EXHIBIT 2.5
CONFORMED COPY
STOCK SUBSCRIPTION AGREEMENT
BETWEEN
AFFILIATED COMMUNITY BANCORP, INC.
AND
MIDDLESEX BANK & TRUST COMPANY (IN ORGANIZATION)
Dated as of December 17, 1996
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS................................................................ 1
ARTICLE 2
THE STOCK PURCHASE......................................................... 4
2.1 Shares Sold and Acquired.......................................... 4
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2.2 Price for Shares.................................................. 4
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2.3 Consideration for Organizational Costs............................ 4
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2.4 Effective Time.................................................... 5
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2.5 Tax and Accounting Consequences................................... 5
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2.6 Possible Alternative Structure.................................... 5
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ARTICLE 3
CERTAIN APPROVALS.......................................................... 5
3.1 Board of Directors Approvals...................................... 5
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3.2 Actions by Middlesex and AFCB..................................... 5
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3.3 Middlesex Approvals............................................... 5
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3.4 AFCB Approvals.................................................... 6
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ARTICLE 4
REGARDING MIDDLESEX........................................................ 6
4.1 Directors and Officers............................................ 6
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF MIDDLESEX................................ 7
5.1 Corporate Organization............................................ 7
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5.2 Capitalization.................................................... 7
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5.3 Authority......................................................... 8
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5.4 No Violation...................................................... 8
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5.5 Consents and Approvals............................................ 8
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5.6 Certain Financial Statements; Projections......................... 8
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5.7 Absence of Undisclosed Liabilities................................ 9
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5.8 Absence of Certain Changes or Events.............................. 9
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5.9 Legal Proceedings................................................. 9
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5.10 Taxes and Tax Returns............................................. 10
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5.11 Properties........................................................ 10
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5.12 Certain Contracts................................................ 10
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5.13 Insurance........................................................ 11
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5.14 Employee Benefit Plans........................................... 11
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5.15 Compliance with Applicable Law................................... 11
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5.16 Broker's Fees.................................................... 12
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5.17 Middlesex Information............................................ 12
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5.18 Labor Matters.................................................... 12
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5.19 Absence of Business Activities................................... 12
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5.20 Disclosure....................................................... 12
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF AFCB.................................... 12
6.1 Corporate Organization........................................... 13
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6.2 Capitalization................................................... 13
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6.3 Authority........................................................ 13
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6.4 No Violations.................................................... 13
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6.5 Consents and Approvals........................................... 13
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6.6 Certain Financial Statements; Annual and Quarterly Reports....... 14
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6.7 Other Statements and Reports..................................... 14
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6.8 Absence of Certain Changes or Events............................. 14
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6.9 Legal Proceedings................................................ 15
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6.10 Financing........................................................ 15
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6.11 Disclosure....................................................... 15
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ARTICLE 7
COVENANTS OF AFCB AND MIDDLESEX........................................... 15
7.1 Conduct of Business.............................................. 15
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7.2 No Solicitation.................................................. 18
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7.3 Current Information.............................................. 18
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7.4 Access to Properties and Records................................. 18
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7.5 Financial and Other Statements................................... 19
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7.6 Confidentiality.................................................. 19
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7.7 Disclosure Supplements........................................... 19
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7.8 Regulatory Matters; Consents..................................... 19
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7.9 Public Announcements............................................. 20
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7.10 Accounting Treatment............................................. 20
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7.11 Executive Agreements............................................. 20
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7.12 Further Assurances............................................... 20
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7.13 Future AFCB Reports.............................................. 20
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7.14 AFCB Payment of Certain Expenses................................. 21
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7.15 Escrow of AFCB Closing Payment................................... 21
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ARTICLE 8
CLOSING CONDITIONS......................................................... 22
8.1 Conditions to Each Party's Obligations under this Agreement....... 22
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8.2 Conditions to the Obligations of AFCB under this Agreement........ 22
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8.3 Conditions to the Obligations of Middlesex under this Agreement... 24
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ARTICLE 9
THE CLOSING................................................................ 25
9.1 Time and Place.................................................... 25
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9.2 Deliveries at the Closing......................................... 25
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ARTICLE 10
TERMINATION, AMENDMENT AND WAIVER.......................................... 25
10.1 Termination....................................................... 25
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10.2 Effect of Termination............................................. 26
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10.3 Amendment, Extension and Waiver................................... 26
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ARTICLE 11
MISCELLANEOUS.............................................................. 26
11.1 Expenses.......................................................... 26
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11.2 Survival.......................................................... 27
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11.3 Notices........................................................... 27
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11.4 Parties in Interest............................................... 28
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11.5 Complete Agreement................................................ 28
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11.6 Counterparts...................................................... 28
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11.7 Governing Law..................................................... 28
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11.8 Captions.......................................................... 28
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11.9 Effect of Investigations.......................................... 28
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11.10 Severability...................................................... 28
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11.11 Specific Enforceability........................................... 28
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LIST OF EXHIBITS AND SCHEDULES
SCHEDULES
2.3 - Middlesex Organizers
5.7 - Undisclosed Liabilities
5.11 - Properties
5.12 - Contracts
EXHIBITS
2.3 - Form of Middlesex Organizer Agreement
7.11.1 - Form of Fulp Severance Agreement
7.11.2 - Form of Fulp Special Termination Agreement
7.15 - Form of Escrow Agreement
STOCK SUBSCRIPTION AGREEMENT
THIS STOCK SUBSCRIPTION AGREEMENT, entered into as of December 17, 1996
("Agreement") between Affiliated Community Bancorp, Inc. ("AFCB"), a
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Massachusetts corporation with its principal offices at 716 Main Street,
Waltham, MA, and Middlesex Bank & Trust Company (in organization) ("Middlesex"),
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a Massachusetts trust company in organization under Chapter 172 of the
Massachusetts General Laws, with its principal offices at 85 Wells Avenue,
Newton, MA.
W I T N E S S E T H
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Whereas, the parties hereto desire to become affiliated so that Middlesex,
upon receipt of all necessary regulatory authorizations to commence business as
a trust company organized under Chapter 172 of the Massachusetts General Laws,
will become a wholly owned subsidiary of AFCB; and
Whereas, Middlesex desires to sell and AFCB desires to acquire such 100%
ownership interest; and
Whereas, Middlesex has incurred certain organizational costs and wishes to
be reimbursed therefor; and
Whereas, the respective Boards of Directors of Middlesex and AFCB believe
that the transactions set forth herein will be in the best interests of each of
them and their respective stockholders, customers, employees and other
constituencies, as applicable, as well as the communities presently and to be
served by them; and
Whereas, Middlesex and AFCB desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby;
NOW , THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, and other valuable consideration the
receipt and adequacy of which is hereby acknowledged, the parties hereto do
hereby agree as follows:
ARTICLE 1
DEFINITIONS
"AFCB" shall mean Affiliated Community Bancorp, Inc., a Massachusetts
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corporation.
"AFCB Common Stock" shall have the meaning ascribed thereto in Section 6.2
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hereof.
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"AFCB Reports" shall have the meaning ascribed thereto in Section 6.7
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hereof.
"Agreement of Association" shall mean that certain agreement of association
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entered into on December 12, 1994 by and among the Incorporators in
connection with their intended organization of Middlesex.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
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"Certificate of Convenience and Advantage" shall have the meaning ascribed
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thereto in Section 3.3 hereof.
"Certificate to Commence Business" shall have the meaning ascribed thereto
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in Section 3.3 hereof.
"Claim Amount" shall have the meaning ascribed thereto in Section 7.15
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hereof.
"Closing" shall mean the events referred to in Article 9 hereof.
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"Code" shall mean the Internal Revenue Code of 1986, as amended.
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"Commissioner" shall mean the Commissioner of Banks of The Commonwealth of
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Massachusetts.
"Confidentiality Agreement" shall mean that certain letter agreement
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between Middlesex and AFCB dated as of December 6, 1996.
"Effective Time" shall mean the date and time specified pursuant to Section
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2.4 hereof as the effective time of the transaction.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
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"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
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"FDIC" shall mean the Federal Deposit Insurance Corporation.
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"FDIC Certificate" shall have the meaning ascribed thereto in Section 3.3
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hereof.
"Federal Reserve Board" shall mean the Board of Governors of the Federal
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Reserve System or the Federal Reserve Bank of Boston.
"HOLA" shall mean the Home Owners' Loan Act of 1933, as amended.
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"Incorporators" shall mean those individuals who signed the Agreement of
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Association in connection with the organization of Middlesex.
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"Middlesex" shall mean Middlesex Bank & Trust Company, a Massachusetts
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trust company in organization.
"Middlesex 1996 Financial Statements" shall have the meaning ascribed
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thereto in Section 5.6 hereof.
"Middlesex Applications" shall have the meaning ascribed thereto in Section
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3.3 hereof.
"Middlesex Balance Sheet" shall have the meaning ascribed thereto in
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Section 5.6 hereof.
