Code of Massachusetts Regulations › 209 CMR - DIVISION OF BANKS AND LOAN AGENCIES › Title 209 CMR 33.00 - Conversion By Co-operative Banks And Savings Banks From Mutual To Stock Form › Section 33.28 - Contents of Stock Issuance Plans

Current through Register 1525, July 5, 2024
(1)
Mandatory provisions
. Each of the provisions mandatory
			 for all stock issuance plans under 209 CMR 33.28 shall be deemed regulatory
			 requirements. Any reference to a subsidiary banking institution shall include a
			 subsidiary holding company in the event of a stock issuance by a subsidiary
			 holding company. Each Stock Issuance Plan shall contain a complete description
			 of all significant terms of the proposed stock issuance (including the
			 information specified in 209 CMR 33.28(2) to the extent known); shall attach
			 and incorporate the proposed stock order form and any agreements or other
			 documents defining the rights of the stockholders; and shall:
(a) provide that the stock shall be sold at a
			 total price equal to the estimated pro forma market value of such stock, based
			 upon an independent valuation as provided in
			 209 CMR
			 33.08;
(b) provide that the aggregate amount of
			 outstanding common stock of the subsidiary banking institution owned or
			 controlled by persons other than the subsidiary banking institution's mutual
			 holding company parent at the close of the proposed issuance shall be less than
			 50% of the subsidiary banking institution's total outstanding common stock.
			 This provision may be omitted if the proposed issuance will be conducted by a
			 subsidiary banking institution that was in the stock form when acquired by its
			 mutual holding company parent, provided the subsidiary banking institution is
			 not a resulting subsidiary banking institution or an acquiree subsidiary
			 banking institution;
(c) provide
			 that the aggregate amount of common stock acquired in the proposed issuance,
			 plus all prior issuances of the subsidiary banking institution, by any non
			 tax-qualified employee stock benefit plan of the subsidiary banking institution
			 or any insider and his or her associates, exclusive of any stock acquired by
			 said plan or insider and his or her associates in the secondary market, shall
			 not exceed ten percent of the outstanding shares of common stock of the
			 subsidiary banking institution held by persons other than the subsidiary
			 banking institution's mutual holding company parent at the close of the
			 proposed issuance. In calculating the number of shares held by any insider or
			 associate under this provision or the provision in 209 CMR 33.28(1)(d), shares
			 held by any tax-qualified or non tax-qualified employee stock benefit plan of
			 the subsidiary banking institution that are attributable to such person shall
			 not be counted;
(d) provide that
			 the aggregate amount of stock, whether common or preferred, acquired in the
			 proposed issuance, plus all prior issuances of the subsidiary banking
			 institution, by non tax-qualified employee stock benefit plan of the subsidiary
			 banking institution and his or her associates, exclusive of any stock acquired
			 by said plan or insider and his or her associates in the secondary market,
			 shall not exceed 10% of the stockholders' equity of the subsidiary banking
			 institution held by persons other than the subsidiary banking institution's
			 mutual holding company parent at the close of the proposed issuance;
(e) provide that the aggregate amount of
			 common stock acquired in the proposed issuance, plus all prior issuances of the
			 subsidiary banking institution, by any one or more tax-qualified employee stock
			 benefit plans of the subsidiary banking institution, exclusive of any stock
			 acquired by such plans in the secondary market, shall not exceed 10% of the
			 outstanding shares of common stock of the subsidiary banking institution held
			 by persons other than the subsidiary banking institution's mutual holding
			 company parent at the close of the proposed issuance;
(f) provide that the aggregate amount of
			 stock, whether common or preferred, acquired in the proposed issuance, plus all
			 prior issuances of the subsidiary banking institution, by any one or more
			 tax-qualified employee stock benefit plans of the subsidiary banking
			 institution, exclusive of any stock acquired by such plans in the secondary
			 market, shall not exceed 10% of the stockholders' equity of the subsidiary
			 banking institution held by persons other than the subsidiary banking
			 institution's mutual holding company parent at the close of the proposed
			 issuance;
(g) provide that the
			 aggregate amount of common stock acquired in the proposed issuance, plus all
			 prior issuances of the subsidiary banking institution, by all nontax-qualified
			 employee stock benefit plans of the subsidiary banking institution, insiders of
			 the subsidiary banking institution, and associates of insiders, exclusive of
			 any stock acquired by said plans, insiders, and associates in the secondary
			 market, shall not exceed 35% of the outstanding shares of common stock of the
			 subsidiary banking institution held by persons other than the subsidiary
			 banking institution's mutual holding company parent at the close of the
			 proposed issuance if the subsidiary banking institution has less than $50
			 million in total assets prior to the issuance, or 25% of such outstanding
			 shares if the subsidiary banking institution has more than $500 million in
			 total assets prior to the issuance. If the subsidiary banking institution has
			 between $50 million and $500 million in total assets prior to the issuance, the
			 maximum percentage shall be equal to 35% minus 1% multiplied by the quotient of
			 total assets less $50 million divided by $45 million. In calculating the number
			 of shares held by insiders and their associates under this provision or the
			 provision in 209 CMR 33.28(1)(h), shares held by any tax-qualified or
			 nontax-qualified employee stock benefit plan of the subsidiary banking
