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Exhibit 2.1
Execution Copy
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AGREEMENT AND PLAN OF MERGER
DATED AS OF NOVEMBER 13, 2006
AMONG
ASSABET VALLEY BANCORP,
HUDWEST FINANCIAL SERVICES, INC.,
HUDSON SAVINGS BANK
AND
WESTBOROUGH BANCORP, MHC,
WESTBOROUGH FINANCIAL SERVICES, INC.,
AND
THE WESTBOROUGH BANK
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TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS;
DISCLOSURE........................................... 2
1.1. CERTAIN
DEFINITIONS................................................. 2
1.2. OTHER DEFINED
TERMS................................................. 7
1.3. OTHER DEFINITIONAL
MATTERS.......................................... 8
1.4. DISCLOSURE
SCHEDULES................................................ 8
ARTICLE II. THE
MERGERS...................................................... 8
2.1. THE MHC
MERGER...................................................... 9
2.2. THE MID-TIER
MERGER................................................. 9
2.3. THE BANK
MERGER.....................................................10
2.4. AUTHORIZED CAPITAL
STOCK............................................10
2.5. EFFECT OF THE MHC MERGER AND
MID TIER MERGER........................10
2.6. ADDITIONAL
ACTIONS..................................................11
2.7. EFFECTIVE DATE AND EFFECTIVE
TIME; CLOSING..........................11
2.8. TAX
CONSEQUENCES....................................................12
ARTICLE III. CONVERSION OF SHARES; CONSIDERATION; PAYMENT
PROCEDURES.........13
3.1. CONVERSION OF
SHARES................................................13
3.2. PAYMENT
PROCEDURES..................................................13
3.3. RETURN OF EXCHANGE
FUND.............................................14
3.4. RIGHTS AS SHAREHOLDERS;
STOCK TRANSFERS.............................14
3.5. DISSENTING
SHARES...................................................14
3.6. WITHHOLDING
RIGHTS..................................................15
3.7. STOCK
OPTIONS.......................................................15
ARTICLE IV. ACTIONS PENDING
MERGER...........................................15
4.1. AGREEMENTS OF
WESTBOROUGH...........................................15
4.2. AGREEMENTS OF
ASSABET...............................................21
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF
WESTBOROUGH.....................24
5.1. ORGANIZATION, STANDING AND
AUTHORITY................................25
5.2. WESTBOROUGH FINANCIAL
CAPITAL STOCK.................................26
5.3.
SUBSIDIARIES........................................................27
5.4. CORPORATE
POWER.....................................................28
5.5. CORPORATE
AUTHORITY.................................................28
5.6. REGULATORY APPROVALS; NO
DEFAULTS...................................28
5.7. FINANCIAL STATEMENTS;
REPORTS.......................................29
5.8. ABSENCE OF UNDISCLOSED
LIABILITIES..................................31
5.9. ABSENCE OF CERTAIN CHANGES
OR EVENTS................................31
5.10.
LITIGATION..........................................................32
5.11. REGULATORY
MATTERS..................................................32
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5.12. COMPLIANCE WITH
LAWS................................................33
5.13. MATERIAL CONTRACTS;
DEFAULTS........................................33
5.14. NO
BROKERS..........................................................35
5.15. EMPLOYEE BENEFIT
PLANS..............................................35
5.16. LABOR
MATTERS.......................................................37
5.17. ENVIRONMENTAL
MATTERS...............................................37
5.18. TAX
MATTERS.........................................................38
5.19. RISK MANAGEMENT
INSTRUMENTS.........................................40
5.20. INVESTMENT
SECURITIES...............................................41
5.21. LOANS; NONPERFORMING AND
CLASSIFIED ASSETS..........................41
5.22. BANK OWNED LIFE
INSURANCE...........................................42
5.23.
PROPERTIES..........................................................42
5.24. INTELLECTUAL
PROPERTY...............................................42
5.25. FIDUCIARY
ACCOUNTS..................................................43
5.26.
CAPITALIZATION......................................................43
5.27. COMMUNITY REINVESTMENT ACT, BANK
SECRECY, ANTI-MONEY LAUNDERING AND
CUSTOMER INFORMATION
SECURITY......................................43
5.28. BOOKS AND
RECORDS...................................................43
5.29.
