Stock Purchase Agreement

STOCK PURCHASE AGREEMENT


THIS STOCK PURCHASE AGREEMENT, entered into as of May 1, 1998 (this "Agreement") between Affiliated Community Bancorp, Inc. ("Seller"), a --------- Massachusetts corporation with its principal offices at 716 Main Street, Waltham, Massachusetts, and William R. Berkley ("Buyer"), an individual residing in the State of Connecticut.


W I T N E S S E T H
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Whereas, Seller desires to sell and Buyer desires to buy all of the issued and outstanding shares of the capital stock of Middlesex Bank & Trust Company, a Massachusetts trust company that is presently a wholly owned subsidiary of Seller ("Middlesex"); and


Whereas, the Board of Directors of Seller believes that the transactions set forth herein will be in the best interests of Seller and its stockholders, customers, employees and other constituencies, as applicable, as well as the communities served by Middlesex; and


Whereas, Seller and Buyer 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


As used in this Agreement, the following capitalized terms shall have the meanings set forth below.


"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.


"Business Day" shall mean a day other than a Saturday, a Sunday or a
Federal or Massachusetts legal holiday.


"Buyer" shall mean William R. Berkley, individually.


"Closing Date" shall have the meaning ascribed thereto Section 2.3(a)
hereof.


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"Code" shall mean the Internal Revenue Code of 1986, as amended.


"Commissioner" shall mean the Commissioner of Banks of the
Commonwealth of Massachusetts.


"Confidentiality Agreement" shall mean that certain letter agreement
by and among Interlaken Capital, Inc., an entity controlled by Buyer,
Seller and Middlesex dated as of March 28, 1998.


"Cutoff Date" shall have the meaning ascribed thereto in Section 3.7
hereof.


"Damages" shall mean all actions, costs, losses, damages,
disbursements, obligations, penalties, liabilities or expenses of any
kind or nature (including, but not limited to interest and penalties
and all reasonable legal, accounting and other professional fees and
expenses incurred in the defense of claims and amounts paid in
settlement and any defense, set-off, or counter-claim) that are
actually imposed or otherwise incurred or suffered by a Person.


"Executive Agreements" shall have the meaning ascribed thereto in
Section 5.20(b) hereof.


"FDIA" shall mean the Federal Deposit Insurance Act, as amended.


"FDIC" shall mean the Federal Deposit Insurance Corporation.


"Lien" shall mean any lien, pledge, charge, encumbrance, security
interest, mortgage, lease, or other adverse claim of any nature, kind
or description, contingent or otherwise.


"Middlesex" shall mean Middlesex Bank & Trust Company, a Massachusetts
trust company.


"Middlesex Common Stock" shall have the meaning ascribed thereto in
Section 3.2 hereof.


"Middlesex Plan" shall have the meaning ascribed thereto in Section
3.12(a) hereof.


"Middlesex Preferred Stock" shall have the meaning ascribed thereto in
Section 3.2 hereof.


"Material Adverse Effect" shall mean, when used with respect to any
Person, (i) a material adverse change in or effect on the assets,
liabilities, business, operations or prospects of such Person,
provided that, with respect to Middlesex, any such change or effect
resulting directly or indirectly from changes in law, regulations or
generally accepted accounting principles (or interpretations of any
thereof), changes in the general level of market interest rates, or
changes in the economic, financial or market conditions affecting the
banking industry generally in the region in which Middlesex operates,
shall not constitute a Material Adverse Effect, or (ii) such Person's
ability to satisfy its obligations under this Agreement.


"NASDAQ" shall mean the Nasdaq Stock Market, Nasdaq Regulation, Inc.
and/or NASD, Inc. as and to the extent applicable.


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"Ownership Claim" shall have the meaning ascribed thereto in Section
5.19(b) hereof.


"Person" shall mean any natural person, corporation, business trust,
joint venture, association, company, partnership or any other entity.


"Purchase Price" shall have the meaning ascribed thereto in Section
2.2 hereof.


"Requisite Regulatory Approvals" shall have the meaning ascribed
thereto in Section 6.1(b) hereof.


"Seller" shall mean Affiliated Community Bancorp, Inc., a
Massachusetts corporation.


"Shares" shall have the meaning ascribed thereto in Section 2.1
hereof.


"Stock Purchase" shall have the meaning ascribed thereto in Section
2.1 hereof.


"subsidiary" shall mean, when used with reference to any party, any
corporation of which the majority 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.


"Tax Claim" shall have the meaning ascribed thereto in Section 5.19(a)
hereof.


"Taxes" shall mean all foreign, federal, state and local taxes
(including deficiencies, interest and penalties relating thereto) of
any kind, including without limitation all income, gross income, gross
receipts, sales, use, ad valorem, franchise, profits, withholding,
payroll, employment, excise, stamp, occupancy, premium, property or
windfall profits tax, customs, duty or other taxes or governmental
fees, assessments or charges, together with any interest and any
penalties, additions to tax or additional amounts, imposed by any
taxing authority (domestic or foreign).


