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Data is current as of April 18, 2008

Title 12:
Banks and Banking

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PART 575—MUTUAL HOLDING COMPANIES

Section Contents
§ 575.1   Scope.
§ 575.2   Definitions.
§ 575.3   Mutual
holding company reorganizations.
§ 575.4   Grounds
for disapproval of reorganizations.
§ 575.5   Membership
rights.
§ 575.6   Contents
of Reorganization Plans.
§ 575.7   Issuances
of stock by savings association subsidiaries of mutual holding
companies.
§ 575.8   Contents
of Stock Issuance Plans.
§ 575.9   Charters
and bylaws for mutual holding companies and their savings association
subsidiaries.
§ 575.10   Acquisition
and disposition of savings associations, savings and loan holding
companies, and other corporations by mutual holding
companies.
§ 575.11   Operating
restrictions.
§ 575.12   Conversion
or liquidation of mutual holding companies.
§ 575.13   Procedural
requirements.
§ 575.14   Subsidiary
holding companies.

Authority:   12 U.S.C. 1462, 1462a,
1463, 1464, 1467a, 1828, 2901.

Source:   58 FR 44114, Aug. 19, 1993,
unless otherwise noted.

§ 575.1   Scope.

top

(a) Purpose. The purpose of this part is to implement the mutual
holding company provisions of the Savings and Loan Holding Company Act, 12
U.S.C. 1467a(o).

(b) General. Except as the OTS may otherwise determine, the
provisions of this part shall exclusively govern the reorganization of
mutual savings associations and any related stock issuances, and no mutual
savings association shall reorganize to a mutual holding company or issue
minority stock without the prior written approval of the OTS. The OTS may
grant a waiver in writing from any requirement of this part for good cause
shown.

[58 FR 44114, Aug. 19, 1993, as amended at 59 FR 61262, Nov. 30,
1994]

§ 575.2   Definitions.

top

As used in this part, the following definitions apply, unless specified
elsewhere in this part:

(a) The terms associate and tax-qualified employee stock
benefit plan have the meanings set forth in §563b.25 of this
chapter.

(b) The terms acting in concert, affiliate, company, person, and
savings association have the meanings set forth in §574.2 of this
chapter.

(c) The term acquiree association means any savings association,
other than a resulting association, that:

(1) Is acquired by a mutual holding company as part of, and
concurrently with, a mutual holding company reorganization; and

(2) Is in the mutual form immediately prior to such acquisition.

(d) The term control has the same meaning as specified in §574.4
of this chapter.

(e) The term default means any adjudication or other official
determination of a court of competent jurisdiction or other public
authority pursuant to which a conservator, receiver, or other legal
custodian is appointed for a mutual holding company or savings association
subsidiary of a mutual holding company.

(f) The term insider means any officer or director of a company
or of any affiliate of such company, and any person acting in concert with
any such officer or director.

(g) The term member means any depositor or borrower of a mutual
savings association that is entitled, under the charter of the savings
association, to vote on matters affecting the association, and any
depositor or borrower of a savings association subsidiary of a mutual
holding company that is entitled, under the charter of the mutual holding
company, to vote on matters affecting the mutual holding company.

(h) The term mutual holding company means a mutual holding
company organized under this part, and unless otherwise indicated, a
subsidiary holding company controlled by a mutual holding company,
organized under this part.

(i) The term parent has the same meaning as the term parent
company specified at §583.15 of this chapter.

(j) The term Reorganization Notice means a notice of a proposed
mutual holding company reorganization that is in the form and contains the
information required by the OTS.

(k) The term Reorganization Plan means a plan to reorganize into
the mutual holding company format containing the information required by
§575.6 of this part.

(l) The term reorganizing association means a mutual savings
association that proposes to reorganize to become a mutual holding company
pursuant to this part.

(m) The term resulting association means a savings association
in the stock form that is organized as a subsidiary of a reorganizing
association to receive the substantial part of the assets and liabilities
(including all deposit accounts) of the reorganizing association upon
consummation of the reorganization.

(n) The term stock means common or preferred stock, or any other
type of equity security, including (without limitation) warrants or
options to acquire common or preferred stock, or other securities that are
convertible into common or preferred stock.

(o) The term Stock Issuance Plan means a plan, submitted
pursuant to §575.7 and containing the information required by §575.8,
providing for the issuance of stock by:

(1) A savings association subsidiary of a mutual holding company;
or

(2) A subsidiary holding company.

(p) The term subsidiary has the meaning specified at §583.23 of
this chapter.

(q) The term subsidiary holding company means a federally
chartered stock holding company, controlled by a mutual holding company,
that owns the stock of a savings association whose depositors have
membership rights in the parent mutual holding company.

[58 FR 44114, Aug. 19, 1993, as amended at 60 FR 66720, Dec. 26, 1995;
61 FR 60184, Nov. 27, 1996; 63 FR 11365, Mar. 9, 1998; 67 FR 52035, Aug.
9, 2002]

§ 575.3   Mutual holding company
reorganizations.

top

A mutual savings association may reorganize to become a mutual holding
company, or join in a mutual holding company reorganization as an acquiree
association, only upon satisfaction of the following conditions:

(a) A Reorganization Plan is approved by a majority of the board of
directors of the reorganizing association and any acquiree
association;

(b) A Reorganization Notice is filed with the OTS and either:

(1) The OTS has given written notice of its intent not to disapprove
the proposed reorganization; or

(2) Sixty days have passed since OTS received the Reorganization Notice
and deemed it complete under §516.210 or §516.220 of this chapter, and OTS
has not:

(i) Given written notice that the proposed reorganization is
disapproved; or

(ii) Extended for an additional 30 days the period during which
disapproval may be issued;

(c) The Reorganization Plan is submitted to the members of the
reorganizing association and any acquiree association pursuant to a proxy
statement cleared in advance by the OTS and such Reorganization Plan is
approved by a majority of the total votes of the members of each
association eligible to be cast at a meeting held at the call of each
association's directors in accordance with the procedures prescribed by
each association's charter and bylaws; and

(d) All necessary regulatory approvals have been obtained and all
conditions specified in §575.9(c)(5) of this part or otherwise imposed by
the OTS in connection with the issuance of a notice of intent not to
disapprove under §575.3(b)(1) of this part or by the OTS in connection
with the granting of the approvals specified in this paragraph have been
satisfied.

[58 FR 44114, Aug. 19, 1993, as amended at 66 FR 13009, Mar. 2,
2001]

§ 575.4   Grounds for disapproval of
reorganizations.

top

(a) Basic standards. The OTS may disapprove a proposed mutual
holding company reorganization pursuant to §575.3(b) of this part if:

(1) Disapproval is necessary to prevent unsafe or unsound
practices;

(2) The financial or managerial resources of the reorganizing
association or any acquiree association warrant disapproval;

(3) The proposed capitalization of the mutual holding company fails to
meet the requirements of paragraph (b) of this section;

(4) A stock issuance is proposed in connection with the reorganization
pursuant to §575.7 of this part that fails to meet the standards
established by that section;

(5) The reorganizing association or any acquiree association fails to
furnish the information required to be included in the Reorganization
Notice or any other information requested by the OTS in connection with
the proposed reorganization; or

(6) The proposed reorganization would violate any provision of law,
including (without limitation) §575.3 (a) and (c) of this part (regarding
board of directors and membership approval) or §575.5(a) of this part
(regarding continuity of membership rights).

(b) Capitalization. (1) The OTS shall disapprove a proposal by a
reorganizing association or any acquiree association to capitalize a
mutual holding company in an amount in excess of a nominal amount if
immediately following the reorganization, the resulting association or the
acquiree association would fail to be “adequately capitalized” as defined
under 12 CFR part 565.

(2) Proposals by reorganizing associations and acquiree associations to
capitalize mutual holding companies shall also comply with any applicable
statutes, and with regulations or written policies of the OTS governing
capital distributions by savings associations in effect at the time of the
reorganization. (Issuance by the OTS of a notice of intent not to
disapprove a mutual holding company reorganization pursuant to §575.3(b)
of this part, or failure by the OTS to disapprove such a reorganization
within the time prescribed in §575.3(b) of this part, shall also be deemed
to constitute OTS approval under any regulation or written policy of the
OTS governing capital distributions by savings associations, if such
approval is required, of the capitalization proposal set forth in the
Reorganization Notice, subject to any conditions imposed by §575.4(d)(2)
of this part.)

(c) Presumptive disqualifiers —(1) Managerial resources.
The factors specified in §574.7 (g)(1)(i)–(g)(1)(vi) of this chapter
shall give rise to a rebuttable presumption that the managerial resources
test of paragraph (a)(2) of this section is not met. For this purpose,
each place the term acquiror appears in §574.7 (g)(1)(i)–(g)(1)(vi)
of this chapter, it shall be read to mean the reorganizing association or
any acquiree association, and the reference in §574.7(g)(1)(v) of this
chapter to filings under this part shall be deemed to include filings
under either part 574 of this chapter or this part.

