets of
$1.4 billion, deposits of $1.0 billion, loans of $623.2 million, and
stockholders' equity of $82.9 million.
Our principal executive offices are located at 601 Penn Street, Reading,
Pennsylvania 19601, and our telephone number at that address is (610) 685-1400.
MBNK CAPITAL TRUST I
MBNK Capital Trust I is a Delaware statutory business trust. A statutory
business trust is a separate legal entity that can be formed for the purpose of
holding property. For tax purposes, MBNK Capital Trust is a grantor trust. A
grantor trust is a trust that does not pay federal income tax if it is formed
solely to facilitate direct investment in the assets of the trust and the
trustee cannot change the investment. We created MBNK Capital Trust for the
limited purposes of:
- issuing the preferred securities and the common securities; and
- investing the proceeds that MBNK Capital Trust receives from the issuance
of the preferred securities and the common securities in an equal
principal amount of junior subordinated debentures issued by us.
The purchasers of the preferred securities MBNK Capital Trust issues in the
offering will own all of MBNK Capital Trust's preferred securities. We will own
all of the common securities. The common securities will represent an aggregate
liquidation amount equal to 3.00% of MBNK Capital Trust's total capital.
The junior subordinated debentures and the interest we pay to MBNK Capital
Trust on the junior subordinated debentures will be MBNK Capital Trust's only
assets and the interest we pay to MBNK Capital Trust on the junior subordinated
debentures will be the only revenue of MBNK Capital Trust.
MBNK Capital Trust will be governed by the trust agreement among us, as
depositor, The Bank of New York (Delaware), as Delaware trustee, and the
administrators, who are selected by us.
The principal executive offices of MBNK Capital Trust are: c/o The Bank of
New York, Corporate Trust Department, White Clay Center, Route 271, Newark,
Delaware 19711 and its telephone number is (610) 685-1400.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
The Securities Being Offered........... 1,000,000 preferred securities having a liquidation amount
of $10.00 per preferred security.
The Offering Price..................... $10.00 per preferred security.
Quarterly Distributions Payable to
You.................................. MBNK Capital Trust will make cash distributions to you on
each preferred security you own at an annual rate of 9.625%.
The distributions will be cumulative, will accumulate from
December 8, 1999, and will be payable on March 31, June
30, September 30, and December 31 of each year. The first
distribution will be made on December 31, 1999.
We Have the Option to Defer Interest
Payments............................. If we are not in default under the junior subordinated
debentures, we may defer interest payments on the junior
subordinated debentures for up to 20 consecutive quarters.
We cannot defer interest payments beyond the stated
maturity date of December 31, 2029. MBNK Capital Trust
will defer quarterly distributions on the preferred
securities during any time that we defer interest payments
on the junior subordinated debentures. If MBNK Capital
Trust defers any quarterly distributions on the preferred
securities, the unpaid distributions will accumulate and
MBNK Capital Trust will be required to pay you additional
amounts on the unpaid distributions at an annual rate of
9.625%, compounded quarterly. After the end of any period
when we have deferred interest payments, if we pay all
deferred and current interest on the junior subordinated
debentures, we may defer interest payments again for up to
another 20 consecutive quarters, as long as we don't defer
the interest payments beyond the junior subordinated
debentures stated maturity date.
You Will Have Taxable Income Even if We
Defer Interest Payments.............. If we defer interest payments on the junior subordinated
debentures and MBNK Capital Trust defers distributions on
the preferred securities, you will be required to include
the amount of the deferred distributions in your gross
income for federal income tax purposes and pay taxes on
the amount of the deferred distributions before you
receive any cash distributions. In addition, if you
dispose of your preferred securities before we pay the
deferred interest and MBNK Capital Trust pays the deferred
distributions, you will incur a tax liability even though
you will never receive the cash distributions. See
"Description of the Preferred Securities--Distributions"
on page 19.
The Junior Subordinated Debentures and
the Preferred Securities Mature on
December 31, 2029 but May Be Redeemed
Earlier.............................. When we pay or redeem the junior subordinated debentures,
MBNK Capital Trust will redeem the preferred securities and
will pay you the liquidation amount of $10.00 per
preferred security plus any accumulated and unpaid
distributions. See "Description of Preferred Securities--
Redemption" on page 20. We must repay the junior
subordinated debentures on their stated maturity date of
December 31, 2029. In addition, subject to any regulatory
approvals that may then be required, we may redeem prior
to their stated maturity date:
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
- all or a portion of the junior subordinated debentures
on or after December 31, 2004, or
- all but not a portion of the junior subordinated
debentures at any time before December 31, 2004,
within 90 days after:
- certain tax events occur or become likely to occur;
- MBNK Capital Trust is deemed to be an investment
company; or
- there is an adverse change in the treatment of the
preferred securities as Tier 1 capital for bank
regulatory purposes.
See "Description of Preferred Securities--Redemption" on
page 20.
The Junior Subordinated Debentures Will
Be Unsecured and Subordinate in Right
of Payment to All Our Other
Indebtedness......................... MBNK Capital Trust has received no security or collateral to
assure that we will pay the interest and principal due on
the junior subordinated debentures. In addition, MBNK
Capital Trust has agreed that before we make payments on
the junior subordinated debentures we will make payments
on:
- our existing and future senior and other
subordinated indebtedness; and
- all existing and future liabilities of our
subsidiaries, including Main Street Bank's deposit
liabilities.
Similarly, MBNK Capital Trust has received no security or
collateral to assure that we will perform our obligations
under the guarantee and has agreed that we may make
interest and principal payments on all of our other senior
and subordinated indebtedness before performing our
obligations under the guarantee. See "Description of
Junior Subordinated Debentures--General" on page 31 and
"Description of Junior Subordinated
Debentures--Subordination" on page 39. See "Description of
Guarantee--Status of the Guarantee" on page 42.
You May Be Required to
Exchange Your Preferred Securities
for Junior Subordinated Debentures... We may dissolve MBNK Capital Trust at anytime. If we
dissolve MBNK Capital Trust, we will give you, in exchange
for your preferred securities, junior subordinated
debentures of the same principal amount. See "Description
of Preferred Securities--Liquidation Distribution upon
Dissolution" on page 23.
Our Full and Unconditional Guarantee of
Payment.............................. We will fully, irrevocably and unconditionally guarantee
that MBNK Capital Trust will pay you:
- quarterly distributions on the preferred securities,
if we have not deferred interest payments on the
junior subordinated debentures; and
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
- the liquidation amount of the preferred securities
if MBNK Capital Trust is liquidated and we do not
distribute junior subordinated debentures to you in
the liquidation.
This guarantee only applies if MBNK Capital Trust has the
funds necessary to make the payments on the preferred
securities, but has failed to do so.
If we do not make payments on the junior subordinated
debentures, MBNK Capital Trust will not have sufficient
funds to make payments on the preferred securities. If we
do not make principal and interest payments on the junior
subordinated debentures, you may institute a legal
proceeding directly against us to force us to make
distributions directly to you. See "Relationship Among the
Preferred Securities, the Junior Subordinated Debentures
and the Guarantee" on page 44.
Limited Voting Rights.................. As holders of the preferred securities, you will have no
voting rights, except in limited circumstances. See
"Description of Preferred Securities--Voting Rights;
Amendment of Trust Agreement" on page 27.
Use of Proceeds........................ MBNK Capital Trust will invest the $10 million of proceeds
from the sale of the preferred securities in our junior
subordinated debentures. After we pay the expenses of the
offering, we will use the estimated $9.5 million of net
proceeds from our sale of the junior subordinated
debentures to infuse capital into Main Street Bank. See
"Risk Factors" on page 10 and "Use of Proceeds" on page
15.
Lack of Rating......................... The preferred securities will not be rated by any rating
service and are not anticipated to be rated in the future.
No other security we have issued has been rated.
American Stock Exchange Symbol......... The preferred securities have been approved for listing on
the American Stock Exchange subject to official notice of
issuance under the symbol "MST.PR". We can not assure you
that an active public market in the preferred securities
will develop or, if one does develop, that it will be
maintained. See "Underwriting" on page 52.
ERISA Considerations................... You should carefully consider the information set forth
under "ERISA Considerations" on page 50.
</TABLE>
7
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following is our selected consolidated financial information. The
balance sheet and income statement data as of and for the five years ended
December 31, 1998 are taken from our audited consolidated financial statements
as of the end of and for each such year. The balance sheet and income statement
data as of and for the nine months ended September 30, 1999 and 1998 are taken
from our unaudited condensed consolidated financial statements as of the end of
and for each such nine-month period. The unaudited interim data include all
adjustments which are, in our opinion, necessary to present a fair statement of
these periods and are of a normal recurring nature. Results for the nine months
ended September 30, 1999 are not necessarily indicative of results for the
entire year. You should read this selected consolidated financial information in
conjunction with our consolidated financial statements and notes that are
contained in our Annual Report on Form 10-K and are incorporated by reference
into this prospectus.
MAIN STREET BANCORP, INC. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
AS OF OR FOR THE
AS OF OR FOR THE NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------------------- -------------------------
1994 1995 1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total interest income............. $ 31,861 $ 36,413 $ 41,809 $ 54,463 $ 65,719 $ 47,041 $ 62,605
Total interest expense............ 12,519 15,803 18,654 25,978 33,264 23,042 35,486
---------- ---------- ---------- ---------- ----------- ----------- -----------
Net interest income............... 19,342 20,610 23,155 28,485 32,455 23,999 27,119
Provision for loan losses......... 644 828 867 1,140 2,210 2,210 800
Other income...................... 2,724 2,769 3,559 4,535 10,301 7,936 4,650
Other expenses.................... 14,331 16,350 16,536 19,234 25,092 18,977 27,589
Federal income taxes (benefit).... 2,013 1,890 2,428 3,317 3,711 2,525 (1,773)
---------- ---------- ---------- ---------- ----------- ----------- -----------
Net income........................ $ 5,078 $ 4,311 $ 6,883 $ 9,329 $ 11,743 $ 8,223 $ 5,153
========== ========== ========== ========== =========== =========== ===========
PER SHARE DATA:
Earnings per share (1)(2)
Basic........................... $ 0.63 $ 0.51 $ 0.82 $ 1.02 $ 1.13 $ 0.79 $ 0.49
Diluted......................... 0.63 0.50 0.82 1.00 1.12 0.78 0.49
Cash dividends declared per
share(2)........................ 0.22 0.25 0.30 0.36 0.49 0.35 0.42
Book value per share (2)(3)....... 6.22 6.71 7.16 8.60 9.14 9.40 9.09
Average shares outstanding (2).... 8,048,922 8,482,808 8,345,300 9,184,980 10,357,974 10,348,663 10,410,114
BALANCE SHEET DATA:
Total assets...................... $ 468,187 $ 509,917 $ 666,476 $ 813,863 $ 1,158,541 $ 1,080,262 $ 1,403,436
Total loans, net.................. 305,356 318,449 397,790 477,838 533,395 518,921 623,153
Total securities.................. 125,796 138,388 203,236 280,020 534,551 479,266 648,403
Total deposits.................... 381,837 432,988 518,567 626,760 818,550 751,482 1,018,370
Borrowings........................ 28,776 16,275 81,120 84,758 221,072 205,293 273,984
Total stockholders' equity........ $ 52,565 $ 56,311 $ 59,785 $ 88,720 $ 94,912 $ 97,567 $ 82,904
PERFORMANCE RATIOS:
Return on average assets.......... 1.06% 0.90% 1.22% 1.28% 1.28% 1.27% 0.54%
Return on average stockholders'
equity.......................... 10.24 7.95 12.05 13.16 12.34 12.08 7.64
Net interest margin (4)........... 4.64 4.73 4.54 4.30 4.03 4.19 3.48
Total other expenses as a
percentage of average assets.... 2.99 3.42 2.93 2.63 2.73 2.93 2.90
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
AS OF OR FOR THE
AS OF OR FOR THE NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------------------- -------------------------
1994 1995 1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSET QUALITY RATIOS:
Allowance for loan losses as a
percentage of loans............. 1.44% 1.51% 1.26% 1.19% 1.34% 1.42% 1.10%
Allowance for loan losses as a
percentage of non-performing
loans........................... 83.19 103.54 125.70 91.90 86.67 95.38 98.92
Non-performing loans as a
percentage of total loans, net
(5)............................. 1.73 1.46 1.00 1.29 1.54 1.49 1.10
Non-performing assets as a
percentage of total assets
(5)............................. 1.16 1.19 0.78 0.82 0.75 0.77 0.54
Net charge-offs as a percentage of
average loans, net.............. 0.03 0.13 0.19 0.11 0.14 0.09 0.19
LIQUIDITY AND CAPITAL RATIOS:
Equity to assets (6).............. 10.95% 11.34% 10.14% 9.71% 10.34% 10.51% 7.08%
Tier 1 capital to risk-weighted
assets (7)...................... 18.48 17.04 14.81 17.56 14.83 15.38 12.66
Leverage ratio (7)(8)............. 11.99 11.60 9.81 10.93 8.70 10.04 7.13
Total capital to risk-weighted
assets (7)...................... 19.74 18.24 16.06 18.72 15.97 16.63 13.59
Dividend payout ratio............. 35.09 48.67 36.25 35.13 43.57 44.55 84.88
</TABLE>
- ------------------------------
(1) Earnings per share amounts have been computed in accordance with the
provisions of FASB Statement No. 128, Earnings Per Share.
(2) Per common share data are adjusted for all stock dividends and stock splits
effected through December 31, 1998.
(3) Based upon total shares issued and outstanding at the end of each respective
period.
(4) Represents net interest income as a percentage of average total-interest
earning assets, calculated on a tax-equivalent basis.
(5) Non-performing loans are comprised of (i) loans which are on a nonaccrual
basis, (ii) accruing loans that are 90 days or more past due which are
insured for credit loss, and (iii) restructured loans. Non-performing assets
are comprised of non-performing loans and foreclosed real estate (assets
acquired in foreclosure).
(6) Based upon average daily balances for the respective periods.
(7) Based on Federal Reserve Board risk-based capital guidelines, as applicable
to Main Street.
(8) The leverage ratio is defined as Tier 1 capital to average total assets.
9
<PAGE>
RISK FACTORS
Your investment in the preferred securities will involve some risks. Below
is a summary of the material risk factors that you should be aware of in
arriving at an investment decision. You should carefully consider the following
risk factors and other information in this prospectus before purchasing the
preferred securities.
RISK FACTORS RELATING TO THE PREFERRED SECURITIES
IF MAIN STREET BANK IS UNABLE TO PAY US DIVIDENDS AND WE DO NOT MAKE PAYMENTS ON
THE JUNIOR SUBORDINATED DEBENTURES, MBNK CAPITAL TRUST WILL NOT HAVE FUNDS TO
MAKE PAYMENTS TO YOU.
MBNK Capital Trust will depend solely on our payments on the junior
subordinated debentures to pay amounts due to you on the preferred securities.
Similarly, to make payments to MBNK Capital Trust on the junior subordinated
debentures we will depend primarily on any dividends we receive from Main Street
Bank, which may be limited by regulations, and our cash and liquid investments.
We are a separate legal entity from our subsidiaries, including Main Street
Bank, and do not have significant operations of our own.
BECAUSE OUR OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR SUBORDINATED
DEBENTURES ARE SUBORDINATED TO MOST OF OUR OTHER CREDITORS AND ALL OF THE
CREDITORS OF MAIN STREET BANK, WE WILL NOT MAKE PAYMENTS TO MBNK CAPITAL TRUST
BEFORE WE PAY OUR OTHER OBLIGATIONS.
Our obligations under the guarantee and the junior subordinated debentures
are unsecured and generally are subordinated to all of our existing and future
senior debt, subordinated debt and additional senior obligations. Our
obligations falling into one of these categories totaled $274.0 million at
September 30, 1999. We will not make payments to MBNK Capital Trust on the
junior subordinated debentures before we pay our other obligations.
Because we are a holding company, the creditors of our subsidiaries also
will have priority over you in any distribution of our subsidiaries' assets in a
liquidation, reorganization or otherwise. Therefore, the junior subordinated
debentures will be effectively subordinated to all existing and future
liabilities of our subsidiaries, and you should look only to our assets for
payments on the junior subordinated debentures. The junior subordinated
debentures do not limit our ability or the ability of our subsidiaries to incur
additional debt. See "Description of Junior Subordinated
Debentures--Subordination" on page 39.
IF WE DEFER INTEREST PAYMENTS ON THE JUNIOR SUBORDINATED DEBENTURES, MBNK
CAPITAL TRUST WILL NOT HAVE FUNDS TO MAKE PAYMENTS TO YOU ON THE PREFERRED
SECURITIES AND THE PRICE OF THE PREFERRED SECURITIES MAY DECLINE.
If we are not in default under the junior subordinated debentures, we may
defer the payment of interest on the junior subordinated debentures for up to 20
consecutive quarters. During any period in which we defer interest payments on
the junior subordinated debentures, MBNK Capital Trust will defer quarterly
distributions on the preferred securities. If we defer interest payments on the
junior subordinated debentures, the market price for the preferred securities
would probably decline. If you dispose of preferred securities during a deferral
period, you might not recover the same return on your investment as someone who
continues to hold the preferred securities. Due to our right to defer interest
payments, the market price of the preferred securities may be more volatile than
the market prices of other securities without the deferral feature.
YOU WILL STILL HAVE TAXABLE INCOME EVEN IF WE DEFER DISTRIBUTIONS ON THE
PREFERRED SECURITIES.
If we defer interest payments on the junior subordinated debentures you
still will be required to include deferred distributions on the preferred
securities in your taxable income, even though you have not received any cash
attributable to that income. In addition, during a deferral period, your tax
basis in the preferred securities will increase by the amount of accumulated but
unpaid distributions. If you sell the preferred securities during a deferral
period, your increased tax basis will decrease the amount of any capital gain or
increase the amount of any capital loss that you may have otherwise recognized
on the sale. A capital loss, except in certain limited circumstances, cannot be
applied to offset ordinary income. As a result, deferral of distributions could
result in
10
<PAGE>
your recognition of ordinary income, with a related tax liability, and you only
may use a capital loss to offset a capital gain. See "Description of Junior
Subordinated Debentures--Option to Extend Interest Payment Period" on page 32
and "Material United States Federal Income Tax Consequences" on page 45.