INSURANCE...........................................................44
5.30. ALLOWANCE FOR LOAN
LOSSES...........................................44
5.31. CREDIT CARD
ACCOUNTS................................................44
5.32. MERCHANT
PROCESSING.................................................44
5.33. TRANSACTIONS WITH
AFFILIATES........................................44
5.34. REQUIRED VOTE; ANTITAKEOVER
PROVISIONS..............................44
5.35. FAIRNESS
OPINION....................................................45
5.36. TRANSACTIONS IN
SECURITIES..........................................45
5.37. PROXY
STATEMENT.....................................................45
5.38.
DISCLOSURE..........................................................46
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF
ASSABET........................46
6.1. ORGANIZATION, STANDING AND
AUTHORITY................................46
6.2. NO AVB
STOCK........................................................47
6.3.
SUBSIDIARIES........................................................47
6.4. CORPORATE
POWER.....................................................48
6.5. CORPORATE
AUTHORITY.................................................48
6.6. REGULATORY APPROVALS; NO
DEFAULTS...................................48
6.7. FINANCIAL STATEMENTS;
REPORTS.......................................49
6.8. ABSENCE OF UNDISCLOSED
LIABILITIES..................................50
6.9. ABSENCE OF CERTAIN CHANGES
OR EVENTS................................50
6.10.
LITIGATION..........................................................51
6.11. REGULATORY
MATTERS..................................................51
6.12. COMPLIANCE WITH
LAWS................................................51
6.13. MATERIAL CONTRACTS;
DEFAULTS........................................52
6.14. NO
BROKERS..........................................................54
6.15. EMPLOYEE BENEFIT
PLANS..............................................54
6.16. LABOR
MATTERS.......................................................55
6.17. ENVIRONMENTAL
MATTERS...............................................56
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6.18. TAX
MATTERS.........................................................56
6.19. RISK MANAGEMENT
INSTRUMENTS.........................................58
6.20. INVESTMENT
SECURITIES...............................................59
6.21. LOANS; NONPERFORMING AND
CLASSIFIED ASSETS..........................59
6.22. BANK OWNED LIFE
INSURANCE...........................................60
6.23.
PROPERTIES..........................................................60
6.24. INTELLECTUAL
PROPERTY...............................................60
6.25. FIDUCIARY
ACCOUNTS..................................................60
6.26.
CAPITALIZATION......................................................61
6.27. COMMUNITY REINVESTMENT ACT, BANK
SECRECY, ANTI-MONEY LAUNDERING AND
CUSTOMER INFORMATION
SECURITY......................................61
6.28. BOOKS AND
RECORDS...................................................61
6.29.
INSURANCE...........................................................61
6.30. ALLOWANCE FOR LOAN
LOSSES...........................................62
6.31. TRANSACTIONS WITH
AFFILIATES........................................62
6.32. REQUIRED VOTE; ANTITAKEOVER
PROVISIONS..............................62
6.33. FAIRNESS
OPINION....................................................62
6.34. PROXY
STATEMENT.....................................................62
6.35. OWNERSHIP OF WESTBOROUGH FINANCIAL
COMMON STOCK.....................62
6.36. FINANCIAL
ABILITY...................................................62
6.37.
DISCLOSURE..........................................................63
ARTICLE VII.
COVENANTS.......................................................63
7.1. REASONABLE BEST
EFFORTS.............................................63
7.2. SHAREHOLDER
APPROVAL................................................63
7.3. CORPORATOR
APPROVAL.................................................64
7.4. REGULATORY
FILINGS..................................................64
7.5. PRESS
RELEASES......................................................64
7.6. ACCESS;
INFORMATION.................................................65
7.7. ACQUISITION
PROPOSALS...............................................65
7.8. CERTAIN
POLICIES....................................................67
7.9.
