Section 33.28 - Contents of Stock Issuance Plans(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; and2. 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; or2. 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.(2)Optional provisions. A Stock Issuance Plan may: (a) provide that, in the event the proposed stock issuance is part of a Reorganization Plan, the stock offering may be commenced concurrently with or at any time after the mailing to the corporators of the reorganizing subsidiary banking institution and any acquiree subsidiary banking institutions which are savings banks and members of the reorganizing subsidiary banking institution and any acquiree subsidiary banking institutions which are co-operative banks of any proxy statement(s) authorized for use by the Commissioner. The offering may be closed before the required corporator or membership vote(s), provided the offer and sale of the stock shall be conditioned upon the approval of the Reorganization Plan and Stock Issuance Plan by the members of the reorganizing subsidiary banking institution and any acquiree subsidiary banking institution;(b) provide that any insignificant residue of stock of the subsidiary banking institution not sold in the offering may be sold in such other manner as provided in the Stock Issuance Plan, with the Commissioner's approval;(c) provide that the subsidiary banking institution may issue and sell, in lieu of shares of its stock, units of securities consisting of stock and long-term warrants or other equity securities, in which event any reference in the provisions of 209 CMR 33.21 through 33.32 to stock shall apply to such units of equity securities unless the context otherwise requires; or(d) provide that the subsidiary banking institution may reserve shares representing up to 10% of the proposed offering for issuance in connection with an employee stock benefit plan which conforms to applicable provisions of 209 CMR 33.28.