February 16, 1999
Board of Directors
Marlborough Co-Operative Bank
175 Main Street PO Box K
Marlborough, Massachusetts 0 1752
Members of the Board:
The Board of Directors of the Federal Deposit Insurance Corporation (the Board) has
today approved the request filed on behalf of Marlborough Co-Operative Bank (the Bank) for
a limited waiver of the depositor voting requirements imposed by 12 C.F.R. Section
333.4(c)(2) with regard to the Bank's conversion from mutual to stock form of ownership.
This waiver is granted pursuant to 12 C.F.R. Section 303.162(a)(2).
The FDIC's regulations at 12 C.F.R. Section 333.4(c)(2) require that the following
depositor voting Procedures be implemented:
The proposed conversion shall be approved by a vote of at least a majority of the
bank's depositors and, as reasonably determined by the bank's directors or trustees, other
stakeholders of the bank who are entitled to vote on the conversion, unless the applicable
state law requires a higher percentage, in which case the higher percentage shall be used.
Voting may be in person or by proxy.
Massachusetts law requires approval of mutual-to-stock conversion plans by more than two thirds of the depositors present at a special meeting called to
vote on a plan. Massachusetts law prohibits voting by proxy for co-operative banks.
The attendance and results of the vote held at the September 18, 1998 special meeting
of depositors was considered in reaching this decision. The special meeting was attended
by 94 eligible depositors out of 2,998 eligible depositors, or 3.1% of eligible
depositors. Of the 94 eligible depositors present, 91 voted on the plan of conversion,
with 79 or 86.8 percent of those depositors voting in favor of the plan of conversion .The
79 depositors who voted in favor of the conversion clearly do not represent a majority of
the Bank's depositors, as required by the FDIC's Rules and Regulations. but the Board
understands that it was difficult for the Bank to obtain votes from a majority of
depositors without the use of proxies, which are prohibited under Massachusetts law. In
the face of this challenge, the Bank made extraordinary efforts to attract depositors to
the special meeting to vote in person. including:
1. The Bank's Notice and Information Statement sent to its depositors on September 1,
1998, informing them of the special meeting and the matters to be considered ended with
the following in bold capital letters. "YOUR ATTENDANCE AT THIS MEETING IS VERY
IMPORTANT."
2. Printed notices of the special meeting were handed to customers at teller windows
and customer service desks at all offices of the Bank.
3. Reminder notices of the meeting were displayed at the teller windows and the
entrances of all offices of the Bank.
4. Each of the Directors and proposed Corporators invited family and friends to the
meeting.
5. As soon as the Notice and Information Statement was sent. Bank staff personally
approached 10 to 15 customers each day to remind them of the meeting.
6. Staff members, Directors. and proposed Corporators attending local community
functions encouraged depositors to attend the meeting.
7. During the week before the meeting. staff members made telephone calls to depositors
reminding them of the meeting.
8. Notice of the meeting was forwarded to the local media and shown on cable
television.
Despite these extraordinary efforts. the Bank attracted only a small proportion of its
depositors to the special meeting. The Board recognizes that the 94 depositors who
attended the special meeting represent a great improvement over the number who attended
previous depositor meetings of the Bank. Over the preceding five years, annual meetings
typically had been attended by fewer than 15 depositors, all of whom were insiders of the
Bank. The Board also recognizes that any further efforts are not likely to attract
significantly higher numbers of depositors to another special meeting. The Board has
provided this explanation of the approval of the Bank's waiver request to emphasize the
special circumstances of this case. Despite great effort, the Bank was unable to meet the
FDIC's requirement of majority approval by depositors of its plan of conversion because
Massachusetts law prohibits the use of proxies. Because of this, the FDIC accepts that it
is a practical impossibility for the Bank to obtain majority approval through in-person
voting only. The Board acknowledges the Bank's extraordinary efforts to inform depositors
about the special meeting and about the purpose of the special meeting, and appreciates
the Bank's dilemma in trying to satisfy the laws and rules of both the Commonwealth of
Massachusetts and the FDIC. For these reasons, the Board has approved the Bank's waiver
request.
Provided that there has been no significant alteration to the terms of the conversion
transaction (by action of other regulators or otherwise), the FDIC is prepared to issue a
letter of nonobjection to the proposed transaction.
Sincerely,
Mark S. Schmidt
Associate Director
cc: Mr. Joel P. Arndt
Arndt & Associates
1825 1 Street, NW
Washington, D.C. 20006
Federal Deposit Insurance Corporation
550 17th Street, NW,
Washington, DC 20429
Division of Supervision
February 19, 1999
Board of Directors
Marlborough Co-operative Bank
175 Main Street PO Box K
Marlborough, Massachusetts 0 1752
Members of the Board:
The Notice to effect a mutual holding company reorganization with the organization of
an intend institutions and a merger to facilitate a conversion from mutual form to stock
form filed on behalf of Marlborough Co-operative Bank-, Marlborough, Massachusetts has
been reviewed by the Federal Deposit Insurance Corporation (FDIC) pursuant to 12 C.F.R.
Sections 303.160-303.164 and other pertinent FDIC regulations. Based on the information
presented and representations made, we do not object to the proposal.
Please advise the Boston Regional Office in writing when the proposed transaction has been
consummated. If an extension of the time limitation included in the Order is required, a
letter requesting a specific extension of the limitation including reasons therefore
should be submitted to the Boston Regional Office.