INDEMNIFICATION.....................................................67
7.10. EMPLOYMENT AND BENEFIT
MATTERS......................................68
7.11. NOTIFICATION OF CERTAIN
MATTERS.....................................70
7.12. PAYMENTS AND RELATED
AGREEMENTS.....................................70
7.13. UPDATE OF DISCLOSURE
SCHEDULES......................................70
7.14. CURRENT
INFORMATION.................................................71
7.15. LOAN LOSS
RESERVES..................................................71
7.16. ALCO
MANAGEMENT.....................................................71
ARTICLE VIII. CONDITIONS TO CONSUMMATION OF THE
MERGERS......................72
8.1. CONDITIONS TO EACH PARTY'S
OBLIGATION TO EFFECT THE MERGERS.........72
8.2. CONDITIONS TO OBLIGATION OF
WESTBOROUGH.............................72
8.3. CONDITIONS TO OBLIGATIONS OF
AVB....................................73
ARTICLE IX.
TERMINATION......................................................74
9.1.
TERMINATION.........................................................74
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9.2. EFFECT OF TERMINATION;
EXPENSES.....................................75
9.3. WESTBOROUGH SPECIAL
PAYMENT.........................................76
ARTICLE X.
MISCELLANEOUS.....................................................77
10.1.
SURVIVAL............................................................77
10.2. WAIVER;
AMENDMENT...................................................77
10.3. COUNTERPARTS AND FACSIMILE
SIGNATURES...............................77
10.4. GOVERNING
LAW.......................................................78
10.5.
EXPENSES............................................................78
10.6.
NOTICES.............................................................78
10.7. ENTIRE UNDERSTANDING; NO THIRD
PARTY BENEFICIARIES..................78
10.8.
SEVERABILITY........................................................79
10.9. ENFORCEMENT OF THE
AGREEMENT........................................79
10.10.
INTERPRETATION......................................................79
10.11.
ASSIGNMENT..........................................................79
10.12. ALTERNATIVE
STRUCTURE...............................................79
Annex A List of Voting
Shareholders
-------
Annex B Form of Voting
Agreement
-------
Annex C Officers and
Directors of Surviving Corporation
-------
Annex D New Bank
Committee Structure
-------
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AGREEMENT AND PLAN OF MERGER
PREAMBLE
THIS
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
November 13, 2006, is by and among (i) Hudson Savings Bank, a
Massachusetts-chartered savings bank ("Hudson"), HudWest Financial
Services,
Inc., a Massachusetts-chartered corporation ("Merger Sub"), and
Assabet Valley
Bancorp ("AVB"), a Massachusetts-chartered mutual holding company
and the
parent company of Hudson and Merger Sub, and (ii) The Westborough
Bank, a
Massachusetts-chartered savings bank ("Westborough Bank"),
Westborough
Financial Services, Inc., a Massachusetts-chartered mid-tier
holding company of
Westborough Bank ("Westborough Financial") and Westborough Bancorp,
MHC, a
Massachusetts-chartered mutual holding company ("Westborough MHC").
Each of
Hudson, AVB, Merger Sub, Westborough Bank, Westborough Financial
and
Westborough MHC is sometimes individually referred to in this
Agreement as a
"party" and collectively as the "parties."
1. Hudson
is a stock savings bank, and AVB is the mutual holding company
for Hudson. Hudson and AVB both have their principal offices
located in Hudson,
Massachusetts.
2.
Westborough MHC owns a majority of the outstanding capital stock
of
Westborough Financial, which, in turn, owns all of the outstanding
capital
stock of Westborough Bank. Westborough Bank, Westborough Financial
and
Westborough MHC all have their principal offices located in
Westborough,
Massachusetts.
3. The
respective Boards of Trustees and Directors of the parties deem
it
advisable and in the best interests of the parties, as well as of
the
shareholders of Westborough Financial, to consummate the following
merger
transactions: (i) Westborough MHC will merge with and into AVB,
with AVB as the
surviving entity (the "MHC Merger"), (ii) Westborough Financial
will merge with
and into Merger Sub, with Westborough Financial as the surviving
entity (the
"Mid-Tier Merger"), (iii) Westborough Bank will merge with and into
Hudson,
with Hudson as the surviving institution (the "Bank Merger") (which
is referred
to herein as "New Bank" and shall be renamed with a name that is
mutually
agreeable to the parties hereto) and New Bank will remain a
subsidiary of AVB,
(iv) concurrently with step (i), each outstanding share of
Westborough
Financial Common Stock previously held by any shareholder other
than
Westborough MHC or AVB (collectively, the "Outstanding Shares")
will be
canceled and exchanged for an amount of cash per share equal to the
Per Share
Merger Consideration to be paid by AVB or Merger Sub pursuant to
the terms of
this Agreement, and (v) as a result of the foregoing, the interests
of
Westborough Bank depositors in Westborough MHC shall cease to exist
and will be
converted into interests of the same nature in AVB.