"Tax Returns" shall mean all returns, declarations, reports and
information returns and statements required to be filed in respect of
any Taxes.


"Transfer Taxes" shall have the meaning ascribed thereto in Section
5.16 hereof.


"UST Agreement" shall mean that certain Affiliation Agreement and Plan
of Reorganization dated as of December 15, 1997 by and among UST
Corp., Mosaic Corp., a wholly owned subsidiary of UST Corp., and
Seller.


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ARTICLE 2


THE STOCK PURCHASE


2.1 Shares Sold and Acquired. Subject to the terms set forth in this Agreement, on the Closing Date, and upon payment of the Purchase Price, Seller shall sell, convey, transfer, assign and deliver to Buyer an aggregate of 800,000 shares of the common stock of Middlesex, par value $1.00 per share (the "Shares"), which constitute 100% of the issued and outstanding shares of capital stock of Middlesex. Such sale and purchase of the Shares is referred to hereinafter as the "Stock Purchase."


2.2 Price for Shares. Buyer shall deliver to Seller as consideration for the sale, conveyance, transfer, assignment and delivery to Buyer of the Shares, in accordance with the terms and conditions of this Agreement, the sum of Eight Million Two Hundred Forty Thousand and 00/100 Dollars ($8,240,000.00) in cash (the "Purchase Price").


2.3 Closing.


(a) The purchase and sale of the Shares hereunder shall occur at the
offices of Sullivan & Worcester LLP, One Post Office Square, Boston,
Massachusetts, or at such other place as shall be mutually agreeable to the
parties, at a time and on a date (the "Closing Date") to be mutually agreed
upon by Buyer and Seller, which date shall be within five (5) Business Days
after the last of the conditions precedent set forth in Article 6 hereof
has been satisfied or properly waived.


(b) On the Closing Date, the following actions shall be taken:


(i) Buyer shall pay the Purchase Price to Seller by wire transfer
of immediately available federal funds in an amount equal to the
Purchase Price to such bank account in the United States of America as
Seller shall have designated at least two (2) Business Days prior to
the Closing Date;


(ii) Seller shall deliver or cause to be delivered one or more
certificates for the Shares to Buyer, duly endorsed in blank or with
stock powers duly endorsed in blank, together with such other
documents as Buyer may reasonably request to evidence the transfer to
Buyer of good and valid title in and to the Shares, free and clear of
any Lien, together with such minute books, stock record books and
other corporate documents and records relating to Middlesex which are
in the possession of Seller and not otherwise located in the Middlesex
offices or otherwise held in the custody of Middlesex; and


(iii) Each party shall take such other actions, and shall execute
and deliver such other instruments or documents, as shall be required
under Article 6 hereof.


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ARTICLE 3


REPRESENTATIONS AND WARRANTIES OF SELLER


Seller hereby represents and warrants to Buyer as follows:


3.1 Corporate Organization. Seller is a business corporation duly organized, validly existing and in corporate good standing under the laws of the Commonwealth of Massachusetts. Seller is a bank holding company registered with the Board of Governors of the Federal Reserve System under the BHCA. Middlesex is a trust company duly organized and validly existing under the laws of the Commonwealth of Massachusetts. Middlesex is an "insured bank" as such term is defined in Section 3(h) of the FDIA. Middlesex has the corporate power and authority to own, lease or operate all of its properties and assets and to carry on its business as it is now being conducted. All of the issued and outstanding shares of the capital stock of Middlesex are owned beneficially and of record by Seller, free and clear of any Lien. Middlesex has no subsidiaries and owns no equity interest beneficially or of record in any other Person.


3.2 Capitalization of Middlesex.


(a) The authorized capital stock of Middlesex consists of 3,000,000
shares of common stock, par value of $1.00 per share (the "Middlesex Common
Stock"), and 100,000 shares of preferred stock, par value of $1.00 per
share (the "Middlesex Preferred Stock"). As of the date hereof, there are
800,000 shares of Middlesex Common Stock issued and outstanding, no shares
of Middlesex Preferred Stock issued or outstanding and no shares of
Middlesex capital stock of any kind held in Middlesex's treasury.


(b) Neither Seller nor Middlesex is bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the transfer, sale, purchase or issuance of, or
representing the right to purchase, subscribe for or otherwise receive, any
shares of the capital stock of Middlesex or any securities convertible into
or representing the right to receive, purchase or subscribe for any such
shares of Middlesex.