BECAUSE THE GUARANTEE COVERS PAYMENTS ONLY IF MBNK CAPITAL TRUST HAS FUNDS
AVAILABLE, YOU CAN NOT RELY ON THE GUARANTEE IF WE DO NOT MAKE PAYMENTS ON THE
JUNIOR SUBORDINATED DEBENTURES.
If we do not make payments on the junior subordinated debentures, MBNK
Capital Trust will not have sufficient funds to pay distributions on the
preferred securities or the liquidation amount. Because the guarantee does not
cover payments when MBNK Capital Trust does not have sufficient funds, you will
not be able to rely on the guarantee for payment of these amounts. Instead, you
or the property trustee must enforce the rights of MBNK Capital Trust under the
junior subordinated debentures directly against us to recover amounts owed to
you. See "Description of Guarantee" on page 41.
IN CERTAIN CIRCUMSTANCES MBNK CAPITAL TRUST MAY REDEEM THE PREFERRED SECURITIES,
WHICH MAY REQUIRE YOU TO REINVEST YOUR PRINCIPAL SOONER THAN YOU EXPECT.
Under the following circumstances and, subject to regulatory approvals, we
may redeem the junior subordinated debentures before the stated maturity of the
junior subordinated debentures:
- We may redeem all or a portion of the junior subordinated debentures on or
before December 31, 2004, for any reason.
- We may redeem all but not a portion of the junior subordinated debentures
at any time before December 31, 2004 within 90 days after certain
occurrences at any time during the life of MBNK Capital Trust. These
occurrences include certain adverse tax, Investment Company Act or bank
regulatory developments.
If we redeem some but not all the junior subordinated debentures, MBNK
Capital Trust will redeem a proportionate amount of the preferred and common
securities, and you may be required to reinvest your principal at a time when
you may not be able to earn a return that is as high as you were earning on the
preferred securities. See "Description of Preferred Securities--Redemption" on
page 20.
BECAUSE HOLDERS OF PREFERRED SECURITIES WILL HAVE VOTING RIGHTS ONLY IN LIMITED
CIRCUMSTANCES WE CAN AMEND THE TRUST AGREEMENT WITHOUT YOUR CONSENT.
Holders of preferred securities will not have voting rights except in
limited circumstances. You will have voting rights only in the following
circumstances for:
- removal of a trustee at a time when there is a default under the trust
agreement;
- changes in the amount or the timing of distributions on the preferred
securities; and
- changes to the guarantee that would affect your rights.
You will not usually be able to appoint, remove or replace the property trustee
or the Delaware trustee because these rights generally reside with us as the
holder of the common securities. Because you will have only limited voting
rights, we will be able to amend the trust agreement without your consent.
WE CAN DISTRIBUTE THE JUNIOR SUBORDINATED DEBENTURES TO YOU, WHICH MAY AFFECT
THE MARKET PRICE OF THE PREFERRED SECURITIES.
We may dissolve MBNK Capital Trust at any time before the maturity of the
junior subordinated debentures. If we dissolve MBNK Capital Trust, generally the
trustees will be able to distribute the junior subordinated debentures to the
holders of the preferred securities. See "Description of Preferred
Securities--Liquidation Distribution Upon Dissolution" on page 23.
We cannot predict the market price for the junior subordinated debentures
that may be distributed. The junior subordinated debentures that you receive in
a distribution may trade at a price that is less than you paid to purchase the
preferred securities. Because you may become a holder of the junior subordinated
debentures, you
11
<PAGE>
must also make an investment decision with regard to the junior subordinated
debentures. You should carefully review all of the information regarding the
junior subordinated debentures contained in this prospectus.
If the trustee distributes junior subordinated debentures in exchange for
the preferred securities, we will use our best efforts to list the junior
subordinated debentures for trading on the American Stock Exchange, however, we
may not be able to achieve that listing and a market for the junior subordinated
debentures may not develop.
THE INDENTURE AND THE TRUST AGREEMENT DO NOT CONTAIN RESTRICTIVE COVENANTS THAT
COULD PROTECT YOU.
The indenture and the trust agreement, do not contain any restrictions on
our activities or other financial covenants that could protect holders of junior
subordinated debentures or the preferred securities if our financial condition
or results of operations significantly deteriorate.
YOU MAY NOT BE ABLE TO SELL YOUR PREFERRED SECURITIES FOR AS MUCH AS YOU PAID
FOR THEM.
There is no current public market for the preferred securities. Although the
preferred securities have been approved for listing, subject to official notice
of issuance, on the American Stock Exchange, there is no guarantee that an
active or liquid public trading market will develop for the preferred securities
or that listing of the preferred securities will continue on the American Stock
Exchange. If an active trading market does not develop, the market price and
liquidity of the preferred securities will be adversely affected. Even if an
active public market does develop, there is no guarantee that the market price
for the preferred securities will equal or exceed the price you pay for the
preferred securities. Future trading prices of the preferred securities may be
subject to significant fluctuations in response to prevailing interest rates,
our future operating results and financial condition, the market for similar
securities and general economic and market conditions.
RISK FACTORS RELATING TO US AND OUR INDUSTRY
IF WE EXPERIENCE DIFFICULTIES IN MANAGING OUR GROWTH WE MAY BE UNABLE TO MAKE
OUR PAYMENTS ON THE JUNIOR SUBORDINATED DEBENTURES.
As part of our general strategy, we are significantly expanding our branch
network. We plan to expand our branch network by building new branches and by
acquiring banks and related businesses that we believe provide a strategic fit
with our business. We will incur significant costs in connection with this
expansion program including start up costs associated with building, remodeling
and equipping new branch sites and hiring new employees. It will take some time
before we can recoup these costs by earning money from these new branches. If it
takes too long to recoup these costs or if the costs are higher than we expect,
we may not have enough cash to make payments on the junior subordinated
debentures. Some factors that may affect the profitability of our new branches
are:
- we may have difficulty in attracting deposits at our new branch sites and
generating loan volume in our new markets;
- we may experience disruption to our business; and
- we may experience diversion of our management's time and attention.
Our expansion strategy also has made us vulnerable to dramatic changes in
interest rates that could adversely affect our income and our ability to make
our payments on the junior subordinated debentures. This is because we are
funding our expansion by borrowing funds from the Federal Home Loan Bank and
investing them, pending their use in our expansion strategy, in government and
corporate fixed income securities with longer maturities. Federal Home Loan Bank
borrowings are more expensive than deposits and fixed income securities do not
give us as high of a return on investment as loans. As our branch expansion
strategy provides us with a larger deposit base, we will pay down our borrowings
and will decrease our costs of funds. As we establish our new branches, we will
replace our investment in securities with loans.
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<PAGE>
IF WE EXPERIENCE LOSSES ON OUR LOAN PORTFOLIO THAT EXCEED OUR RESERVES FOR THESE
LOSSES WE MAY NOT BE ABLE TO MAKE PAYMENTS ON THE JUNIOR SUBORDINATED
DEBENTURES.
As a lender, we are exposed to the risk that our customers will be unable to
repay their loans according to their terms and that any collateral securing the
payment of their loans may not be sufficient to assure repayment. Credit losses
are inherent in the lending business and could have a material adverse effect on
our operating results. Our credit risk with respect to our real estate and
construction loan portfolio relates principally to the general creditworthiness
of our borrowers and the value of real estate serving as security for the
repayment of loans. Our credit risk with respect to our commercial and consumer
installment loan portfolio relates principally to the general creditworthiness
of businesses and individuals within our local market. Our entire loan portfolio
may be affected by local economic conditions.
We make various assumptions and judgments about the collectibility of our
loan portfolio and create a reserve for potential losses based on a number of
factors. If our assumptions are wrong, we may need to add more funds to this
reserve to cover our loan losses. This would reduce our net income which may
result in our not having sufficient funds to make our payments on the junior
subordinated debentures.
WE MAY BE UNABLE TO MANAGE INTEREST RATE RISKS THAT COULD REDUCE OUR NET
INTEREST INCOME.
Like other financial institutions, we make money principally on the
difference between interest earned on loans and investments and interest paid on
deposits and other borrowings. Our liabilities are generally more short term
than our assets and will reprice more quickly in response to changes in interest
rates. Therefore we may be less profitable in periods when interests rates are
rising. We cannot predict or control changes in interest rates. We continually
take measures intended to manage the risks from changes in market interest rates
but if we are unable to manage our interest rate risk, changes in interest rates
could have a significant negative effect on our profitability, and we may not
have sufficient funds to make our payments on the junior subordinated
debentures.
OUR OPERATIONS MAY BE ADVERSELY AFFECTED IF WE, OR CERTAIN PERSONS WITH WHOM WE
DO BUSINESS, FAIL TO ADEQUATELY ADDRESS THE YEAR 2000 ISSUE.
A critical issue has emerged in the banking industry and for the economy
overall regarding how existing application software programs and operating
systems can accommodate the date value for the year 2000. The "year 2000 issue"
arose because many of these existing programs and systems use only the last two
digits in referring to a year. Therefore, these computer programs do not
properly recognize a year beginning with "20" instead of the familiar "19." If
not corrected, many computer applications and other technology-based systems
could fail or create erroneous results. The effects of this problem will vary
from system to system, and the extent of the potential impact of the year 2000
issue is not yet known. The year 2000 issue may adversely affect Main Street
Bank's operations. We could experience interruptions in our business and suffer
significant losses if we, or a supplier or vendor with whom we contract, are
unable to achieve year 2000 readiness before January 1, 2000. We are in the
process of working with our third party service providers and software vendors
to assure that we and our subsidiaries are prepared for the year 2000.
BECAUSE WE WILL HAVE DISCRETION OVER THE USE OF A PORTION OF THE NET PROCEEDS,
YOU WILL BE RELYING ON US TO USE THOSE DISCRETIONARY FUNDS APPROPRIATELY.
After we pay the expenses of the offering, we estimate that we will have net
proceeds of approximately $9.5 million. We will contribute the entire amount of
the net proceeds to Main Street Bank. See "Use of Proceeds" on Page 15.
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<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions, including, among other things the factors
discussed in "Risk Factors on page 10."
We undertake no obligation to publicly update or otherwise revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties and assumptions, the
events discussed in any forward-looking statements in this prospectus might not
occur.
You should rely on the information contained or incorporated by reference in
this prospectus only. We have not, and our underwriters have not, authorized any
person to provide you with different information. If anyone provides you with
different or inconsistent information, you should not rely on it. We are not,
and our underwriters are not, making an offer to sell the preferred securities
in any jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus is
accurate as of the date on the front cover of this prospectus only.
Certain persons participating in this offering may engage in transactions
that stabilize, maintain, or otherwise affect the price of the preferred
securities being offered, including over-allotting the preferred securities and
bidding for and purchasing preferred securities at a price above that which
otherwise might prevail in the open market. For a description of these
activities, see "Underwriting" on page 52. Such transactions, if commenced, may
be discontinued at any time. In connection with this offering certain
underwriters may engage in passive market making transactions in the preferred
securities on the American Stock Exchange or otherwise in accordance with
Rule 103 of Regulation M. See "Underwriting" on page 52.
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<PAGE>
USE OF PROCEEDS
MBNK Capital Trust will invest the $10 million in proceeds it receives from
the sale of the preferred securities in the junior subordinated debentures. We
will pay on behalf of MBNK Capital Trust the expenses of the offering and the
underwriting commission which we estimate will total approximately
$0.5 million. We will use the estimated $9.5 million of net proceeds we receive
from the sale of the junior subordinated debentures to infuse approximately
$9.5 million into Main Street Bank which will constitute regulatory capital
under the guidelines of the Federal Reserve Board. We want to increase our
regulatory capital to support the growth that we anticipate will occur as a
result of our branch expansion strategy. See "Risk Factors" on page 10.
The cash proceeds infused into Main Street Bank to increase regulatory capital
also will be used to fund loan growth or will be invested in investment
securities. Funds retained by us for general corporate purposes also will be
invested in short-term investment securities.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth our consolidated ratios of earnings to fixed
charges for each of the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------------------- ----------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings to Fixed Charges:
Excluding interest on deposits... 5.30x 5.52x 5.45x 3.51x 3.50x 4.02x 1.30x
Including interest on deposits... 1.56 1.39 1.49 1.48 1.46 1.46 1.09
</TABLE>
For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of earnings before income taxes plus interest and one-half of rental
expense. Fixed charges, excluding interest on deposits, consist of interest on
indebtedness and one-half of rental expense which is deemed representative of
the interest factor. Fixed charges, including interest on deposits, consists of
the foregoing items plus interest on deposits.
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<PAGE>
CAPITALIZATION
The following tables set forth:
- our consolidated capitalization at September 30, 1999;
- our consolidated capitalization giving effect to the issuance of the
preferred securities;
- our actual consolidated regulatory capital ratios as of September 30,
1999; and
- our capital ratios after giving effect to the issuance of the
preferred securities.
The table assumes application of the net proceeds from the corresponding
sale of the junior subordinated debentures to MBNK Capital Trust as if the sale
of the preferred securities had been completed on September 30, 1999.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
----------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS,
EXCEPT SHARE AND
PER SHARE AMOUNTS)
<S> <C> <C>
Other borrowed funds........................................ $188,984 $188,984
Long-term debt.............................................. 85,000 85,000
Guaranteed preferred beneficial interests in corporation's
junior subordinated deferrable interest debentures, series
A......................................................... -- 10,000
-------- --------
Total debt.................................................. 273,984 283,984
-------- --------
Stockholders' equity
common stock.............................................. 10,430 10,430
surplus................................................... 64,390 64,390
retained earnings......................................... 20,006 20,006
accumulated other comprehensive income.................... (11,922) (11,922)
-------- --------
Total stockholders' equity.............................. 82,904 82,904
-------- --------
Total capitalization........................................ $356,888 $366,888
======== ========
Leverage ratio.............................................. 7.13% 7.83%(1)
Tier 1 capital to risk-weighted assets...................... 12.66 13.96 (1)
Total capital to risk-weighted assets....................... 13.59 14.88 (1)
</TABLE>
- ------------------------
(1) Assumes $10,000,000 from the proceeds of the offering of the preferred
securities are invested in assets with a 20% risk weighting under the
risk-based capital rules.
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<PAGE>
ACCOUNTING TREATMENT
For financial reporting purposes, MBNK Capital Trust will be treated as our
subsidiary and, accordingly, the accounts of MBNK Capital Trust will be included
in our consolidated financial statements. The preferred securities will be
included in our consolidated balance sheets under the caption "Company Obligated
Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely
Subordinated Debentures" and appropriate disclosures about the preferred
securities, the guarantee and the junior subordinated debentures will be
included in the notes to our consolidated financial statements. For financial
reporting purposes, we will record distributions on the preferred securities in
our consolidated statements of income.
Our future reports filed under the Securities Exchange Act of 1934 will
include a footnote to the consolidated financial statements stating that:
- MBNK Capital Trust is wholly-owned;
- the sole assets of MBNK Capital Trust are the junior subordinated
debentures and specifying their principal amount, interest rate and
maturity date; and
- our obligations described in this prospectus, in the aggregate,
constitute a full, irrevocable and unconditional guarantee on a
subordinated basis by us of the obligations of MBNK Capital Trust under
the preferred securities.
Because MBNK Capital Trust will have no material assets or liabilities until
we complete this offering, we do not believe that separate financial statements
for MBNK Capital Trust would be material to you in deciding whether to invest in
the preferred securities. Therefore, separate financial statements of MBNK
Capital Trust are not included in this prospectus.
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<PAGE>
MBNK CAPITAL TRUST I
MBNK Capital Trust is a statutory business trust created under Delaware law
by filing of a Certificate of Trust with the Delaware Secretary of State on
September 1, 1999 and the execution of the trust agreement. A statutory business
trust is a separate legal entity that can be formed for the purpose of holding
property. For tax purposes, MBNK Capital Trust is a grantor trust. A grantor
trust is a trust that does not pay federal income tax if it is formed solely to
facilitate direct investment in the assets of the trust and the trustee cannot
change the investment. MBNK Capital Trust will be governed by the trust
agreement among us, as depositor, The Bank of New York (Delaware), as Delaware
trustee, The Bank of New York, as property trustee and three individuals
selected by us to act as administrators with respect to MBNK Capital Trust.
While we hold the common securities, we intend to select three individuals who
are our employees or officers or are affiliated with us to serve as the
administrators. See "Description of Preferred Securities--Miscellaneous" on page
30. MBNK Capital Trust exists for the exclusive purposes of:
- issuing and selling the preferred securities and the common securities;
- using the proceeds from the sale of the preferred securities and the
common securities to acquire the junior subordinated debentures; and
- engaging in only those other activities necessary, convenient or
incidental thereto, such as registering the transfer of the preferred
securities and the common securities.
Accordingly, the junior subordinated debentures will be the sole assets of MBNK
Capital Trust, and payments under the junior subordinated debentures will be the
sole source of revenue of MBNK Capital Trust.
We will own all of the common securities. The common securities will rank
equally, and payments on them will be made pro rata, with the preferred
securities, except that during a period when there is a default under the
indenture, our rights as the holder of the common securities to distributions
and payments upon liquidation, redemption or otherwise will be subordinated to
the rights of the holders of the preferred securities. See "Description of
Preferred Securities--Subordination of Common Securities" on page 23. We will
acquire common securities in an aggregate liquidation amount equal to $309,280
or 3.00% of the total capital of MBNK Capital Trust. MBNK Capital Trust has a
term of 30 years, but may terminate earlier as provided in the trust agreement.
The address of the Delaware trustee is The Bank of New York (Delaware),
Corporate Trust Department, White Clay Center, Route 271, Newark, Delaware
19711, and the telephone number is (212) 815-6286.
The address of the property trustee, the guarantee trustee and the debenture
trustee is The Bank of New York, 101 Barclay Street, Floor 21, West, Corporate
Trust Trustee Administration, New York, New York 10286, and the telephone number
is (212) 815-6286.