4. The
parties intend each of the MHC Merger, the Mid-Tier Merger, and
the Bank Merger to qualify as a reorganization within the meaning
of Section
368(a) of the Internal Revenue Code of 1986, as amended (the
"Code").
In view of
the foregoing and for other good and valuable consideration,
receipt and sufficiency of which are hereby acknowledged, the
parties agree as
follows:
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ARTICLE I.
DEFINITIONS; DISCLOSURE
1.1.
Certain Definitions. The following terms are used in this
Agreement
with the meanings set forth below:
"Acquisition Proposal" shall mean (x) a bona fide proposal by any
Person
(other than AVB or any Subsidiary of AVB) to Westborough or the
shareholders of
Westborough Financial to engage in a Change in Control Transaction,
(y) a
public statement by any Person (other than AVB or any Subsidiary of
AVB) to
Westborough or the shareholders of Westborough Financial of such
Person's
intention to make a proposal to engage in a Change in Control
Transaction if
this Agreement terminates, or (z) the filing by any Person (other
than AVB or
any Subsidiary of AVB) of an application or notice with any
Governmental
Authority to engage in a Change in Control Transaction.
"Affiliate" shall mean a Person that directly, or indirectly
through one
or more intermediaries, controls or is controlled by, or is under
common
control with, the Person specified. For purposes of this
definition, the terms
"control," "controlled by" and "under common control with" shall
mean the
possession, directly or indirectly, of the power to direct or cause
the
direction of the management or policies of such Person and, in the
case of an
entity, shall require (a) in the case of a corporate entity, direct
or indirect
ownership of at least a majority of the securities having the right
to vote for
the election of directors, and (b) in the case of a non-corporate
entity,
direct or indirect ownership of at least a majority of the Equity
Interests
with the power to direct the management and policies of such
non-corporate
entity.
"Aggregate
Merger Consideration" shall be equal to the aggregate Per
Share Merger Consideration payable with respect to all Outstanding
Shares of
Westborough Financial Common Stock pursuant to Section 3.1(c) plus
the
aggregate amount payable to holders of Westborough Financial
Options pursuant
to Section 3.7.
"Agreement" shall mean this Agreement, as amended or modified from
time
to time in accordance with Section 10.2.
"Assabet"
shall mean each of AVB, Merger Sub and Hudson and the
Subsidiaries of each of the foregoing, individually and
collectively.
"AVB"
shall have the meaning set forth in the Preamble to this
Agreement.
"AVB
Board" shall mean the Board of Trustees of AVB.
"AVB
Bylaws" shall mean the Bylaws of AVB.
"AVB
Charter" shall mean the Amended and Restated Charter of AVB, as
amended.
"Bank
Merger" shall have the meaning set forth in the Preamble to
this
Agreement.
"Bank
Regulator" shall mean and include any pertinent federal or
state
Governmental Authority charged with the supervision of banks or
bank or
financial holding companies or
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engaged in the insurance of bank deposits, including, without
limitation, the
Federal Reserve Board, the FDIC, the Depositors Insurance Fund
of
Massachusetts, the Massachusetts Bank Commissioner and the
Massachusetts Board.
"BHCA"
shall mean the Bank Holding Company Act of 1956, as amended.
"Business
Day" shall mean Monday through Friday of each week, except (i)
a legal holiday recognized as such by the United States Government,
or (ii) any
day on which banking institutions in The Commonwealth of
Massachusetts are
authorized or obligated to close.
"Certificate" shall mean any certificate which, immediately prior
to the
Mid-Tier Effective Time, represented Outstanding Shares of
Westborough
Financial Common Stock.