"Middlesex Common Stock" shall have the meaning ascribed thereto in Section
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5.2 hereof.
"Middlesex Organizational Costs" shall mean the sum of $400,000.00, which
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the parties acknowledge and agree constitutes the organizational costs and
related expenses, including legal, accounting and other professional fees, all
amounts due to any Middlesex Organizer or other Person for time and expenses and
all other costs and obligations to any Middlesex Organizer or other Person
(including those referenced in footnotes 2 and 3 of the Middlesex 1996 Financial
Statements), incurred from the time of the inception of Middlesex or to be
incurred up to and as of the Effective Time (and not otherwise subject to
payment by AFCB in accordance with Section 7.14 hereof) by Middlesex and/or the
Middlesex Organizers.
"Middlesex Organizer Agreement" shall have the meaning ascribed thereto in
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Section 2.3 hereof.
"Middlesex Organizers" shall have the meaning ascribed thereto in Section
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2.3 hereof.
"Middlesex Preferred Stock" shall have the meaning ascribed thereto in
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Section 5.2 hereof.
"Middlesex Shares" shall have the meaning ascribed thereto in Section 5.2
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hereof.
"Massachusetts BBI" shall mean the Massachusetts Board of Bank
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Incorporation.
"Material Adverse Effect" shall mean, when used with respect to any Person,
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a material adverse change in or effect on the assets, liabilities, business,
operations, results of operations, condition (financial or otherwise) or
prospects of such Person.
"NASDAQ" shall mean the Nasdaq Stock Market, Nasdaq Regulation, Inc. and/or
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NASD, Inc. as and to the extent applicable.
"OTS" shall mean the Office of Thrift Supervision.
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"Person" shall mean any natural person, corporation, business trust, joint
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venture, association, company, partnership or any other entity.
"Price for Shares" shall have the meaning ascribed thereto in Section 2.2
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hereof.
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"Requisite Regulatory Approvals" shall have the meaning ascribed thereto in
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Section 8.1(b) hereof.
"SEC" shall mean the Securities and Exchange Commission.
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"Securities Act" shall mean the Securities Act of 1933, as amended.
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"Shares" shall have the meaning ascribed thereto in Section 2.1 hereof.
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"Stock Purchase" shall have the meaning ascribed thereto in Section 2.1
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hereof.
"Subsidiary" shall mean, when used with reference to any party, any
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corporation of which more than 25% of the securities or other interests having
by their terms ordinary voting power to elect a majority of the board of
directors is directly or indirectly owned or controlled by such party or by any
one or more of its subsidiaries, or by such party and one or more of its
subsidiaries.
ARTICLE 2
THE STOCK PURCHASE
2.1 Shares Sold and Acquired. Subject to the terms set forth in this
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Agreement, at the Effective Time (as defined in Section 2.4), and upon payment
of the Price for Shares set forth below, Middlesex shall issue to AFCB an
aggregate of 800,000 shares (the "Shares") of the common stock of Middlesex, par
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value $1.00 per share, which shall then constitute 100% of the issued and
outstanding capital stock of Middlesex. Such sale and purchase of the Shares
being referred to hereinafter as the "Stock Purchase."
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2.2 Price for Shares. AFCB shall deliver to Middlesex as consid-
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eration for the sale, transfer and delivery to AFCB of the Shares, by wire
transfer of immediately available funds, an aggregate of Eight Million and
00/100 Dollars ($8,000,000.00).
2.3 Consideration for Organizational Costs. In addition to the payment
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set forth in Section 2.2, AFCB shall reimburse the Middlesex Organizers , and
/or such other Persons to whom such payment or portion thereof is directed by
Middlesex, in the amount of $400,000.00 for the Middlesex Organizational Costs
by the payment in accordance with the terms of Section 7.15 hereof of equivalent
value in cash or shares of AFCB Common Stock (such payment in cash or stock to
be based on the individual election of each Middlesex Organizer), the value of
which shares shall be calculated as the average closing price on the Nasdaq
National Market for the twenty trading days prior to the Effective Time. As
used herein, "Middlesex Organizers" shall mean those individuals identified on
the attached Schedule 2.3. Prior to the Effective Time, Middlesex shall deliver
to AFCB a schedule setting forth in reasonable detail all of the costs and
expenses included in the Middlesex Organizational Costs, and appropriate support
and/or documentation, and a schedule setting forth the portion of the Middlesex
Organizational Costs allocated to each of the Middlesex Organizers, and the
amount of such allocated
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portion to be paid in cash or shares of AFCB Stock to each such Middlesex
Organizer. Each of the Middlesex Organizers who receives any shares of AFCB
Common Stock at the Effective Time in accordance with this Section 2.3 shall
enter into a letter agreement with AFCB, and with Middlesex to the extent deemed
to be necessary or appropriate by the parties, at the Effective Time, such
agreement (the "Middlesex Organizer Agreement") to be substantially in the
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form of Exhibit 2.3 hereto.
2.4 Effective Time. The Stock Purchase shall become effective upon
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completion of the transfer and delivery of the Shares by Middlesex and delivery
of the Price for Shares by AFCB, all of which shall occur on the day of the
closing provided in Article 9 hereof (the "Closing"). The date and time at
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which the transaction is completed shall be the "Effective Time."
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2.5 Tax and Accounting Consequences.
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(a) It is intended by the parties hereto that the Stock Purchase
will constitute an investment in Middlesex by AFCB.
(b) It is intended that under generally accepted accounting
principles, the Stock Purchase will be accounted for as an investment by
AFCB using the purchase method of accounting.
2.6 Possible Alternative Structure. Section 2.5(a) or 2.5(b) and any
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other provision of this Agreement to the contrary notwithstanding, to the
extent necessary or appropriate (i) to assure fulfillment of the intentions
of the parties in Section 2.5(a) and 2.5(b) hereof, and the satisfaction of
the conditions to closing in Article 8 hereof, and (ii) to minimize any
adverse consequence to the Stock Purchase, Middlesex and AFCB may jointly
elect, at or prior to the Effective Time, to substitute an alternative
structure in lieu of the Stock Purchase for the accomplishment of AFCB's
acquisition of a 100% ownership interest in Middlesex.
ARTICLE 3
CERTAIN APPROVALS
3.1 Board of Directors Approvals. Prior to the parties' execution and
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delivery of this Agreement, (a) Middlesex's Board of Directors has approved and
adopted this Agreement and the transactions contemplated hereby and (b) AFCB'S
Board of Directors has approved and adopted this Agreement and the transactions
contemplated hereby.
3.2 Actions by Middlesex and AFCB. Middlesex and AFCB will take all
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necessary actions to obtain necessary permits, consents and authorizations of
other third parties and governmental bodies necessary to consummate the
transactions contemplated by this Agreement.
3.3 Middlesex Approvals. Middlesex is a trust company in organization
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under Chapter 172 of the Massachusetts General Laws. Middlesex has filed (i) an
application with the Massachusetts BBI
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on October 21, 1996 pursuant to ch. 172 (S) 6 for a certificate that public
convenience and advantage will be promoted by the establishment of Middlesex
(the "Certificate of Convenience and Advantage") and(ii) an application with
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the FDIC on June 12, 1995 pursuant to-Section 5(a) of the FDIA to obtain a
certificate of deposit insurance (the "FDIC Certificate") (such applications
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being referred to herein as the "Middlesex Applications"). In conjunction with
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the consummation of the Stock Purchase, Middlesex will have received a
certificate issued by the Massachusetts BBI authorizing Middlesex to commence
the transaction of a banking business (the "Certificate to Commence Business")
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and shall have received the FDIC Certificate from the FDIC.
3.4 AFCB Approvals. AFCB is a bank holding company as defined under
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Section 2(a) of the BHCA and as defined in Section 1 of Chapter 167A of the
Massachusetts General Laws. As soon as reasonably practicable after the
execution of this Agreement, and prior to the consummation of the Stock
Purchase, AFCB will have filed an application with the Federal Reserve Board
pursuant to Section 3(a) of the BHCA and a petition to the Massachusetts BBI
pursuant to Section 2 of Chapter 167A of the Massachusetts General Laws, in each
case for prior approval to acquire 100% ownership and control of Middlesex, and
will have received the approvals of such regulatory authorities necessary to
effect the Stock Purchase as contemplated hereby.
ARTICLE 4
REGARDING MIDDLESEX
4.1 Directors and Officers.
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(a) Middlesex Board of Directors. The directors of Middlesex at
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the Effective Time shall consist of seven persons, six of whom shall be
designated by Middlesex, of whom four shall be selected from among the current
members of the Middlesex Board of Directors and two of whom shall be selected by
C. Bernard Fulp from a list of not less than five candidates to be provided by
AFCB, and one of whom shall be designated by AFCB. Each such director shall
serve in accordance with the Middlesex articles of organization and Middlesex
by-laws and applicable law. The Board of Directors of Middlesex shall be divided
into three classes, as further described in the Middlesex articles of
organization, and the classification of, and corresponding term of office for,
each of the director-designees at the Effective Time shall be as mutually agreed
upon by the parties.