(2) Safety and soundness and financial resources. Failure by a
reorganizing association and any acquiree association to submit a business
plan in connection with a Reorganization Notice, or submission of a
business plan that projects activities that are inconsistent with the
credit and lending needs of your proposed market area or that fails to
demonstrate that the capital of the mutual holding company will be
deployed in a safe and sound manner, shall give rise to a rebuttable
presumption that the safety and soundness and financial resources tests of
paragraphs (a)(1) and (a)(2) of this section are not met.

(d) Failure of the OTS to act on a Reorganization Notice within the
prescribed time period. A proposed reorganization that obtains
regulatory clearance from the OTS due to the operation of §575.3(b)(2) of
this part may take place in the manner proposed, subject to the following
conditions:

(1) The reorganization shall be consummated within one year of the date
of the expiration of the OTS's review period under §575.3(b)(2) of this
part;

(2) The mutual holding company shall not be capitalized in an amount in
excess of what is permissible under §575.4(b) of this part;

(3) No request for regulatory waivers or forbearances shall be deemed
granted;

(4) The following information shall be submitted within the specified
time frames:

(i) On the business day prior to the date of the reorganization, the
chief financial officers of the reorganizing association and any acquiree
association shall certify to the OTS in writing that no material adverse
events or material adverse changes have occurred with respect to the
financial condition or operations of their respective associations since
the date of the financial statements submitted with the Reorganization
Notice;

(ii) No later than thirty days after the reorganization, the mutual
holding company shall file with the OTS a certification by legal counsel
stating the effective date of the reorganization, the exact number of
shares of stock of the resulting association and any acquiree association
acquired by the mutual holding company and by any other persons, and that
the reorganization has been consummated in accordance with §575.3 of this
part and all other applicable laws and regulations and the Reorganization
Notice;

(iii) No later than thirty days after the reorganization, the mutual
holding company shall file with the OTS an opinion from its independent
auditors certifying that the reorganization was consummated in accordance
with generally accepted accounting principles; and

(iv) No later than thirty days after the reorganization, the mutual
holding company shall file with the OTS a certification stating that the
mutual holding company will not deviate materially, or cause its savings
association subsidiaries to deviate materially, from the business plan
submitted in connection with the Reorganization Notice, unless prior
written approval from the Regional Director is obtained.

[58 FR 44114, Aug. 19, 1993, as amended at 67 FR 52035, Aug. 9,
2002]

§ 575.5   Membership rights.

top

(a) Depositors and borrowers of resulting associations, acquiree
associations, and associations in mutual form when acquired. The
charter of a mutual holding company must:

(1) Confer upon existing and future depositors of the resulting
association the same membership rights in the mutual holding company as
were conferred upon depositors by the charter of the reorganizing
association as in effect immediately prior to the reorganization;

(2) Confer upon existing and future depositors of any acquiree
association or any association that is in the mutual form when acquired by
the mutual holding company the same membership rights in the mutual
holding company as were conferred upon depositors by the charter of the
acquired association immediately prior to acquisition, provided that
if the acquired association is merged into another association from
which the mutual holding company draws members, the depositors of the
acquired association shall receive the same membership rights as the
depositors of the association into which the acquired association is
merged;

(3) Confer upon the borrowers of the resulting association who are
borrowers at the time of reorganization the same membership rights in the
mutual holding company as were conferred upon them by the charter of the
reorganizing association immediately prior to reorganization, but shall
not confer any membership rights in connection with any borrowings made
after the reorganization; and

(4) Confer upon the borrowers of any acquiree association or any
association that is in the mutual form when acquired by the mutual holding
company who are borrowers at the time of the acquisition the same
membership rights in the mutual holding company as were conferred upon
them by the charter of the acquired association immediately prior to
acquisition, but shall not confer any membership rights in connection with
any borrowings made after the acquisition, provided that if the
acquired association is merged into another association from which the
mutual holding company draws members, the borrowers of the acquired
association shall instead receive the same grandfathered membership rights
as the borrowers of the association into which the acquired association is
merged received at the time that association became a subsidiary of the
mutual holding company.

(b) Depositors and borrowers of associations in the stock form when
acquired. A mutual holding company that acquires a savings association
in the stock form, other than a resulting association or an acquiree
association, shall not confer any membership rights upon the depositors
and borrowers of such association, unless such association is merged into
an association from which the mutual holding company draws members, in
which case the depositors of the stock association shall receive the same
membership rights as other depositors of the association into which the
stock association is merged.

§ 575.6   Contents of Reorganization
Plans.

top

Each Reorganization Plan shall contain a complete description of all
significant terms of the proposed reorganization, shall attach and
incorporate any Stock Issuance Plan proposed in connection with the
Reorganization Plan, and shall:

(a) Provide for amendment of the charter and bylaws of the reorganizing
association to read in the form of the charter and bylaws of a mutual
holding company, and attach and incorporate such charter and bylaws;

(b) Provide for the organization of the resulting association, which
shall be an interim federal or state savings association subsidiary of the
reorganizing association, and attach and incorporate the proposed charter
and bylaws of such association;

(c) If the reorganizing association proposes to form a subsidiary
holding company, provide for the organization of a subsidiary holding
company and attach and incorporate the proposed charter and bylaws of such
subsidiary holding company.

(d) Provide for amendment of the charter and bylaws of any acquiree
association to read in the form of the charter and bylaws of a state or
federal savings association in the stock form (as modified by §575.9(b) of
this part), and attach and incorporate such charter and bylaws;

(e) Provide that, upon consummation of the reorganization,
substantially all of the assets and liabilities (including all savings
accounts, demand accounts, tax and loan accounts, United States Treasury
General Accounts, or United States Treasury Time Deposit Open Accounts, as
defined in part 561 of this chapter) of the reorganizing association shall
be transferred to the resulting association, which shall thereupon become
an operating savings association subsidiary of the mutual holding
company;

(f) Provide that all assets, rights, obligations, and liabilities of
whatever nature of the reorganizing association that are not expressly
retained by the mutual holding company shall be deemed transferred to the
resulting association;

(g) Provide that each depositor in the reorganizing association or any
acquiree association immediately prior to the reorganization shall upon
consummation of the reorganization receive, without payment, an identical
account in the resulting association or the acquiree association, as the
case may be (Appropriate modifications should be made to this provision if
savings associations are being merged as a part of the
reorganization);

(h) Provide that the Reorganization Plan as adopted by the boards of
directors of the reorganizing association and any acquiree association may
be substantively amended by those boards of directors as a result of
comments from regulatory authorities or otherwise prior to the
solicitation of proxies from the members of the reorganizing association
and any acquiree association to vote on the Reorganization Plan and at any
time thereafter with the concurrence of the OTS; and that the
reorganization may be terminated by the board of directors of the
reorganizing association or any acquiree association at any time prior to
the meeting of the members of the association called to consider the
Reorganization Plan and at any time thereafter with the concurrence of the
OTS;

(i) Provide that the Reorganization Plan shall be terminated if not
completed within a specified period of time (The time period shall not be
more than 24 months from the date upon which the members of the
reorganizing association or the date upon which the members of any
acquiree association, whichever is earlier, approve the Reorganization
Plan and may not be extended by the reorganizing or acquiree association);
and

(j) Provide that the expenses incurred in connection with the
reorganization shall be reasonable.

[58 FR 44114, Aug. 19, 1993, as amended at 63 FR 11365, Mar. 9,
1998]

§ 575.7   Issuances of stock by savings
association subsidiaries of mutual holding companies.

top

(a) Requirements. No savings association subsidiary of a mutual
holding company (including any resulting association or acquiree
association) may issue stock to persons other than its mutual holding
company parent in connection with a mutual holding company reorganization,
or at any time subsequent to the association's acquisition by the mutual
holding company, unless the association obtains advance approval of each
such issuance from the OTS. Issuance by the OTS of a notice of intent not
to disapprove a mutual holding company reorganization pursuant to
§575.3(b) of this part, or failure by the OTS to disapprove such a
reorganization within the time prescribed in §575.3(b) of this part, shall
be deemed to constitute approval of any stock issuance specifically
applied for pursuant to this section in connection with the
reorganization, unless otherwise specified by the OTS. The OTS shall
approve any proposed issuance that meets each of the criteria set forth
below in paragraphs (a)(1)–(a)(7) of this section.

(1) The proposed issuance is to be made pursuant to a Stock Issuance
Plan that contains all the provisions required by §575.8 of this part.

(2) The Stock Issuance Plan is consistent with the terms of the
association's charter (or any proposed amendments thereto), including
terms governing the type and amount of stock that may be issued.

(3) The Stock Issuance Plan would provide the association, its mutual
holding company parent, and any other savings association subsidiaries of
the mutual holding company with fully sufficient capital and would not be
inequitable or detrimental to the association or its mutual holding
company parent or to members of the mutual holding company parent.

(4) The proposed price or price range of the stock to be issued is
reasonable. (The OTS shall review the reasonableness of the proposed price
or price range in accordance with paragraph (b) of this section.)