"Change in
Control Transaction" shall mean (A) a merger, reorganization,
tender or exchange offer, recapitalization, reorganization,
liquidation, share
exchange, consolidation or similar transaction involving
Westborough MHC or any
Subsidiary of Westborough MHC whose assets constitute more than 15%
of the
consolidated assets of Westborough MHC, (B) the disposition, by
sale, lease,
exchange or otherwise, of assets of Westborough MHC or any
Subsidiary of
Westborough MHC representing in either case 15% or more of the
consolidated
assets of Westborough MHC, or (C) the issuance, sale or other
disposition of
(including by way of merger, consolidation, share exchange or any
similar
transaction), or the acquisition of, securities representing 15% or
more of the
voting power of Westborough Financial or any Subsidiary whose
assets constitute
more than 15% of the consolidated assets of Westborough
Financial.
"Code"
shall have the meaning set forth in the Preamble to this
Agreement.
"Community
Reinvestment Act" shall mean the Community Reinvestment Act of
1977, as amended.
"Equal
Credit Opportunity Act" shall mean the Equal Credit Opportunity
Act, as amended.
"Equity
Interests" shall mean, with respect to any Person, capital
stock
or other ownership or equity interests of such Person or any
Subsidiary, and
warrants, options, rights, subscriptions, calls, commitments,
convertible
securities and other arrangements or commitments of any character
which call
for the Person to issue, deliver or dispose, or cause to be issued,
delivered
or disposed, any of its or its Subsidiaries' capital stock or other
ownership
or equity interests of such Person or any Subsidiary.
"ERISA"
shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange
Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Fair
Housing Act" shall mean the Fair Housing Act, as amended.
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"FDIC"
shall mean the Federal Deposit Insurance Corporation.
"Federal
Reserve Act" shall mean the Federal Reserve Act, as amended.
"Federal
Reserve Board" shall mean the Board of Governors of the Federal
Reserve System.
"GAAP"
shall mean United States generally accepted accounting
principles.
"Governmental Authority" shall mean any United States or
foreign,
federal, state or local governmental commission, board, body,
bureau, agency or
other regulatory authority (including all Bank Regulators),
including courts
and other judicial bodies, or any self-regulatory body or
authority, including
any instrumentality or entity designated to act for or on behalf of
the
foregoing.
"Hudson"
shall have the meaning set forth in the Preamble to this
Agreement.
"Hudson
Bylaws" shall mean the Bylaws of Hudson.
"Hudson
Charter" shall mean the Charter of Hudson.
"JFM"
shall mean Joseph F. MacDonough.
"Joint
Venture" shall mean any corporation, limited liability company,
limited liability partnership, partnership, joint venture, trust,
association
or other entity which is not a Subsidiary of Westborough or Assabet
and in
which (a) Westborough or Assabet, directly or indirectly, owns or
controls any
shares of any class of the outstanding voting securities or other
Equity
Interests, including, without limitation, an equity investment, as
such term as
of the date of this Agreement is defined in the FDIC's rules and
regulations
regarding activities and investments of insured state banks at 12
C.F.R.
[SECTION] 362.2(g), or (b) Westborough or Assabet is a general
partner.
"knowledge" or any words or phrases of similar effect shall mean,
with
respect to any Person, the actual knowledge of such Person, after
reasonable
due inquiry.
"Liens"
shall mean any charge, mortgage, pledge, security interest,
restriction, option, right of first refusal, claim, lien or
encumbrance.
"Loan Loss
Reserves" shall mean the reserves established by Westborough
or Hudson in accordance with its customary practices with respect
to Loans as
of the Closing Date.
"Massachusetts Bank Commissioner" shall mean the Commissioner of
Banks of
The Commonwealth of Massachusetts.
"Massachusetts Board" shall mean the Massachusetts Board of
Bank
Incorporation.
"Material
Adverse Effect" shall mean, with respect to any Person, any
change or effect that (i) is or would be reasonably likely to be
material and
adverse to the financial position, results of operations, business
or prospects
of such Person or its Subsidiaries, or (ii) would
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materially impair the ability of any Person to perform its
respective
obligations under this Agreement or the Bank Merger Agreement, or
otherwise
materially impede the consummation of the Transactions; provided,
however, that
"Material Adverse Effect" shall not be deemed to include the impact
of (1)
changes in banking and similar laws, rules or regulations of
general
applicability or interpretations thereof by Governmental
Authorities, (2)
changes in GAAP or regulatory accounting requirements applicable to
financial
institutions and their holding companies generally, (3) changes
after the date
of this Agreement in general economic or capital market conditions
affecting
financial institutions or their market prices generally and not
specifically
related to Westborough or Assabet, including, but not limited to,
changes in
levels of interest rates generally, (4) direct effects of
compliance with this
Agreement on the operating performance of Westborough or Assabet,
including
expenses incurred by Westborough or Assabet in consummating the
transactions
contemplated by this Agreement, and (5) the effects of any action
or omission
taken by Westborough with the prior consent of Assabet, and vice
versa, or as
otherwise contemplated by this Agreement, the Bank Merger Agreement
and the
Voting Agreements.