DESCRIPTION OF PREFERRED SECURITIES
MBNK Capital Trust will issue the preferred securities and the common
securities under the trust agreement. The preferred securities will represent
preferred interests in the assets of MBNK Capital Trust. You, as holders of the
preferred securities, will be entitled to a preference over the common
securities in certain circumstances with respect to distributions and amounts
payable on liquidation or redemption, as well as other benefits described in the
trust agreement. We believe this summary of the terms and provisions of the
preferred securities and the trust agreement describes all the material
provisions that would be important to you to make an informed investment
decision. However, the form of the trust agreement, including the definitions,
is filed as an exhibit to the registration statement that contains this
prospectus and you may read it in its entirety. You can also request a copy of
the form of the trust agreement from the trustee. We have referred to some of
the trust agreement's defined terms in this prospectus.
In addition, the trust agreement will be qualified as an indenture under the
Trust Indenture Act of 1939. The terms of the preferred securities include those
made a part of the trust agreement by the Trust Indenture Act.
GENERAL
MBNK Capital Trust will only issue $10 million aggregate liquidation amount
of preferred securities. MBNK Capital Trust will issue $309,280 aggregate
liquidation amount of common securities. The preferred securities will rank
equally, and payments will be made pro rata, with the common securities except
as described under "--Subordination of Common Securities" on page 23. We will
purchase and hold all of the common securities. The
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<PAGE>
MBNK Capital Trust will use the proceeds from selling the preferred securities
and the common securities to purchase $10,309,280 of junior subordinated
debentures from us. The junior subordinated debentures will be registered in the
name of MBNK Capital Trust and held by the property trustee in trust for your
benefit as holders of the preferred securities and for our benefit as the holder
of the common securities. The guarantee that we will execute for the benefit of
the holders of the preferred securities, will be a guarantee of payment that is
subordinate to our other obligations. We will not guarantee payment when MBNK
Capital Trust does not have funds available to make the payments. See
"Description of Guarantee" on page 41.
DISTRIBUTIONS
You will receive distributions on each preferred security at the annual rate
of 9.625% of the stated liquidation amount of $10.00, payable quarterly on
March 31, June 30, September 30 and December 31 of each year. To be entitled to
receive distributions the preferred security must be registered in your name at
the close of business on the 15th day of the month of the relevant distribution
date, even if the day is not a business day. Each date on which distributions
will be paid is referred to as a distribution date in this prospectus.
Distributions on the preferred securities will be cumulative. Distributions will
accumulate from December 8, 1999. The first distribution date for the preferred
securities will be December 31, 1999.
The total distributions MBNK Capital Trust will pay for any full
distribution period will be computed by dividing the annual rate of 9.625% by
four. We will compute the amount of distributions payable for any period less
than a full distribution period on the basis of a 360-day year of twelve 30-day
months and the actual days elapsed in the partial month during that period. If
any date on which MBNK Capital Trust is supposed to pay distributions on the
preferred securities is not a business day, then MBNK Capital Trust will pay the
distributions payable on that date on the next succeeding day that is a business
day, without making any additional distributions or other payments because of
the delay. However, if the next business day falls in the next calendar year,
MBNK Capital Trust will make the payment on the immediately preceding business
day.
The term distributions includes quarterly payments made on the preferred and
common securities, payments that accumulate on distributions not paid on the
applicable distribution date and, if applicable, any additional sums we pay
during a tax event, all as further described below.
OPTION TO EXTEND INTEREST PAYMENT DATE
If we are not in default under the indenture, we can defer the payment of
interest on the junior subordinated debentures for an extension period.
Quarterly distributions on the preferred securities will be deferred during the
extension period. We cannot defer distribution payments for a period of time:
- that exceeds 20 consecutive quarterly periods with respect to each
extension period;
- that extends beyond the maturity date of the junior subordinated
debentures; or
- that ends on a date that is not a distribution date.
During an extension period, distributions to which you are entitled will
accumulate additional amounts at an annual rate of 9.625%. There may be more
than one extension period prior to the maturity of the junior subordinate
debentures.
During any extension period, we may not:
(1) declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of our capital
stock; or
(2) make any principal, interest or premium payments on, or repay,
repurchase or redeem any of our debt securities that rank equally with in
all respects or junior in interest to the junior subordinated debentures,
except that we may:
(a) repurchase, redeem or make other acquisitions of shares of our
capital stock in connection with:
- any employment contract, benefit plan or other similar arrangement
with or for the benefit of any one or more of our employees,
officers, directors or consultants,
- a dividend reinvestment or shareholder stock purchase plan, or
- the issuance of our capital stock or securities convertible into or
exercisable for our capital stock as consideration in any
acquisition transactions entered into prior to the applicable
extension period;
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<PAGE>
(b) take any necessary action in connection with any reclassification,
exchange or conversion of any of our capital stock, any capital stock of a
subsidiary or any of our debt;
(c) purchase fractional interests in shares of our capital stock in
connection with the conversion or exchange provisions of any of our capital
stock or the security being converted or exchanged;
(d) declare a dividend in connection with any shareholders' rights plan,
or issue rights, stock or other property under any shareholders' rights
plan, or redeem or repurchase rights under any shareholders rights plan; or
(e) declare a dividend in the form of stock, warrants, options or other
rights where the dividend stock or the stock issuable upon exercise of the
warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks equally with or junior to that stock.
If we are not in default under the indenture, before the end of an extension
period, we may extend the extension period, further deferring the payment of
interest. Upon the termination of an extension period and the payment of all
amounts then due, we may elect to begin a new extension period as long as we
comply with the above conditions. We will not pay additional interest on the
junior subordinated debentures during an extension period until the extension
period ends and all additional interest becomes due. We must give you and the
property trustee notice of our election to defer interest payments at least one
business day before the next interest payment date on which interest on the
junior subordinated debentures would be payable, or at least one business day
before:
(1) the next date distributions would have been payable on the preferred
securities but for the election to defer interest payments; and
(2) the date the property trustee is required to give you notice of the
record date or the date the distributions are payable, but in any event
not less than one business day prior to the record date.
The property trustee will give you notice of our election to defer interest
payments. Except as described above, there is no limitation on the number of
times that we may elect to defer interest payments and begin an extension
period. Because distributions will continue to accumulate on the unpaid
distributions during an extension period, you will be required to accrue and
recognize income on the unpaid distributions, for United States federal income
tax purposes. See "Description of Junior Subordinated Debentures--Option To
Extend Interest Payment Period" on page 32 and "Material United States Federal
Income Tax Consequences--Interest Income and Original Issue Discount" on page
47. We currently do not intend to exercise our right to defer payments of
interest by extending the interest payment period on the junior subordinated
debentures.
The only source of revenue for MBNK Capital Trust is the payments we will
make on the junior subordinated debentures. Under the terms of the trust
agreement, MBNK Capital Trust cannot: (1) issue any securities other than the
preferred securities and the common securities, (2) incur any indebtedness, or
(3) pledge any of its assets. If we do not make payments on the junior
subordinated debentures, MBNK Capital Trust may not have funds available to pay
distributions or other amounts payable on the preferred securities. While we
guarantee payment of distributions on the preferred securities under the
guarantee agreement, we are only obligated to make payments under the guarantee
agreement if MBNK Capital Trust has the funds available to make the
distribution.
REDEMPTION
The junior subordinated debentures mature on December 31, 2029. We may
redeem the junior subordinated debentures under certain circumstances. A
redemption or repurchase of the junior subordinated debentures would cause a
mandatory redemption of a proportionate amount of the preferred securities and
common securities at the redemption price. The redemption price for each
preferred security will equal $10.00 plus accumulated but unpaid distributions
including any additional amounts to, but not including, the redemption date.
(1) We may redeem all or a portion of the junior subordinated debentures on
or after December 31, 2004 in whole or in part, or
(2) We may redeem all but not a portion of the junior subordinated
debentures, at any time before December 31, 2004 within 90 days following
the occurrence and during the continuation of a tax event, investment
company event or capital treatment event each as defined below, and in
each case subject to prior regulatory approval if it is then required.
See "--Liquidation Distribution Upon Dissolution" on page 23.
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<PAGE>
We also may repurchase the junior subordinated debentures, in whole or in part,
from MBNK Capital Trust any time after December 31, 2004.
Tax event means the receipt by us and MBNK Capital Trust of an opinion of
counsel to the effect that, as a result of:
(1) any amendment to, or change, including an announced prospective change,
in the laws or any regulations of the United States or any political
subdivision or taxing authority, or
(2) any official or administrative pronouncement or action or judicial
decision interpreting or applying United States laws or regulations, that
is adopted, effective or announced on or after the date of issuance of
the preferred securities, that causes there to be more than an
insubstantial risk that:
- MBNK Capital Trust is, or will be within 90 days of the delivery of the
opinion, subject to United States federal income tax with respect to
income received or accrued on the junior subordinated debentures;
- interest payable by us on the junior subordinated debentures is not, or
within 90 days of the delivery of the opinion will not be, deductible
by us, in whole or in part, for United States federal income tax
purposes; or
- MBNK Capital Trust is, or will be within 90 days of the delivery of the
opinion, subject to more than an insignificant amount of other taxes,
duties or other governmental charges.
If a tax event described in the first or third circumstances above has
occurred and is continuing and MBNK Capital Trust holds all of the junior
subordinated debentures, we will pay on the junior subordinated debentures any
additional amounts as may be necessary in order that the amount of distributions
then due and payable by MBNK Capital Trust on the outstanding preferred
securities and common securities will not be reduced as a result of any
additional taxes, duties and other governmental charges to which MBNK Capital
Trust has become subject.
Investment company event means the receipt by us and MBNK Capital Trust of
an opinion of counsel to the effect that, as a result of the occurrence of a
change in law or regulation or a written change, including any announced
prospective change, in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority, there is
more than an insubstantial risk that MBNK Capital Trust is or will be considered
an investment company that is required to be registered under the Investment
Company Act of 1940, and this change becomes effective or would become effective
on or after the date of the issuance of the preferred securities.
Capital treatment event means the reasonable determination by us that, as a
result of:
(1) the occurrence of any amendment to, or change, including any announced
prospective change, in the laws or regulations of the United States or
any political subdivision, or
(2) any official or administrative pronouncement or action or judicial
decision interpreting or applying United States laws or regulations, that
is effective or is announced on or after the date of issuance of the
preferred securities,
there is more than an insubstantial risk that we will not be entitled to treat
an amount equal to the liquidation amount of the preferred securities as Tier 1
capital under the risk-based capital adequacy guidelines of the Federal Reserve
Board.
The Federal Reserve Board has determined that the proceeds of certain
qualifying securities like the preferred securities will qualify as Tier 1
capital for us but only up to an amount not to exceed, when taken together with
all of our cumulative preferred stock, if any, 25% of our Tier 1 capital.
We or MBNK Capital Trust must request an opinion of counsel with regard to
any matter deemed to be a tax, investment company or capital treatment event
within a reasonable period of time after we or MBNK Capital Trust, as
appropriate, become aware of the possible occurrence of the event.
REDEMPTION PROCEDURES
If we repay or redeem the junior subordinated debentures, we must give the
property trustee not less than 30 nor more than 60 days' notice in order that it
can redeem a proportionate amount of the preferred and common securities.
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Redemptions of the preferred securities will be made and the redemption
price will be payable on each redemption date only to the extent that MBNK
Capital Trust has funds available for the payment of the redemption price. See
also "--Subordination of Common Securities" on page 23.
If MBNK Capital Trust gives notice of redemption of any of the preferred
securities, then, by 12:00 noon, Eastern time, on the redemption date, to the
extent funds are available, in the case of preferred securities held in
book-entry form, the property trustee will deposit irrevocably with the
Depository Trust Company funds sufficient to pay the applicable redemption price
and will give the Depository Trust Company irrevocable instructions and
authority to pay the redemption price to you. With respect to preferred
securities not held in book-entry form, the property trustee, to the extent
funds are available, will irrevocably deposit with the paying agent for the
preferred securities funds sufficient to pay the applicable redemption price and
will give the paying agent irrevocable instructions and authority to pay the
redemption price to you once you surrender your certificates evidencing the
preferred securities. Distributions payable on or prior to the redemption date
for any preferred securities called for redemption will be payable on the
distribution dates to holders of preferred securities on the relevant record
dates.
If MBNK Capital Trust gives notice of redemption and deposits the required
funds, then on the date of that deposit all of your rights with respect to your
preferred securities called for redemption will cease, except your right to
receive the redemption price and any distributions payable in respect of the
preferred securities on or prior to the redemption date, but without interest.
Preferred securities that MBNK Capital Trust redeems will cease to be
outstanding. If any date fixed for redemption of preferred securities is not a
business day, then the paying agent will pay the redemption price on the next
succeeding day which is a business day, without any interest or other payment
due to the delay. However, if the next business day falls in the next calendar
year, the paying agent will make the payment on the immediately preceding
business day. In the event that payment of the redemption price for the
preferred securities called for redemption is improperly withheld or refused and
not paid either by MBNK Capital Trust or by us pursuant to the guarantee,
distributions on the preferred securities will continue to accumulate at the
then applicable rate, from the redemption date originally established by MBNK
Capital Trust until the redemption price is actually paid. In that case, the
actual payment date will be the date fixed for redemption for purposes of
calculating the redemption price.
Subject to applicable law, we or our affiliates may from time to time
purchase outstanding preferred securities by tender, in the open market or by
private agreement. We may resell these securities at any time that interest on
the junior subordinated debentures is not being deferred, and there is no event
of default or an event that could cause an event of default under the indenture
or an event of default under the guarantee.
If less than all the preferred securities and common securities are to be
redeemed on a redemption date, then the aggregate liquidation amount of
preferred securities and common securities to be redeemed shall be allocated pro
rata to the preferred securities and the common securities based upon the
relative liquidation amounts of those classes. The particular preferred
securities to be redeemed shall be selected by the property trustee in a manner
that the property trustee deems fair, not more than 60 days prior to the
redemption date or in accordance with the Depository Trust Company's customary
procedures if the preferred securities are then held in book-entry form. The
property trustee shall promptly notify the securities registrar for the
preferred securities in writing of the preferred securities selected for
redemption and, in the case of any preferred securities selected for partial
redemption, the liquidation amount of the preferred securities to be redeemed.
For all purposes of the trust agreement, unless the context otherwise requires,
all provisions relating to the redemption of preferred securities relate, in the
case of any preferred securities redeemed or to be redeemed only in part, to the
portion of the aggregate liquidation amount of preferred securities which has
been or is to be redeemed.
If your preferred securities will be redeemed, the property trustee will
mail to you a notice of redemption at your address as it appears on the
securities register for MBNK Capital Trust at least 30 days but not more than
60 days before the redemption date. Unless we default in payment of the
redemption price on the junior subordinated debentures, on and after the
redemption date interest will cease to accrue on the junior subordinated
debentures.
Unless payment of the redemption price in respect of the preferred
securities is withheld or refused and not paid either by MBNK Capital Trust or
us pursuant to the guarantee, distributions will cease to accumulate on the
preferred securities called for redemption.
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SUBORDINATION OF COMMON SECURITIES
MBNK Capital Trust will pay all distributions, any redemption price, and any
liquidation distribution to holders of the preferred securities and common
securities pro rata based on the liquidation amount of the preferred securities
and common securities held. However, if on any distribution date, redemption
date or liquidation date we are in default under the indenture because we have
not paid amounts due on the junior subordinated debentures, we will not pay any
distribution, redemption price, or liquidation distribution to holders of the
common securities. MBNK Capital Trust will make payments on the common
securities only after making payment in full and in cash of all accumulated and
unpaid distributions to holders of the outstanding preferred securities for all
distribution periods, or in the case of payment of the redemption price or a
liquidation distribution, the full amount of the redemption price or liquidation
distribution to holders of the outstanding preferred securities then called for
redemption or liquidation. All funds immediately available to the property
trustee shall first be applied to the payment in full in cash of all
distributions on, or redemption price of, the preferred securities then due and
payable. The existence of a default does not entitle you to accelerate the
maturity of the preferred securities.
If an event of default occurs with respect to the preferred securities
because of an event of default with respect to the junior subordinated
debentures, we, as the holder of the common securities, will have no right to
take action under the trust agreement, until all events of default with respect
to the preferred securities have been cured, waived or otherwise eliminated. See
"-- Events of Default; Notice" on page 24 and "Description of Junior
Subordinated Debentures -- Debenture Events of Default" on page 37. Until all
events of default under the trust agreement have been cured, waived or otherwise
eliminated, the property trustee will act solely on your behalf and not on our
behalf as the holder of the common securities, and only you will have the right
to direct the property trustee to act on your behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
If MBNK Capital Trust is liquidated, each holder of a preferred security
will receive $10.00 per preferred security plus accumulated and unpaid
distributions. Payments will be made only from the assets of MBNK Capital Trust
and may be in the form of a distribution of junior subordinated debentures
having an equal aggregate principal amount.
We, as the holder of all the outstanding common securities, have the right
at any time to dissolve and liquidate MBNK Capital Trust and cause the junior
subordinated debentures to be distributed to you, as holders of the preferred
securities, and to us, as the holder of the common securities.
The Federal Reserve Board's risk-based capital guidelines currently provide
that redemptions of permanent equity or other capital instruments before stated
maturity could have a significant impact on a bank holding company's overall
capital structure. Therefore, any organization considering a redemption of
securities which make up a part of the organization's regulatory capital should
consult with the Federal Reserve Board if the redemption could have a material
effect on the level or composition of the organization's capital base. This
consultation may not be necessary if the equity or capital instrument is
redeemed with the proceeds of, or replaced by, a like amount of a similar or
higher quality capital instrument and the Federal Reserve Board considers the
organization's capital position to be fully adequate after the redemption. If we
dissolve MBNK Capital Trust prior to the maturity date of the preferred
securities and the Federal Reserve Board believes that the dissolution
constitutes the redemption of capital instruments under its risk-based capital
guidelines or policies, our dissolution of MBNK Capital Trust may be subject to
the prior approval of the Federal Reserve Board.