(b) Middlesex Executive Officers. At the Effective Time,
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the Chairman of the Board of Directors, President and Chief Executive Officer of
Middlesex shall be Mr. Fulp. The remaining officers of Middlesex at the
Effective Time shall be such other persons as shall be mutually agreed upon by
the parties. Each officer of Middlesex shall hold office in accordance with the
Middlesex articles of organization and Middlesex by-laws and applicable law.
(c) Middlesex Board Committees. The committees of the Board of
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Directors of Middlesex as of the Effective Time shall include Compensation,
Audit and Compliance, and
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ALCO committees. The membership of such committees as of the Effective Time
shall be as determined by the Middlesex Board of Directors in accordance
with the Middlesex by-laws.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF MIDDLESEX
In order to induce AFCB to enter into this Agreement, Middlesex represents
and warrants to AFCB as set forth below, which representations and warranties
are acknowledged by Middlesex as being material and as being relied upon by
AFCB.
5.1 Corporate Organization.
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(a) Middlesex is a trust company in organization (and at the
Effective Time will be duly organized) and validly existing under the laws
of The Commonwealth of Massachusetts. Middlesex has the power and authority
to own or lease all of its properties and assets and to complete its
organization and obtain the Certificate to Commence Business pursuant to
ch. 172 M.G.L. (S) 9. Middlesex has furnished to AFCB true and complete
copies of the following documents, each as amended to date: (i) the
articles of organization and by-laws of Middlesex and (ii) all records of
Middlesex of all meetings of, and other corporate action taken by, the
Incorporators, Board of Directors and committees thereof. The minute books
of Middlesex contain records, which are complete and accurate in all
material respects, of the meetings of the Incorporators, directors and
committees, as the case may be, and all meetings and actions reflected
therein have been duly and validly held or taken in all material respects,
except where the failure to do so does not or would not, either
individually or in the aggregate, have a Material Adverse Effect on
Middlesex.
(b) Middlesex does not have any subsidiaries and does not own,
control or hold power to vote, directly or indirectly, of record,
beneficially or otherwise, any capital stock or other equity ownership
interest in any corporation, partnership, association, joint venture or
other entity.
5.2 Capitalization.
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(a) The authorized capital stock of Middlesex consists of
3,000,000 shares of common stock with a par value of $1.00 per share (the
"Middlesex Common Stock") and 100,000 shares of preferred stock with a par
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value of $1.00 per share (the "Middlesex Preferred Stock"). As of the date
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hereof, there are no shares of Middlesex Common Stock or Middlesex
Preferred Stock issued or outstanding.
(b) Middlesex is not bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character
calling for the transfer, purchase or issuance of, or representing the
right to purchase, subscribe for or otherwise receive, any shares of its
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capital stock or any securities convertible into or representing the right
to receive, purchase or subscribe for any such shares of Middlesex, except
with respect to any such rights as may be based upon or arise out of the
Agreement of Association.
5.3 Authority. Middlesex has full corporate power and authority to
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execute and deliver this Agreement and, subject to receipt of applicable
regulatory approvals, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and, subject to receipt of applicable
regulatory approvals, the consummation of the transactions contemplated hereby
have been duly and validly approved by the Board of Directors of Middlesex. No
other corporate proceedings on the part of Middlesex are necessary to consummate
the Stock Purchase or any other transaction contemplated hereby. This Agreement
has been duly and validly executed by Middlesex, and when delivered by
Middlesex, will constitute a valid and binding obligation of Middlesex,
enforceable against Middlesex in accordance with its terms.
5.4 No Violation. Neither the execution and delivery of this
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Agreement, nor the consummation by Middlesex of the transactions contemplated
hereby, nor the compliance by Middlesex with any of the terms or provisions
hereof to the extent applicable does or will (i) violate any provision of the
articles of organization or by-laws of Middlesex, (ii) assuming that the
consents and approvals referred to in Section 5.5 hereof are duly obtained,
violate any statute, code, ordinance, permit, authorization, registration, rule,
regulation, judgment, order, writ, decree or injunction applicable to Middlesex
or (iii) violate, conflict with, result in a breach of any provisions of,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of, accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or other encumbrance upon any of the properties or assets of
Middlesex, under any of the terms, conditions or provisions of any note, bond,
capital note, debenture, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which Middlesex is a party, or by
which it or any of its properties or assets may be bound or affected, except for
any such breach or default referred to in this clause (iii) which would not have
a Material Adverse Effect on AFCB.
5.5 Consents and Approvals. Except for the receipt of the Certificate
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of Convenience and Advantage, the Certificate to Commence Business, the FDIC
Certificate and related approvals of the FDIC, the Commissioner or the
Massachusetts BBI, no consents or approvals of or filings or registrations with
any nongovernmental third party or any governmental agency or authority are
necessary to be obtained or made by Middlesex in connection with the execution
and delivery by Middlesex of this Agreement and the consummation by Middlesex of
the transactions contemplated hereby.
5.6 Certain Financial Statements; Projections. Middlesex has
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previously made available to AFCB copies, which are true and complete in all
material respects, of (i) financial statements as of September 30, 1995, which
have been audited by Middlesex's independent outside accountants, Wolf &
Company, P.C., and financial statements for the period from inception to October
31, 1996, which have been reviewed by Wolf & Company P.C., including in each
case the notes thereto (such financial statements for October 31, 1996 being
referred to herein as the "Middlesex 1996 Financial Statements" and the balance
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sheet included therein being referred to herein as the ("Middlesex Balance
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Sheet"); and
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(ii) its unaudited financial projections for Middlesex's first three years of
banking operations, including the notes thereto (the "Projections"). The
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Middlesex Balance Sheet (including any related notes and schedules) fairly
presents in all material respects the consolidated financial position of
Middlesex as of the date thereof, subject to the notes thereto, and the other
financial statements included in the Middlesex 1996 Financial Statements
(including any related notes and schedules), fairly present in all material
respects the results of operations or other information included therein of
Middlesex for the periods or as of the dates therein set forth, subject to the
notes thereto, in each case in accordance with generally accepted accounting
principles applied on a consistent basis (except as indicated therein). The
assumptions underlying the Projections are set forth therein and are, to the
best knowledge of Middlesex, reasonable, and the Projections have been
diligently and carefully prepared based upon such assumptions. The books and
records of Middlesex have been, and are being, maintained in accordance with
applicable legal and accounting requirements, reflect only actual transactions
and reflect all of its material assets, liabilities and accruals and all of its
material items of income and expense in accordance with such principles.
5.7 Absence of Undisclosed Liabilities. Except as disclosed in Schedule
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5.7 hereto, all of which liabilities and/or obligations are included in the
Middlesex Organizational Costs, since October 31, 1996, Middlesex has not
incurred any obligation or liability (contingent or otherwise) that is material
to Middlesex, or that when combined with all similar obligations or liabilities
would be material to Middlesex.
5.8 Absence of Certain Changes or Events. Since October 31, 1996, there
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has not been:
(i) any occurrence of any event or circumstance that has caused a
Material Adverse Effect on Middlesex;
(ii) any employment contract, severance contract, bonus, pension,
retirement, incentive or similar arrangement or plan
instituted, agreed to or amended by Middlesex;
(iii) any increase in the compensation payable or to become payable
to any of the officers, directors or employees of Middlesex or
any bonus payment or arrangement made to or with any of them;
(iv) any agreement, contract or commitment entered into or agreed
to be entered into by Middlesex, except for any disclosed in
Schedule 5.12 hereto; or
(v) any change in any of the accounting methods or practices of
Middlesex other than changes required by applicable law or by
generally accepted accounting principles.
5.9 Legal Proceedings. There are no pending or, to the best of
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Middlesex's knowledge, threatened, legal, administrative, arbitral or other
proceedings, claims, actions or governmental investigations of any nature
against Middlesex, except any which individually or in the aggregate do
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not or would not have a Material Adverse Effect on Middlesex. Middlesex is not a
party to any order, judgment or decree, which has or is reasonably likely to
have a Material Adverse Effect on Middlesex.