"MBCA"
shall mean the Massachusetts Business Corporations Act, MGL
Chapter 156D, [SECTIONS]1 et seq., as amended.
"Merger"
shall have the meaning set forth in the Preamble to this
Agreement.
"Merger
Sub" shall mean the wholly owned subsidiary of AVB incorporated
under the MBCA for the purpose of being merged with and into
Westborough
Financial.
"Merger
Sub Charter" shall mean the Corporate Charter of Merger Sub.
"MHC
Merger" shall have the meaning set forth in the Preamble to
this
Agreement.
"MHPF"
shall mean the Massachusetts Housing Partnership Fund.
"National
Labor Relations Act" shall mean the National Labor Relations
Act, as amended.
"New Bank"
shall have the meaning set forth in the Preamble to this
Agreement.
"OREO"
shall mean other real estate owned.
"Outstanding Shares" shall have the meaning set forth in the
Preamble to
this Agreement.
"Person"
shall mean any individual, bank, corporation, partnership,
association, joint-stock company, business trust, limited liability
company or
unincorporated organization.
"SEC"
shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and
the rules and regulations thereunder.
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"Subsidiary" shall have the meaning ascribed to that term in Rule
1-02 of
Regulation S-X of the SEC.
"Tax" and
"Taxes" mean all federal, state, local or foreign income, gross
income, gains, gross receipts, sales, use, ad valorem, goods and
services,
capital, production, transfer, franchise, windfall profits,
license,
withholding, payroll, employment, disability, employer health,
excise,
estimated, severance, stamp, occupation, property, environmental,
custom
duties, unemployment or other taxes of any kind whatsoever,
together with any
interest, additions or penalties thereto and any interest in
respect of such
interest and penalties.
"Tax
Returns" shall mean any return, declaration, report, claim for
refund, information return or other document (including any
schedules or
attachments thereto) filed or required to be filed in connection
with the
determination, assessment or collection of any Tax or the
administration of any
laws, regulations or administrative requirements relating to any
Tax.
"Tender Offer" shall
mean a tender offer or exchange offer to purchase
any shares of Westborough Financial Common Stock such that, upon
consummation
of such offer, the Person making such tender offer or exchange
offer would own
or control 25% or more of the then Outstanding Shares of
Westborough Financial
Common Stock.
"Transaction Documents" shall mean this Agreement, the Bank
Merger
Agreement and the Voting Agreements.
"Transactions" shall mean the MHC Merger, the Mid-Tier Merger and
the
Bank Merger.
"Voting
Agreements" shall mean those certain Voting Agreements (each of
which is in the form set forth on Annex B to this Agreement)
executed by the
Voting Shareholders in connection with the execution and delivery
of this
Agreement.
"Voting Shareholders"
shall mean the Persons listed on Annex A to this
Agreement.
"Westborough" shall mean each of Westborough Bank, Westborough
Financial
and Westborough MHC and the Subsidiaries of each of the foregoing,
individually
and collectively.
"Westborough Bank" shall have the meaning set forth in the Preamble
to
this Agreement.
"Westborough Financial" shall have the meaning set forth in the
Preamble
to this Agreement.
"Westborough Financial Board" shall mean the Board of Directors
of
Westborough Financial.
"Westborough Financial Bylaws" shall mean the Bylaws of
Westborough
Financial.
"Westborough Financial Charter" shall mean the Articles of
Organization
of Westborough Financial.
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"Westborough Financial Common Stock" shall mean the common stock,
$0.01
par value per share, of Westborough Financial.
"Westborough Financial Options" shall mean the options to
acquire
Westborough Financial Common Stock issued under the Westborough
Financial Stock
Option Plan.
"Westborough Financial Preferred Stock" shall mean the serial
preferred
stock, par value $0.01 per share, of Westborough Financial.