			 institution that are attributable to such persons shall not be
			 counted;
(h) provide that the
			 aggregate amount of stock, whether common or preferred, acquired in the
			 proposed issuance, plus all prior issuances of the subsidiary banking
			 institution, by all nontax-qualified employee stock benefit plans of the
			 subsidiary banking institution, insiders and associates of insiders, exclusive
			 of any stock acquired by said plans, insiders and associates in the secondary
			 market, shall not exceed 35% of the stockholders' equity of the subsidiary
			 banking institution held by persons other than the subsidiary banking
			 institution's mutual holding company parent at the close of the proposed
			 issuance if the subsidiary banking institution has less than $50 million in
			 total assets prior to the issuance or 25% of such stockholders' equity if the
			 subsidiary banking institution has more than $500 million in total assets prior
			 to the issuance. If the subsidiary banking institution has between $50 million
			 and $500 million in total assets prior to the proposed issuance, the maximum
			 percentage shall be equal to 35% minus 1% multiplied by the quotient of total
			 assets less $ 5 0 million divided by $ 45 million;
(i) provide that the sales price of the
			 shares of stock to be sold in the issuance shall be a uniform price determined
			 in accordance with
			 209
			 CMR 33.27;
(j) provide that, if at the close of the
			 stock issuance the subsidiary banking institution has more than three hundred
			 shareholders of any class of stock, the subsidiary banking institution shall
			 promptly register that class of stock pursuant to the Securities Exchange Act
			 of 1934, as amended (
			 15
			 U.S.C. 78a -
			 78jj ), and undertake
			 not to deregister such stock for a period of three years thereafter;
(k) provide that, if at the close of the
			 stock issuance the subsidiary banking institution has more than 300
			 shareholders of any class of stock, the subsidiary banking institution shall
			 use its best efforts to:
1. encourage and
			 assist a market maker to establish and maintain a market for that class of
			 stock; and
2. list that class of
			 stock on a national or regional securities exchange or on the NASDAQ quotation
			 system.
(l) provide
			 that, for a period of three years following the proposed issuance, no insider
			 or his or her associates shall purchase, without the prior written approval of
			 the Commissioner, any stock of the subsidiary banking institution except from a
			 broker dealer registered with the Securities and Exchange Commission, except
			 the foregoing restriction shall not apply to:
1. negotiated transactions involving more
			 than 1% of the outstanding stock in the class of stock; or
2. purchases of stock made by and held by any
			 tax-qualified or nontax-qualified employee stock benefit plan of the subsidiary
			 banking institution even if such stock is attributable to insiders or their
			 associates.
(m) provide
			 that stock purchased by insiders and their associates in the proposed issuance
			 shall not be sold for a period of at least one year following the date of
			 purchase, except in the case of death or substantial disability, as determined
			 by the Commissioner, of the insider or associate;
(n) provide that, in connection with stock
			 subject to restriction on sale for a period of time:
1. Each certificate for such stock shall bear
			 a legend giving appropriate notice of such restriction.
2. Appropriate instructions shall be issued
			 to the subsidiary banking institution's transfer agent with respect to
			 applicable restrictions on transfer of such stock.
3. Any shares issued as a stock dividend,
			 stock split, or otherwise with respect to any such restricted stock shall be
			 subject to the same restrictions as apply to the restricted stock.
(o) provide that the subsidiary
			 banking institution will not offer or sell any of the stock proposed to be
			 issued to any person whose purchase would be financed by funds loaned, directly
			 or indirectly, to the person by the subsidiary banking institution;
(p) provide that, if necessary, the
			 subsidiary banking institution's Articles of Organization will be amended to
			 authorize issuance of the stock and attach and incorporate by reference the
			 text of any such amendment;
(q)
			 provide that the expenses incurred in connection with the issuance shall be
			 reasonable;
(r) provide that the
			 Stock Issuance Plan, if provided as part of a Reorganization Plan, may be
			 amended or terminated in the same manner as the Reorganization Plan. Otherwise,
			 the Stock Issuance Plan shall provide that it may be substantively amended by
			 the board of trustees or directors of the mutual banking institution or the
			 issuing subsidiary banking institution as a result of comments from regulatory
			 authorities or otherwise prior to approval of the Stock Issuance Plan by the
			 Commissioner, and at any time thereafter with the concurrence of the
			 Commissioner; and that the Stock Issuance Plan may be terminated by the board
			 of trustees or directors at any time prior to approval of the Plan by the
			 Commissioner, and at any time thereafter with the concurrence of the
			 Commissioner;
(s) provide that the
			 subsidiary banking institution may make scheduled discretionary contributions
			 to a tax-qualified employee stock benefit plan provided such contributions do
			 not cause the subsidiary banking institution to fail to meet any of its
			 regulatory capital requirements; and
(t) provide that in any Stock Issuance Plan
			 that includes an offer to the general public, eligible account holders with
			 subscription rights have first priority to purchase stock, supplemental
			 eligible account holders have second priority and tax-qualified employee stock
			 benefit plans have third priority. If the final stock valuation range exceeds
			 the maximum stock offering range, up to 10% of the total offering of shares may
			 be sold to the tax-qualified employee stock benefit plans.