Sincerely,
James L. Sexton
Director
cc: Mr. Joel P. Arndt, Esq
Arndt & Associates
1825 1 Street, NW
Washington. D.C. 20006
FEDERAL DEPOSIT INSURANCE CORPORATION
RE: Marlborough Co-operative Bank Marlborough, Middlesex County, Massachusetts
Applications for Federal Deposit Insurance and Consent to Merge
ORDER AND BASIS FOR CORPORATION APPROVAL
Pursuant to Sections 5 and 18(c) and other provisions of the Federal Deposit Insurance
Act ("FDI Act"), an application has been filed on behalf of Marlborough
Co-operative Bank, Marlborough, Massachusetts, ("Mutual"), a mutual-owned, Bank
Insurance Fund ("BIF") member, with total resources of $67,859,000 and total
deposits of $59,460,000 as of September 30, 1998, for the FDIC's consent to merge with
Marlborough Interim Co-operative Bank, Marlborough, Massachusetts, a proposed
Massachusetts-chartered, BIF member, co-operative bank. Also, applications for federal
deposit insurance for Marlborough Interim Co-operative Bank-, and Marlborough MHC
Co-operative Bank, Marlborough, Massachusetts have been filed.
This transaction is the result of Mutual's plan of reorganization which, solely to
facilitate this undertaking, includes:
1. Mutual will cause a new co-operative bank to be chartered under Massachusetts law,
to be known as Marlborough MHC Co-operative Bank ("MHC Bank"),
2. MHC Bank will reorganize as a mutual holding company, to be known as Marlborough
Bancorp ("Bancorp"),
3. Bancorp will simultaneously form a Massachusetts-chartered subsidiary co-operative
bank in the stock form of organization, to be known as Marlborough Interim Co-operative
Bank ("Interim"), and
4. Mutual will merge with Interim, with Interim as the legally surviving entity under
the name "Marlborough Co-operative Bank".
By virtue of the merger. Mutual will transfer substantially all of its assets *and
liabilities to Interim, which will be a wholly-owned subsidiary of Bancorp. Following the
consummation of the merger, the resultant bank will operate the same banking business.
with the same management, at the same locations now being served by Mutual. The proposed
transaction, per se, will not alter the competitive structure of banking in the market
served by Mutual. The resultant bank's principal office will be at 175 Main Street,
Marlborough, Massachusetts. Notice of the proposed transaction, in a form approved by the
FDIC, has been published pursuant to the FDI Act.
A review of available information. including the Community Reinvestment Act
("CRA") Statements of the proponent. discloses no inconsistencies with the
purposes of the CPA. The new institution is expected to continue to meet the credit needs
of its entire community, consistent with the safe and sound operation of the institution.
In connection with the applications, the FDIC has taken into consideration the
financial and managerial resources and future prospects of the proponent banks and the
resultant bank, and the convenience and needs of the community to be served. Having found
favorably on all statutory factors and having considered other relevant information,
including all reports on the competitive factors furnished by the Comptroller of the
Currency, the Board of Governors of the Federal Reserve System, the Office of Thrift
Supervision, and the Attorney General of the United States, it is the FDIC's judgement
that the applications should be and hereby are approved, subject to the following
conditions:
1. That changes in proposed management, including the board of directors or proposed
ownership (ten per cent or more of the stock and new acquisitions of or subscriptions to
ten per cent or more of the stock), will render this approval null and void unless such
proposal is approved by the Regional Director (Supervision) of the FDIC's Boston Regional
Office prior to the consummation of the proposed transaction.
2. Unless prior notice is provided to and non-objection is received from the FDIC, no
shares of the stock of Marlborough Co-operative Bank shall be sold, transferred or
otherwise disposed of, to any persons (including any Employee Stock Ownership Plan) other
than Marlborough Bancorp.
3. That, prior to a sale, transfer or other disposition of any shares of Marlborough
Co-operative Bank by Marlborough Bancorp to any person (including any Employee Stock
Ownership Plan), or a conversion of Marlborough Bancorp to stock form, Marlborough
Co-operative Bank- will provide written notification to the FDIC and provide the FDIC with
copies of all documents filed with state and federal banking and/or securities regulators
in connection with any such sale, transfer, disposition or conversion.
4. That should any shares of stock be issued to persons other than the Bancorp, any
dividends waived by the Bancorp must be retained by Marlborough Bancorp or Marlborough
Co-operative Bank and segregated, earmarked. or otherwise identified on its books and
records; such amounts must be taken into account in any valuation of the institution and
factored into the calculation used in establishing a fair and reasonable basis for
exchanging shares in any subsequent conversion of the Bancorp to stock form: such amounts
shall not be available for payment to or the value thereof transferred to minority
shareholders. by any means including through dividend payments or at liquidation.
5. That the transaction shall not be consummated sooner than fifteen calendar days
after the date of this Order nor later than six months after the date of this Order unless
such period is extended for good cause by the Corporation.
6. That until the conditional commitment herein granted becomes effective, the
Corporation shall have the right to alter, suspend. or withdraw the said commitment should
any interim development be deemed to warrant such action.
Dated at Washington, D.C., this 19th day of February, 1999
James L. Sexton
Director