5.10 Taxes and Tax Returns.
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(a) Middlesex has duly filed in correct form all federal, state
and local information returns and tax returns required to be filed by it
(all such returns being accurate and complete in all material respects) and
has duly paid or made provisions for the payment of all taxes and other
governmental charges, the nonpayment of which, either individually or in
the aggregate, has or would have a Material Adverse Effect on Middlesex,
and that have been incurred or that are due or claimed to be due from it by
federal, state or local taxing authorities (including, without limitation,
those due in respect of its properties, income, business, capital stock,
deposits, franchises, licenses, sales and payrolls) other than taxes or
other charges which (a) are not yet due and payable and (b) have not been
finally determined. The amounts set up as reserves on the Middlesex Balance
Sheet for the payment of all unpaid federal, state and local taxes
(including any interest or penalties thereon), if any, whether or not
disputed or accrued, through the period ended October 31, 1996 or for any
year or period ending prior thereto, and for which Middlesex may be liable
in its own right or as transferee of the assets of, or successor to, any
corporation, person, association, partnership, joint venture or other
entity, are adequate under generally accepted accounting principles and
auditing standards and are sufficient to cover all such taxes due, except
where the failure to so do would not have a Material Adverse Effect on
Middlesex. The federal income tax returns of Middlesex, if any, have never
been audited by the Internal Revenue Service. As of the date hereof, there
are no disputes pending, or claims asserted for, federal or state taxes or
assessments or local taxes or assessments upon Middlesex nor has Middlesex
been requested to give or given any currently effective waivers extending
the statutory period of limitation applicable to any federal or state taxes
or assessments or local taxes or assessments upon Middlesex nor has
Middlesex been requested to give or given any currently effective waivers
extending the statutory period of limitation applicable to any federal or
state income tax return. Middlesex has not agreed to nor is required to
make any adjustments under Section 481(a) of the Code. No consent has been
filed pursuant to Section 341(f) of the Code with respect to Middlesex.
(b) As of the date hereof, Middlesex has no employees with respect
to which it has any income tax withholding, Social Security or unemployment
tax obligations or liabilities imposed or arising under any federal, state
or local law.
5.11 Properties. As of the date hereof, except as disclosed in Schedule
-----------
5.11, Middlesex neither owns nor leases any real or personal property.
5.12 Certain Contracts.
------------------
(a) Middlesex is not a party to or bound by any contract,
arrangement or understanding (whether written or oral) with respect to the
employment of any officers or employees or any contracts, arrangements or
understandings (whether written or oral) with any
-11-
consultants or advisers (including without limitation legal counsel,
accountants or financial advisers), except as set forth in Schedule 5.12
hereto. The consummation of the transactions contemplated by this Agreement
will not (either alone or upon the occurrence of any additional acts or
events) result in any payment (whether of severance pay or otherwise)
becoming due from Middlesex to any officer, director or employee thereof or
to any other person, firm or entity, except as disclosed in the agreements
or arrangements set forth in Schedule 5.12.
(b) Schedule 5.12 sets forth or refers to every commitment,
agreement or other instrument which Middlesex is a party to or bound by. No
commitment, agreement or other instrument to which Middlesex is a party to
or bound by limits the freedom of Middlesex to compete in any line of
business or with any person. Middlesex has furnished to AFCB true and
complete copies of each of the agreements, arrangements, commitments and
understandings disclosed in Schedule 5.12 hereto.
5.13 Insurance. Middlesex has been during the last two years and
----------
currently is insured with respect to its property and the conduct of its
business (but not including any business interruption insurance) in such amounts
(subject to reasonable deductibles) and against such risks as are reasonably
believed by management of Middlesex to be adequate to protect the properties and
business of itself, including liability insurance. Middlesex has previously
furnished to AFCB copies of all insurance policies of Middlesex. Middlesex
maintains all insurance policies required under applicable law and regulations.
Middlesex has not received any notice of cancellation of any policy or bond
maintained by it.
5.14 Employee Benefit Plans. As of the date hereof, Middlesex has no
-----------------------
bonus, deferred compensation, pension, profit-sharing, retirement, stock
purchase, stock option, welfare, incentive, severance or any other employee or
fringe benefit plan, arrangement or practice, whether formal or informal and
whether legally binding or not.
5.15 Compliance with Applicable Law.
-------------------------------
(a) Middlesex holds, and has at all times held, all licenses,
franchises, permits, approvals, consents, qualifications and authorizations
material for the lawful conduct of its business under and pursuant to, and
has complied with, and is not in default under, any applicable law, statute
(including 31 U.S.C. 5311, et seq.), order, rule (including 31 C.F.R. Part
103), regulation, policy, ordinance, reporting or filing requirement and/or
guideline of any federal, state or local governmental authority relating to
Middlesex, except for violations which, either individually or in the
aggregate, do not or would not have a Material Adverse Effect on Middlesex
and except that Middlesex must obtain the Certificate of Convenience and
Advantage, the Certificate to Commence Business, the FDIC Certificate and
related state and federal approvals to lawfully commence a banking business
in accordance with the requirements of Chapter 172 of the Massachusetts
General Laws.
(b) All organizational and capital raising activities of Middlesex
prior to the date hereof have been undertaken in compliance in all material
respects with all applicable federal,
-12-
state (including so-called "blue sky") and local laws, statutes,
regulations, rules, administrative procedures or orders governing,
regulating or relating to a trust company in organization under Chapter 172
of the Massachusetts General Laws or the issuance and sale of securities,
and Middlesex and the Incorporators have complied on a timely basis with
all filing and reporting obligations arising under such laws, statutes,
regulations, rules, administrative procedures or orders.
5.16 Broker's Fees. Neither Middlesex nor any of its officers or
--------------
directors nor any of the Incorporators has any liability or obligation to any
third party, including without limitation the Flagship Group, for the payment of
any broker's fees, advisory fees, commissions, finder's fees or any other
compensation, which is not otherwise expressly disclosed in this Agreement, in
connection with Middlesex's obtaining the Certificate to Commence Business or
any related activities or otherwise consummating the transactions contemplated
by this Agreement.
5.17 Middlesex Information. The information relating to Middlesex
----------------------
contained in the Middlesex Applications, the offering circular of Middlesex
dated December 6, 1995 and any other statement, application or filing filed by
Middlesex with any governmental agency or authority does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
such information not misleading.
5.18 Labor Matters. Middlesex is not a party to any collective
-------------
bargaining or labor agreement or union contract, there are no labor or
representation negotiations or union organizing efforts pending which involve
Middlesex or any of its employees and there are no charges of unfair labor
practices pending or, to the best of Middlesex's knowledge, threatened by or
before any governmental authority which involve Middlesex or any of its present
or former employees.
5.19 Absence of Business Activities. At no time since its incorporation
------------------------------
has Middlesex engaged in any business activities, banking or otherwise, except
for activities undertaken for the sole purpose and with the exclusive objective
of obtaining the Certificate to Commence Business, including capital raising
efforts and other organizational activities required to be completed in order to
obtain the Certificate to Commence Business and any related state or federal
approvals.
5.20 Disclosure. To the best knowledge of Middlesex, no representation
-----------
or warranty contained in this Agreement, including the Schedules provided by
Middlesex in connection therewith and attached hereto, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein not misleading.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF AFCB
AFCB hereby represents and warrants to Middlesex as follows:
-13-
6.1 Corporate Organization.
-----------------------
(a) AFCB is a business corporation duly organized and validly
existing under the laws of The Commonwealth of Massachusetts.
(b) AFCB is a bank holding company registered as such and in good
standing with the Federal Reserve Board.
6.2 Capitalization. The authorized capital stock of AFCB consists
---------------
solely of 18,000,000 shares of common stock, par value $0.01 per share
(the "AFCB Common Stock"), and 2,000,000 shares of preferred stock, par value
-----------------------
$0.01 per share. As of September 30, 1996, there were 5,094,666 shares AFCB
Common Stock issued and outstanding, 238,000 shares of AFCB Common Stock held in
treasury, and no shares of AFCB preferred stock issued or outstanding. All
issued and outstanding shares of AFCB Common Stock have been duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive rights
with no personal liability attaching to the ownership thereof.
6.3 Authority. AFCB has full corporate power and authority to execute
----------
and deliver this Agreement and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement have been duly
and validly approved by the Board of Directors of AFCB. No other corporate
proceedings on the part of AFCB are necessary to consummate the Stock Purchase
or any other transaction contemplated by this Agreement. This Agreement has
been duly and validly executed by AFCB and, when delivered by AFCB, will
constitute a valid and binding obligation of AFCB, enforceable against AFCB in
accordance with its terms.
6.4 No Violations. Neither the execution and delivery of this
--------------
Agreement, nor the consummation by AFCB of the transactions contemplated hereby,
nor the compliance by AFCB with any of the terms nor provisions hereof to the
extent applicable does or will (i) violate any provision of the articles of
organization or by-laws of AFCB, (ii) assuming that the consents and approvals
referred to in Section 6.5 hereof are duly obtained, violate any status, code,
ordinance, permit, authorization, registration, rule, regulation, judgment,
order, writ, decree or injunction applicable to AFCB or (iii) violate, conflict
with, result in a breach of any provisions of, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
result in the termination of, accelerate the performance required by, or result
in the creation of any lien, security interest, charge or other encumbrance upon
any of the properties or assets of AFCB, under any of the terms, conditions or
other encumbrance upon any of the properties or assets of AFCB, under any of the
terms, conditions or provisions of any note, bond, capital note, debenture,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which AFCB is a party, or by which it or any of its
properties or assets may be bound or affected, except for any such breach or
default referred to in this clause (iii) which would not have a Material Adverse
Effect on AFCB.
