Each depositor insured to at least $250,000 per insured bank

FEDERAL DEPOSIT INSURANCE CORPORATION

IN RE: New Haven Savings Bank New Haven, Connecticut

Application Pursuant to Section 24 of the Federal Deposit Insurance Act for Consent to Indirectly Engage as Principal Through a Wholly-Owned Subsidiary in Investment Activities That May Not Be Permissible for a Subsidiary of a National Bank

ORDER

The Federal Deposit Insurance Corporation (FDIC) has fully considered all available facts and information relevant to the application by the New Haven Savings Bank, New Haven, Connecticut (Bank), pursuant to Section 24 of the Federal Deposit Insurance Act, 12 U.S.C. § 1831a, and Part 362 of the FDIC's Rules and Regulations, for consent to indirectly acquire and retain through a wholly-owned subsidiary $3,000,000 of limited partnership interests in Zero Stage Capital VII, L.P., which in turn intends to invest in companies in the Internet, communications, and medical technology sectors. These are activities that may not be permissible for a subsidiary of a national bank.

Accordingly, it is hereby ORDERED, for the reasons set forth in the attached Statement, that the application submitted by the Bank for consent to indirectly acquire and retain through a wholly-owned subsidiary (Subsidiary) Zero Stage Capital VII, L.P. be and hereby is approved, subject to the following conditions:

(1) That the investments in equity securities be held indirectly through a single, wholly-owned subsidiary organized for the purpose of holding such investments;

(2) That the Bank shall conduct the activity in a wholly-owned subsidiary that:

i.Meets applicable statutory or regulatory capital requirements and has sufficient operating capital in light of the normal obligations that are reasonably foreseeable for a business of its size and character within the industry;

ii. Maintains separate accounting and other business records;

iii.Observes separate business entity formalities such as separate board of directors' meetings;

iv. Conducts business pursuant to independent policies and procedures designed to inform customers and prospective customers of the Subsidiary that the Subsidiary is a separate organization from the Bank, and that the Bank is not responsible for and does not guarantee the obligations of the Subsidiary;

v. Has a current written business plan that is appropriate to the type and scope of business conducted by the Subsidiary; and

vi. Has qualified management and employees for the type of activity contemplated;

(3) That the Bank maintains a "well-capitalized" status pursuant to Part 325 of the FDIC's Rules and Regulations after deducting from its Tier I capital the investment in the Subsidiary as well as the Bank's pro rata share of any retained earnings of the Subsidiary, and that this deduction be reflected on the appropriate schedule of the Bank's Consolidated Reports of Condition and Income, and that such deduction shall not be used for the purposes of determining whether the Bank is "critically undercapitalized";

(4) The Bank shall limit its indirect equity investment activity through the Subsidiary to the $3,000,000 investment in Zero Stage Capital VII, L.P.;

(5) That, without prior written approval of the FDIC's Regional Director of the Boston Regional Office, neither the Bank nor any of its subsidiaries may extend credit to the Subsidiary, purchase any debt instruments issued by the Subsidiary, or originate any other transaction that is used to benefit the Subsidiary; and

(6) That neither the Bank nor the Subsidiary may enter into any transaction with the Bank's executive officers, directors, principal shareholders, or related interests of such persons which relate to the Subsidiary's activities unless the transactions are on terms and conditions that are substantially the same as those prevailing at the time for comparable transactions with persons not affiliated with the Bank; and,

(7) That in the event the facts and circumstances presented or otherwise known to the FDIC in connection with this request change significantly, the FDIC retains the ability to alter, suspend, or withdraw its approval.

Dated at Washington, D.C., this 22nd day of November, 2000.