(5) The aggregate amount of outstanding common stock of the association
owned or controlled by persons other than the association's mutual holding
company parent at the close of the proposed issuance shall be less than
50% of the association's total outstanding common stock, unless the
association was a stock association when acquired by the mutual holding
company and is not a resulting association or an acquiree association, in
which case the foregoing restriction shall not apply. Any amount of
preferred stock may be issued by any savings association subsidiary of a
mutual holding company to persons other than the association's mutual
holding company, consistent with any other applicable laws and
regulations.

(6) The association furnishes the information required by the OTS in
connection with the proposed issuance.

(7) The proposed stock issuance would fail to meet the convenience and
needs standard of §563b.200(c) of this chapter.

(8) The proposed issuance complies with all other applicable laws and
regulations.

(9) Unless otherwise determined by the OTS, the limitations on the
minimum and maximum amounts of the estimated price range required by
§563b.330 of this chapter shall apply.

(b) Related approvals. Approval by the OTS of any stock issuance
pursuant to this section shall also be deemed to constitute:

(1) Approval under §563.3 of this chapter of the form of stock
certificate proposed to be utilized in connection with the stock issuance,
provided such form was included in the application materials filed
pursuant to this section; and

(2) Preliminary approval under §552.4 of this chapter and approval
under §563.3 of this chapter of any charter or bylaw amendment required to
authorize issuance of the stock, provided such amendment was proposed in
the application materials filed pursuant to this section.

(c) Offering restrictions. (1) No representations may be made in
any manner in connection with the offer or sale of any stock issued
pursuant to this section that the price, price range or any other pricing
information related to such stock issuance has been approved by the OTS or
that the stock has been approved or disapproved by the OTS or that the OTS
has endorsed the accuracy or adequacy of any securities offering documents
disseminated in connection with such stock.

(2) The sale of minority stock of the reorganized stock savings
association to be made under the minority stock issuance plan, including
any sale in a public offering or direct community marketing, shall be
completed as promptly as possible and within 45 calendar days after the
last day of the subscription period, unless extended by the OTS.

(3) In the offer, sale, or purchase of stock issued pursuant to this
section, no person shall:

(i) Employ any device, scheme, or artifice to defraud;

(ii) Make any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made, in the light
of the circumstances under which they were made, not misleading; or

(iii) Engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon a purchaser or seller.

(4) Prior to the completion of a stock issuance pursuant to this
section, no person shall transfer, or enter into any agreement or
understanding to transfer, the legal or beneficial ownership of the stock
to be issued to any other person.

(5) Prior to the completion of a stock issuance pursuant to this
section, no person shall make any offer, or any announcement of any offer,
to purchase any stock to be issued, or knowingly acquire any stock in the
issuance, in excess of the maximum purchase limitations established in the
Stock Issuance Plan.

(6) All stock issuances pursuant to this section must:

(i) Comply with 12 CFR part 563g and, to the extent applicable, Form
OC; and

(ii) Provide that the offering be structured in a manner similar to a
standard conversion under 12 CFR part 563b, including the stock purchase
priorities accorded members of the issuing association's mutual holding
company, unless the association would qualify for a supervisory conversion
if it were to undertake a conversion under 12 CFR part 563b; or
demonstrates to the satisfaction of the OTS that a non-conforming issuance
would be more beneficial to the association compared to a conforming
offering, considering, in the aggregate, the effect of each on the
association's financial and managerial resources and future prospects, the
effect of the issuance upon the association, the insurance risk to the
Deposit Insurance Fund, and the convenience and needs of the community to
be served.

(7) Notwithstanding the restrictions in paragraph (d)(6)(ii) of this
section, a savings association subsidiary of a mutual holding company may
issue stock as part of a stock benefit plan to any insider, associate of
an insider, or tax qualified or non-tax qualified employee stock benefit
plan of the mutual holding company or subsidiary of the mutual holding
company without including the purchase priorities of part 563b of this
chapter.

(8) As part of a reorganization, a reasonable amount of shares or
proceeds may be contributed to a charitable organization that complies
with §§563b.550 to 563b.575 of this chapter, provided such contribution
does not result in any taxes on excess business holdings under section
4943 of the Internal Revenue Code (26 U.S.C. 4943).

(d) Procedural and substantive requirements. The procedural and
substantive requirements of 12 CFR part 563b shall apply to all mutual
holding company stock issuances under this section, unless clearly
inapplicable, as determined by OTS. For purposes of this paragraph (d),
the term conversion as it appears in the provisions of Part 563b of
this chapter shall refer to the stock issuance, and the term converted
or converting savings association shall refer to the savings
association undertaking the stock issuance.

[58 FR 44114, Aug. 19, 1993, as amended at 59 FR 22735, May 3, 1994; 67
FR 52035, Aug. 9, 2002; 67 FR 78153, Dec. 23, 2002; 68 FR 75110, Dec. 30,
2003; 71 FR 19812, Apr. 18, 2006; 72 FR 35150, June 27, 2007]

§ 575.8   Contents of Stock Issuance
Plans.

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(a) Mandatory provisions. Each of the provisions mandatory for
all stock issuance plans under this paragraph shall be deemed regulatory
requirements. Each Stock Issuance Plan shall contain a complete
description of all significant terms of the proposed stock issuance
(including the information specified in §563b.650 of this chapter to the
extent known), shall attach and incorporate the proposed form of stock
certificate, the proposed stock order form, and any agreements or other
documents defining the rights of the stockholders, and shall:

(1) 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 §575.7(b) of this part;

(2) Provide that the aggregate amount of outstanding common stock of
the association owned or controlled by persons other than the
association's mutual holding company parent at the close of the proposed
issuance shall be less than fifty percent of the association's total
outstanding common stock (This provision may be omitted if the proposed
issuance will be conducted by an association that was in the stock form
when acquired by its mutual holding company parent, provided the
association is not a resulting association or an acquiree
association);

(3) Provide that all employee stock ownership plans or other
tax-qualified employee stock benefit plans (collectively, ESOPs) must not
encompass, in the aggregate, more than either 4.9 percent of the
outstanding shares of the savings association's common stock or 4.9
percent of the savings association's stockholders' equity at the close of
the proposed issuance.

(4) Provide that all ESOPs and management recognition plans (MRPs) must
not encompass, in the aggregate, more than either 4.9 percent of the
outstanding shares of the savings association's common stock or 4.9
percent of the savings association's stockholders' equity at the close of
the proposed issuance. However, if the savings association's tangible
capital equals at least ten percent at the time of implementation of the
plan, OTS may permit such ESOPs and MRPs to encompass, in the aggregate,
up to 5.88 percent of the outstanding common stock or stockholders' equity
at the close of the proposed issuance.

(5) Provide that all MRPs must not encompass, in the aggregate, more
than either 1.47 percent of the common stock of the savings association or
1.47 percent of the savings association's stockholders' equity at the
close of the proposed issuance. However, if the savings association's
tangible capital is at least ten percent at the time of implementation of
the plan, OTS may permit MRPs to encompass, in the aggregate, up to 1.96
percent of the outstanding shares of the savings association's common
stock or 1.96 percent of the savings association's stockholders' equity at
the close of the proposed issuance.

(6) Provide that all stock option plans (Option Plans) must not
encompass, in the aggregate, more than either 4.9 percent of the savings
association's outstanding common stock at the close of the proposed
issuance or 4.9 percent of the savings association's stockholders' equity
at the close of the proposed issuance.

(7) Provide that an ESOP, a MRP or an Option Plan modified or adopted
no earlier than one year after the close of: the proposed issuance, or any
subsequent issuance that is made in substantial conformity with the
purchase priorities set forth in part 563b, may exceed the percentage
limitations contained in paragraphs (a)(3) through (6) of this section
(plan expansion), subject to the following two requirements. First, all
common stock awarded in connection with any plan expansion must be
acquired for such awards in the secondary market. Second, such
acquisitions must begin no earlier than when such plan expansion is
permitted to be made.

(8)(i) Provide that the aggregate amount of common stock that may be
encompassed under all Option Plans and MRPs, or acquired by all insiders
of the association and associates of insiders of the association, must not
exceed the following percentages of common stock or stockholders' equity
of the savings association, held by persons other than the savings
association's mutual holding company parent at the close of the proposed
issuance:

Institution size

Officer
and
director
purchases
(percent)

$ 50,000,000 or less

35

$
50,000,001–100,000,000

34

$100,000,001–150,000,000

33

$150,000,001–200,000,000

32

$200,000,001–250,000,000

31

$250,000,001–300,000,000

30

$300,000,001–350,000,000

29

$350,000,001–400,000,000

28

$400,000,001–450,000,000

27

$450,000,001–500,000,000

26

Over $500,000,000

25

(ii) The percentage limitations contained in paragraph 8(i) may be
exceeded provided that all stock acquired by insiders and associates of
insiders or awarded under all MRPs and Option Plans in excess of those
limitations is acquired in the secondary market. If acquired for such
awards on the secondary market, such acquisitions must begin no earlier
than one year after the close of the proposed issuance or any subsequent
issuance that is made in substantial conformity with the purchase
priorities set forth in Part 563b.