6.5 Consents and Approvals. Except for consents and approvals of or
-----------------------
filings or registrations with the Federal Reserve Board and the Massachusetts
BBI (including filings with the Massachusetts
-14-
Housing Partnership Fund in connection therewith), no consents or approvals of
or filings or registrations with any nongovernmental third party or governmental
agency or authority are necessary to be obtained or made by AFCB in connection
with the execution and delivery by AFCB of this Agreement and the consummation
by AFCB of the transactions contemplated hereby.
6.6 Certain Financial Statements; Annual and Quarterly Reports. AFCB
-----------------------------------------------------------
has made available to the Seller a copy of (a) the consolidated balance sheet of
AFCB and its subsidiaries as of December 31, 1995 and the related consolidated
statements of income, changes in stockholders' equity and cash flows for the
year then ended as reported in AFCB's Annual Report on Form 10-K for the year
ended December 31, 1995 filed with the SEC under the Exchange Act, accompanied
by the audit report of Arthur Andersen LLP, independent accountants for AFCB,
and (b) the unaudited consolidated balance sheets of AFCB and its subsidiaries
as of September 30, 1996 and September 30, 1995, the related unaudited
consolidated statements of income and changes in stockholders' equity for the
nine months ended September 30, 1996 and September 30, 1995 and the related
unaudited consolidated statements of cash flows for the nine months ended
September 30, 1996 and September 30, 1995, all as reported in AFCB's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996 filed with the SEC
under the Exchange Act. The financial statements of AFCB contained in such
Quarterly Report on Form 10-Q (including the related notes, where applicable)
fairly present, in all material respects, the consolidated financial position
and results of the consolidated operations and cash flows and changes in
stockholders' equity of AFCB and its subsidiaries for the fiscal periods or as
of the dates therein set forth, and each of such statements (including the
related notes, where applicable) has been prepared in accordance with generally
accepted accounting principals consistently applied, except as otherwise set
forth in the notes thereto (subject, in the case of unaudited interim
statements, to normal year-end adjustments). The books and records of AFCB and
its subsidiaries have been, and are being, maintained in accordance with
generally accepted accounting principals and applicable legal and regulatory
requirements and reflect only actual transactions.
6.7 Other Statements and Reports. Since January 1, 1996, AFCB and its
-----------------------------
subsidiaries have filed all reports, registrations and statements, together with
any amendments required to be made with respect thereto, that were required to
be filed with (a) the SEC, including, but not limited to, Forms 10- K, Forms 10-
Q, Forms 8-K and proxy statements, (b) the OTS, (c) the FDIC, (d) the Federal
Reserve Board and (e) any applicable state securities or banking authorities
(except, in the case of state securities authorities, no such representation is
made as to filings which are not material) (all such reports and statements are
collectively referred to herein as the "AFCB Reports"), except where the failure
---- -------
to file any such AFCB Report would not have a Material Adverse Effect on AFCB.
As of their respective dates, the AFCB Reports complied in all material respects
with all of the statutes, rules and regulations enforced or promulgated by the
regulatory authority with which they were filed, except where any such non-
compliance would not have a Material Adverse Effect on AFCB. As of their
respective dates, the AFCB Reports did not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein not misleading.
6.8 Absence of Certain Changes or Events. Since December 31, 1995,
-------------------------------------
AFCB and its subsidiaries have not incurred any material liability, except in
the ordinary course of their business, nor has there been any changes in the
assets, liabilities, business, operations or conditions of AFCB or any
-15-
of its subsidiaries which has had or is reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on AFCB.
6.9 Legal Proceedings. There are no pending or, to the best of AFCB's
------------------
knowledge, threatened, legal, administrative, arbitral or other proceedings,
claims, actions or governmental investigations of any nature against AFCB or its
subsidiaries except those, if any, which, individually or in the aggregate, do
not or would not have a Material Adverse Effect on AFCB. Neither AFCB nor its
subsidiaries is a party to any order, judgment or decree which has or is
reasonably likely to have a Material Adverse Effect on AFCB.
6.10 Financing. AFCB has available to it, on a consolidated basis with
----------
its subsidiaries, capital and cash sufficient to fulfill its obligations
hereunder.
6.11 Disclosure. To the best knowledge of AFCB, no representation or
-----------
warranty contained in this Agreement contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
herein or therein not misleading.
ARTICLE 7
COVENANTS OF AFCB AND MIDDLESEX
7.1 Conduct of Business.
--------------------
(a) During the period from the date of this Agreement to the
Effective Time, unless otherwise permitted by the prior written consent of
AFCB, Middlesex shall:
(i) maintain its legal existence and good standing;
(ii) conduct business and engage in transactions only for the sole
purposes and with the exclusive objectives of obtaining the
Certificate of Convenience and Advantage, the Certificate to
Commence Business and the FDIC Certificate and consummating
the Stock Purchase and other transactions contemplated by
this Agreement, which shall expressly include (i) entering
into a lease agreement for its main office and operating
space, the site therefor and the terms and conditions of such
lease to be subject to review and approval by AFCB, (ii)
entering into agreements with third party vendors of
products, equipment and services required in connection with
the commencement of a banking business consistent with the
transactions contemplated by this Agreement, such vendors and
the terms and conditions of all such agreements having a term
of one year or more or requiring payment by Middlesex of
$10,000 or more during the term thereof to be subject to
review and approval by AFCB, and (iii) hiring the necessary
senior officers and other employees required in connection
with the commencement of a banking business consistent with
the transactions
-16-
contemplated by this Agreement, such senior officers and
other employees and the terms and conditions of their
employment (including, without limitation, salary and
benefits) to be subject to review and approval by AFCB;
(iii) use all reasonable efforts to (x) preserve its business
organization intact, (y) keep available to itself the present
or future services of any employees, and (z) preserve for
itself the good will of potential customers and others with
whom business relationships exist or may exist;
(iv) use all reasonable efforts to maintain and keep any
properties in as good repair and condition in all material
respects as existing at the time of acquisition thereof,
except for depreciation due to ordinary wear and tear and
damage due to casualty;
(v) use all reasonable efforts to maintain in full force and
effect insurance generally comparable in amount and in scope
of coverage to that now maintained by it or in accordance
with the recommendations of AFCB; and
(vi) comply with and perform in all material respects all of its
obligations and duties (x) under material contracts, leases
and documents relating to or affecting its assets, properties
and business and (y) imposed upon it by all federal and state
laws and all rules, regulations and orders imposed by federal
or state governmental authorities (including, without
limitation, the timely payment of all taxes, assessments and
governmental charges lawfully imposed upon it or any of its
property or upon the income and profits thereof except where
the amount of or obligation to pay any such tax, assessment
or charge is being contested in good faith thereby), judicial
orders, judgments, decrees and similar determinations.
(b) Middlesex agrees, to the extent applicable to it, that from
the date of this Agreement to the Effective Time, except as
otherwise specifically permitted or required, or otherwise
contemplated, by this Agreement, or consented to in writing
by AFCB, it shall not:
(i) change or waive any provision of its articles of organization
or by-laws, as applicable;
(ii) change the number of shares of its authorized capital;
(iii) issue any shares of its capital stock or issue or grant any
option, warrant, call, commitment, subscription, right to
purchase or agreement of any character (or similar
arrangements) relating to its capital stock;
(iv) hypothecate, pledge or otherwise encumber any shares of its
capital stock;
-17-
(v) grant any severance or termination pay to, or enter into any
employment, severance or termination agreements,
noncompetition, bonus, stock option, profit-sharing,
retirement or incentive plan or any other similar plan or
agreement with, any of its directors, officers or other
employees;
(vi) except as otherwise expressly permitted in this Section 7.1,
incur any liability or obligation (whether absolute or
contingent, whether primary or secondary or whether directly
or by way of guaranty) involving in any one instance an
amount in excess of $1,000.00 or in the aggregate an amount
in excess of $5,000.00;
(vii) merge into, consolidate with, affiliate with, or be
purchased or acquired by, any other corporation, entity or
person, or permit any other corporation, entity or person to
be merged, consolidated or affiliated with it or be
purchased or acquired by it, or acquire any portion of the
assets or securities of any other corporation, entity or
person, or sell any of its assets or issue any of its
securities to any other corporation, entity or person;
(viii) make any change in its accounting methods or practices,
other than changes required in accordance with applicable
law and/or generally accepted accounting principles;
(ix) permit any of its current insurance policies to be canceled
or terminated or any of the coverage thereunder to lapse,
unless simultaneously with such termination, cancellation or
lapse, replacement policies are obtained providing coverage
equal to or greater than the coverage under those canceled,
terminated or lapsed policies for substantially similar
premiums; and
(x) agree to do or publicly announce an intention to do or to
agree to do any of the foregoing or any other action that
would make any of its representations or warranties
contained in this Agreement untrue or incorrect or would
otherwise violate any of its agreements or commitments
contained in this Agreement.
(c) Each of the balance sheets of Middlesex included in any
report or financial statements as of any date subsequent to October 31,
1996 (including any related notes and schedules), will fairly present in
all material respects the financial position of Middlesex as of such date
and any other financial statements of Middlesex for any period subsequent
to October 31, 1996 (including any related notes and schedules) will fairly
present in all material respects the consolidated results of operations or
other information included therein of Middlesex for such period, subject to
the notes thereto, in each case in accordance with generally accepted
accounting principles applied on a consistent basis.