Pursuant to the trust agreement, MBNK Capital Trust will automatically
dissolve upon the first to occur of:
(1) the termination date of MBNK Capital Trust;
(2) certain events of bankruptcy, dissolution or liquidation of us or
another holder of the common securities;
(3) we, as the holder of common securities, have given written direction to
the property trustee to dissolve MBNK Capital Trust;
(4) the repayment of all the preferred securities in connection with the
redemption of all of the junior subordinated debentures and common
securities as described under "-- Redemption" on page 20; and
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(5) the entry of an order for the dissolution of MBNK Capital Trust by a
court of competent jurisdiction.
If MBNK Capital Trust is dissolved as described in any of the second, third and
fifth circumstances described above, MBNK Capital Trust will be wound-up and
liquidated by the property trustee as expeditiously as possible. This means that
the property trustee will pay, or make reasonable provision to pay, all claims
and obligations of MBNK Capital Trust in accordance with The Delaware Business
Trust Act, and then distribute to you, as holders of the preferred securities,
and to us, as holder of the common securities, a proportionate amount of the
junior subordinated debentures, unless such distribution is not practical.
If distribution of the junior subordinated debentures is not practical, you,
as holders of the preferred securities, and we, as holder of the common
securities, will be entitled to receive an amount equal to the aggregate of the
liquidation amount plus accumulated and unpaid distributions to the date of
payment. However, the property trustee must first pay or make reasonable
provision to pay all claims and obligations of MBNK Capital Trust in accordance
with the Delaware Business Trust Act. If a liquidation distribution can be paid
only in part because MBNK Capital Trust has insufficient assets available to pay
in full the aggregate liquidation distribution, then MBNK Capital Trust will
make a partial payment to holders of the preferred and common securities on a
pro rata basis.
We, as the holder of the common securities, will be entitled to receive
distributions upon any liquidation pro rata with you. However, if we are in
default under the junior subordinated debentures because we have not paid
amounts due on the junior subordinated debentures, the preferred securities will
have a priority over the common securities. See "-- Subordination of Common
Securities" on page 23.
After the liquidation date is fixed for any distribution of junior
subordinated debentures:
(1) the preferred securities will no longer be deemed to be outstanding;
(2) the Depository Trust Company or its nominee, as the registered holder of
preferred securities, will receive a registered global certificate or
certificates representing the junior subordinated debentures to be
distributed with respect to preferred securities held by the Depository
Trust Company or its nominee; and
(3) any certificates representing the preferred securities not held by the
Depository Trust Company or its nominee will be deemed to represent the
junior subordinated debentures having a principal amount equal to the
stated liquidation amount of the preferred securities and bearing accrued
and unpaid interest in an amount equal to the accumulated and unpaid
distributions on the preferred securities until the certificates are
presented to the security registrar for the preferred securities and
common securities for transfer or reissuance.
If we do not redeem the junior subordinated debentures prior to maturity, or
if MBNK Capital Trust is not liquidated and the junior subordinated debentures
are not distributed to you, then the preferred securities will remain
outstanding until we repay the junior subordinated debentures at their stated
maturity. At that time, MBNK Capital Trust will be dissolved and a liquidation
distribution will be paid to you.
Under current United States federal income tax law and interpretations and
assuming, as expected, that MBNK Capital Trust is treated as a grantor trust, a
distribution of the junior subordinated debentures should not be a taxable event
to you. If there is a change in law, a change in legal interpretation, a tax
event or other circumstances, however, the distribution could be a taxable event
to you. See "Material United States Federal Income Tax Consequences" on page 45.
We cannot make any guarantees about the market prices for the preferred
securities or the junior subordinated debentures that may be distributed in
exchange for preferred securities if a dissolution and liquidation of MBNK
Capital Trust occurs. Accordingly, the preferred securities that you may
purchase, or the junior subordinated debentures that you may receive on
dissolution and liquidation of MBNK Capital Trust, may trade at a price less
than you paid to purchase the preferred securities.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an event of default under the
trust agreement. Each of these events are defaults regardless of the reason for
the event and whether it is voluntary or involuntary or effected by
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operation of law or pursuant to a judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental body:
(1) the occurrence of an event of default with respect to the junior
subordinated debentures. See "Description of Junior Subordinated
Debentures -- Debenture Events of Default" on page 37;
(2) MBNK Capital Trust's failure to pay any distribution when it becomes due
and payable, and it does not make the payment in the next 30 days;
(3) MBNK Capital Trust's failure to pay the redemption price of any
preferred security or common security when it becomes due and payable;
(4) any default in the performance, or breach, in any material respect, of
any of MBNK Capital Trust's covenants or warranties in the trust
agreement, except for the failures to make payments described in the
second or third bulleted clauses above, and continuation of this default
or breach for a period of 60 days after there has been given, by
registered or certified mail, to the trustees and us by the holders of at
least 25% in aggregate liquidation amount of the outstanding preferred
securities, a written notice specifying the default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" under the trust agreement; or
(5) the occurrence of certain events of bankruptcy or insolvency with
respect to the property trustee if a successor property trustee has not
been appointed within 90 days of the event.
Unless the event of default is cured or waived, within five business days
after the occurrence of any event of default actually known to the property
trustee, the property trustee will transmit notice of the event of default to
you, as holders of the preferred securities, to us, as the holder of the common
securities, and to the administrators. We, as depositor, and the administrators
are required to file annually with the property trustee a certificate as to
whether or not we are in compliance with all the conditions and covenants
applicable to us under the trust agreement.
If we are in default under the indenture because we have not paid amounts
due on the junior subordinated debentures, the preferred securities will have a
preference over the common securities with respect to payments of any amounts as
described above. See "-- Subordination of Common Securities" on page 23,
"-- Liquidation Distribution Upon Dissolution" on page 23 and "Description of
Junior Subordinated Debentures -- Debenture Events of Default" on page 37.
REMOVAL OF TRUSTEES; APPOINTMENT OF SUCCESSORS
The holders of a majority in aggregate liquidation amount of the outstanding
preferred securities may remove the property trustee or the Delaware trustee for
cause at any time, or, if we are in default under the indenture because we have
not paid amounts due under junior subordinated debentures. If a trustee is
removed by the holders of the outstanding preferred securities, the successor
may be appointed by the holders of at least 25% in aggregate liquidation amount
of preferred securities. If a trustee resigns, that trustee will appoint its
successor. If a trustee fails to appoint a successor, the holders of at least
25% in aggregate liquidation amount of the outstanding preferred securities may
appoint a successor. If a successor has not been appointed by the holders, any
holder of preferred securities or common securities or the other trustee may
petition a court in the State of Delaware to appoint a successor. Any Delaware
trustee must meet the applicable requirements of Delaware law. Any property
trustee must be a national or state-chartered bank and have a combined capital
and surplus of at least $50,000,000. No resignation or removal of a trustee and
no appointment of a successor trustee shall be effective until the acceptance of
appointment by the successor trustee in accordance with the provisions of the
trust agreement. You do not have any right to appoint, remove or replace the
administrators of MBNK Capital Trust. Only we, as holder of the common
securities, have those rights.
MERGER OR CONSOLIDATION OF TRUSTEES
If the property trustee or the Delaware trustee merges, converts or
consolidates with or into another entity, or another entity results from any
merger, conversion or consolidation with or into the trustee, the entity
succeeding to all or substantially all the corporate trust business of the
trustee, will be the successor trustee under the trust agreement, provided that
entity is otherwise qualified and eligible under the trust agreement. The
succession will
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occur without the execution or filing of any paper or any further act on the
part of the parties to the trust agreement.
MERGERS, REPLACEMENTS OR SIMILAR TRANSACTIONS OF MBNK CAPITAL TRUST
The trust agreement severely restricts MBNK Capital Trust's ability to merge
or consolidate with any other entity. MBNK Capital Trust may do so only if the
transaction occurs at our request as the holder of the common securities, and
with the consent of the holders of a majority in aggregate liquidation amount of
the outstanding preferred securities, but without the consent of the property
trustee or the Delaware trustee. In addition, MBNK Capital Trust may only merge
with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or
lease its properties and assets substantially as an entirety to a trust
organized under the laws of any state, if:
(1) the successor entity expressly assumes all the obligations of MBNK
Capital Trust with respect to the preferred securities. or substitutes
for the preferred securities other securities having substantially the
same terms as the preferred securities, including the same priority as
the preferred securities with respect to distributions and payments upon
liquidation, redemption and otherwise;
(2) a trustee of the successor entity, possessing the same powers and duties
as the property trustee, is appointed to hold the junior subordinated
debentures;
(3) the merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause the preferred securities, including any
substitute securities, to be downgraded by any nationally recognized
statistical rating organization, if then rated;
(4) the merger, consolidation, amalgamation, replacement conveyance transfer
or lease does not adversely affect the rights, preferences and privileges
of the holders of the preferred securities, including any substitute
securities, in any material respect;
(5) the successor entity has a purpose substantially identical to that of
MBNK Capital Trust;
(6) prior to the merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, MBNK Capital Trust has received an opinion
from independent counsel to the effect that the merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of holders of
preferred securities, or substitute securities, in any material respect,
and following the merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, neither MBNK Capital Trust nor the
successor entity will be required to register as an investment company
under the Investment Company Act; and
(7) we or any permitted transferee to whom we have transferred the common
securities, owns all the common securities of the successor entity and
guarantees the obligations of the successor entity at least to the extent
provided by the guarantee.
Except with the consent of holders of 100% in aggregate liquidation amount of
the preferred securities, MBNK Capital Trust may not merge with or into,
consolidate, amalgamate, or be replaced by, or convey, transfer or lease its
properties or assets substantially as an entirety to any other entity or permit
any other entity to consolidate, amalgamate, merge with or into or replace it,
if that event would cause MBNK Capital Trust or the successor entity not to be
classified as a grantor trust for United States federal income tax purposes.
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VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT
You will have no voting rights except as described above under
" -- Removal of Trustees; Appointment of Successors" on page 25 and "Description
of Guarantee -- Amendments and Assignment" on page 42 as described below and as
otherwise required by law and the trust agreement.
As the holder of the common securities we do not need your consent to amend
the trust agreement and we and the property trustee may amend the trust
agreement without your consent, to:
(1) cure any ambiguity in the trust agreement, correct or supplement any
provisions that may be inconsistent within the trust agreement, or to
address other matters or questions arising under the trust agreement,
provided that the amendment does not adversely affect in any material
respect your interests; or
(2) modify, eliminate or add to any provisions of the trust agreement to
such extent as may be necessary to ensure that:
(a) MBNK Capital Trust will not be taxable other than as a grantor trust
for United States federal income tax purposes at any time that any
preferred securities or common securities are outstanding; or
(b) MBNK Capital Trust will not be required to register as an investment
company under the Investment Company Act.
Any amendments of the trust agreement will become effective when notice of the
amendment is given to you, as the holders of preferred securities, and us, as
the holder of the common securities.
We, as the holder of the common securities, the property trustee and the
administrators may amend the trust agreement if:
(1) we have the consent of holders representing at least a majority in
aggregate liquidation amount of the preferred securities; and
(2) the trustees receive an opinion of counsel to the effect that the
amendment or the exercise of any power granted to the trustees in
accordance with the amendment will not affect MBNK Capital Trust's status
as a grantor trust for United States federal income tax purposes or MBNK
Capital Trust's exemption from status as an investment company under the
Investment Company Act.
However, every holder of preferred securities or common securities must consent
in order to amend the trust agreement to:
(1) change the amount or timing of any distribution on the preferred
securities or common securities or otherwise adversely affect the amount
of any distribution required to be made on the preferred securities or
common securities as of a specified date; or
(2) restrict your right, as holders of preferred securities, or our right,
as the holder of the common securities, to institute suit for the
enforcement of any payment on or after such date.
Without obtaining the prior approval of the holders of at least a majority
in aggregate liquidation amount of the preferred securities, or, if a consent
under the indenture would require the consent of each holder of junior
subordinated debentures affected, the property trustee will not:
(1) direct when, where and how any proceeding for any remedy available to
the debenture trustee will be conducted, or execute any trust or power
conferred on the property trustee with respect to the junior subordinated
debentures;
(2) waive any past default that is waivable pursuant to the terms of the
indenture;
(3) exercise any right to rescind or annul a declaration that the principal
of all the junior subordinated debentures shall be due and payable; or
(4) consent to any amendment, modification or termination of the indenture
or the junior subordinated debentures, where consent is required.
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The property trustee may not revoke any action previously authorized or
approved by a vote of the holders of the preferred securities unless the holders
of the preferred securities vote again on the same issue. The property trustee
will notify you of any notice of default with respect to the junior subordinated
debentures. In addition to obtaining your approval as described above, before
taking any of the actions listed above, the property trustee will, at our
expense, obtain an opinion of counsel to the effect that the action will not
cause MBNK Capital Trust to be taxable other than as a grantor trust for United
States federal income tax purposes on account of such action.
As a holder of preferred securities, your vote or consent will not be
required to redeem and cancel preferred securities in accordance with the trust
agreement. If holders of preferred securities are entitled to vote or consent,
any preferred securities that are owned by us, the trustees or any of our
respective affiliates will be treated as if they were not outstanding for
purposes of that vote or consent.
EXPENSES AND TAXES
We have agreed to pay all debts and other obligations other than
distributions on the preferred securities of MBNK Capital Trust. We have also
agreed to pay all costs and expenses of MBNK Capital Trust. These costs and
expenses include costs and expenses relating to the organization of MBNK Capital
Trust and the fees and expenses of the trustees and their counsel. Further, we
have also agreed to pay any and all taxes, other than United States withholding
taxes, to which MBNK Capital Trust might become subject. These obligations of
ours are for the benefit of, and will be enforceable by, any creditor of MBNK
Capital Trust to whom any of these debts, obligations, costs, expenses and taxes
are owed whether or not that creditor has received notice. Any creditor may
enforce these obligations directly against us. We have irrevocably waived any
right or remedy to require that any creditor take any action against MBNK
Capital Trust or any other person before proceeding against us.
BOOK ENTRY, DELIVERY AND FORM
The preferred securities will be issued in the form of one or more fully
registered global securities, which will be deposited with, or on behalf of, the
Depository Trust Company and registered in the name of a Depository Trust
Company nominee. Unless and until it is exchangeable in whole or in part for the
preferred securities in definitive form, a global security may not be
transferred except as a whole by:
(1) the Depository Trust Company to a nominee of the Depository Trust
Company;
(2) a nominee of the Depository Trust Company to the Depository Trust
Company;
(3) a nominee of the Depository Trust Company to another nominee of the
Depository Trust Company; or
(4) the Depository Trust Company or any nominee to a successor of the
Depository Trust Company or to a nominee of that successor.
Ownership of beneficial interests in a global security will be limited to
participants that have accounts with the Depository Trust Company or its nominee
or persons that may hold interests through those participants. We expect that
upon the issuance of a global security the Depository Trust Company will credit,
on its book-entry registration and transfer system, the participants' accounts
with their respective principal amounts of preferred securities represented by
the global security. Ownership of beneficial interests in this global security
will be shown on, and the transfer of such ownership interests will be effected
only through, records maintained by the Depository Trust Company with respect to
the interests of participants. Ownership of beneficial interests in this global
security will be shown on the records of participants with respect to your
interests. You will not receive written confirmation from the Depository Trust
Company of your purchase, but you are expected to receive written confirmations
from participants through which you entered into the transaction. Transfers of
ownership interests will be accomplished by entries on the books of participants
acting on your behalf.
If the Depository Trust Company, or its nominee, is the registered owner of
a global security, the Depository Trust Company or its nominee, as the case may
be, will be considered the sole owner or holder of the preferred securities
represented by the global security for all purposes under the trust agreement.
Except as provided below, you are the owner of beneficial interests in a global
security and will not be entitled to receive physical delivery of the preferred
securities in definitive form. You will not be considered an owner or holder
under the trust
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agreement. Accordingly, you must rely on the procedures of the Depository Trust
Company and, if you are not a participant, on the procedures of the participant
through which you own your interest to exercise any rights as a holder of
preferred securities under the trust agreement. We understand that under the
Depository Trust Company's existing practices, in the event that we request any
action of you, or if you desire to take any action which a holder of preferred
securities is entitled to take under the trust agreement, the Depository Trust
Company would authorize the participants holding your interests to take that
action, and those participants would authorize you to take that action or would
otherwise act upon your instructions. Redemption and other notices also will be
sent to the Depository Trust Company. If less than all of the preferred
securities are being redeemed, we understand that it is the Depository Trust
Company's existing practice to determine by lot the amount of the interest of
each participant to be redeemed. Therefore, as long as the preferred securities
are held in book-entry form, references in this prospectus to your rights and
benefits mean your indirect interest held through the Depository Trust Company.
You should consider the procedures of the Depository Trust Company with respect
to distributions, redemptions, notice, voting and similar rights and benefits,
as well as those described in this prospectus.
Distributions on the preferred securities registered in the name of the
Depository Trust Company or its nominee will be made to the Depository Trust
Company or its nominee, as the case may be, as the registered owner of the
global security representing the preferred securities. Neither the trustees, nor
the administrators, any paying agent or any other agent of ours or the trustees
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the global
security for the preferred securities or for maintaining, supervising or
reviewing any records relating to beneficial ownership interests. Disbursements
of distributions to participants will be the responsibility of the Depository
Trust Company. The Depository Trust Company's practice is to credit
participants' accounts on a payable date in accordance with their respective
holdings shown on the Depository Trust Company's records unless the Depository
Trust Company has reason to believe that it will not receive payment on the
payable date. Payments by participants to you will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name." If you
hold your preferred securities in "street name," distributions to you will be
the responsibility of the participant and not of the Depository Trust Company,
us, the trustees, the paying agent or any other agent of ours, subject to any
statutory or regulatory requirements as may be in effect. The laws of some
states require that certain purchasers of securities take physical delivery of
their purchased securities in definitive form. These laws may impair your
ability to transfer beneficial interests in the global security.