3.3 Authority. Seller has full corporate power and authority to execute and deliver this Agreement and to consummate the Stock Purchase as contemplated hereby. The execution and delivery of this Agreement and the consummation of the Stock Purchase as contemplated hereby have been duly and validly authorized and approved by the Board of Directors of Seller. No other corporate actions or proceedings on the part of Seller or Middlesex are necessary to consummate the Stock Purchase. This Agreement has been duly and validly executed and delivered by Seller, and (assuming due authorization, execution and delivery by Buyer) constitutes the valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except that enforcement thereof may be limited by the receivership, conservatorship and supervisory powers of bank regulatory agencies generally as well as bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting enforcement of creditors' rights generally and except that enforcement thereof may be subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law) and the availability of equitable remedies.


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3.4 No Violation. Neither the execution and delivery of this Agreement, nor the consummation of the Stock Purchase by Seller does or will (i) violate any provision of the articles of organization or by-laws of Seller or Middlesex or (ii) assuming that the consents and approvals referred to in Section 3.5 hereof are duly obtained, (a) violate any statute, code, ordinance, permit, authorization, registration, rule, regulation, judgment, order, writ, decree or injunction applicable to Seller or Middlesex or (b) 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 Seller or 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 Seller or Middlesex is a party, or by which Seller or Middlesex or any of their respective properties or assets may be bound or affected, except for any such breach or default referred to in this clause (b) which individually or in the aggregate would not have a Material Adverse Effect on Middlesex following the consummation of the Stock Purchase.


3.5 Consents and Approvals. Except for notice of the consummation of the Stock Purchase that is required to be filed with the Commissioner or as otherwise disclosed in Schedule 3.5 hereto, no consents or approvals of, filings or registrations with or notices to any governmental agency or authority or any nongovernmental third party are necessary to be obtained or made by Seller or Middlesex in connection with the execution and delivery by Seller of this Agreement and the consummation by Seller of the Stock Purchase as contemplated hereby.


3.6 Legal Proceedings. There is no suit, action, proceeding or claim pending or, to the knowledge of Seller, threatened, (i) against Seller or Middlesex or (ii) challenging the validity or propriety of the transactions contemplated by this Agreement, as to which, in either case, there is a reasonable probability of an adverse determination and which, if adversely determined, would have or could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect on Seller or Middlesex, as applicable, nor is there any judgment, decree, injunction, rule or order of any legal or administrative body or arbitrator outstanding against Seller or Middlesex having any such effect.


3.7 Tax Matters.


(a) Seller or Middlesex have timely filed or will timely file all Tax
Returns that are or will be required to be filed by or with respect to
activities of Middlesex on or prior to the day immediately preceding the
Closing Date (the "Cutoff Date") and have paid or will pay on a timely
basis all material Taxes due or have provided or will provide for such
Taxes in accordance with generally accepted accounting principles. All such
Tax Returns that have been filed were correct and complete in all material
respects.


(b) Seller or Middlesex has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid to any employee
or independent contractor of Middlesex or other third party providing
services to Middlesex.


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(c) No consent or agreement has been filed relating to Middlesex under
Section 341(f) of the Code.


(d) No extension of time with respect to any date on which any Tax
Return was or is to be filed by or with respect to Middlesex is in effect,
and no waiver or agreement is in effect for the extension of time for the
assessment or payment of any Tax for which Middlesex may be liable.


(e) No Tax Return of Middlesex is, as of the date of this Agreement,
currently the subject of an audit or, to Seller's knowledge, investigation
by any taxing authority. No returns of Taxes of Middlesex have been
examined by any taxing authority. There is no claim or assessment pending
or, to Seller's knowledge, threatened against Middlesex for any deficiency
in Taxes.


(f) All tax sharing agreements and other similar procedures between
Middlesex and Seller or any of Seller's affiliates will terminate, having
been fully satisfied, by the Closing Date.


(g) Middlesex is a member of Seller's affiliated group and will be
included in Seller's consolidated federal income tax return that includes
the period from January 1, 1998 through the Cutoff Date. As such, Seller is
and will be eligible to file an election under Section 338(h)(10) of the
Code with respect to a "qualified stock purchase" (as such term is defined
in Section 338 of the Code) of the capital stock of Middlesex.


3.8 Broker's Fees. Neither Seller nor any of its officers or directors has employed any broker or finder or incurred any liability for any broker's fees, commissions or finder's fees in connection with any of the transactions contemplated by this Agreement.


3.9 Absence of Undisclosed Liabilities. To the best knowledge of Seller, as of March 31, 1998, Middlesex does not have any obligation or liability (contingent or otherwise) that is material, or that when combined with all similar obligations or liabilities would be material, except as disclosed or reflected in Middlesex's Call Report (Form FFIEC 034) for the period ended March 31, 1998.