-18-
(d) To the extent that Middlesex shall hire any employees prior
to the Effective Time, appropriate amounts shall be withheld by Middlesex
from such employees, based on information furnished by such employees, for
all applicable periods up to the Effective Time in compliance in all
material respects with the tax withholding provisions of applicable
federal, state and local laws. With respect to such employees, federal,
state and local returns which are accurate and complete in all material
respects shall be filed by Middlesex for all periods for which returns are
due with respect to income tax withholding, Social Security and
unemployment taxes, and the amounts shown on such returns to be due and
payable shall be paid in full or adequate provision therefor shall be made,
except in all cases where the failure to so do would not have a Material
Adverse Effect on Middlesex.
(e) Neither the information to be provided by Middlesex to AFCB
for inclusion in any application, petition, statement or other filing to be
submitted by AFCB to any governmental agency or authority in connection
with the Stock Purchase or any other transaction contemplated by this
Agreement nor the information to be contained in any other application,
petition, statement or other filing to be submitted by Middlesex to any
governmental agency or authority in connection with the Stock Purchase or
any other transaction contemplated by this Agreement will contain any
untrue statement of a material fact or omit a material fact necessary to
make such information not misleading.
7.2 No Solicitation. Neither Middlesex nor any of its directors,
----------------
officers, Incorporators, employees, representatives or agents or other persons
controlled thereby shall directly or indirectly, encourage or solicit or hold
discussions or negotiations with or assist or, provide any information to, any
person, entity or group (other than AFCB or any affiliate thereof, advisor
thereto or regulatory authority, in each such case in connection with the
transactions contemplated by this Agreement) concerning any affiliation, merger,
disposition of any of its assets, acquisition of any of its capital stock or
similar transactions, involving it. Middlesex will immediately communicate to
AFCB the terms of any proposal or offer or any inquiry or request for
information which Middlesex may receive in respect of any such transaction.
7.3 Current Information. During the period from the date of this
--------------------
Agreement to the Effective Time, Middlesex will make available one or more of
its designated representatives to confer on a regular and frequent basis with
representatives of AFCB to report the general status of its ongoing operations.
Middlesex will promptly notify AFCB of any material change in its consolidated
business, operations, results of operations, properties, securities,
capitalization, assets, liabilities or condition (financial or otherwise) and of
any governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the threat
of any litigation or similar proceeding involving it and will keep AFCB informed
of such events. Middlesex will promptly notify AFCB upon discovery by senior
management of any condition or event which would constitute a breach of the
terms and conditions of this Agreement.
7.4 Access to Properties and Records. Middlesex shall permit AFCB
---------------------------------
access during normal business hours, during the period prior to the Effective
Time, to its properties and shall disclose and make available to AFCB and its
advisers all books, papers and records relating to the assets, stock
-19-
ownership, properties, operations, obligations and liabilities, including, but
not limited to, all books of account (including the general ledger), tax
records, minute books of Incorporators and directors meetings, organizational
documents, by-laws, material contracts and agreements, filings with any
regulatory authority, litigation files, plans affecting employees, and any other
business activities or operations. The rights of access granted pursuant to this
section shall not diminish or in any manner affect the representations,
warranties or agreements of Middlesex hereunder or in any manner constitute a
waiver or relinquishment on the part of AFCB of the right to rely upon the
representations, warranties and agreements of Middlesex hereunder.
7.5 Financial and Other Statements.
-------------------------------
(a) As soon as prepared, and in any case prior to submission,
Middlesex will deliver to AFCB all reports or other statements filed after
the date hereof with the FDIC, Commissioner, Massachusetts BBI or any other
federal or state governmental agency or authority, except to the extent
that any such disclosure of any such reports or statements is prohibited by
law.
(b) Promptly upon receipt thereof, Middlesex will furnish to AFCB
copies of all internal control reports submitted to it by independent
accountants in connection with each annual, interim or special audit of its
books made by such accountants.
(c) Middlesex will advise AFCB promptly of its receipt of any
examination report of any federal or state regulatory or examination
authority with respect to its condition or activities, except to the extent
prohibited by law.
(d) With reasonable promptness, Middlesex will furnish to AFCB
such additional financial data as AFCB may reasonably request, including
without limitation, detailed monthly financial statements.
7.6 Confidentiality. AFCB and Middlesex shall continue to be bound by
----------------
the terms and conditions of the Confidentiality Agreement.
7.7 Disclosure Supplements. From time to time prior to the Effective
-----------------------
Time, and in any event immediately prior thereto, Middlesex will promptly
supplement the schedules delivered in connection herewith pursuant to Articles 5
and 6 with respect to any material inaccuracies thereon existing as of the date
hereof and with respect to any matter hereafter arising which, if existing,
occurring or known at the date of this Agreement, would have been required to be
set forth or described in such schedules or which is necessary to correct any
information in such schedules which has been rendered materially inaccurate
thereby. No supplement to such schedules shall have any effect for the purpose
of determining satisfaction of the conditions set forth in Article 8 hereof.
7.8 Regulatory Matters; Consents. Each of Middlesex and AFCB will
-----------------------------
cooperate with the other and use all reasonable efforts to prepare all necessary
documentation, to effect all necessary filings with and to obtain all necessary
permits, consents, approvals and authorizations of all third
-20-
parties and governmental agencies and authorities necessary to consummate the
transactions contemplated by this Agreement, including without limitation those
required from or with respect to the FDIC, Federal Reserve Board and
Massachusetts BBI. Each party hereto shall have the right to review and approve
in advance all descriptions of it and its subsidiaries which appear in any
application or other filing made in connection with the transactions
contemplated by this Agreement with any governmental agency or authority. In
exercising the foregoing right, the parties hereto shall act reasonably and as
promptly as practicable.
7.9 Public Announcements. Except as otherwise required by law or the
---------------------
rules of NASDAQ, Middlesex and AFCB will cooperate with each other in the
development and distribution of all news releases and other public information
disclosures with respect to this Agreement or any of the transactions
contemplated hereby.
7.10 Accounting Treatment. The parties agree that they shall use all
---------------------
reasonable efforts to ensure that the Stock Purchase shall be treated for tax
purposes and accounted for in accordance with the contemplated tax and
accounting treatments described in Section 2.5. Neither Middlesex nor AFCB
shall intentionally take or cause to be taken any action, whether before or
after the Effective Time, which would prevent such tax and accounting treatment
from being accorded to the Stock Purchase.
7.11 Executive Agreements. At the Effective Time, Middlesex will enter
---------------------
into a severance agreement and a special termination agreement with C. Bernard
Fulp, each substantially in the form set forth in the attached Exhibit 7.11.
7.12 Further Assurances. Subject to the terms and conditions herein
-------------------
provided, each of the parties hereto agrees to use all reasonable efforts to, as
promptly as practicable, take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purpose of this
Agreement, the proper officers and directors of each party to this Agreement
shall take all such necessary steps. Following the Effective Time, and subject
to receipt of payment pursuant to Section 7.15 hereof, Middlesex and/or the
Middlesex Organizers shall take all necessary and appropriate actions, including
without limitation payment of outstanding bills and invoices and receipt from
third-party service providers of releases and/or waivers of liability, in form
and substance satisfactory to AFCB, to ensure that neither Middlesex nor AFCB is
liable or otherwise obligated following the Effective Time for any costs,
expenses or other liabilities, contingent or otherwise, incurred or otherwise
accrued by or for the account of Middlesex or any predecessor or any Middlesex
Organizer (in connection with organizational activities prior to the legal
existence of Middlesex) at any time prior to or as of the Effective Time, which
are not of the type that AFCB has agreed to advance payment for under Section
7.14 hereof or AFCB has not otherwise approved in writing.
7.13 Future AFCB Reports. AFCB shall file all AFCB Reports required
--------------------
to be filed by it after the date hereof, and all such AFCB Reports will comply
in all material respects with all of the statutes, rules and regulations
enforced or promulgated by the regulatory authority with which they are filed,
-21-
except where the failure to so file or any such non-compliance will not have a
Material Adverse Effect on AFCB. None of such AFCB Reports shall contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein not misleading. All financial statements
contained in any such AFCB Report (including the related notes, where
applicable) will fairly present in all material respects the consolidated
financial position or other information included therein of AFCB for the fiscal
periods or as of the dates therein set forth, and each of such statements
(including the related notes, where applicable) will be prepared in accordance
with generally accepted accounting principles consistently applied, except as
otherwise set forth in the notes thereto (subject, in the case of unaudited
interim statements, to normal year-end adjustments).