FEDERAL DEPOSIT INSURANCE CORPORATION

JohnM. Lane
Associate Director
Division of Supervision

FEDERAL DEPOSIT INSURANCE CORPORATION

IN RE: New Haven Savings Bank New Haven, Connecticut

Application Pursuant to Section 24 of the Federal Deposit Insurance Act for Consent to Indirectly Engage as Principal Through a Wholly-Owned Subsidiary in Investment Activities That May Not Be Permissible for a Subsidiary of a National Bank

STATEMENT

The Federal Deposit Insurance Corporation (FDIC) has fully considered all available facts and information relevant to the application by the New Haven Savings Bank, New Haven, Connecticut (Bank), pursuant to Section 24 of the Federal Deposit Insurance Act, 12 U.S.C. § 1831a, and Part 362 of the FDIC's Rules and Regulations, for consent to indirectly acquire and retain through a wholly-owned subsidiary $3,000,000 of limited partnerships in Zero Stage Capital VII, L.P., which in turn intends to invest in start-up and later stage companies in the Internet, communications, and medical technology sectors. Zero Stage Capital VII, L.P. intends to seek investments in companies located along the East Coast of the United States, including in the Bank's local area. Zero Stage Capital VII, L.P. is managed by a team of investment professionals with over 100 years of investment experience. The Bank's proposed investment represents less than one percent of its Tier 1 capital. These are activities that may not be permissible for a subsidiary of a national bank.

Neither insured state banks nor their subsidiaries may engage as principal in an activity prohibited for national banks unless consent has been obtained from the FDIC. Consent may not be granted unless the bank is in compliance with applicable capital standards and the FDIC determines that the activity poses no significant risk to the deposit insurance funds.

The Bank will establish a new, wholly-owned subsidiary, (Subsidiary), to conduct the activity. The Subsidiary will be organized as a corporation under Connecticut law and the proposed investment is permissible under section 36a-276 of the Connecticut General Statues.

The making of an equity investment entails risks related to the loss of investment and price volatility. However, certain factors may lessen these risks.

As of June 30, 2000, the Bank had total assets of $2.1 billion. Its financial condition, future earnings prospects, and management are regarded as satisfactory. The Bank meets the definition of "well-capitalized" within the meaning of Part 325 of the FDIC's Rules and Regulations, and would continue to be "well-capitalized" after deducting the maximum proposed investment in the Subsidiary from its Tier 1 capital.

Equity investing may be somewhat riskier than lending, but it requires the application of financial analysis, economic assessment, and business judgment similar to that required for lending. Subject to prudent supervision and judgment, investing inequity securities may not be unduly risky. The Bank has successfully demonstrated its ability to manage its investments in equity securities.

Nevertheless, because the proposed investments may be of greater risk than other, more traditional bank activities, the FDIC is imposing a condition requiring the Bank to maintain a "well-capitalized" status pursuant to Section 325.103 of the FDIC Rules and Regulations after deducting from its Tier 1 capital the investment in the Subsidiary as well as the Bank's pro-rata share of any retained earnings of the Subsidiary, provided that the capital deduction shall not be used for purposes of determining whether the Bank is "critically undercapitalized." As such, the Bank must have a Tier 1 leverage capital ratio of not less than 5.0 percent, a Tier 1 risk-based capital ratio of not less than 6.0 percent, and a total risk-based capital ratio of not less than 10.0 percent after the required deduction. Also required is that such deduction be reflected on the appropriate schedule of the Bank's consolidated report of condition and income.

In order to prevent transactions that could undermine the purposes of the capital deduction, the FDIC is further imposing a condition that neither the Bank nor any of its subsidiaries may extend credit to the Subsidiary, purchase any debt instruments issued by the Subsidiary, or originate any other transaction that is used to benefit the Subsidiary without prior written approval of the Regional Director of the FDIC's Boston Regional Office.

In order to ensure prudent operational safeguards, the Subsidiary should be operated in a manner to ensure corporate separation between it and the Bank. This is to provide reasonable assurance that the assets of the Bank will not be subject to liability from a party seeking to hold the Bank responsible for the actions of the Subsidiary. Accordingly, the FDIC finds it appropriate to impose separateness conditions.

Finally, in order to prevent potential abuses, the FDIC is imposing a condition that transactions between the Bank or the Subsidiary and any of the Bank's insiders or their related interests must be on an arm's length basis.

Based on a careful review of all available facts and information, including the investment limits within the Bank's proposal, the FDIC has concluded that the proposed investments do not pose a significant risk to the Bank Insurance Fund and therefore, approval of the application subject to the conditions in the Order is warranted.

ASSOCIATE DIRECTOR
DIVISION OF SUPERVISION
FEDERAL DEPOSIT INSURANCE CORPORATION