(iii) In calculating the number of shares held by insiders and their
associates under this provision, shares awarded but not delivered under an
ESOP, MRP, or Option Plan that are attributable to such persons shall not
be counted as being acquired by such persons.

(9) Provide that the amount of common stock that may be encompassed
under all Option Plans and MRPs must not exceed, in the aggregate, 25
percent of the outstanding common stock held by persons other than the
savings association's mutual holding company parent at the close of the
proposed issuance.

(10) Provide that the issuance shall be conducted in compliance with 12
CFR part 563g and, to the extent applicable, Form OC;

(11) 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 §575.7
of this part;

(12) Provide that, if at the close of the stock issuance the
association has more than thirty-five shareholders of any class of stock,
the association 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;

(13) Provide that, if at the close of the stock issuance the
association has more than one hundred shareholders of any class of stock,
the association shall use its best efforts to:

(i) Encourage and assist a market maker to establish and maintain a
market for that class of stock; and

(ii) List that class of stock on a national or regional securities
exchange or on the NASDAQ quotation system;

(14) Provide that, for a period of three years following the proposed
issuance, no insider of the association or his or her associates shall
purchase, without the prior written approval of the OTS, any stock of the
association except from a broker dealer registered with the Securities and
Exchange Commission, except that the foregoing restriction shall not apply
to:

(i) Negotiated transactions involving more than one percent of the
outstanding stock in the class of stock; or

(ii) Purchases of stock made by and held by any tax-qualified or
non-tax-qualified employee stock benefit plan of the association even if
such stock is attributable to insiders of the association or their
associates;

(15) Provide that stock purchased by insiders of the association 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 of the insider or associate;

(16) Provide that, in connection with stock subject to restriction on
sale for a period of time:

(i) Each certificate for such stock shall bear a legend giving
appropriate notice of such restriction;

(ii) Appropriate instructions shall be issued to the association's
transfer agent with respect to applicable restrictions on transfer of such
stock; and

(iii) 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;

(17) Provide that the association 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
association;

(18) Provide that, if necessary, the association's charter will be
amended to authorize issuance of the stock and attach and incorporate by
reference the text of any such amendment;

(19) Provide that the expenses incurred in connection with the issuance
shall be reasonable;

(20) Provide that the Stock Issuance Plan, if proposed 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 directors of the
issuing association as a result of comments from regulatory authorities or
otherwise prior to approval of the Plan by the OTS, and at any time
thereafter with the concurrence of the OTS; and that the Stock Issuance
Plan may be terminated by the board of directors at any time prior to
approval of the Plan by the OTS, and at any time thereafter with the
concurrence of the OTS;

(21) Provide that, unless an extension is granted by the OTS, the Stock
Issuance Plan shall be terminated if not completed within 90 days of:

(i) The date of such approval; or

(ii) For stock issuances subject to the offering circular requirements
of part 563g of this chapter, the date on which the offering circular was
declared effective by the OTS; and

(22) Provide that the association may make scheduled discretionary
contributions to a tax-qualified employee stock benefit plan provided such
contributions do not cause the association to fail to meet any of its
regulatory capital requirements.

(b) Optional provisions. A Stock Issuance Plan may:

(1) 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 members of the reorganizing
association and any acquiree association of any proxy statement(s)
authorized for use by the OTS. The offering may be closed before the
required 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 association and any
acquiree association;

(2) Provide that any insignificant residue of stock of the association
not sold in the offering may be sold in such other manner as provided in
the Stock Issuance Plan, with the OTS's approval;

(3) Provide that the association 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 this section and in §575.7 of this part to stock shall apply
to such units of equity securities unless the context otherwise requires;
or

(4) Provide that the association may reserve shares representing up to
ten percent of the proposed offering for issuance in connection with an
employee stock benefit plan.

(c) Applicability of provisions of §563b.500(a) to minority stock
issuances. Notwithstanding §575.7(d) of this section, §563b.500(a)(2)
and (3) do not apply to minority stock issuances, because the permissible
sizes of ESOPs, MRPs, and Option Plans in minority stock issuances are
subject to each of the requirements set forth at paragraphs (a)(3) through
(a)(9) of this section. Section 563b.500, paragraphs (a)(4) through (14),
apply for one year after the savings association engages in a minority
stock issuance that is conducted in accordance with the purchase
priorities set forth in part 563b. In addition to the shareholder vote
requirement for Option Plans and MRPs set forth at §563b.500(a)(6), any
Option Plans and MRPs put to a shareholder vote after a minority stock
issuance that is conducted in accordance with the purchase priorities set
forth in part 563b must be approved by a majority of the votes cast by
stockholders other than the mutual holding company.

[58 FR 44114, Aug. 19, 1993, as amended at 67 FR 52035, Aug. 9, 2002;
72 FR 35150, June 27, 2007]

§ 575.9   Charters and bylaws for mutual holding
companies and their savings association subsidiaries.

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(a) Charters and bylaws for mutual holding companies —(1)
Charters. The charter of a mutual holding company shall be in the
form set forth in this paragraph (a)(1) and may include any of the
additional provisions permitted pursuant to paragraph (a)(2) of this
section.

Charter

Section 1: Corporate title. The name of the mutual holding
company is ___(the “Mutual Company”).

Section 2: Duration. The duration of the Mutual Company is
perpetual.

Section 3: Purpose and powers. The purpose of the Mutual Company
is to pursue any or all of the lawful objectives of a federal mutual
savings and loan holding company chartered under section 10(o) of the Home
Owners' Loan Act, 12 U.S.C. 1467a(o), and to exercise all of the express,
implied, and incidental powers conferred thereby and all acts amendatory
thereof and supplemental thereto, subject to the Constitution and the laws
of the United States as they are now in effect, or as they may hereafter
be amended, and subject to all lawful and applicable rules, regulations,
and orders of the Office of Thrift Supervision (“OTS”).

Section 4: Capital. The Mutual Company shall have no capital
stock.

Section 5: Members. [The content of this section 5 shall be
identical to the content of the parallel section in the charter of the
reorganizing association, with the following exceptions: (A) Any
provisions conferring membership rights upon borrowers of the reorganizing
association shall be eliminated and replaced with provisions
grandfathering those rights in accordance with 12 CFR 575.5; and (B)
appropriate changes shall be made to indicate that membership rights in
the mutual holding company derive from deposit accounts in and, to the
extent of any grandfather provisions, borrowings from the resulting
association. Set forth below is an example of how section 5 should appear
in the charter of a mutual holding company formed by a reorganizing
association whose charter conforms to the model charter prescribed for
federal mutual savings associations for calendar year 1989. Additional
changes to this section 5 may be required whenever a mutual holding
company reorganization involves an acquiree association, or a mutual
holding company makes a post-reorganization acquisition of a mutual
savings association, so as to preserve the membership rights of the
members of the acquired association consistent with 12 CFR 575.5.]

All holders of the savings, demand, or other authorized accounts of
______[insert the name of the resulting association] (the “Association”)
are members of the Mutual Company. With respect to all questions requiring
action by the members of the Mutual Company, each holder of an account in
the Association shall be permitted to cast one vote for each $100, or
fraction thereof, of the withdrawal value of the member's account. In
addition, borrowers from the Association as of ______[insert the date of
the reorganization or any earlier date as of which new borrowings ceased
to result in membership rights] shall be entitled to one vote for the
period of time during which such borrowings are in existence. [The
foregoing sentence should be included only if the charter of the
reorganizing association confers voting rights on any borrowers.] No
member, however, shall cast more than one thousand votes. All accounts
shall be nonassessable.

Section 6. Directors. The Mutual Company shall be under the
direction of a board of directors. The authorized number of directors
shall not be fewer than five nor more than fifteen, as fixed in the Mutual
Company's bylaws, except that the number of directors may be decreased to
a number less than five or increased to a number greater than fifteen with
the prior approval of the Director of the Office or his or her
delegate.

Section 7: Capital, surplus, and distribution of earnings. [The
content of this section 7 shall be identical to the content of the
parallel section in the charter of the reorganizing association, except
for changes made to indicate that distribution rights in the mutual
holding company derive from deposit accounts in the resulting association,
any changes required to provide that the Director of the OTS shall be the
approving authority in instances where the charter requires regulatory
approval of distributions, and any other changes necessary to accommodate
the mutual holding company format. Set forth below is an example of how
section 7 should appear in the charter of a mutual holding company formed
by a reorganizing association whose charter conforms to the model charter
prescribed for federal mutual savings associations for calendar year 1989.
Additional changes to this section 7 may be required whenever a mutual
holding company reorganization involves an acquiree association, or a
mutual holding company makes a post-reorganization acquisition of a mutual
savings association, so as to preserve the membership rights of the
members of the acquired association consistent with 12 CFR 575.5.]