The Depository Trust Company may discontinue providing its services as
securities depository with respect to the preferred securities at any time by
giving reasonable notice to us or the trustees. If the Depository Trust Company
notifies us that it is unwilling to continue, or if it is unable to continue or
ceases to be a clearing agency registered under the Exchange Act, and a
successor depository is not appointed by us within 90 days after receiving such
notice or becoming aware that the Depository Trust Company is no longer so
registered, we will issue the preferred securities in definitive form upon
registration of, transfer of, or in exchange for, the global security. In
addition, we may at any time and in our sole discretion determine not to have
the preferred securities represented by one or more global securities and, in
such event, will issue preferred securities in definitive form in exchange for
all of the global securities representing the preferred securities. Finally,
holders of a majority in liquidation amount of preferred securities may
determine to discontinue the system of book-entry transfers through the
Depository Trust Company following an event of default with respect to the
preferred securities.
The Depository Trust Company has advised MBNK Capital Trust and us as
follows:
(1) The Depository Trust Company is a limited purpose trust company
organized under the laws of the State of New York, a "banking
organization" within the meaning of New York banking law, a member of the
Federal Reserve Board, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Exchange Act;
(2) The Depository Trust Company was created to hold securities for its
participants and to facilitate the clearance and settlement of securities
transactions between participants through electronic book entry changes
to accounts of its participants, thereby eliminating the need for
physical movement of certificates;
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(3) its participants include securities brokers and dealers, such as the
underwriters, banks, trust companies and clearing corporations and may
include certain other organizations;
(4) certain participants, or their representatives, together with other
entities, own the Depository Trust Company; and
(5) indirect access to the Depository Trust Company system is available to
others such as banks, brokers, dealers and trust companies that clear
through, or maintain a custodial relationship with, a participant, either
directly or indirectly.
PAYMENT AND PAYING AGENCY
MBNK Capital Trust will make payments on the preferred securities to the
Depository Trust Company, which will credit the relevant accounts at the
Depository Trust Company on the applicable distribution dates. If the preferred
securities are not held by the Depository Trust Company, payments will be made
by check mailed to the address of the holder entitled thereto to the address
that appears on the securities register for the preferred securities. The paying
agent that will make the payments on behalf of MBNK Capital Trust will initially
be the property trustee. The paying agent will be permitted to resign as paying
agent upon 30 days' written notice to the property trustee and the
administrators. If the property trustee is no longer the paying agent, the
property trustee will appoint a successor to act as paying agent. The successor
must be a bank or trust company reasonably acceptable to the administrators.
REGISTRAR AND TRANSFER AGENT
The property trustee will act as registrar and transfer agent for the
preferred securities.
Registration of transfers of preferred securities will be effected without
charge by or on behalf of MBNK Capital Trust, but only upon payment of any tax
or other governmental charges that may be imposed in connection with any
transfer or exchange. MBNK Capital Trust will not be required to register or
cause to be registered the transfer of the preferred securities after the
preferred securities have been called for redemption.
OBLIGATIONS AND DUTIES OF THE PROPERTY TRUSTEE
Other than during the occurrence and continuance of an event of default, the
property trustee has promised to perform only the duties specifically contained
in the trust agreement. If there is a default under the trust agreement, the
property trustee must enforce the trust agreement for your benefit and must
exercise the powers vested in it by the trust agreement and use the same degree
of care and skill as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs. The property trustee is
not required to exercise any of the powers vested in it by the trust agreement
at your request, unless you offer reasonable indemnity against the costs,
expenses and liabilities that the trustee may incur by the exercise of these
powers. The property trustee is not required to expend or risk its own funds or
otherwise incur any financial liability in the performance of its duties if it
has reasonable grounds to believe that repayment or adequate indemnity is not
assured to it.
The property trustee may rely upon any certificates or opinions furnished to
it and conforming to the requirements of the trust agreement.
For information concerning the relationships between us and The Bank of New
York as the property trustee, See "Description of Junior Subordinated
Debentures -- Information Concerning the Debenture Trustee" on page 40.
MISCELLANEOUS
The administrators and the property trustee are authorized and directed to
conduct the affairs of and to operate MBNK Capital Trust in such a way that:
(1) MBNK Capital Trust will not be deemed to be an investment company
required to be registered under the Investment Company Act or be taxable
as other than a grantor trust taxable as a corporation for United States
federal income tax purposes; and
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(2) the junior subordinated debentures will be treated as our indebtedness
for United States federal income tax purposes.
The property trustee, we, as the holder of the common securities, and the
administrators are authorized to take any action not inconsistent with
applicable law, the certificate of trust of MBNK Capital Trust or the trust
agreement that the property trustee, we, and the administrators, determine in
our discretion to be necessary or desirable for these purposes, as long as this
action does not materially adversely affect your interests.
You will not have preemptive or similar rights.
MBNK Capital Trust may not borrow money or issue debt or mortgage or pledge
its assets.
GOVERNING LAW
The trust agreement will be governed by and construed in accordance with the
laws of the State of Delaware.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
We will issue the junior subordinated debentures under the indenture between
The Bank of New York, the debenture trustee, and us. This summary of the terms
and provisions of the junior subordinated debentures and the indenture describes
all material provisions which would be important to you to make an informed
investment decision. However, the form of the indenture is filed as an exhibit
to the registration statement that contains this prospectus and you should read
it in its entirety. You can also request a copy of the form of indenture from
the debenture trustee. We have referred to some of the indenture's defined terms
in this prospectus. The indenture will be qualified under the Trust Indenture
Act of 1939. The terms of the junior subordinated debentures include those made
a part of the indenture by the Trust Indenture Act.
GENERAL
As soon as MBNK Capital Trust has sold the preferred securities to you and
the common securities to us, it will invest the proceeds of these sales in the
junior subordinated debentures. The total principal amount of the junior
subordinated debentures will be equal to the total liquidation amount of the
preferred securities and common securities. The junior subordinated debentures
will be junior and subordinate in right of payment to all of our senior
indebtedness and other subordinated indebtedness. The junior subordinated
debentures will not be subject to a sinking fund. The indenture does not limit
our ability to incur or issue other secured or unsecured debt, including senior
indebtedness and other subordinated indebtedness, whether under any existing or
future indenture. See "-- Subordination" on page 39. Because we are a holding
company, our obligations under the junior subordinated debentures are also
effectively subordinated to all existing and future liabilities of our
subsidiaries. We rely primarily on dividends from our subsidiaries to meet debt
service obligations and pay operating expenses. If our direct or indirect
subsidiaries could not pay us dividends in an amount sufficient to meet our debt
service obligations and pay our operating expenses we would not have sufficient
funds to make payments on the junior subordinated debentures. In addition,
because we are a holding company, if there is any distribution of assets by any
of our subsidiaries because of a subsidiary's liquidation or similar event, we
will not receive funds until the claims of creditors of that subsidiary have
been satisfied, except to the extent we are recognized as a creditor of that
subsidiary.
The junior subordinated debentures will bear interest, accruing from
December 8, 1999, at the annual rate of 9.625% of the principal amount of the
junior subordinated debentures. We will pay interest quarterly on March 31,
June 30, September 30 and December 31 of each year, beginning on December 31,
1999, to the person in whose name each junior subordinated debenture is
registered at the close of business on the 15th day of the month of the interest
payment date, even if the day is not a business day. We anticipate that, unless
MBNK Capital Trust is liquidated, each junior subordinated debenture will be
registered in the name of MBNK Capital Trust and held by the property trustee in
trust for you, as holders of the preferred securities, and us, as holder of the
common securities.
The amount of interest we pay for any full interest period will be computed
by dividing the annual rate of 9.625% by four. We will compute the amount of
interest payable for any period less than a full interest period on
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the basis of a 360-day year of twelve 30-day months and the actual days elapsed
in a partial month. If any date on which we are supposed to pay interest on the
junior subordinated debentures is not a business day, then we will pay the
interest payable on that date on the next business day, without paying any
interest or making any additional interest payments because of the delay.
However, if that business day falls in the next calendar year, we will make the
payment on the immediately preceding business day.
If we do not make an interest payment on the applicable interest payment
date, the junior subordinated debentures will bear additional interest on the
unpaid amount, to the extent permitted by law, at the annual rate of 9.625%,
compounded quarterly.
The term interest includes quarterly interest payments, interest on
quarterly interest payments not paid on the applicable interest payment date
and, if applicable, any other additional sums we pay on the junior subordinated
debentures. We may need to pay additional interest if there are changes in the
law that have negative tax consequences on the preferred securities. See
"Description of Preferred Securities -- Redemption" on page 20.
The junior subordinated debentures will mature on December 31, 2029, if we
don't shorten the maturity date. We can shorten the maturity date to any date
not earlier than December 31, 2004, although we may need the prior approval of
the Federal Reserve Board to do so. If we do shorten the maturity of the junior
subordinated debentures, we will give notice to the registered holders of the
junior subordinated debentures, the debenture trustee and MBNK Capital Trust no
less than 90 days before the shortened maturity date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
If we are not in default under the indenture, we can at any time defer
interest payments on the junior subordinate debentures. But we cannot defer
interest payments for a period of time:
(1) that exceeds 20 consecutive quarterly periods;
(2) that extends beyond the stated maturity of the junior subordinated
debentures; or
(3) that ends on a date other than an interest payment date.
During any extension period we can make partial payments of interest on any
interest payment date. At the end of an extension period we must pay all
interest then accrued and unpaid. During an extension period interest will
continue to accrue and holders of junior subordinated debentures, and holders of
preferred securities while outstanding, will be required to recognize original
issue discount income for United States federal income tax purposes. See
"Material United States Federal Income Tax Consequences -- Interest Income and
Original Issue Discount" on page 47.
During any extension period, we may not:
(1) declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make any liquidation payments with respect to, any of our
capital stock; or
(2) make any payments of principal of or interest or premium on, or repay,
repurchase or redeem any of our debt securities that rank equally with in
all respects or junior in interest to the junior subordinated debentures;
except that we may:
(a) repurchase, redeem or make other acquisitions of shares of our
capital stock in connection with:
- any employment contract, benefit plan or other similar arrangement
with or for the benefit of any one or more of our employees,
officers, directors or consultants,
- a dividend reinvestment or shareholder stock purchase plan, or
- the issuance of our capital stock, or securities convertible into
or exercisable for our capital stock, as consideration in any
acquisition transactions entered into prior to the applicable
extension period;
(b) take any necessary action in connection with any reclassification,
exchange or conversion of any of our capital stock, any capital stock of a
subsidiary or any of our debt;
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(c) purchase fractional interests in shares of our capital stock in
connection with the conversion or exchange provisions of any of our capital
stock or the security being converted or exchanged;
(d) declare a dividend in connection with any shareholders' rights plan,
or issue rights, stock or other property under any shareholders' rights
plan, or redeem or repurchase rights under any shareholders rights plan; or
(e) declare a dividend in the form of stock, warrants, options or other
rights where the dividend stock or the stock issuable upon exercise of the
warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks equally with or junior to that stock.
If we are not in default under the indenture, before the end of any
extension period we may extend the extension period, further deferring the
payment of interest. Upon the termination of any extension period and the
payment of all amounts then due, we may elect to begin a new extension period as
long as we comply with the above conditions. We will not pay additional interest
on the junior subordinated debentures during an extension period, until the
extension period ends and all additional interest becomes due. We must give you
and the debenture trustee notice of our election to defer interest payments at
least one business day before the next interest payment date on which interest
on the junior subordinated debentures would be payable, or at least one business
day before:
(1) the next date distributions would have been payable on the preferred
securities but for the election to defer interest payments; and
(2) the date the property trustee is required to give you notice of the
record date or the distribution date, not less than one business day
prior to such record date.
The debenture trustee will give you prompt notice of our election to defer
interest payments. Except as described above, there is no limitation on the
number of times that we may elect to defer interest payments and begin an
extension period.
REDEMPTION
(1) We may redeem all or a portion the junior subordinated debentures prior
to maturity on or after December 31, 2004:
(2) We may redeem all but not only a portion of the junior subordinated
debentures, at any time before December 31, 2004 or within 90 days
following the occurrence and during the continuation of a tax event,
investment company event or capital treatment event. These events are
defined under "Description of Preferred Securities -- Redemption" on
page 20. The redemption price will be equal to the outstanding principal
amount of the junior subordinated debentures plus accrued interest,
including any additional interest, to the redemption date. MBNK Capital
Trust will use the proceeds of any redemption to redeem the preferred
securities.
The Federal Reserve Board's risk-based capital guidelines, which are subject
to change, currently provide that redemptions of permanent equity or other
capital instruments before stated maturity could have a significant impact on a
bank holding company's overall capital structure. Therefore, any organization
considering a redemption should consult with the Federal Reserve Board if the
redemption could significantly effect the level or composition of the
organization's capital base. If we redeem the junior subordinated debentures
prior to their stated maturity, and the Federal Reserve Board believes the
redemption would constitute the redemption of capital instruments under its
current risk-based capital guidelines, our redemption of the junior subordinated
debentures may be subject to the prior approval of the Federal Reserve Board.
ADDITIONAL SUMS
We have promised that, if we are not in default under the indenture and
except as otherwise specified in the indenture, if and for so long as MBNK
Capital Trust is the holder of all junior subordinated debentures and MBNK
Capital Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a tax event,
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we will pay additional amounts on the junior subordinated debentures, so that
the distributions payable by MBNK Capital Trust will not be reduced as a result
of any additional taxes, duties or other governmental charges. See "Description
of Preferred Securities -- Redemption" on page 20.
REGISTRATION, DENOMINATION AND TRANSFER
The junior subordinated debentures will initially be registered in the name
of the property trustee on behalf of MBNK Capital Trust. If the junior
subordinated debentures are distributed to you, it is anticipated that the
depositary arrangements for the junior subordinated debentures will be
substantially identical to those in effect for the preferred securities. See
"Description of Preferred Securities -- Book Entry, Delivery and Form" on
page 28.
Although the Depository Trust Company has agreed to the procedures described
in "Description of Preferred Securities -- Book Entry, Delivery and Form" on
page 28, it is under no obligation to continue to perform these procedures, and
it may discontinue or change these procedures at any time. If the Depository
Trust Company is at any time unwilling or unable to continue as depositary and
we do not appoint a successor depositary within 90 days of receipt of notice
from the Depository Trust Company to that effect, we will cause the junior
subordinated debentures to be issued in certificate form.
If we issue junior subordinated debentures in certificated form, we will
make principal and interest payments at the New York office of the debenture
trustee or the transfer or paying agent we choose. However, at our option we may
make interest payments by check mailed to the address of the persons entitled
thereto. However, a holder of $1 million or more in aggregate principal amount
of junior subordinated debentures may receive payments of interest, other than
interest payable at the stated maturity, by wire transfer of immediately
available funds upon written request to the debenture trustee not later than 15
calendar days prior to the date on which the interest is payable.
Junior subordinated debentures are issuable only in registered form without
coupons in integral multiples of $10.00. Junior subordinated debentures will be
exchangeable for other junior subordinated debentures of like tenor, of any
authorized denominations, and of a like aggregate principal amount.
Junior subordinated debentures may be presented for exchange as provided
above, and may be presented for registration of transfer, at the office of the
securities registrar appointed under the indenture or at the office of any
transfer agent we designate for that purpose without service charge and upon
payment of any taxes and other governmental charges as described in the
indenture. We will appoint the debenture trustee as securities registrar under
the indenture.
In the event of any redemption, we will not, nor will the debenture trustee
be required to:
(1) issue, register the transfer of or exchange junior subordinated
debentures during a period beginning at the opening of business 15 days
before the day of selection for redemption of the junior subordinated
debentures to be redeemed and ending at the close of business on the day
of mailing of the relevant notice of redemption; or
(2) register the transfer of or exchange any junior subordinated debentures
selected for redemption, except, in the case of any junior subordinated
debentures being redeemed in part, any portion of the debenture not to be
redeemed.
Any amount deposited with the debenture trustee or any paying agent, or held
by us in trust, for the payment of principal or interest on any junior
subordinated debenture that is unclaimed for two years will be repaid to us at
our request. Thereafter, the holder of that unpaid junior subordinated debenture
must look, as a general unsecured creditor, only to us for payment.
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RESTRICTIONS ON CERTAIN PAYMENTS; CERTAIN COVENANTS
We have promised that at any time:
(1) if we have actual knowledge that an event of default has occurred, or
with notice or lapse of time an event of default would occur, under the
indenture and we have not taken reasonable steps to remedy the situation;
(2) if the junior subordinated debentures are held by MBNK Capital Trust and
we are in default with respect to our payment of any obligations under
the guarantee; or
(3) we have given notice of our election of an extension period as provided
in the indenture and have not rescinded such notice, or an extension
period, or any extension of an extension period, is continuing
We will not:
(1) make any payment of principal of or interest or premium on, or repay,
repurchase or redeem any of our debt securities that rank equally in all
respects with, or junior in interest to, the junior subordinated
debentures; or
(2) declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of our capital
stock, except that we may:
(a) repurchase, redeem or make other acquisitions of shares of our
capital stock in connection with:
- any employment contract, benefit plan or other similar arrangement
with or for the benefit of any one or more employees, officers,
directors or consultants;
- a dividend reinvestment or shareholder stock purchase plan; or
- the issuance of our capital stock, or securities convertible into
or exercisable for our capital stock, as consideration in any
acquisition transactions entered into prior to any extension
period;
(b) take any necessary action in connection with any reclassification,
exchange or conversion of any of our capital stock, any capital stock
of any subsidiary of ours or of our debt;
(c) purchase fractional interests in shares of our capital stock relating
to the conversion or exchange provisions of the capital stock or the
security being converted or exchanged;
(d) declare a dividend in connection with any shareholders' rights plan,
or issue rights, stock or other property under any shareholders'
rights plan, or redeem or repurchase rights under any shareholder
rights plan; or
(e) declare a dividend in the form of stock, warrants, options or other
rights where the dividend stock or the stock issuable upon exercise of
the warrants, options or other rights is the same stock as that on
which the dividend is being paid or ranks equally with or junior to
that stock.
We have promised in the indenture:
(1) to continue to hold, directly or indirectly, 100% of the common
securities, except that certain successors that are permitted pursuant to
the indenture may succeed to our ownership of the common securities;
(2) as holder of the common securities, not to voluntarily terminate,
wind-up or liquidate MBNK Capital Trust, other than:
(a) in connection with a distribution of junior subordinated debentures
to the holders of the preferred securities in a liquidation of MBNK
Capital Trust; or
(b) in connection with certain mergers, consolidations or amalgamation
transactions permitted by the trust agreement; and
(3) to use our reasonable efforts, consistent with the terms and provisions
of the trust agreement, to cause MBNK Capital Trust to continue to be
classified as a grantor trust for United States federal income tax
purposes.
