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