The Mutual Company shall distribute net earnings to account holders of
the Association on such basis and in accordance with such terms and
conditions as may from time to time be authorized by the Director of the
OTS, provided that the Mutual Company may establish minimum account
balance requirements for account holders to be eligible for distributions
of earnings.

All holders of accounts of the Association shall be entitled to equal
distribution of the assets of the Mutual Company, pro rata to the
value of their accounts in the Association, in the event of voluntary or
involuntary liquidation, dissolution, or winding up of the Mutual
Company.

Section 8. Amendment. Adoption of any preapproved charter
amendment shall be effective after such preapproved amendment has been
approved by the members at a legal meeting. Any other amendment, addition,
change, or repeal of this charter must be approved by the Office prior to
approval by the members at a legal meeting and shall be effective upon
filing with the Office in accordance with regulatory
procedures.
Attest:____________________

Secretary of the
Association
By:____________________

President or Chief Executive
Officer of the Association
Attest:____________________

Secretary of the Office of Thrift
Supervision
By:____________________

Director of the Office of Thrift
Supervision
Effective Date:____________________

(2) Charter amendments. The rules and regulations set forth in
§544.2 of this chapter regarding charter amendments and reissuances of
charters (including delegations and filing instructions) shall be
applicable to mutual holding companies to the same extent as if mutual
holding companies were Federal mutual savings associations, except that,
with respect to the pre-approved charter amendments set forth in §544.2 of
this chapter, §§544.2(b)(1) and (b)(3) of this chapter shall not apply to
mutual holding companies, and mutual holding companies changing their
corporate title pursuant to §544.2(b)(2) of this chapter shall be required
to comply with §575.9(a)(3) of this part as well as §543.1(b) of this
chapter.

(3) Corporate title. The corporate title of each mutual holding
company shall include the term “mutual” or the abbreviation “M.H.C.”

(4) Bylaws. The rules and regulations set forth in §544.5 of
this chapter regarding bylaws (including their content, any amendments
thereto, delegations, and filing instructions) shall be applicable to
mutual holding companies to the same extent as if mutual holding companies
were federal mutual savings associations. The model bylaws for Federal
mutual savings associations set forth in the OTS Applications Processing
Handbook shall also serve as the model bylaws for mutual holding
companies, except that the term “association” each time it appears therein
shall be replaced with the term “Mutual Company”; section 11(e) (extending
leniency to borrowing members) and section 11(f) (rejection of
applications for accounts or membership) shall be removed and the
remaining paragraphs of section 12 redesignated accordingly.

(5) Availability of charter and bylaws. A mutual holding company
shall make available to its members at all times in the offices of each
subsidiary savings association from which the mutual holding company draws
members a true copy of its charter and bylaws, including any amendments,
and shall deliver such a copy to any member upon request. Mutual holding
companies shall also be subject to the provisions of §544.8 of this
chapter.

(b) Charters and bylaws of subsidiary savings associations of mutual
holding companies. Except as specified otherwise by the OTS in any
notice of intent not to disapprove a mutual holding company reorganization
or in any regulation or order, each subsidiary savings association of a
mutual holding company shall be subject to the same rules and regulations
regarding charters and bylaws as are applicable to stock savings
associations that are chartered by the OTS, 12 CFR part 552, or by the
appropriate state chartering authority, as the case may be, provided
that the charter of each resulting association, each acquiree
association, and each mutual savings association that is acquired by a
mutual holding company shall contain the provision set forth below:

In any situation in which the priority of the accounts of the
association is in controversy, all such accounts shall, to the extent of
their withdrawable value, be debts of the association having at least as
high a priority as the claims of general creditors of the association not
having priority (other than any priority arising or resulting from
consensual subordination) over other general creditors of the
association.

(c) Approval of charters and bylaws of mutual holding companies and
their savings association subsidiaries in connection with Reorganization
Plans. (1) Issuance by the OTS of a notice of intent not to disapprove
a reorganization pursuant to §575.3(b) of this part, or failure by the OTS
to disapprove such a reorganization within the time prescribed in
§575.3(b) of this part, shall be deemed to constitute:

(i) Approval pursuant to §575.3(d) of this part and this section for
the reorganizing association to amend its charter and bylaws in their
entirety to read in the form of the mutual holding company charter and
bylaws proposed in the Reorganization Notice (as modified by any
conditions imposed by the OTS in its notice of intent not to disapprove or
paragraph (c)(2) of this section and subject to paragraph (c)(5) of this
section);

(ii) If the Reorganization Plan provides that the resulting association
is to be federally chartered, approval pursuant to 12 U.S.C. 1464 (a) and
(e) and §§552.2–1 and 552.2–2 of this chapter of the organization of the
resulting association and the proposed charter and bylaws of such
association (as modified by any conditions imposed by the OTS in its
notice of intent not to disapprove or by paragraph (c)(2) of this section
and subject to paragraph (c)(5) of this section); and

(iii) If the Reorganization Plan provides that the acquiree association
is to be federally chartered, approval pursuant to §552.4 of this chapter
of the amendment of the existing charter of the acquiree association in
its entirety to read in the form of the proposed charter and bylaws of
such association (as modified by any conditions imposed by the OTS in its
notice of intent not to disapprove or paragraph (c)(2) of this section and
subject to paragraph (c)(5) of this section).

(2) In the event the charter and bylaws of a mutual holding company and
of any federally-chartered resulting association or acquiree association
are approved pursuant to paragraph (c)(1) of this section due to failure
of the OTS to disapprove a Reorganization Notice within the time
prescribed in §575.3(b) of this part, such approval shall be subject to
the condition that such charter(s) and bylaws shall conform in every
particular to the model charter(s) and bylaws for mutual holding companies
and/or federal stock savings associations, as the case may be, as set
forth in the OTS's regulations.

(3) Promptly after approval of the amendment of the charter of a
reorganizing association to read in the form of a mutual holding company
charter pursuant to paragraph (c)(1) of this section, the OTS shall issue
an executed copy of such charter to the reorganizing association. Such
charter shall not become effective until consummation of the
Reorganization Plan, at which point in time it shall replace and nullify
the charter of the reorganizing association. The charter of the
reorganizing association shall be surrendered to the OTS within five days
after consummation of the Reorganization Plan. If the Reorganization Plan
is terminated for any reason, the charter of the mutual holding company
shall become immediately null and void and shall be returned to the OTS
within five days.

(4) Promptly after approval of any federal charter for a resulting
association pursuant to paragraph (c)(1) of this section or approval of
the amendment of any federal charter of an acquiree association pursuant
to paragraph (c)(1) of this section, the OTS shall issue an executed copy
of such charter(s) to the reorganizing association and/or the acquiree
association, as the case may be.

(i) Prior to consummation of the Reorganization Plan, the resulting
association (whether chartered under federal or state law) shall
constitute an interim savings association subsidiary of the reorganizing
association and shall not accept any deposits or engage in any other
business activities except for those activities necessary to consummate
the Reorganization Plan. If the Reorganization Plan is terminated for any
reason, the charter of the resulting association shall immediately become
null and void and, if the resulting association is federally chartered,
the charter shall be returned to the OTS within five days.

(ii) Any amended charter issued to an acquiree association (whether by
the OTS or the appropriate state authority) shall not become effective
until consummation of the Reorganization Plan, at which point in time it
shall replace and nullify the prior charter of the acquiree association.
The prior charter of any federally-chartered acquiree association shall be
surrendered to the OTS within five days after consummation of the
Reorganization Plan. If the Reorganization Plan is terminated for any
reason, the amended charter of the acquiree association shall become
immediately null and void and, if the acquiree association is federally
chartered, the amended charter shall be returned to the OTS within five
days.

(5) Approval of the amendment of the charter and bylaws of the
reorganizing association to read in the form of the charter and bylaws of
a mutual holding company and of any acquiree association to read in the
form of a stock association and approval of the organization of any
resulting association and of its charter and bylaws pursuant to paragraph
(c)(1) of this section shall be subject to any conditions subsequent that
the OTS may impose in connection therewith or with its notice of intent
not to disapprove the reorganization.

[58 FR 44114, Aug. 19, 1993, as amended at 61 FR 64021, Dec. 3, 1996;
62 FR 66264, Dec. 18, 1997]

§ 575.10   Acquisition and disposition of savings
associations, savings and loan holding companies, and other corporations
by mutual holding companies.

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(a) Acquisitions— (1) Stock savings associations. A
mutual holding company may acquire control of a savings association that
is in the stock form, provided the necessary approvals are obtained from
the OTS, including (without limitation) approval pursuant to part 574 of
this chapter and, if the acquisition involves a merger or transfer of
assets or liabilities, approval pursuant to §§552.13, 563.22, and part 546
of this chapter, as appropriate.