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MODIFICATION OF INDENTURE
We and the debenture trustee can, without the consent of any of the holders
of the outstanding junior subordinated debentures, amend, waive or supplement
the provisions of the indenture in the following ways:
(1) if we are acquired by someone, to have that person assume our
obligations under the indenture and the junior subordinated debentures;
(2) to convey, transfer, assign, mortgage, pledge any property to or with
the debenture trustee or to surrender any right or power conferred upon
us by the indenture;
(3) to add further covenants, restrictions or conditions that would protect
the holders of the junior subordinated debentures or to surrender any
right or power conferred upon us under the indenture;
(4) to change or eliminate any of the provisions of the indenture, if at the
time of the change or elimination there are no outstanding junior
subordinated debentures entitled to the benefit of the provision or the
change or elimination does not apply to any outstanding securities;
(5) to add events of default that would benefit the holders of the junior
subordinated debentures;
(6) to add additional events of default that would benefit the holders of
the preferred securities and the common securities;
(7) to cure any ambiguity, to correct or supplement any provision in the
indenture that may be defective or inconsistent with any other provision
in the indenture, if that action does not negatively affect the interest
of the holders of the junior subordinated debentures, or, if they are
outstanding, the preferred securities in any material respect;
(8) to change the terms of the junior subordinated debentures to facilitate
the issuance of the junior subordinated debentures in certificated or
other definitive form;
(9) to evidence or provide for the appointment of a successor debenture
trustee;
(10) to qualify, or maintain the qualification of, the indenture under the
Trust Indenture Act; or
(11) to establish the form or terms of any series of the junior subordinated
debentures as permitted by the indenture.
If we have the consent of a majority in principal amount of junior
subordinated debentures that would be affected, the debenture trustee and we can
modify the indenture in the following ways:
(1) change the stated maturity of the principal of, or affect the interest
payment date on, any of the junior subordinated debentures, or reduce the
principal amount, the rate of interest or any premium we would owe if we
redeemed the junior subordinated debentures, or change the place of
payment where, or the currency in which, these amount are payable, or
impair the right to institute suit for the enforcement of any payment on
the junior subordinated debentures;
(2) lower the percentage of principal amount of junior subordinated
debentures needed to approve any modification of, or waiver of rights
under, the indenture; or
(3) modify any other provisions of the indenture, except to increase any
percentage or to provide that certain other provisions of the indenture
cannot be modified or waived without the consent of the holder of each
junior subordinated debenture affected.
Furthermore, so long as any of the preferred securities remain outstanding:
(1) we cannot:
- change the indenture in a way that would adversely affect you in any
material respect,
- terminate the indenture,
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- waive default, without the prior consent of the holders of at least a
majority of the aggregate liquidation amount of the outstanding
preferred securities,
unless and until we have paid principal of, and premium, if any, on, the
junior subordinated debentures, including all accrued and unpaid
interest, and certain other conditions are satisfied; and
(2) we cannot amend the indenture in a way that would impair the rights of
the holders of the preferred securities without the prior consent of the
holders of each preferred security then outstanding unless and until we
have paid the principal of, and premium, if any, on, the junior
subordinated debentures including all accrued and unpaid interest.
DEBENTURE EVENTS OF DEFAULT
The indenture provides that any one or more of the following described
events with respect to the junior subordinated debentures that has occurred and
is continuing constitute an "event of default" with respect to the junior
subordinated debentures:
(1) if we fail to pay any interest on the junior subordinated debentures
when due and payable and do not make the payment in the next 30 days,
unless we have deferred the due date by declaring an extension period;
(2) if we fail to pay any principal of or premium, if any, on the junior
subordinated debentures when due and payable whether at the stated
maturity, upon redemption, by declaration of acceleration or otherwise;
(3) if we fail to observe or perform in any material respect certain of the
other covenants in the indenture for 90 days after written notice of the
failure to us from the debenture trustee or the holders of at least 25%
in aggregate outstanding principal amount of the outstanding junior
subordinated debentures; or
(4) the appointment of a receiver or other similar official in any
liquidation, insolvency or similar proceeding with respect to us or all
or substantially all of our property; or a court or other governmental
agency enters a decree or order appointing a receiver or similar official
and the decree or order remains unstayed and undischarged for a period of
60 days.
As described in "Description of Preferred Securities -- Events of Default;
Notice" on page 24, the occurrence of an event of default on the junior
subordinated debentures also will constitute an event of default in respect of
the preferred securities and common securities.
With some limitations, the holders of at least a majority in aggregate
principal amount of outstanding junior subordinated debentures can direct how,
when and where any proceeding for any remedy available to the debenture trustee
is conducted. The debenture trustee or the holders of not less than 25% in
aggregate principal amount of outstanding junior subordinated debentures can
declare the principal due and payable immediately during a continuing event of
default and, if the debenture trustee or the holders of junior subordinated
debentures do not make this declaration, the holders of at least 25% in
aggregate liquidation amount of the outstanding preferred securities can do so.
The holders of a majority in aggregate principal amount of outstanding junior
subordinated debentures also can annul a default declaration and waive the
default if:
(1) we have cured all defaults, other than the non-payment of the principal
of junior subordinated debentures which has become due because of the
default; and
(2) we have cured all matured installments of interest and principal due on
the junior subordinated debentures other than those amounts that were due
because of the default, and all sums paid or advanced by the debenture
trustee and the reasonable compensation, expenses, disbursements and
advances of the debenture trustee, its agent and its counsel.
If the holders of junior subordinated debentures do not annul a default
declaration or waive a default, the holders of a majority in aggregate
liquidation amount of the outstanding preferred securities can do so.
We are required to certify annually to the debenture trustee as to whether
or not we are in compliance with all the conditions and covenants applicable to
us under the indenture.
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During a continuing event of default the debenture trustee can declare the
principal of and the interest on the junior subordinated debentures, and any
other amounts payable under the indenture, to be due and payable and can enforce
its other rights as a creditor of ours with respect to the junior subordinated
debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
During a continuing event of default that is caused by our failure to pay
any amounts payable on the junior subordinated debentures on the date those
amounts are due, you may institute a legal action against us to enforce the
payment to you of an amount equal to the amount payable on the junior
subordinated debentures having a principal amount equal to the aggregate
liquidation amount of the preferred securities you hold. We may not amend the
indenture to remove this right to bring a legal action without your prior
written consent. We have the right under the indenture to set-off against the
amount owed to MBNK Capital Trust any payment we make to you in connection with
a legal action.
With certain exceptions, as a holder of preferred securities, you will not
be able to exercise directly any remedies available to the holders of the junior
subordinated debentures except under the circumstances described in the
preceding paragraph unless there has been an event of default under the trust
agreement. See "Description of Preferred Securities -- Events of Default;
Notice" on page 24.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The indenture provides that we may not consolidate with or merge into any
other entity or convey, transfer or lease substantially all of our assets to any
entity, and no entity may consolidate with or merge into us, or convey, transfer
or lease its properties and assets substantially as an entirety to us, unless:
- immediately after giving effect to the transactions there is no continuing
event of default with respect to the junior subordinated debentures, and
no event which, after notice or lapse of time or both, would constitute an
event of default with respect to the junior subordinated debentures; and
- certain other conditions as prescribed in the indenture are satisfied.
Nothing in the indenture prohibits us from acquiring other banks.
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SATISFACTION AND DISCHARGE
We will be deemed to have satisfied and discharged the indenture, which
means you will have no legal rights under the indenture, when:
(1) all junior subordinated debentures have been delivered to the debenture
trustee for cancellation, or all junior subordinated debentures not
previously delivered to the debenture trustee for cancellation:
- have become due and payable,
- will become due and payable at the stated maturity date within one
year, or
- are to be called for redemption within one year under arrangements
satisfactory to the debenture trustee;
(2) we deposit funds with the debenture trustee for the purpose and in an
amount sufficient to pay all of our obligations on the junior
subordinated debentures not previously delivered to the debenture trustee
for cancellation, for the principal, and premium, if any, and interest to
the date of the deposit or to the stated maturity or redemption date; and
(3) we have paid all other sums payable by us under the indenture and we
have delivered applicable certificates and opinions of counsel that
indicate we have complied with all of our obligations.
SUBORDINATION
The junior subordinated debentures generally will be subordinate and junior
in right of payment to all of our senior indebtedness or other subordinated
indebtedness, as described below. If we default in the payment of any principal,
premium, if any, or interest, if any, or any other amount payable on any senior
or other subordinated indebtedness when the same becomes due and payable whether
at maturity or at a date fixed for redemption or by declaration of acceleration
or otherwise, then unless and until we have cured the default or it has been
waived or all senior indebtedness has been paid, we cannot make any payments on
the junior subordinated debentures.
As used in this prospectus, "senior indebtedness or other subordinated
indebtedness" means, whether recourse exists as to all or a portion of our
assets and whether or not contingent:
(1) every obligation of ours for money borrowed;
(2) every obligation of ours evidenced by bonds, debentures, notes or other
similar instruments, including obligations incurred in connection with
the acquisition of property, assets or businesses;
(3) every reimbursement obligation of ours with respect to letters of
credit, bankers' acceptances or similar facilities issued for our
account;
(4) every obligation of ours issued or assumed as the deferred purchase
price of property or services, but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business;
(5) every capital lease obligation of ours;
(6) every obligation of ours for claims, as defined in Section 101(4) of the
United States Bankruptcy Code of 1978, in respect of derivative products
such as interest, foreign exchange rate contracts, commodity contracts
and similar arrangements; and
(7) every obligation of the type referred to above of another person and all
dividends of another person the payment of which, in either case, we have
guaranteed or for which we are responsible or liable, directly or
indirectly, as obligor or otherwise.
However, senior indebtedness and other subordinated indebtedness does not
include any of the following:
(1) any obligations which, by their terms, are expressly stated to rank
equally in right of payment with, or subordinate in right of payment to,
the junior subordinated debentures;
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(2) any of our indebtedness and other subordinated indebtedness which when
incurred and without respect to any election under Section 1111(b) of the
United States Bankruptcy Code of 1978, was without recourse to us;
(3) any indebtedness of ours to any of our subsidiaries;
(4) indebtedness for wages or bank deposits payable to executive officers or
directors; and
(5) any indebtedness in respect of debt securities issued to any trust, or a
trustee of such trust, partnership or other entity affiliated with us
that is a financing entity of ours in connection with the issuance by
such financing entity of securities that are similar to the preferred
securities.
As of September 30, 1999, we had senior indebtedness and other subordinated
indebtedness of approximately $274.0 million. We must pay in full our
obligations under all senior indebtedness, before we can make any payments or
distributions, whether in cash, securities or other property, on the junior
subordinated debentures if we experience:
(1) any insolvency, bankruptcy, receivership, liquidation, reorganization,
readjustment, imposition or other similar proceedings relating to us, our
creditors or our property;
(2) any proceeding for our liquidation, dissolution or other winding up,
voluntary or involuntary, whether or not involving insolvency or
bankruptcy proceedings;
(3) any assignment by us for the benefit of creditors; or
(4) any other marshaling of our assets.
If payment or distribution on account of the junior subordinated debentures
of any character or security, whether in cash, securities or other property, is
received by any holder of any junior subordinated debentures in contravention of
any of the terms of the indenture and before all our senior indebtedness has
been paid in full, that payment or distribution or security will be received in
trust for the benefit of, and must be paid over or delivered and transferred to,
the holders of our senior indebtedness at the time outstanding in accordance
with the priorities then existing among those holders for application to the
payment of all senior indebtedness remaining unpaid to the extent necessary to
pay all senior indebtedness in full.
If during any proceeding described above, after we have paid in full all
sums we owe on our senior indebtedness and other subordinated indebtedness, the
holders of junior subordinated debentures, together with the holders of our
obligations ranking on a parity with the junior subordinated debentures, will be
entitled to be paid from our remaining assets the amounts at the time due and
owing on the junior subordinated debentures and the other obligations. We will
make payment on the junior subordinated debentures before we make any payment or
other distribution, whether in cash, property or otherwise, on account of any
capital stock or obligations ranking junior to the junior subordinated
debentures.
By reason of this subordination, if we become insolvent, holders of senior
indebtedness and other subordinated indebtedness may receive more, and holders
of the junior subordinated debentures may receive less, than our other
creditors. This subordination will not prevent the occurrence of any event of
default on the junior subordinated debentures.
The indenture places no limitation on the amount of additional senior
indebtedness and other subordinated indebtedness that we may incur. We expect
from time to time to incur additional senior indebtedness and other subordinated
indebtedness.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
Other than during the occurrence and continuance of a default, the debenture
trustee has promised to perform only the duties specifically contained in the
indenture. If we are in default under the indenture, the debenture trustee must
exercise the same degree of care and skill as a prudent person would in the
conduct of his or her own affairs. The debenture trustee is not required to
expend or risk its own funds or otherwise incur
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personal financial liability in the performance of its duties if it has
reasonable grounds to believe that repayment or adequate indemnity is not
reasonably assured to it.
The debenture trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
security or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties. The debenture trustee
may consult with counsel of its choice and the advice of counsel or any opinion
of counsel shall be full and complete authorization and protection in respect of
any action taken in reliance on that advice or opinion.
The Bank of New York, the debenture trustee, may serve from time to time as
trustee under other indentures or trust agreements with us or our subsidiaries
relating to other issues of our securities. In addition, we as well as certain
of our affiliates may have other banking relationships with The Bank of New York
and its affiliates.
GOVERNING LAW
The indenture and the junior subordinated debentures will be governed by and
construed in accordance with the laws of the State of New York.
DESCRIPTION OF GUARANTEE
We will execute and deliver the guarantee at the same time MBNK Capital
Trust issues the preferred securities. The Bank of New York will act as
guarantee trustee under the guarantee and will hold the guarantee for your
benefit. We believe this summary of the provisions of the guarantee describes
all material provisions that would be important to you to make an informed
investment decision. However, the form of the guarantee is filed as an exhibit
to the registration statement which contains this prospectus and you should read
it in its entirety. A copy of the form of guarantee is available upon request
from the guarantee trustee. Whenever particular defined terms of the guarantee
are referred to in this prospectus, those terms are incorporated herein by
reference. The guarantee will be qualified as an indenture under the Trust
Indenture Act.
GENERAL
We will irrevocably agree to pay in full on a subordinated basis, to the
extent set forth in the guarantee, the payments described below to you, as and
when due, regardless of any defense, right of set-off or counterclaim which MBNK
Capital Trust may have or assert other than the defense of payment. The
following payments with respect to the preferred securities, to the extent not
paid or made by or on behalf of MBNK Capital Trust, will be subject to the
guarantee without duplication:
(1) any accumulated and unpaid distributions MBNK Capital Trust is required
to pay on the preferred securities, to the extent that MBNK Capital Trust
has the funds to make the distributions at such time;
(2) the redemption price with respect to any preferred securities called for
redemption by MBNK Capital Trust, to the extent that MBNK Capital Trust
has the funds to pay the redemption at such time; and
(3) upon a voluntary or involuntary termination, winding up or liquidation
of MBNK Capital Trust, unless the junior subordinated debentures are
distributed to you, as holders of the preferred securities, the lesser
of:
- the total liquidation amount and all accumulated and unpaid
distributions to the date of payment, to the extent that MBNK
Capital Trust has sufficient funds available for their payment; and
- the amount of assets of MBNK Capital Trust remaining available for
distribution to you on liquidation of MBNK Capital Trust.
Our obligation to make a guarantee payment may be satisfied by directly
paying you or by causing MBNK Capital Trust to pay you.
The guarantee will be an irrevocable, subordinated guarantee of payment of
MBNK Capital Trust's obligations under the preferred securities. The guarantee
will apply only to the extent that MBNK Capital Trust has funds sufficient to
make payments. If we do not make payments on the junior subordinated debentures
held by MBNK
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Capital Trust, MBNK Capital Trust will not have funds to pay any amounts payable
in respect of the preferred securities.
STATUS OF THE GUARANTEE
The guarantee will constitute our unsecured obligation and will rank
subordinate and junior in right of payment to all of our senior indebtedness and
subordinated indebtedness in the same manner as the junior subordinated
debentures. The guarantee does not limit our ability to incur or issue other
secured or unsecured senior or subordinated indebtedness and we expect to incur,
from time to time, additional senior and subordinated indebtedness. Our
obligations under the guarantee are effectively subordinated to all existing and
future liabilities of any of our subsidiaries and their respective subsidiaries.
The guarantee will constitute a guarantee of payment and not of collection.
A guarantee of payment entitles the guarantee trustee or you to institute a
legal proceeding directly against us as the guarantor to enforce your rights
under the guarantee without first instituting a legal proceeding against MBNK
Capital Trust or any other person or entity. The guarantee will be held by the
guarantee trustee for your benefit. The guarantee will not be discharged except
by paying the amounts required under the guarantee in full to the extent not
paid by MBNK Capital Trust or distributing the junior subordinated debentures to
you.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
your rights, in which case no consent will be required, the guarantee may not be
amended without the prior approval of the holders of a majority of the aggregate
liquidation amount of the outstanding preferred securities. The manner of
obtaining any such approval is set forth under "Description of Preferred
Securities -- Voting Rights; Amendment of Trust Agreement" on page 27. All
guarantees and agreements contained in the guarantee will bind our successors,
assigns, receivers, trustees and representatives and will be for your benefit
and the benefit of all of the holders of the preferred securities then
outstanding. Except in connection with a consolidation, merger or sale involving
us that is permitted under the indenture and pursuant to which the assignee
agrees in writing to perform our obligations under the guarantee, we may not
assign our obligations under the guarantee.
EVENTS OF DEFAULT
An event of default under the guarantee will occur if we do not perform any
of our payment or other obligations under the guarantee, and do not perform the
obligation for 30 days. The holders of a majority in aggregate liquidation
amount of the outstanding preferred securities have the right to direct when,
how and where any proceeding for any remedy available to the guarantee trustee
under the guarantee is conducted or to direct the guarantee trustee to exercise
any trust or power conferred upon the guarantee trustee under the guarantee.
