[Code of Federal Regulations] [Title 12, Volume 5] [Revised as of January 1, 2005] From the U.S. Government Printing Office via GPO Access [CITE: 12CFR575.7] [Page 411-413] TITLE 12--BANKS AND BANKING CHAPTER V--OFFICE OF THRIFT SUPERVISION, DEPARTMENT OF THE TREASURY PART 575_MUTUAL HOLDING COMPANIES--Table of Contents Sec. 575.7 Issuances of stock by savings association subsidiaries of mutual holding companies. (a) Requirements. Before any stock issuance, a savings association subsidiary of a mutual holding company must submit a business plan in accordance with the provisions of Sec. Sec. 563b.105 through 563b.115 of this chapter. 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 Sec. 575.3(b) of this part, or failure by the OTS to disapprove such a reorganization within the time prescribed in Sec. 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 Sec. 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 [[Page 412]] needs standard of Sec. 563b.200(c) of this chapter. (8) The proposed issuance complies with all other applicable laws and regulations. (b) Pricing and sale of securities. (1) All of the provisions of part 563b of this chapter shall apply to a stock issuance applied for pursuant to this section, unless otherwise provided for in this part or clearly inapplicable, as determined by the OTS. For purposes of this paragraph (b)(1), the term conversion as it appears in the provisions of part 563b of this chapter shall be deemed to refer to the stock issuance, and the term converted or converting savings association shall be deemed to refer to the savings association undertaking the stock issuance. (2) Unless otherwise determined by the OTS, the limitations on the minimum and maximum amounts of the estimated price range required by Sec. 563b.330 of this chapter shall not apply. (3) To the extent the pricing materials submitted pursuant to paragraph (b)(1) of this section include any discount due to the minority status of the stock to be offered, the materials must indicate the amount of the discount and how that amount was determined. (c) Related approvals. Approval by the OTS of any stock issuance pursuant to this section shall also be deemed to constitute: (1) Approval under Sec. 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 Sec. 552.4 of this chapter and approval under Sec. 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. (d) 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 [[Page 413]] 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 relevant Federal 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 Sec. Sec. 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). (e) 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. [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]