(2) Mutual savings associations. A mutual holding company may
acquire a savings association in the mutual form by merger of such
association into any subsidiary savings association of such holding
company from which the parent mutual holding company draws members or into
an interim savings association subsidiary of the mutual holding company,
provided:

(i) The proposed acquisition is approved by a majority of the board of
directors of the mutual association;

(ii) The proposed acquisition is submitted to the mutual association's
members pursuant to a proxy statement authorized for use by the OTS and
such acquisition is approved by a majority of the total votes of the
association's members eligible to be cast at a meeting held at the call of
the association's directors in accordance with the procedures prescribed
by the association's charter and bylaws;

(iii) The necessary approvals are obtained from the OTS, including
(without limitation) approval pursuant to part 574 of this chapter and
§§552.13, 563.22, and part 546 of this chapter, as appropriate, and any
approvals required to form an interim association, to amend the charter
and bylaws of the association being acquired, and/or to amend the charter
and bylaws of the mutual holding company consistent with 575.6(a) of this
part; and

(iv) The approval of the members of the mutual holding company is
obtained, if the OTS advises the mutual holding company in writing that
such approval will be required.

(3) Mutual holding companies. A mutual holding company that is
not a subsidiary holding company may acquire control of another mutual
holding company, including a subsidiary holding company, by merging with
or into such company, provided the necessary approvals are obtained from
the OTS, including (without limitation) approval pursuant to part 574 of
this chapter. The approval of the members of the mutual holding companies
shall also be obtained if the OTS advises the mutual holding companies in
writing that such approval will be required.

(4) Stock holding companies. A mutual holding company may
acquire control of a savings and loan holding company in the stock form
that is not a subsidiary holding company, provided the necessary approvals
are obtained from the OTS, including (without limitation) approval
pursuant to part 574 of this chapter. The acquired holding company may be
held as a subsidiary of the mutual holding company or merged into the
mutual holding company.

(5) Non-controlling acquisitions of savings association stock. A
mutual holding company may acquire non-controlling amounts of the stock of
savings associations and savings and loan holding companies subject to the
restrictions imposed by 12 U.S.C. 1467a(e) and (q) and §§574.8 and 584.4
of this chapter.

(6) Other corporations. A mutual holding company may acquire
control of, and make non-controlling investments in the stock of, any
corporation other than a savings association or savings and loan holding
company only if:

(i) (A) Such corporation is engaged exclusively in activities that are
permissible for mutual holding companies pursuant to §575.11(a) of this
part; or

(B) It is lawful for the stock of such corporation to be purchased by a
federal savings association under part 559 of this chapter or by a state
savings association under the law of any state where any subsidiary
savings association of the mutual holding company has its home office;
and

(ii) Such corporation is not controlled, directly or indirectly, by a
savings association subsidiary of the mutual holding company.

(b) Dispositions. (1) A mutual holding company shall provide
written notice to the OTS at least 30 days prior to the effective date of
any direct or indirect transfer of any of the stock that it holds in a
subsidiary holding company, a resulting association, an acquiree
association, or any subsidiary savings association that was in the mutual
form when acquired by the mutual holding company, including stock
transferred in connection with a pledge pursuant to §575.11(b) or any
transfer of all or a substantial portion of the assets or liabilities of
any such subsidiary holding company or association. Any such disposition
shall comply with the requirements of this part or with part 563b of this
chapter, as appropriate, and with any other applicable statute or
regulation including, without limitation, parts 546, 563 and 574 of this
chapter.

(2) A mutual holding company may, subject to applicable laws and
regulations, transfer any or all of the stock or cause or permit the
transfer of any or all of the assets and liabilities of:

(i) Any subsidiary savings association that was in the stock form when
acquired, provided such association is not a resulting association or an
acquiree association;

(ii) Any subsidiary savings and loan holding company acquired pursuant
to paragraph (a)(4) of this section; or

(iii) Any corporation other than a savings association or savings and
loan holding company.

(3) A mutual holding company may, subject to applicable laws and
regulations, transfer any stock acquired pursuant to paragraph (a)(5) of
this section.

(4) No transfer authorized by this section may be made to any insider
of the mutual holding company, any associate of an insider of the mutual
holding company, or any tax-qualified or non-tax-qualified employee stock
benefit plan of the mutual holding company unless the mutual holding
company provides notice to the OTS at least 30 days prior to the effective
date of the proposed transfer. This notice shall be in addition to any
other application or notice required under applicable laws or regulations,
including, without limitation, this part and parts 563, 563b, 574 of this
chapter.

[58 FR 44114, Aug. 19, 1993, as amended at 60 FR 66720, Dec. 26, 1995;
63 FR 11365, Mar. 9, 1998]

§ 575.11   Operating restrictions.

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(a) Activities restrictions. A mutual holding company may engage
in any business activity specified in 12 U.S.C. 1467a(c)(2) or
(c)(9)(A)(ii). In addition, the business activities of subsidiaries of
mutual holding companies may include the activities specified in
§575.10(a)(6) of this part. A mutual holding company or its subsidiaries
may engage in the foregoing activities only upon compliance with the
procedures specified in §§584.2–1(c) or 584.2–2(b) of this chapter.

(b) Pledging stock. (1) No mutual holding company may pledge the
stock of its resulting association, an acquiree association, or any
subsidiary savings association that was in the mutual form when acquired
by the mutual holding company (or its parent mutual holding company),
unless the proceeds of the loan secured by the pledge are infused into the
association whose stock is pledged. No mutual holding company may pledge
the stock of its subsidiary holding company unless the proceeds of the
loan secured by the pledge are infused into any savings association
subsidiary of the subsidiary holding company that is a resulting
association, an acquiree association, or a subsidiary savings association
that was in the mutual form when acquired by the subsidiary holding
company (or its parent mutual holding company). In the event the
subsidiary holding company has more than one savings association
subsidiary, the loan proceeds shall, unless otherwise approved by the OTS,
be infused in equal amounts to each savings association subsidiary. Any
amount of the stock of such association or subsidiary holding company may
be pledged for these purposes. Nothing in this paragraph (b)(1) shall be
deemed to prohibit:

(i) The payment of dividends from a subsidiary savings association to
its mutual holding company parent to the extent otherwise permissible;
or

(ii) The payment of dividends from a subsidiary holding company to its
mutual holding company parent to the extent otherwise permissible; or

(iii) A mutual holding company from pledging the stock of more than one
savings association subsidiary provided that the stock pledged of each
such subsidiary association is proportionate to the proceeds of the loan
infused into each subsidiary association.

(2) Within 10 days after its pledge of stock pursuant to paragraph
(b)(1) of this section, a mutual holding company shall provide written
notice to the OTS regarding the terms of the transaction (including the
amount of principal and interest, repayment terms, maturity date, the
nature and amount of collateral, and the terms governing seizure of the
collateral) and shall include in such notice a certification that the
proceeds of the loan have been transferred to the subsidiary savings
association whose stock (or the stock of its parent subsidiary holding
company) has been pledged.

(3) Any mutual holding company that fails to make any payment on a loan
secured by the pledge of stock pursuant to paragraph (b)(1) of this
section on or before the date on which such payment is due shall, on the
first day after such payment is due, provide written notice of nonpayment
to the Regional Director.

(c) Restrictions on stock repurchases. (1) No subsidiary savings
association of a mutual holding company that has any stockholders other
than the association's mutual holding company and no subsidiary holding
company that has any stockholders other than its parent mutual holding
company may repurchase any share of stock within one year of its date of
issuance (which may include the time period the shares issued by the
savings association were outstanding if the subsidiary holding company was
formed after the initial issuance by the savings association), unless the
repurchase:

(i) Is in compliance with §563b.510 of this chapter;

(ii) Is part of a general repurchase made on a pro rata basis pursuant
to an offer approved by the OTS and made to all stockholders of the
association or subsidiary holding company (except that the parent mutual
holding company may be excluded from the repurchase with the OTS'
approval);

(iii) Is limited to the repurchase of qualifying shares of a director;
or

(iv) Is purchased in the open market by a tax-qualified or
non-tax-qualified employee stock benefit plan of the savings association
(or of a subsidiary holding company) in an amount reasonable and
appropriate to fund such plan.

(2) No mutual holding company may purchase shares of its subsidiary
savings association or subsidiary holding company within one year after a
stock issuance, except if the purchase complies with §563b.510 of this
chapter. For purposes of this subsection, the reference in §563b.510 of
this chapter to five percent refers to minority shareholders.

(d) Restrictions on waiver of dividends. No mutual holding
company may waive its right to receive any dividend declared by a
subsidiary unless either:

(1) No insider of the mutual holding company, associate of an insider,
or tax-qualified or non-tax-qualified employee stock benefit plan of the
mutual holding company holds any share of stock in the class of stock to
which the waiver would apply; or

(2) The mutual holding company provides the OTS with written notice of
its intent to waive its right to receive dividends 30 days prior to the
proposed date of payment of the dividend, and the OTS does not object. The
OTS shall not object to a notice of intent to waive dividends if:

(i) The waiver would not be detrimental to the safe and sound operation
of the savings association; and

(ii) The board of directors of the mutual holding company expressly
determines that waiver of the dividend by the mutual holding company is
consistent with the directors' fiduciary duties to the mutual members of
such company. A dividend waiver notice shall include a copy of the
resolution of the board of directors of the mutual holding company, in
form and substance satisfactory to the OTS, together with any supporting
materials relied upon by the board, concluding that the proposed dividend
waiver is consistent with the board's fiduciary duties to the mutual
members of the mutual holding company.