In addition to acts taken by the guarantee trustee, you may institute a
legal proceeding directly against us to enforce your rights under the guarantee
without first instituting a legal proceeding against MBNK Capital Trust, the
guarantee trustee or any other person or entity. Since you will not be the
record holder of the preferred securities while they are in book-entry form, you
will have to observe the procedures of the Depository Trust Company to take such
action. See "Description of Preferred Securities -- Book Entry, Delivery and
Form" on page 28.
We are required, as guarantor, to certify annually to the guarantee trustee
whether or not we are in compliance with all the conditions and covenants
applicable to us under the guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The guarantee trustee, other than during a default by us in performance of
the guarantee, has only promised to perform the duties specifically contained in
the guarantee. If there is a default under the guarantee, the guarantee trustee
must exercise the rights and powers vested in it by the guarantee and must
exercise the same degree of care and skill as a prudent person would exercise or
use under the circumstances in the conduct of his or her own affairs. The
guarantee trustee is under no obligation to expend or risk its own funds or
otherwise incur any
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personal financial liability in the performance of its duties or in the exercise
of any of its rights or powers if it has reasonable grounds to believe that
repayment or adequate indemnity is not assured.
TERMINATION OF THE GUARANTEE
The guarantee will terminate and be of no further force and effect upon:
(1) full payment of the redemption price of the preferred securities;
(2) full payment of the amounts payable with respect to the preferred
securities;
(3) liquidation of the MBNK Capital Trust; or
(4) distribution of junior subordinated debentures to you and the other
holders of the preferred securities in exchange for all of the preferred
securities.
The guarantee will continue to be effective or will be reinstated, as the case
may be, if at any time you must return payment of any sums paid to you under the
preferred securities or the guarantee.
GOVERNING LAW
The guarantee will be governed by and construed in accordance with the laws
of the State of New York.
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RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE JUNIOR SUBORDINATED
DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
We have irrevocably guaranteed, on a subordinate basis, payments of
distributions and other amounts due on the preferred securities to the extent
that MBNK Capital Trust has funds available to make these payments. Taken
together, our obligations under the junior subordinated debentures, the
indenture, the trust agreement and the guarantee provide a full, irrevocable and
unconditional guarantee of payments of distributions and other amounts due on
the preferred securities. No single document standing alone or operating in
conjunction with fewer than all the other documents gives you a full guarantee.
It is only the combined operation of these documents that has the effect of
providing a full, irrevocable and unconditional guarantee of MBNK Capital
Trust's obligations in respect of the preferred securities.
If we do not make payments on the junior subordinated debentures, MBNK
Capital Trust will not have sufficient funds to pay distributions or other
amounts due on the preferred securities. The guarantee does not cover payment of
amounts payable with respect to the preferred securities when MBNK Capital Trust
does not have sufficient funds to pay these amounts. In that event, your remedy
is to institute a legal proceeding directly against us for enforcement of our
payment obligations under the junior subordinated debentures having a principal
amount equal to the liquidation amount of the preferred securities you hold.
Our obligations under the junior subordinated debentures and the guarantee
are subordinate and junior in right of payment to all of our senior indebtedness
and other subordinated indebtedness. An event of default under any of our senior
indebtedness or other subordinated indebtedness would not constitute an event of
default in respect of the preferred securities. However, in the event of payment
defaults under, or acceleration of, our senior indebtedness or other
subordinated indebtedness, the subordination provisions of the indenture provide
that we will not make any payments on the junior subordinated debentures until
we have paid in full the senior indebtedness or other subordinated indebtedness
and all of our defaults on our senior indebtedness have been cured or waived.
See "Description of Junior Subordinated Debentures -- Subordination" on
page 39. Failure to make required payments on the junior subordinated debentures
would constitute an event of default in respect of the preferred securities.
SUFFICIENCY OF PAYMENTS
If we make the payments on the junior subordinated debentures when they are
due, those payments will be sufficient to cover distributions and other payments
distributable on the preferred securities, primarily because:
(1) the total principal amount of the junior subordinated debentures will be
equal to the sum of the total stated liquidation amount of the preferred
securities and common securities;
(2) the interest rate and interest and other payment dates on the junior
subordinated debentures will match the distribution rate, distribution
dates and other payment dates for the preferred securities;
(3) we will pay for any and all costs, expenses and liabilities of MBNK
Capital Trust except MBNK Capital Trust's obligations to you and to us,
as the holder of the common securities, to pay amounts due under the
preferred securities and the common securities, respectively; and
(4) the trust agreement provides that MBNK Capital Trust will not engage in
any activity that is not consistent with the limited purposes of MBNK
Capital Trust.
If we make a payment under the guarantee, our obligations under the
indenture will be reduced by the amount of that payment.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
You may institute a legal proceeding directly against us to enforce your
rights under the guarantee without first instituting a legal proceeding against
the guarantee trustee, MBNK Capital Trust or any other person or entity. See
"Description of Guarantee" on page 41.
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RIGHTS TO DISTRIBUTIONS
The preferred securities represent preferred beneficial interests in the
assets of MBNK Capital Trust, and MBNK Capital Trust exists for the sole
purposes of issuing the preferred securities and common securities and investing
the proceeds in the junior subordinated debentures and engaging in other
activities necessary, convenient or incidental to those activities. A principal
difference between your rights as a holder of preferred securities and a holder
of a junior subordinated debenture is that a holder of a junior subordinated
debenture is entitled to receive from us payments on the junior subordinated
debentures held, while you are entitled to receive distributions or other
amounts distributable with respect to the preferred securities from MBNK Capital
Trust, or from us under the guarantee, only if MBNK Capital Trust has funds
available for the payment of those distributions.
RIGHTS UPON DISSOLUTION
Upon any voluntary or involuntary dissolution of MBNK Capital Trust, other
than any dissolution involving the distribution of the junior subordinated
debentures to you, as holders of the preferred securities, and after
satisfaction of liabilities to creditors of MBNK Capital Trust as required by
applicable law, you will be entitled to receive, out of assets held by MBNK
Capital Trust, the liquidation distribution in cash. See "Description of
Preferred Securities -- Liquidation Distribution Upon Dissolution" on page 23.
If we are voluntarily or involuntarily liquidated or declare bankruptcy, MBNK
Capital Trust, as registered holder of the junior subordinated debentures, will
be our subordinated creditor, subordinated and junior in right of payment to all
our senior indebtedness or other subordinated indebtedness. However, MBNK
Capital Trust will be entitled to receive payment in full of all amounts payable
with respect to the junior subordinated debentures before any of our
shareholders receive payments or distributions. Because we are the guarantor
under the guarantee and have agreed under the indenture to pay for all costs,
expenses and liabilities of MBNK Capital Trust, other than MBNK Capital Trust's
obligations to you and the holder of the common securities, your position as
holders of the preferred securities and the position of holders of junior
subordinated debentures compared to other creditors and to our shareholders in
the event of our liquidation or bankruptcy are expected to be substantially the
same.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
GENERAL
Except where expressly stated, the following discussion is the opinion of
Stevens & Lee, P.C., Reading, Pennsylvania, our counsel, as to the material
United States federal income tax consequences of the purchase, ownership and
disposition of the preferred securities.
Except where we state otherwise, this discussion deals only with preferred
securities held as capital assets within the meaning of the Internal Revenue
Code of 1986 by a holder who:
(1) is a United States Person (as defined below), and
(2) purchases the preferred securities upon original issuance at their
original issue price.
"United States Person" means a beneficial owner of preferred securities
that, for United States federal income tax purposes, is:
(1) a citizen or resident of the United States;
(2) a corporation or partnership created or organized in or under the laws
of the United States or any political subdivision thereof;
(3) an estate the income of which is subject to United States federal income
taxation without regard to its source; or
(4) a trust that (y) is subject to the supervision of a court within the
United States and the control of one or more United States Persons or
(z) has a valid election in effect under the applicable United States
Treasury regulations to be treated as a United States Person.
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This discussion does not discuss all of the tax consequences that may be
relevant to beneficial owners who are subject to special rules, such as:
(1) banks,
(2) thrift institutions,
(3) real estate investment trusts,
(4) regulated investment companies,
(5) insurance companies,
(6) dealers in securities or currencies,
(7) securities traders that elect to mark to market,
(8) tax-exempt organizations,
(9) individual retirement and certain tax-deferred accounts,
(10) persons holding a preferred security as a position in a straddle, or as
part of a hedging, conversion or other integrated investment; and
(11) except with respect to the discussion under the caption "Non-United
States Holders," persons who are not United States Persons.
In addition, this discussion does not address:
(1) the income tax consequences to stockholders in, or partners or
beneficiaries of, a holder of preferred securities;
(2) the United States alternative minimum tax consequences of purchasing,
owning and disposing of preferred securities; or
(3) any state, local or foreign tax consequences of purchasing, owning and
disposing of preferred securities.
This discussion is based on United States federal income tax laws in effect
as of the date of this prospectus, including applicable regulations and
administrative and judicial interpretations. Changes to any of these laws,
regulations or interpretations after this date may affect the tax consequences
described below, possibly on a retroactive basis.
The authorities on which this discussion is based are subject to various
interpretations, and the opinions of Stevens & Lee, P.C., are not binding on the
Internal Revenue Service, or the courts, either of which could take a contrary
position. Moreover, no rulings have been or will be sought from the IRS with
respect to the transactions described in this prospectus. Accordingly, we cannot
assure you that the IRS will not challenge the opinions expressed or that a
court would not sustain such a challenge.
If you would be a beneficial owner identified above that would be subject to
special rules or otherwise believe that your particular tax situation is not
addressed in this discussion, we advise you to consult your tax advisor
regarding the tax consequences of purchasing, owning and disposing of the
preferred securities based on your particular circumstances and the relevant
taxing jurisdictions.
CLASSIFICATION OF THE TRUST
Stevens & Lee, P.C., is of the opinion that MBNK Capital Trust will be
classified for United States federal income tax purposes as a grantor trust and
not an association taxable as a corporation based on:
(1) current law and our factual representations and other facts and
assumptions set forth in this prospectus;
(2) the assumption that there will be full compliance with the terms of the
trust agreement; and
(3) other assumptions and qualifications stated in the opinion which is
filed as an exhibit to the registration statement of which this
prospectus is a part.
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Accordingly, for United States federal income tax purposes, you generally will
be considered the owner of an undivided interest in the junior subordinated
debentures owned by MBNK Capital Trust, and you will be required to include all
income or gain recognized for United States federal income tax purposes with
respect to your share of the junior subordinated debentures on your United
States federal income tax return
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
Stevens & Lee, P.C., has not delivered a legal opinion that the junior
subordinated debentures constitute indebtedness because whether a security is
classified as debt or equity involves substantial questions of fact. However,
based on the facts contained in this prospectus and the terms of the indenture
and the junior subordinated debentures, we intend to take the position that the
junior subordinated debentures will be classified for United States federal
income tax purposes as our indebtedness. By acceptance of preferred securities,
each holder covenants to treat the junior subordinated debentures as
indebtedness and the preferred securities as evidence of an indirect beneficial
ownership interest in the junior subordinated debentures. We cannot assure you
that the IRS will not challenge this position. The remainder of this discussion
assumes that the junior subordinated debentures will be treated as our
indebtedness for United States federal income tax purposes.
If the junior subordinated debentures are classified as indebtedness for
United States federal income tax purposes, a corporate holder of the preferred
securities will not be entitled to claim a dividends-received deduction for any
income recognized with respect to such securities.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under Treasury Regulations, a "remote" contingency that stated interest will
not be timely paid will be ignored in determining whether a debt instrument is
issued with original issue discount. We believe that the likelihood of our
exercising our option to defer payments is remote, based in part on the fact
that exercising that option would prevent us from declaring dividends on our
common stock and would prevent us from making any payments with respect to debt
securities that rank equally with or junior to the junior subordinated
debentures. The Treasury regulations dealing with original issue discount and
the deferral of interest have not yet been addressed in any rulings or other
interpretations by the IRS. Because of this lack of guidance from the IRS and
the fact that whether the junior subordinated debentures are issued with
original issue discount involves substantial questions of fact, Stevens & Lee
has not provided a legal opinion on this issue. However, based on the foregoing,
we intend to take the position that the junior subordinated debentures will not
be considered to be initially issued with original issue discount. Accordingly,
you will be taxed on stated interest on the junior subordinated debentures when
such interest is paid or accrued in accordance with your regular method of tax
accounting.
In the event that we exercise our option to defer the payment of stated
interest on the junior subordinated debentures, the junior subordinated
debentures would be treated, solely for purpose of the original issue discount
rules, as being "re-issued" at such time with original issue discount. Under
these rules, a holder of the junior subordinated debentures or preferred
securities would be required to include original issue discount in ordinary
income, on a current basis, over the period that the instrument is held even
though there would be no actual cash payments during the extended interest
payment period. The amount of original issue discount income includible in the
taxable income of a holder of the junior subordinated debentures or preferred
securities would be determined on the basis of a constant yield method over the
remaining term of the instrument and the actual receipt of future payments on
the junior subordinated debentures or preferred securities would no longer be
separately reported as taxable income. The amount of original issue discount
that would accrue, in the aggregate, during the extended interest payment period
would be approximately equal to the amount of the cash payment due at the end of
extension period. Any original issue discount included in income would increase
the holder's adjusted tax basis in the junior subordinated debentures or
preferred securities and the holder's actual receipt of payments would reduce
such basis.
If our power to defer payments of interest is not treated by the IRS as
remote, the junior subordinated debentures would be treated as initially issued
with original issue discount. In that event, you would be required to include
original issue discount in your taxable income over the term of the junior
subordinated debentures on a daily accrual basis, as described above.
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RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
Under certain circumstances described above, MBNK Capital Trust may
distribute the junior subordinated debentures to you in exchange for your
preferred securities in liquidation of MBNK Capital Trust. See "Description of
Preferred Securities -- Liquidation Distribution Upon Dissolution" on page 23.
Except as discussed below, a distribution of the junior subordinated debentures
would not be a taxable event for United States federal income tax purposes, and
you would have an aggregate adjusted basis in the junior subordinated debentures
you receive for United States federal income tax purposes equal to your
aggregate adjusted basis in your preferred securities. For United States federal
income tax purposes, your holding period in the junior subordinated debentures
you receive in a liquidation of the Trust would include the period during which
you held the preferred securities. If, however, the relevant event is a tax
event as described in "Description of Preferred Securities -- Redemption" on
page 20, which results in MBNK Capital Trust being treated as an association
taxable as a corporation, the distribution would likely constitute a taxable
event to you for United States federal income tax purposes.
Under certain circumstances described above, we may redeem junior
subordinated debentures for cash and distribute the proceeds of this redemption
to you in exchange for your preferred securities. See "Description of Preferred
Securities" on page 18. This redemption would be taxable for United States
federal income tax purposes, and you would recognize gain or loss as if you had
sold the preferred securities for cash. See " -- Sales of Preferred Securities"
below.
SALES OF PREFERRED SECURITIES
If you sell or exchange your preferred securities, including a redemption
for cash, you will recognize gain or loss equal to the difference between your
adjusted tax basis in the preferred securities and the amount realized on the
sale of the preferred securities. If you dispose of a preferred security prior
to an extended interest payment period, any portion of the amount you receive
that is attributable to accrued interest will be treated as interest income and
will not be treated as part of the amount realized for purposes of determining
your gain or loss on the disposition of preferred securities. Your adjusted tax
basis in the preferred securities generally will be the initial purchase price,
increased by original issue discount previously included, or currently
includible, in your gross income to the date of disposition, and decreased by
payments received on the preferred securities other than any interest received
with respect to the period prior to the date that preferred securities are
treated as issued with original issue discount. Any gain or loss generally will
be capital gain or loss, and generally will be a long-term capital gain or loss
if you have held the preferred securities as a capital asset for more than one
year prior to the date of disposition. In the case of individuals, trusts and
estates, long-term capital gains generally are taxed at reduced rates. Subject
to certain limited exceptions, capital losses generally cannot be applied to
offset ordinary income for United States federal income tax purposes.
NON-UNITED STATES HOLDERS
The following discussion applies to you only if you would be a beneficial
owner of preferred securities and are not a United States Person as defined
above. Under present United States federal income tax law:
(a) No withholding of United States federal income tax will be required
with respect to the payment by us, the MBNK Capital Trust or any paying
agent of principal or interest, including any original issue discount, on
the preferred securities or the junior subordinated debentures provided
that:
- you do not actually or constructively own 10% or more of the total
combined voting power of all classes of our stock entitled to vote within
the meaning of Section 871(h)(3) of the tax code and the regulations
thereunder;
- you are not a controlled foreign corporation that is related to us through
stock ownership;
- you are not a bank whose receipt of interest on a junior subordinated
debenture or preferred security is described in Section 881(c)(3)(A) of
the tax code; and
- either (a) you provide your name and address on IRS Form W-8, or IRS Form
W-8BEN or successor form and certify, under penalties of perjury, that you
are not a United States Person, or (b) a financial institution
48
<PAGE>
holding the preferred security (or the junior subordinated debenture) on
your behalf certifies, under penalties of perjury, that it has received an
IRS Form W-8, or IRS Form W-8BEN or successor form from you and provides
us with a copy.
(b) No withholding of United States federal income tax will be required
with respect to any gain realized by you upon the sale or other disposition
of the preferred securities or the junior subordinated debentures.
If you cannot satisfy the requirements of the "portfolio interest" exception
described in (a) above, payments of interest made to you will be subject to a
30% United States federal withholding tax unless you provide us or our paying
agent with a properly executed:
- IRS Form W-8BEN or successor form claiming an exemption from, or a
reduction of, this withholding tax under the benefit of a tax treaty or
- IRS Form W-8ECI or successor form stating that interest paid on the
preferred securities or the junior subordinated debentures is not subject
to withholding tax because it is effectively connected with your conduct
of a trade or business in the United States.