7.14 AFCB Payment of Certain Expenses. AFCB shall advance payment for
---------------------------------
reasonable costs and expenses incurred and reasonably documented by Middlesex
from and after January 1, 1997 up to the Effective Time in connection with
Middlesex's preparation for the commencement of a banking business as a wholly
owned subsidiary of AFCB, which shall include payment for salary expenses
commencing upon such date as is mutually agreeable to the parties and expenses
incurred in accordance with a mutually agreed upon budget for opening (i.e.,
commencement of business) events, marketing activities, leasehold improvements,
equipment and other customary office expenses, and shall expressly not include
payment for legal, accounting and any other professional services fees. If this
Agreement is terminated for any reason, other than a breach of this Agreement by
AFCB or a failure to obtain a Requisite Regulatory Approval as a result of any
act or omission of, or issue raised with respect to, AFCB or any of its
subsidiaries, then Middlesex shall reimburse AFCB for all such advances within
five business days following the date of such termination. In no event shall
any Middlesex Organizer or any member of the Middlesex Board of Directors or
other individual affiliated with Middlesex be liable for any such reimbursement
obligation.
7.15 Escrow of AFCB Closing Payment. At the Effective Time, the
-------------------------------
payment of AFCB in cash or shares of AFCB Common Stock of the reimbursement
amount provided for in Section 2.3 hereof shall be deposited with a third-party
escrow agent, pursuant to an escrow agreement substantially in the form attached
hereto as Exhibit 7.15 (the "Escrow Agreement"), which shall provide, among
------ ---------
other terms and conditions, that such payment shall be held in escrow for a
period of ninety days from and after the Effective Time (the "Escrow Period"),
------ ------
after the expiration of which such aggregate payment, net of any Claim Amount
(as such term is defined further herein), shall be distributed to and allocated
among the Middlesex Organizers and/or such other Person(s) referenced in the
Escrow Agreement or otherwise designated by Middlesex. Under no circumstances
shall any dispute under the Escrow Agreement, including without limitation any
disagreement between the parties regarding the final amount to be distributed
thereunder to the Middlesex Organizers or any other Person following the
expiration of the Escrow Period, give rise to, or otherwise provide any basis
for, a claim by Middlesex, the Middlesex Organizers or any other Person
challenging or otherwise calling into question the validity or effectiveness of
the Stock Purchase and/or AFCB's ownership and control of Middlesex from and
after the Effective Time. The term "Claim Amount" means the aggregate amount
----- ------
required to satisfy any and all claims against Middlesex and/or AFCB made during
the Escrow Period by any Person for services provided (including for
disbursements related thereto) or goods sold to or for the account of Middlesex
or any predecessor prior to or as of the Effective Time, so long as and to the
extent that the cost or expense to Middlesex or AFCB, as the case may be,
resulting from such claim(s)
-22-
would not be of the type for which AFCB has agreed to advance payments pursuant
to Section 7.14 hereof or AFCB has not otherwise approved in writing such cost
or expense or such claim was not otherwise based upon any act or omission of
AFCB.
ARTICLE 8
CLOSING CONDITIONS
8.1 Conditions to Each Party's Obligations under this Agreement.
-----------------------------------------------------------
The respective obligations of each party under this Agreement shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions, none of which may be waived:
(a) Injunctions. None of the parties hereto shall be subject
-----------
to any order, decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits the consummation of the transactions
contemplated by this Agreement.
(b) Regulatory Approvals. All necessary approvals,
--------------------
authorizations and consents of all governmental agencies and authorities
required to consummate the transactions contemplated herein shall have been
obtained and shall remain in full force and effect and all waiting periods
relating to any such approvals, authorizations or consents shall have expired
(all such approvals, authorizations and consents and the lapse of all such
waiting periods being referred to as the "Requisite Regulatory Approvals").
--------- ---------- ---------
8.2 Conditions to the Obligations of AFCB under this Agreement. The
----------------------------------------------------------
obligations of AFCB under this Agreement shall be further subject to the
satisfaction, at or prior to the Effective Time, of the following conditions:
(a) Covenants; Representations. The obligations of Middlesex
--------------------------
required to be performed by it at or prior to the Closing pursuant to the terms
of this Agreement shall have been duly performed and complied with, and the
representations and warranties of Middlesex contained in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Effective Time, as though made at and as of the Effective Time (except
as otherwise specifically contemplated by this Agreement and except as to any
representation or warranty which specifically relates to an earlier date), and
AFCB shall have received a certificate to such effect signed by the chairman or
president and the chief financial officer or chief accounting officer of
Middlesex.
(b) Absence of Any Material Adverse Effect. There shall have not
--------------------------------------
occurred any events or circumstances that have caused a Material Adverse Effect
on Middlesex unless otherwise cured in accordance with Section 10.1(e) hereof.
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(c) Third-Party Consents. All permits, consents, waivers, clearances,
--------------------
approvals and authorizations of all nongovernmental and nonregulatory third
parties required to be obtained by Middlesex under the terms hereof to
consummate the transactions contemplated by this Agreement shall have been
obtained and shall remain in full force and effect, other than any such permits,
consents, waivers, clearances, approvals or authorizations the failure of which
to obtain would neither make it impossible to consummate such transactions nor,
individually or in the aggregate, result in a Material Adverse Effect on either
of AFCB or Middlesex after the Closing.
(d) Burdensome Condition. None of the Requisite Regulatory Approvals
--------------------
imposes any condition or restriction, which is not usual or customary, upon
either of AFCB or Middlesex, in each case taken as a whole with its
subsidiaries, upon or following the Closing which would materially adversely
impact the economic or business benefits to AFCB of the transactions
contemplated by this Agreement, so as to render inadvisable in the reasonable
judgment of AFCB's Board of Directors the consummation of the transactions
contemplated by the Agreement.
(e) Legal Opinion. AFCB shall have received the opinion of Goodwin,
-------------
Procter & Hoar, L.L.P. as to matters that are reasonable and customary for
transactions of this type.
(f) Termination of Rights Under Agreement of Association. Middlesex
----------------------------------------------------
shall have taken all actions necessary or appropriate to terminate any rights,
whether regarding the Incorporators' rights to and interests in purchasing
shares of Middlesex Common Stock or otherwise, that any Person may have under,
in connection with, relating to or as a result of the Agreement of Association,
and any such termination shall be evidenced to the reasonable satisfaction of
AFCB.
(g) Absence of Other Third-Party Claims. Subject to receipt of payment
-----------------------------------
pursuant to Section 7.15 hereof, no Person shall have any claim or right,
contingent or otherwise, for payment for any services provided (including for
disbursements related thereto) or goods sold to or for the account of Middlesex
or any predecessor prior to or as of the Effective Time, if the resulting cost
or expense to Middlesex would not be of the type for which AFCB has agreed to
advance payments pursuant to Section 7.14 hereof or AFCB has not otherwise
approved in writing such cost or expense.
(h) Middlesex Organizer Agreements. Each of the Middlesex Organizers to
------------------------------
whom shares of AFCB Common Stock are issued in accordance with Section 2.3
hereof shall have executed and delivered a Middlesex Organizer Agreement.
(i) Middlesex Board of Directors. The restructuring of the Middlesex
----------------------------
Board of Directors provided for in Section 4.1(a) hereof shall have been
completed and the Middlesex Board of Directors shall be composed of the seven
persons contemplated by said Section 4.1(a).
-24-
(j) Escrow Agreement. The Escrow Agreement shall have been executed and
----------------
delivered by the parties and shall be in full force and effect.
In addition to the foregoing, Middlesex will furnish AFCB with such
additional certificates, instruments or other documents in the name or on behalf
of Middlesex, executed by appropriate officers or others, including without
limitation certificates or correspondence of governmental agencies or
authorities or nongovernmental third parties, to evidence fulfillment of the
conditions set forth in this Section 8.2 as AFCB may reasonably request
8.3 Conditions to the Obligations of Middlesex under this Agreement.
----------------------------------------------------------------
The obligations of Middlesex under this Agreement shall be further subject to
the satisfaction, at or prior to the Effective Time, of the following
conditions:
(a) Covenants; Representations. The obligations of AFCB
--------------------------
required to be performed by it at or prior to the Closing pursuant to the
terms of this Agreement shall have been duly performed and complied with,
and the representations and warranties of AFCB contained in this Agreement
shall be true and correct as of the date of this Agreement and as of the
Effective Time in all material respects, as though made at and as of the
Effective Time (except as otherwise specifically contemplated by this
Agreement and except as to any representation or warranty which
specifically relates to an earlier date), and Middlesex shall have received
a certificate to such effect signed by the chairman or president and the
chief financial officer or chief accounting officer of AFCB.
(b) Absence of Any Material Adverse Effect. There shall have
--------------------------------------
not occurred any events or circumstances that have caused a Material
Adverse Effect on AFCB and its subsidiaries, unless otherwise cured in
accordance with Section 10.1(d) hereof.
(c) Third-Party Consents. All permits, consents, waivers,
--------------------
clearances, approvals and authorizations of all nongovernmental and
nonregulatory third parties required to be obtained by AFCB under the terms
hereof to consummate the transactions contemplated by this Agreement shall
have been obtained and shall remain in full force and effect, other than
any such permits, consents, waivers, clearances, approvals or
authorizations the failure of which to obtain would neither make it
impossible to consummate such transactions nor, individually or in the
aggregate, result in a Material Adverse Effect on AFCB after the Closing.