(3) The OTS will not consider waived dividends in determining an
appropriate exchange ratio in the event of a full conversion to stock
form.

(e) Restrictions on issuance of stock to insiders. A subsidiary
of a mutual holding company that is not a savings association or
subsidiary holding company may issue stock to any insider, associate of an
insider or tax-qualified or non-tax-qualified employee stock benefit plan
of the mutual holding company or any subsidiary of the mutual holding
company, provided that such persons or plans provide written notice to the
OTS at least 30 days prior to the stock issuance, and OTS does not object
to the subsequent stock issuance. Subsidiary savings associations and
subsidiary holding companies may issue stock to such persons only in
accordance with §575.7.

(f) Restrictions on indemnification. The provisions of §545.121
of this chapter shall apply to mutual holding companies in the same manner
as if they were federal savings associations.

(g) Restrictions on employment contracts. The provisions of
§563.39 of this chapter and any policies of the OTS thereunder shall apply
to mutual holding companies in the same manner as if they were savings
associations.

(h) Applicability of rules governing savings and loan holding
companies. Except as expressly provided in this part, mutual holding
companies shall be subject to the provisions of 12 U.S.C. 1467a and 3201
et seq. and parts 563e, 574, 583, and 584 of this chapter.

(i) Separate vote for charitable organization contribution. In a
mutual holding company stock issuance, a separate vote of a majority of
the outstanding shares of common stock held by stockholders other than the
mutual holding company or subsidiary holding company must approve any
charitable organization contribution.

[58 FR 44114, Aug. 19, 1993, as amended at 60 FR 66720, Dec. 26, 1995;
63 FR 11365, Mar. 9, 1998; 65 FR 43091, July 12, 2000; 67 FR 52036, Aug.
9, 2002]

§ 575.12   Conversion or liquidation of mutual
holding companies.

top

(a) Conversion —(1) Generally. A mutual holding company
may convert to the stock form in accordance with the rules and regulations
set forth in part 563b of this chapter.

(2) Exchange of savings association stock. Any stock issued pursuant to
§575.7 by a subsidiary savings association or subsidiary holding company
of a mutual holding company to persons other than the parent mutual
holding company may be exchanged for the stock issued by the parent mutual
holding company in connection with the conversion of the parent mutual
holding company to stock form. The parent mutual holding company and the
subsidiary holding company or savings association must demonstrate to the
satisfaction of the OTS that the basis for the exchange is fair and
reasonable.

(3) If a subsidiary holding company or subsidiary savings association
has issued shares to an entity other than the mutual holding company, the
conversion of the mutual holding company to stock form may not be
consummated unless a majority of the shares issued to entities other than
the mutual holding company vote in favor of the conversion. This
requirement applies in addition to any otherwise required account holder
or shareholder votes.

(b) Involuntary liquidation. (1) The OTS may file a petition
with the federal bankruptcy courts requesting the liquidation of a mutual
holding company pursuant to 12 U.S.C. 1467a(o)(9) and title 11, United
States Code, upon the occurrence of any of the following events:

(i) The default of the resulting association, any acquiree association,
or any subsidiary savings association of the mutual holding company that
was in the mutual form when acquired by the mutual holding company;

(ii) The default of the parent mutual holding company or its subsidiary
holding company; or

(iii) Foreclosure on any pledge by the mutual holding company of
subsidiary savings association stock or subsidiary holding company stock
pursuant to §575.11(b).

(2) Except as provided in paragraph (b)(3) of this section, the net
proceeds of any liquidation of any mutual holding company shall be
transferred to the members of the mutual holding company or the stock
holders of the subsidiary holding company in accordance with the charter
of the mutual holding company or subsidiary holding company.

(3) If the FDIC incurs a loss as a result of the default of any savings
association subsidiary of a mutual holding company and that mutual holding
company is liquidated pursuant to paragraph (b)(1) of this section, the
FDIC shall succeed to the membership interests of the depositors of such
savings association in the mutual holding company, to the extent of the
FDIC's loss.

(c) Voluntary liquidation. The provisions of §546.4 of this
chapter shall apply to mutual holding companies in the same manner as if
they were federal savings associations.

[58 FR 44114, Aug. 19, 1993, as amended at 63 FR 11366, Mar. 9, 1998;
67 FR 52036, Aug. 9, 2002]

§ 575.13   Procedural requirements.

top

(a) Proxies and proxy statements —(1) Solicitation of
proxies. The provisions of §§563b.225 to 563b.295 of this chapter
shall apply to all solicitations of proxies by any person in connection
with any membership vote required by this part. OTS must authorize all
proxy materials used in connection with such solicitations. Proxy
materials must be in the form and contain the information specified in
§§563b.255 and 563b.270 of this chapter and Form PS, to the extent such
information is relevant to the action that members are being asked to
approve, with such additions, deletions, and other modifications as are
necessary or appropriate under the disclosure standard set forth in
§563b.280 of this chapter. File proxies and proxy statements in accordance
with §563b.155 of this chapter and address them to the Business
Transactions Division, Chief Counsel's Office, Office of Thrift
Supervision, at the address set forth in §516.40 of this chapter. For
purposes of this paragraph (a)(1), the term conversion, as it
appears in the provisions of part 563b of this chapter cited above in this
paragraph (a)(1), refers to the reorganization or the stock
issuance, as appropriate.

(2) Additional proxy disclosure requirements. In addition to all
disclosure required by Form PS, all proxies requesting accountholder
approval of a mutual holding company reorganization shall address in
detail:

(i) The reasons for the reorganization, including the relative
advantages and disadvantages of undertaking the transaction proposed
instead of a standard conversion;

(ii) Whether management believes the reorganization is in the best
interests of the association and its accountholders and the basis of that
belief;

(iii) The fiduciary duties owed to accountholders by the association's
officers and directors and why the reorganization is in accord with those
duties and is otherwise equitable to the accountholders and the
association;

(iv) Any compensation agreements that will be entered into by
management in connection with the reorganization; and

(v) Whether the mutual holding company intends to waive dividends, the
implications to accountholders, and the reasons such waivers are
consistent with the fiduciary duties of the directors of the mutual
holding company.

(3) Nonconforming minority stock issuances. Savings associations
proposing non-conforming minority stock issuances pursuant to
§575.7(d)(6)(ii)(2) of this part must include in the proxy materials to
accountholders seeking approval of a proposed reorganization an additional
disclosure statement that serves as a cover sheet that clearly
addresses:

(i) The consequences to accountholders of voting to approve a
reorganization in which their subscription rights are prioritized
differently and potentially eliminated; and

(ii) Any intent by the mutual holding company to waive dividends, and
the implications to accountholders.

(4) Use of “running” proxies. A mutual savings association or
mutual holding company may make use of any proxy conferring general
authority to vote on any and all matters at any meeting of members,
provided that the member granting such proxy has been furnished a proxy
statement regarding the matters and the member does not grant a
later-dated proxy to vote at the meeting at which the matter will be
considered or attend such meeting and vote in person, and further provided
that “running” proxies or similar proxies may not be used to vote for a
mutual holding company reorganization, mutual-to-stock conversion
undertaken either by a mutual savings association or a mutual holding
company or any other material transaction. Subject to the limitations set
forth in this paragraph, any proxy conferring on the board of directors or
officers of a mutual savings association general authority to cast a
member's votes on any and all matters presented to the members shall be
deemed to cover the member's votes as a member of the mutual holding
company and such authority shall be conferred on the board of directors or
officers of a mutual holding company.

(b) Applications under this part. Except as provided in
paragraph (c) of this section, any application, notice or certification
required to be filed with OTS under this part must be filed in accordance
with part 516, subpart A of this chapter.

(c) Reorganization Notices and stock issuance applications —(1)
Contents. Each Reorganization Notice submitted to the OTS pursuant
to §575.3(b) of this part and each application for approval of the
issuance of stock submitted to the OTS pursuant to §575.7(a) of this part
shall be in the form and contain the information specified by the OTS.

(2) Filing instructions. Any Reorganization Notice submitted
under §575.3(b) of this part must be filed in accordance with part 516,
subpart A of this chapter. Any stock issuance application submitted
pursuant to §575.7(a) of this part shall be filed in accordance with
§563b.150 of this chapter.

(3) Public notice, public comment, and meetings. This part
imposes no requirements regarding public notice, public comment, or
meetings for mutual holding company reorganizations. However, mutual
holding company reorganizations under this part are subject to applicable
public notice, public comment, and meeting requirements under the Bank
Merger Act regulations at §563.22(e)(1) of this chapter and the Savings
and Loan Holding Company Act regulations at §574.6(d) and (e) of this
chapter.

(d) Amendments. Any association or mutual holding company may
amend any notice or application submitted pursuant to this part or file
additional information with respect thereto upon request of the OTS or
upon the association's or mutual holding company's own initiative.