If you are engaged in a trade or business in the United States and interest
or original issue discount on the preferred securities or the junior
subordinated debentures is effectively connected with the conduct of that trade
or business, you will be subject to United States federal income tax on the
interest and original issue discount on a net income basis in the same manner as
if you were a United States Person. In addition, if you are a foreign
corporation, you may be subject to a 30% branch profits tax.
Any gain realized upon the sale or other disposition of the preferred
securities or the junior subordinated debentures generally will not be subject
to United States federal income tax unless:
- such gain is effectively connected with a United States trade or business
conducted by you;
- in the case of a Non-United States Holder who is an individual, the
individual is present in the United States for 183 days or more in the
taxable year of the sale, exchange or retirement, and certain other
conditions are met; or
- in the case of any gain representing accrued interest or original issue
discount on the junior subordinated debentures, the requirements described
for exemption from withholding above are not satisfied.
Your estate will not be subject to U.S. federal estate tax on the preferred
securities or the junior subordinated debentures beneficially owned by you at
the time of your death, provided that:
- you do not own, within the meaning of the tax code and Treasury
regulations, 10% or more of the total combined voting power of all classes
of our voting stock; and
- interest on the preferred securities or junior subordinated debentures
would not have been, if received at the time of your death, effectively
connected with the conduct by you of a trade or business in the United
States.
NON-UNITED STATES HOLDERS SHOULD CONSULT THEIR TAX ADVISORS ABOUT THE NEW RULES
CONCERNING WITHHOLDING ON NON-UNITED STATES HOLDERS AND THE RELATED TRANSITION
RULES.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of interest paid and original issue discount accrued on the
preferred securities or the junior subordinated debentures to United States
Persons, other than corporations and other exempt recipients, will be reported
to the IRS. Income on the preferred securities or the junior subordinated
debentures will be reported to holders on Form 1099 and mailed to holders of the
preferred securities or the junior subordinated debentures by January 31
following each calendar year.
"Backup" withholding at a rate of 31% will apply to payments of interest and
payments of disposition, including redemption, proceeds to you if you are a
non-exempt United States Person unless you furnish your taxpayer identification
number in the manner prescribed in applicable Treasury regulations, certify that
this number is correct, certify as to no loss of exemption from backup
withholding, and meet certain other conditions. Any amounts withheld under the
backup withholding rules will be allowed as a refund or a credit against your
United States federal income tax liability, provided the required information is
furnished to the IRS.
49
<PAGE>
ERISA CONSIDERATIONS
Before authorizing an investment in the preferred securities, fiduciaries of
pension, profit sharing or other employee benefit plans subject to the Employee
Retirement Income Security Act of 1974 or ERISA should consider, among other
matters:
- ERISA's fiduciary standards, including its prudence and diversification
requirements;
- whether the fiduciaries have authority to make an investment in the
preferred securities under the applicable plan investment policies and
governing instruments; and
- rules under ERISA and the Code that prohibit plan fiduciaries from causing
a plan to engage in a "prohibited transaction."
Section 406 of ERISA and Section 4975 of the Code prohibit plans, as well as
individual retirement accounts and Keogh plans subject to Section 4975 of the
Code, from engaging in certain transactions involving plan assets with persons
who are "parties in interest" under ERISA or "disqualified persons" under the
Code with respect to the plan. A violation of these "prohibited transaction"
rules may result in an excise tax or other liabilities under ERISA and/or
Section 4975 of the Code, unless exemptive relief is available under an
applicable statutory or administrative exemption. Employee benefit plans that
are governmental plans (as defined in Section 3(32) of ERISA), certain church
plans (as defined in Section 3(33) of ERISA) and foreign plans (as described in
Section 4(b)(4) of ERISA) are not subject to the requirements of ERISA or
Section 4975 of the Code.
The Department of Labor has issued a regulation, the plan assets regulation,
concerning the definition of what constitutes the assets of a plan. The plan
assets regulation provides that, for purposes of ERISA, as a general rule, the
underlying assets and properties of corporations, partnerships, trusts and
certain other entities in which a plan makes an equity investment will be deemed
to be assets of the investing plan unless certain exceptions apply.
Pursuant to an exception in the plan assets regulation, the assets of MBNK
Capital Trust would not be deemed to be plan assets of investing plans if,
immediately after the most recent acquisition of any equity interest in MBNK
Capital Trust, less than 25% of the value of each class of equity interests in
MBNK Capital Trust were held by plans, other employee benefit plans not subject
to ERISA or Section 4975 of the Code such as governmental, church and foreign
plans, and entities holding assets deemed to be plan assets, or benefit plan
investors. We cannot assure you that the value of the preferred securities held
by benefit plan investors will be less than 25% of the total value of the
preferred securities at the completion of the offering or thereafter, and no
monitoring or other measures will be taken to satisfy the conditions to this
exception. We will purchase and hold all of the common securities.
We cannot assure you that any of the exceptions set forth in the plan assets
regulation will apply to the purchase of preferred securities and, as a result,
an investing plan's assets could be considered to include an undivided interest
in the junior subordinated debentures held by MBNK Capital Trust. In the event
that assets of MBNK Capital Trust are considered assets of an investing plan,
the property trustee, we and/or others, in providing services with respect to
the junior subordinated debentures, could be considered fiduciaries to the plan
and subject to the fiduciary responsibility provisions of Title I of ERISA. In
addition, certain transactions involving MBNK Capital Trust and/or the preferred
securities could be deemed to constitute direct or indirect prohibited
transactions under ERISA and Section 4975 of the Code with respect to a plan.
For example, if we are a party in interest with respect to an investing plan,
extensions of credit between us and MBNK Capital Trust, as represented by the
junior subordinated debentures and the guarantee, would likely be prohibited by
Section 406(a)(1)(B) of ERISA and Section 4975(c)(1)(B) of the Code.
The Department of Labor has issued five prohibited transaction class
exemptions, or PTCEs, that may provide exemptive relief for direct or indirect
prohibited transactions resulting from the purchase or holding of the preferred
securities, assuming that assets of MBNK Capital Trust were deemed to be plan
assets of plans investing in MBNK Capital Trust. Those class exemptions are:
- PTCE 96-23 which pertains to certain transactions by an in-house asset
manager;
- PTCE 91-38 which pertains to certain transactions involving bank
collective investment funds;
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<PAGE>
- PTCE 95-60 which pertains to certain transactions involving insurance
company general accounts;
- PTCE 90-1 which pertains to certain transactions involving insurance
company pooled separate accounts; and
- PTCE 84-14 which pertains to certain transactions by independent qualified
asset managers.
Because of ERISA's prohibitions and those of Section 4975 of the Code, the
preferred securities may not be purchased or held by any plan, any entity whose
underlying assets include plan assets by reason of any plan's investment in the
entity, or a plan asset entity, or any other person investing plan assets of any
plan, unless the purchase or holding is covered by the exemptive relief provided
by PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or another applicable exemption. If a
purchaser or holder of the preferred securities that is a plan or a plan asset
entity elects to rely on an exemption other than PTCE 96-23, 95-60, 91-38, 90-1
or 84-14, we and MBNK Capital Trust may require a satisfactory opinion of
counsel or other evidence with respect to the availability of such exemption.
Any purchaser or holder of the preferred securities that is a plan or a plan
asset entity or is purchasing such securities on behalf of or with plan assets
will be deemed to have represented by its purchase that:
- the purchase and holding of the preferred securities is covered by the
exemptive relief provided by PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or
another applicable exemption;
- we and the administrators are not "fiduciaries," within the meaning of
Section 3(21) of ERISA and the regulations thereunder, with respect to
that person's interest in the preferred securities or the junior
subordinated debentures; and
- in purchasing the preferred securities, that person approves the purchase
of the junior subordinated debentures and the appointment of the Trustee.
Insurance companies considering an investment in the preferred securities
should note that the Small Business Job Protection Act of 1996 added new
Section 401(c) of ERISA relating to the status of the assets of insurance
company general accounts under ERISA and Section 4975 of the Code. Pursuant to
Section 401(c) of ERISA, the Department of Labor issued the proposed general
account regulations in December 1997 with respect to insurance policies that are
supported by an insurer's general account. The proposed general account
regulations are intended to provide guidance on which assets held by the insurer
constitute plan assets of a plan for purposes of the fiduciary responsibility
provisions of ERISA and Section 4975 of the Code.
Any plans or other entities whose assets include plan assets subject to
ERISA or Section 4975 of the Code proposing to acquire preferred securities
should consult with their own counsel.
Governmental plans and certain church plans are not subject to ERISA, and
are also not subject to the prohibited transaction provisions of Section 4975 of
the Code. However, state laws or regulations governing the investment and
management of the assets of these types of plans may contain fiduciary and
prohibited transaction provisions similar to those under ERISA and the Code
discussed above. Accordingly, fiduciaries of governmental and church plans, in
consultation with advisers, should consider the impact of their respective state
laws on investments in the preferred securities and the considerations discussed
above to the extent applicable.
51
<PAGE>
UNDERWRITING
Under the terms and conditions of the underwriting agreement that set forth
representations and covenants by us to the underwriters and conditions to the
underwriters obligations under the agreement, the underwriters named below, for
whom Wheat First Securities, a division of First Union Securities, Inc., and
Janney Montgomery Scott LLC, are acting as representatives, have severally
agreed to purchase from us, and we have agreed to sell to them, the respective
number of preferred securities set forth opposite each underwriter's name below:
<TABLE>
<CAPTION>
AMOUNT OF
PRINCIPAL AMOUNT OF UNDERWRITING
UNDERWRITER PREFERRED SECURITIES COMPENSATION
- ----------- -------------------- ------------
<S> <C> <C>
Wheat First Securities................................ $6,000,000 $195,000
Janney Montgomery Scott LLC........................... 4,000,000 130,000
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the preferred securities are subject to approval of
legal matters by their counsel and to various conditions including the
effectiveness with the SEC of the registration statement which contains this
prospectus, receipt of legal opinions from our lawyers, and receipt of a letter
from our independent public accountants regarding our financial statements and
the statistical data contained in this prospectus and in our filings under the
Securities Exchange Act of 1934. The underwriters' are committed to purchase and
pay for all the preferred securities if any are purchased.
The underwriters will initially offer the preferred securities to the public
at the price stated on the cover page. The underwriters may offer preferred
securities to selected dealers at the public offering price less a concession of
up to $.20 per preferred security. Those dealers may reallow a discount not in
excess of $.15 per preferred security to other brokers and dealers. After the
initial offering of the preferred securities, the underwriters may change the
offering price, concession, discount and other selling terms.
In connection with the offering of the preferred securities, the
underwriters and any selling group members and their respective affiliates may
engage in transactions effected in accordance with Rule 104 of the SEC's
Regulation M that are intended to stabilize, maintain or otherwise affect the
market price of the preferred securities. Such transactions may include
transactions in which the underwriters create a short position for their own
account by selling more preferred securities than they are committed to purchase
from the MBNK Capital Trust. In such a case, to cover all or part of the short
position, the underwriters may purchase preferred securities in the open market
following completion of the initial offering of preferred securities. The
underwriters also may engage in stabilizing transactions in which it bids for,
and purchases, the preferred securities at a level above that which might
otherwise prevail in the open market for the purpose of preventing or retarding
a decline in the market price of the preferred securities. The underwriters also
may reclaim any selling concessions allowed to a dealer if the underwriters
repurchase preferred securities distributed by that dealer. Any of the foregoing
transactions may result in the maintenance of a price for the preferred
securities at a level above that which might otherwise prevail in the open
market. Neither we nor any of the underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the preferred securities. The
underwriters are not required to engage in any of the foregoing transactions
and, if commenced, such transactions may be discontinued at any time without
notice.
The underwriters agreed to purchase the preferred securities at the price
stated on the cover page of this prospectus which is the price of the preferred
securities in the offering minus the underwriters' fee. Because the MBNK Capital
Trust will use the proceeds from the sale of the preferred securities to
purchase the junior subordinated debentures from us, we have agreed to pay the
underwriters a fee in the amount of $.325 per preferred security. The
underwriters will receive no other items of value that could be considered
underwriting compensation by the National Association of Securities Dealers.
We estimate that we will spend approximately $200,000 for printing,
depository and trustees' fees, legal and accounting fees, and other expenses of
the offering in addition to underwriting compensation.
We and MBNK Capital Trust have agreed that, during the period beginning from
the date of the underwriting agreement and continuing to and including the
earlier of (1) the termination of trading restrictions on the preferred
securities, as communicated to us by the underwriters, and (2) 180 days
following the closing of the
52
<PAGE>
offering, we will not offer, sell, contract to sell or otherwise dispose of any
additional securities of the MBNK Capital Trust or of ours substantially similar
to the preferred securities or any securities convertible into or exchangeable
for or that represent the right to receive any such similar securities, without
the consent of the underwriters, which consent shall not be unreasonably
withheld.
Prior to this offering, there has been no public market for the preferred
securities. An application has been approved subject to official notice of
issuance to list the preferred securities on the American Stock Exchange under
the symbol "MST.PR". Trading of the preferred securities on the American Stock
Exchange is expected to commence at the time of the initial delivery of the
preferred securities. No assurance can be given as to the liquidity of or the
existence of the trading market for the preferred securities.
We and MBNK Capital Trust have agreed to indemnify the underwriters against
liabilities arising from the offering of the preferred securities, including
civil liabilities under the Securities Act of 1933, or to contribute to payments
that the underwriters may be required to make in connection with those
liabilities.
The underwriters and their affiliates may provide investment banking
services for us or our affiliates in the future for which they would expect to
receive customary fees and commissions.
VALIDITY OF SECURITIES
The validity of the guarantee and the junior subordinated debentures and
certain tax matters will be passed upon for us by Stevens & Lee, P.C., our
counsel, and certain legal matters will be passed upon for the underwriters by
Alston & Bird. Certain matters of Delaware law relating to the validity of the
preferred securities, the enforceability of the trust agreement and the creation
of MBNK Capital Trust will be passed upon by Richards, Layton & Finger, P.A. as
special Delaware counsel to us and MBNK Capital Trust. Stevens & Lee will rely
as to certain matters of Delaware law on the opinion of Richards, Layton &
Finger, P.A.
EXPERTS
Beard & Company, Inc., independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 1998 as set forth in their report, which is included and
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our financial statements are included and incorporated by reference
in reliance on Beard & Company, Inc.'s report, given on their authority as
experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934. Accordingly, we file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any document we file with the Securities and Exchange
Commission at the public reference facilities maintained by the Securities and
Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Our
Securities and Exchange Commission file number is 0-24145. Our filings with the
Securities and Exchange Commission also are available to the public from the
Securities and Exchange Commission's website at http://www.sec.gov. Please call
the Securities and Exchange Commission at 1-800-SEC-0330 for further
information. Our common stock is listed on the Nasdaq National Market under the
symbol "MBNK".
This prospectus is part of a registration statement we filed with the
Securities and Exchange Commission and does not contain all of the information
set forth in the registration statement. You should consult the registration
statement for further information with respect to our company and these
securities.
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus, and later information that we file with the Securities and Exchange
Commission will automatically update and supersede this information and
information in this prospectus. We incorporate by reference the documents listed
below and any future filings made with the Securities and Exchange Commission
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until all of the securities are sold.
53
<PAGE>
- Annual Report on Form 10-K for the year ended December 31, 1998;
- Quarterly Report on Form 10-Q for the quarter ended March 31, 1999;
- Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, as
amended on Form 10-Q/A on September 20, 1999; and
- Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.
You may request a copy of these filings, at no cost, by writing or calling
us at the following address: Secretary, Main Street Bancorp, Inc., 601 Penn
Street, Box 1097, Reading, Pennsylvania 19603, telephone (610) 685-1400.
No separate financial statements of MBNK Capital Trust have been included or
incorporated by reference in this document. We do not, nor does MBNK Capital
Trust, consider that such financial statements would be material to holders of
the preferred securities because MBNK Capital Trust is a newly formed special
purpose entity, has no operating history or independent operations and is not
engaged in and does not propose to engage in any activity other than holding as
trust assets the junior subordinated debentures and issuing the preferred
securities and common securities. See "MBNK Capital Trust I" on page 18,
"Description of Preferred Securities" on page 18, "Description of Junior
Subordinated Debentures" on page 31, and "Description of Guarantee" on page 41.
In addition, we do not expect that MBNK Capital Trust will be filing reports
under the Securities Exchange Act of 1934 with the SEC.
54
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -------------------------------------------
- -------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THIS OFFERING, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY MAIN STREET BANCORP, INC. OR MBNK CAPITAL TRUST I. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF MAIN STREET BANCORP,
INC., OR MBNK CAPITAL TRUST I SINCE ANY OF THE DATES AS OF WHICH INFORMATION IS
FURNISHED IN THIS PROSPECTUS OR SINCE THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary.................... 3
Selected Consolidated Financial
Data................................ 8
Risk Factors.......................... 10
Cautionary Statement Regarding
Forward-Looking Statements.......... 14
Use of Proceeds....................... 15
Consolidated Ratios of Earnings to
Fixed Charges....................... 15
Capitalization........................ 16
Accounting Treatment.................. 17
MBNK Capital Trust I.................. 18
Description of Preferred Securities... 18
Description of Junior Subordinated
Debentures.......................... 31
Description of Guarantee.............. 41
Relationship Among the Preferred
Securities, the Junior Subordinated
Debentures and the Guarantee........ 44
Material United States Federal Income
Tax Consequences.................... 45
ERISA Considerations.................. 50
Underwriting.......................... 52
Validity of Securities................ 53
Experts............................... 53
Where You Can Find Additional
Information......................... 53
</TABLE>
- -------------------------------------------
- -------------------------------------------
1,000,000 PREFERRED SECURITIES
MBNK CAPITAL TRUST I
9.625% CUMULATIVE PREFERRED SECURITIES
(LIQUIDATION AMOUNT
$10.00 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY
GUARANTEED AS DESCRIBED HEREIN BY
MAIN STREET BANCORP, INC.
[LOGO]
---------------------
PROSPECTUS
---------------------
WHEAT FIRST SECURITIES
JANNEY MONTGOMERY SCOTT LLC
DECEMBER 3, 1999
- -------------------------------------------
- -------------------------------------------