(d) Legal Opinion. Middlesex shall have received the opinion of
-------------
Sullivan & Worcester LLP as to matters that are reasonable and customary
for transactions of this type.
In addition to the foregoing, AFCB will furnish Middlesex with such
additional certificates, instruments or other documents in the name or on behalf
of AFCB, executed by appropriate officers or others, including without
limitation certificates or correspondence of governmental agencies or
authorities or nongovernmental third parties, to evidence fulfillment of the
conditions set forth in this Section 8.3 as Middlesex may reasonably request
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ARTICLE 9
THE CLOSING
9.1 Time and Place. Subject to the provisions of Articles 8 and 10
--------------
hereof, the Closing shall take place at the offices of Sullivan & Worcester LLP,
One Post Office Square, Boston, MA 02109, within five business days after the
date on which the last of the conditions to be satisfied in accordance with
Article 8 hereof has been so satisfied or otherwise properly waived (if such
waiver is legally permitted), or at such other place, date or time as AFCB and
Middlesex may mutually agree upon.
9.2 Deliveries at the Closing. At the Closing there shall be delivered
-------------------------
to AFCB and Middlesex the opinions, certificates, and other documents and
instruments required to be delivered under Article 8 hereof.
ARTICLE 10
TERMINATION, AMENDMENT AND WAIVER
10.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time, if one or more of the following events shall occur:
(a) by mutual written consent of AFCB and Middlesex authorized by
their respective Boards of Directors;
(b) by AFCB or Middlesex if the Effective Time shall not have
occurred on or prior to June 30, 1997, or such later date as shall have
been agreed to in writing by AFCB and Middlesex, unless the failure of such
occurrence shall be due to the failure of the party seeking to terminate
this Agreement to perform or observe its agreements herein required to be
performed or observed at or prior to the Effective Time.
(c) by AFCB or Middlesex: (i) thirty days after the date on which
any request or application for a Requisite Regulatory Approval shall have
been denied, unless within the thirty-day period following such denial a
petition for rehearing or an amended application has been filed with such
governmental regulatory authority or agency, except that no party shall
have the right to terminate this Agreement pursuant to this clause (i) if
such denial shall be due to the failure of the party seeking to terminate
this Agreement to perform or observe in any material respects the covenants
and agreements of such party set forth herein; or (ii) if any governmental
or regulatory authority or agency, or court of competent jurisdiction,
shall have issued a final permanent order or injunction enjoining or
otherwise prohibiting the consummation of the transactions contemplated by
this Agreement and the time for appeal or petition for reconsideration of
such order or injunction shall have expired without such appeal or petition
being granted or such order or injunction shall otherwise have become final
and non- appealable;
-26-
(d) by AFCB or Middlesex (provided that the terminating party is
not then in material breach of any representation, warranty, covenant or
other agreement contained herein), in the event of a material breach by the
other party of any representation , warranty, covenant or other agreement
contained herein, which breach is not cured after thirty (30) days written
notice thereof is given to the party committing such breach.
10.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either AFCB or Middlesex as provided above, this Agreement shall
forthwith become null and void (other than Sections 7.6, 7.14 and 10.2 hereof,
which shall remain in full force and effect) and there shall be no further
liability on the part of AFCB or Middlesex or their respective officers or
directors to the other, except any liability of AFCB and Middlesex as provided
under Section 7.14 or Section 11.1 hereof, and in the event of a willful breach
of any representation warranty, covenant or agreement contained in this
Agreement, in which case, the breaching party shall remain liable for any and
all damages, costs and expenses, including all reasonable attorneys' fees,
sustained or incurred by the nonbreaching party (i) as a result thereof or in
connection therewith, (ii) in connection with the enforcement of its rights
hereunder or (iii) in connection with the negotiation and execution of this
Agreement and the transactions contemplated hereby.
10.3 Amendment, Extension and Waiver. Subject to applicable law and as
-------------------------------
may be authorized by their respective Boards of Directors, at any time prior to
the consummation of the transactions contemplated by this Agreement or
termination of this Agreement in accordance with the provisions of Section 10.1
hereof, the parties may (a) amend this Agreement, (b) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(c) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto, or (d) waive compliance
with any of the agreements or conditions contained in Articles 7 and 8 (other
than Section 8.1) hereof. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto. Any
agreement on the part of a party hereto to any extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party, but such waiver or failure to insist on strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
ARTICLE 11
MISCELLANEOUS
11.1 Expenses. Except as may otherwise be agreed to hereunder,
--------
including pursuant to Sections 2.3 and 7.14 hereof, or in a writing by the
parties of subsequent date hereto, all legal and other costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs and expenses.
-27-
11.2 Survival. None of the representations, warranties, covenants and
--------
agreements of any party shall survive after the Effective Time, except for the
agreements and covenants contained or referred to in Section 7.10, the last two
sentences of Section 7.12, and Section 7.15, all of which agreements and
covenants shall survive the Effective Time.
11.3 Notices. All notices or other communications hereunder shall be in
-------
writing and shall be delivered by hand, by overnight courier service, by
registered or certified mail (return receipt requested) or by telecopy (in which
case a copy thereof shall, simultaneously therewith, be sent by hand, by
overnight courier service or by registered or certified mail), addressed as
follows:
(a) If to AFCB, to:
Affiliated Community Bancorp, Inc.
716 Main Street
Waltham, Massachusetts 02154
Attention: Timothy J. Hansberry, President & CEO
Copy to:
Stephen J. Coukos, Esq.
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
(b) If to Middlesex, to:
Middlesex Bank & Trust
85 Wells Avenue
Newton, Massachusetts 02159
Attention: C. Bernard Fulp, President & CEO
Copy to:
William P. Mayer, Esq.
Jeffrey P. Naimon, Esq.
Goodwin, Procter & Hoar, L.L.P.
Exchange Place
Boston, Massachusetts 02109-2881
or such other address or telecopy number as shall be furnished in writing by any
party in conformity with the foregoing, and any such notice or communication
shall be deemed to have been given as of the date received.
-28-
11.4 Parties in Interest. This Agreement shall be binding upon and
-------------------
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the other parties, and that nothing in this
Agreement is intended to confer, expressly or by implication, upon any other
person any rights or remedies under or by reason of this Agreement, including
without limitation any right to continued employment.
11.5 Complete Agreement. This Agreement, including the schedules
------------------
referred to herein, contain the entire agreement and understanding of the
parties with respect to its subject matter. There are no restrictions,
agreements, promises, warranties, covenants or undertakings between the parties
other than those expressly set forth herein. This Agreement supersedes all prior
agreements (except for the Confidentiality Agreement) and understanding between
the parties, both written and oral, with respect to its subject matter.
11.6 Counterparts. This Agreement may be executed in counterparts,
------------
all of which shall be considered one and the same agreement and each of which
shall be deemed to be an original and shall become effective when a counterpart
has been signed by each of the parties and delivered to each of the other
parties.
11.7 Governing Law. This Agreement shall be governed by the laws of The
-------------
Commonwealth of Massachusetts.
11.8 Captions. The Article and Section heading contained in this
--------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
11.9 Effect of Investigations. No investigation by the parties hereto
------------------------
made heretofore or hereafter, whether pursuant to this Agreement or otherwise,
shall affect the representations and warranties of the parties which are
contained herein and each such representation and warranty shall survive such
investigation, subject, however, to Section 11.2 hereof.
11.10 Severability. In the event that any one or more provisions of this
-----------
Agreement shall for any reason be held invalid, illegal or unenforceable in any
respect, by any court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement and the
parties shall use their best efforts to substitute a valid, legal and
enforceable provision which, insofar as practicable, implements the purposes and
intents of this Agreement.
11.11 Specific Enforceability. The parties recognize and hereby
-----------------------
acknowledge that it is impossible to measure in money the damages that would
result to a party by reason of the failure of any of the parties to perform any
of the obligations imposed on it by this Agreement Accordingly, if any party
should institute an action or proceeding seeking specific enforcement of the
provisions hereof, each party against which such action or proceeding is brought
hereby waives the claim or defense that the party instituting such action or
proceeding has an adequate remedy at law and hereby agrees not to assert in any
such action or proceeding the claim or defense that such a remedy at law exists.
-29-
IN WITNESS WHEREOF, Middlesex and AFCB have caused this Agreement to be
executed as a sealed instrument by their duly authorized officers as of the day
and year first above written.
AFFILIATED COMMUNITY BANCORP, INC.
By: /s/ Timothy J. Hansberry
----------------------------------------------
Timothy J. Hansberry
President and Chief Executive Officer
MIDDLESEX BANK & TRUST COMPANY
(IN ORGANIZATION)
By: /s/ C. Bernard Fulp
----------------------------------------------
C. Bernard Fulp
President and Chief Executive Officer