(e) Time-frames. All Reorganization Notices and applications
filed pursuant to this part must be processed in accordance with standard
treatment processing procedures at part 516, subparts A and E. Any related
approvals requested in connection with Reorganization Notices or
applications for approval of stock issuances (including, without
limitation, requests for approval to transfer assets to resulting
associations, to acquire acquiree associations, and to organize resulting
associations or interim associations, and requests for approval of
charters, bylaws, and stock forms) shall be processed pursuant to the
procedures specified in this section in conjunction with the
Reorganization Notice or stock issuance application to which they pertain,
rather than pursuant to any inconsistent procedures specified elsewhere in
this chapter. The approval standards for all such related applications,
however, shall remain unchanged. The review by OTS of proxy solicitation
materials, including forms of proxy and proxy statements, and of any other
materials used in connection with the issuance of stock under §575.7 of
this part must not be subject to the applications processing time-frames
set forth in §§516.210 through 516.290 of this chapter.

(f) Disclosure. The rules governing disclosure of any notice or
application submitted pursuant to this part, or any public comment
submitted pursuant to paragraph (c) of this section, shall be the same as
set forth in §574.6(f) of this chapter for notices, applications, and
public comments filed under part 574 of this chapter.

(g) [Reserved]

(h) Appeals. Any party aggrieved by a final action by the OTS
which approves or disapproves any application or notice pursuant to this
part 575 may obtain review of such action only by complying with 12 U.S.C.
1467a(j).

(i) Federal preemption. This part 575 preempts state law with
regard to the creation and regulation of mutual holding companies.

[58 FR 44114, Aug. 19, 1993, as amended at 59 FR 22735, May 3, 1994; 59
FR 44627, Aug. 30, 1994; 59 FR 61262, Nov. 30, 1994; 66 FR 13010, Mar. 2,
2001; 67 FR 52036, Aug. 9, 2002; 69 FR 68251, Nov. 24, 2004]

§ 575.14   Subsidiary holding
companies.

top

(a) Subsidiary holding companies. A mutual holding company may
establish a subsidiary holding company as a direct subsidiary to hold 100%
of the stock of its savings association subsidiary. The formation and
operation of the subsidiary holding company may not be utilized as a means
to evade or frustrate the purposes of this part 575 or part 563b of this
chapter. The subsidiary holding company may be established either at the
time of the initial mutual holding company reorganization or at a
subsequent date, subject to the approval of the OTS.

(b) Stock issuances. For purposes of §§575.7 and 575.8, the
subsidiary holding company shall be treated as a savings association
issuing stock and shall be subject to the requirements of those sections.
In the case of a stock issuance by a subsidiary holding company, the
aggregate amount of outstanding common stock of the association owned or
controlled by persons other than the subsidiary holding company's mutual
holding company parent at the close of the proposed issuance shall be less
than 50% of the subsidiary holding company's total outstanding common
stock.

(c) Charters and bylaws for subsidiary holding companies —(1)
Charters. The charter of a subsidiary holding company shall be in
the form set forth in this paragraph (c)(1) and may include any of the
additional provisions permitted pursuant to paragraph (c)(2) of this
section. The form of the charter is as follows:

Federal MHC Subsidiary Holding Company Charter

Section 1. Corporate title. The full corporate title of the MHC
subsidiary holding company is XXX.

Section 2. Domicile. The domicile of the MHC subsidiary holding company
shall be in the city of _________, in the State of ______.

Section 3. Duration. The duration of the MHC subsidiary holding company
is perpetual.

Section 4. Purpose and powers. The purpose of the MHC subsidiary
holding company is to pursue any or all of the lawful objectives of a
federal mutual holding company chartered under section 10(o) of the Home
Owners' Loan Act, 12 U.S.C. 1467a(o), and to exercise all of the express,
implied, and incidental powers conferred thereby and by all acts
amendatory thereof and supplemental thereto, subject to the Constitution
and laws of the United States as they are now in effect, or as they may
hereafter be amended, and subject to all lawful and applicable rules,
regulations, and orders of the Office of Thrift Supervision
(“Office”).

Section 5. Capital stock. The total number of shares of all classes of
the capital stock that the MHC subsidiary holding company has the
authority to issue is ______, all of which shall be common stock of par
[or if no par is specified then shares shall have a stated] value of
______ per share. The shares may be issued from time to time as authorized
by the board of directors without the approval of its shareholders, except
as otherwise provided in this section 5 or to the extent that such
approval is required by governing law, rule, or regulation. The
consideration for the issuance of the shares shall be paid in full before
their issuance and shall not be less than the par [or stated] value.
Neither promissory notes nor future services shall constitute payment or
part payment for the issuance of shares of the MHC subsidiary holding
company. The consideration for the shares shall be cash, tangible or
intangible property (to the extent direct investment in such property
would be permitted to the MHC subsidiary holding company), labor, or
services actually performed for the MHC subsidiary holding company, or any
combination of the foregoing. In the absence of actual fraud in the
transaction, the value of such property, labor, or services, as determined
by the board of directors of the MHC subsidiary holding company, shall be
conclusive. Upon payment of such consideration, such shares shall be
deemed to be fully paid and nonassessable. In the case of a stock
dividend, that part of the retained earnings of the MHC subsidiary holding
company that is transferred to common stock or paid-in capital accounts
upon the issuance of shares as a stock dividend shall be deemed to be the
consideration for their issuance.

Except for shares issued in the initial organization of the MHC
subsidiary holding company, no shares of capital stock (including shares
issuable upon conversion, exchange, or exercise of other securities) shall
be issued, directly or indirectly, to officers, directors, or controlling
persons (except for shares issued to the parent mutual holding company) of
the MHC subsidiary holding company other than as part of a general public
offering or as qualifying shares to a director, unless the issuance or the
plan under which they would be issued has been approved by a majority of
the total votes eligible to be cast at a legal meeting.

The holders of the common stock shall exclusively possess all voting
power. Each holder of shares of common stock shall be entitled to one vote
for each share held by such holder, except as to the cumulation of votes
for the election of directors, unless the charter provides that there
shall be no such cumulative voting. Subject to any provision for a
liquidation account, in the event of any liquidation, dissolution, or
winding up of the MHC subsidiary holding company, the holders of the
common stock shall be entitled, after payment or provision for payment of
all debts and liabilities of the MHC subsidiary holding company, to
receive the remaining assets of the MHC subsidiary holding company
available for distribution, in cash or in kind. Each share of common stock
shall have the same relative rights as and be identical in all respects
with all the other shares of common stock.

Section 6. Preemptive rights. Holders of the capital stock of the MHC
subsidiary holding company shall not be entitled to preemptive rights with
respect to any shares of the MHC subsidiary holding company which may be
issued.

Section 7. Directors. The MHC subsidiary holding company shall be under
the direction of a board of directors. The authorized number of directors,
as stated in the MHC subsidiary holding company's bylaws, shall not be
fewer than five nor more than fifteen except when a greater or lesser
number is approved by the Director of the Office, or his or her
delegate.

Section 8. Amendment of charter. Except as provided in Section 5, no
amendment, addition, alteration, change or repeal of this charter shall be
made, unless such is proposed by the board of directors of the MHC
subsidiary holding company, approved by the shareholders by a majority of
the votes eligible to be cast at a legal meeting, unless a higher vote is
otherwise required, and approved or preapproved by the
Office.
Attest:____________________

Secretary of the Subsidiary Holding
Company
By:____________________

President or Chief Executive Officer of the Subsidiary Holding
Company
Attest:____________________

Secretary of the Office of Thrift
Supervision
By:____________________

Director of the Office of Thrift Supervision
Effective
Date:____________________

(2) Charter amendments. The rules and regulations set forth in
§552.4 of this chapter regarding charter amendments and reissuances of
charters (including delegations and filing instructions) shall be
applicable to subsidiary holding companies to the same extent as if the
subsidiary holding companies were Federal stock savings associations,
except that, with respect to the pre-approved charter amendments set forth
in §552.4 of this chapter, the reference to home office in §552.4(b)(2) of
this chapter shall be deemed to refer to the domicile of the subsidiary
holding company and the requirements of §545.95 of this chapter shall not
apply to subsidiary holding companies.

(3) Bylaws. The rules and regulations set forth in §552.5 of
this chapter regarding bylaws (including their content, any amendments
thereto, delegations, and filing instructions) shall be applicable to
subsidiary holding companies to the same extent as if subsidiary holding
companies were federal stock savings associations. The model bylaws for
Federal stock savings associations set forth in the OTS Applications
Processing Handbook shall also serve as the model bylaws for subsidiary
holding companies, except that the term “association” each time it appears
therein shall be replaced with the term “Subsidiary Holding Company.”

(4) Annual reports and books and records. The rules and
regulations set forth in §§552.10 and 552.11 of this chapter regarding
annual reports to stockholders and maintaining books and records shall be
applicable to subsidiary holding companies to the same extent as if
subsidiary holding companies were Federal stock savings associations.

[63 FR 11366, Mar. 9, 1998]

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