3.10 Subsequent Events. To the best knowledge of Seller, except as set forth on Schedule 3.10 hereto, since March 31, 1998, Middlesex has not (i) conducted its business other than in the ordinary course, (ii) incurred or discharged any liability other than in the ordinary course of business, (iii) made any sale or disposition of any assets, including loans, other than sales and dispositions in the ordinary course of business, (iv) made, amended, or entered into any employment contract or bonus, incentive, stock option, profit sharing, pension, retirement, or other similar plan or arrangement, other than any increases in compensation or bonus payments to officers or employees paid in the ordinary course of business, (v) entered into or engaged in any transaction with, or made any payment to, any officer, director, stockholder or affiliate, other than in the ordinary course of business, (vi) made any change in accounting practices, methods or principles except in accordance with generally accepted accounting principles, (vii) made any commitment to borrow money or make


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a capital expenditure other than in the ordinary course of business, (viii) amended its bylaws or articles of organization, (ix) terminated or waived any material rights of value to its business or (x) entered into any agreement or commitment to do any of the foregoing.


3.11 Material Agreements. To the best knowledge of Seller, except as disclosed in Schedule 3.11 hereto and except for this Agreement, the UST Agreement and any other agreements specifically referred to herein, (i) neither Seller nor any of its subsidiaries, other than Middlesex, is a party to any written agreement, arrangement or commitment relating to the business, operations, properties, assets, liabilities or personnel of Middlesex and (ii) Middlesex is not a party to or bound by (a) any written agreement, arrangement or commitment relating to the employment (including severance) of any person, (b) any written contract, agreement or understanding with any labor union or (c) any other written contract, agreement or commitment that is material to the business, operations or financial condition of Middlesex.


3.12 Employee Benefit Plans.


(a) To the best knowledge of Seller, Schedule 3.12 lists each employee
benefit plan that Middlesex maintains or to which it contributes (each a
"Middlesex Plan"). To the best knowledge of Seller, all contributions
(including all employer contributions and employee salary reduction
contributions) which are required to have been paid to date to each
Middlesex Plan have been so paid.


(b) To the best knowledge of Seller, Middlesex has no obligation to
provide retiree health or welfare benefits to any of its current or former
employees. To the best knowledge of Seller, there are no actions, suits or
claims (other than routine claims for benefits) pending or threatened
against Middlesex or Seller with respect to any Middlesex Plan or the
assets of any such plan, and Seller is not aware of any facts that exist
that could give rise to any actions, suits or claims (other than routine
claims for benefits ) against any Middlesex Plan or the assets of any such
plan.


3.13 Affiliate Transactions. To the best knowledge of Seller, except as disclosed in Schedule 3.13 hereto, Middlesex is not a party to any agreement or arrangement pursuant to which assets and/or liabilities may be transferred between Middlesex and Seller or any of Seller's other subsidiaries or services may be provided to or for the benefit of Middlesex by Seller or any of Seller's other subsidiaries or by Middlesex to or for the benefit of Seller or any of Seller's other subsidiaries, other than agreements or arrangements containing terms and conditions that are substantially the same as those that would be entered into with unaffiliated third parties or that are immaterial with respect to the assets or liabilities transferred or services provided.


For purposes of this Agreement, including without limitation this Article 3, when a representation or warranty of Seller is given to the best of its knowledge or to its knowledge or with reference to matters of which Seller is aware or which are known to Seller, or with any other similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness, without any special or additional investigation or inquiry having been undertaken for the purpose of this Agreement or any specific representation or warranty contained herein, of the following officers


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of Seller: Timothy J. Hansberry, President and Chief Executive Officer; John G. Fallon, Executive Vice President and Chief Financial Officer; and Quentin J. Greeley, Executive Vice President and General Counsel.


ARTICLE 4


REPRESENTATIONS AND WARRANTIES OF BUYER


Buyer hereby represents and warrants to Seller as follows:


4.1 Authority. Buyer is legally competent and otherwise authorized to execute and deliver this Agreement and to consummate the Stock Purchase as contemplated by this Agreement. This Agreement has been duly and validly executed and delivered by Buyer, and (assuming due authorization, execution and delivery by Seller) constitutes the valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except that enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting enforcement of creditors' rights generally and except that enforcement thereof may be subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law) and the availability of equitable remedies.


4.2 No Violations. Neither the execution and delivery of this Agreement, nor the consummation of the Stock Purchase by Buyer does or will, assuming that the consents and approvals referred to in Section 4.3 hereof are duly obtained, (i) violate any statute, code, ordinance, permit, authorization, registration, rule, regulation, judgment, order, writ, decree or injunction applicable to Buyer or (ii) 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 Buyer, 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 Buyer is a party, or by which he or any of his properties or assets may be bound or affected, except for any such breach or default referred to in this clause (ii) which individually or in the aggregate would not have a Material Adverse Effect on Buyer.


4.3 Consents and Approvals. Except for consents and appro ...