Furthermore, if the ESOP is not able to purchase stock in the
				proposed issuance, the ESOP or any other tax-qualified plan may purchase shares
				in the open market or utilize authorized but unissued shares only with prior
				Commissioner approval; and disclosure must be made in the Stock Issuance Plan
				offering materials of the potential open market purchases or use of authorized
				but unissued shares to fund the ESOP and its effect on the subsidiary banking
				institution and its shareholders.
(u) No subsidiary banking institution shall,
			 for a one-year period from the date of the initial stock issuance which
			 includes an offer to the general public, implement a stock option plan or
			 management or employee stock benefit plan, other than a tax-qualified plan,
			 unless each of the following requirements is met:
1. Each of the plans was fully disclosed in
			 the proxy solicitation and offering materials.
2. For stock option plans, the total number
			 of shares of common stock for which options may be granted will not exceed, at
			 the close of each proposed issuance,
10%
of the amount of
			 shares issued in the proposed issuance.
3. For management or employee stock benefit
			 plans, the aggregate amount of such plans will not exceed, at the close of each
			 proposed issuance,
3%
of the amount of shares issued in the
			 proposed issuance.
4. The aggregate
			 amount of all shares obtained by a tax-qualified employee stock benefit plan(s)
			 or ESOP(s) under
			 209 CMR 33.21
			 through
			 33.32, and all
			 the shares in a management or employee stock benefit plan, pursuant to 209 CMR
			 33.28(1)(u)3., shall not exceed, at the close of each proposed issuance,
10%
of the total amount of shares issued in the proposed
			 issuance.
5. Subsidiary banking
			 institutions that have in excess of 10% tangible capital following the initial
			 stock issuance which includes an issuance to the general public, may be
			 granted, on a case by case basis, approval to establish a management or
			 employee stock benefit plan pursuant to 209 CMR 33.28(1)(u)3. in an amount up
			 to four percent of the amount of the shares issued to persons other than the
			 mutual holding company, and an aggregate total of up to 12% for all plans
			 established pursuant to 209 CMR 33.28(1)(u)4..
6. All such plans, prior to establishment and
			 implementation, are approved by the holders of 2/3 of the total votes eligible
			 to be cast at any duly called meeting of shareholders of the subsidiary banking
			 institution or its parent mutual holding company, either annual or special, to
			 be held not earlier than six months after completion of the initial stock
			 issuance which includes an offer to the general public.
7. In the case of a subsidiary banking
			 institution of a mutual holding company, all such plans, prior to establishment
			 and implementation, are approved by the holders (other than its parent mutual
			 holding company) of a majority of the total votes eligible to be cast, at any
			 duly called meeting of shareholders, either annual or special, to be held no
			 earlier than six months after completion of the initial stock issuance which
			 includes an offer to the general public.
8. For stock option plans, stock options are
			 granted at no less than the market price at which the stock is trading at the
			 time of grant.
9. For management or
			 employee stock benefit plans, no stock from an issuance which includes an offer
			 to the general public is used to fund the plans.
10. The plans subject to
			 209 CMR 33.21
			 through
			 33.32 must
			 comply with the terms and amounts specified in 209 CMR 33.28(1)(u)4..
11. The plans subject to
			 209 CMR 33.21
			 through
			 33.32 shall
			 begin vesting no earlier than one year from the date the plans are approved by
			 shareholders, shall not vest at a rate in excess of 20% a year, and shall not
			 provide for accelerated vesting except in the case of substantial disability or
			 death or upon written approval of the Commissioner.
12. Disclosure in all proxy and related
			 material distributed to shareholders in connection with the meeting at which
			 the stock option plans and management stock benefit plans will be voted shall
			 state that the plans comply with regulations of the Commissioner, that the
			 Commissioner in no way endorses or approves the plans, and no written or oral
			 representation to the contrary shall be made.
13. No later than five calendar days from the
			 date of shareholder approval of any stock option or management benefit plans,
			 the institution shall file with the Commissioner a copy of the approved plans
			 and written certification that the plans approved by the shareholders are the
			 same plans filed with and disclosed in the proxy materials.
14. The Commissioner, in his or her
			 discretion, may require the submission of a written independent opinion by a
			 professional third party management compensation expert on the fairness and
			 reasonableness of any such management stock purchase plan or management stock
			 option plan.
(v) provide
			 that any waiver by a mutual holding company of a dividend payment from its
			 subsidiary banking institution shall require the prior approval of the
			 Commissioner; and (w) provide that the proceeds of any Stock Issuance Plan,
			 which entails an offer to the general public, shall be payable in cash to the
			 subsidiary banking institution.