"Westborough Financial Stock" shall mean, collectively,
Westborough
Financial Common Stock and Westborough Financial Preferred
Stock.
"Westborough Financial Stock Option Plan" shall mean the
Westborough
Financial Services, Inc. 2001 Stock Option Plan.
1.2. Other
Defined Terms. Definitions of the defined terms listed below
are contained in the Section set forth opposite the defined term in
the table
below:
Defined Term
Section of Agreement
Articles of Merger
Section 2.7(a)
Assabet Benefit Plan
Section 6.15(a)
Assabet Employees
Section 6.15(a)
Assabet Loan Property
Section 6.17(b)
Assabet Regulatory Authorities
Section 6.11(a)
Assabet Reports
Section 6.7(b)
AVB Benefit Plans
Section 7.10(a)
AVB's Financial Statements
Section 6.7(a)
Bank Effective Time
Section 2.3(a)
Bank Merger Agreement
Section 2.3(a)
BOLI
Section 5.22
Closing and Closing Date
Section 2.7(c)
Derivatives Contract
Section 5.19
Disclosure Schedules
Section 1.4
Dissenting Shares
Section 3.5
Effective Date
Section 2.7(a)
Employment Agreement
Section 7.12
Environmental Laws
Section 5.17
ERISA Affiliate
Section 5.15(d)
ESOP
Section 7.10(f)
Expenses
Section
9.2(b)
Expiration Date
Section 9.1(b)
Hazardous Substance
Section 5.17
Indemnified Party, Indemnified Parties
Section 7.9(a)
and
Indemnifying Party
Insurance Amount
Section 7.9(c)
Insurance Policies
Section 5.29
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Loans
Section 5.21(a)
Material Contract
Section 5.13(a)
Merger Sub Common Stock
Section 3.1(b)
MHC Effective Time
Section 2.7(a)
Mid-Tier Effective Time
Section 2.7(b)
Paying Agent
Section 3.2(a)
Pension Plan
Section 5.15(b)
Per Share Merger Consideration
Section 3.1(c)
Proxy Statement
Section 5.37
Representatives
Section 7.7
SEC Documents
Section 5.7(a)
Surviving Corporation
Section 2.2
Unperfected Dissenting Shares
Section 3.5
USA Patriot Act
Section
5.27
Welfare Plan
Section 5.15(f)
Westborough Benefit Plans
Section 5.15(a)
Westborough Employees
Section 5.15(a)
Westborough Financial Board Recommendation
Section 7.2(b)
Westborough Financial Loan Property
Section 5.17(b)
Westborough Financial Meeting
Section 7.2(b)
Westborough Regulatory Authorities
Section 5.11(a)
Westborough Reports
Section 5.7(c)
Westborough Special Payment
Section 9.3
1.3. Other
Definitional Matters. Unless the context otherwise requires, a
term defined anywhere in this Agreement has the same meaning
throughout; all
references to "the Agreement" or "this Agreement" are to this
Agreement as
modified, supplemented or amended from time to time, and terms
defined in the
singular shall have a comparable meaning when used in the plural,
and vice
versa.
1.4.
Disclosure Schedules. On or prior to the date of this Agreement,
AVB
has delivered to Westborough a schedule and Westborough has
delivered to AVB a
schedule (respectively, its "Disclosure Schedules") setting forth,
among other
things, items the disclosure of which is necessary or appropriate
either in
response to an express disclosure requirement contained in a
provision hereof
or as an exception to one or more representations or warranties
contained in
Article V or Article VI or to one or more of its covenants
contained in Article
IV. The mere inclusion of a fact, circumstance or event in a
Disclosure
Schedule shall not be deemed an admission by a party that such item
represents
a material exception or that such item is reasonably likely to
result in a
Material Adverse Effect. Any matter disclosed pursuant to one
section of a
party's Disclosure Schedules shall be deemed disclosed for all
purposes of such
party's Disclosure Schedules, but only to the extent that it is
reasonably
apparent from a reading of the disclosure that it also qualifies or
applies to
other sections of the Agreement and the corresponding Disclosure
Schedule.
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ARTICLE II.
THE MERGERS
2.1. The
MHC Merger.
(a) Surviving MHC. Subject to the terms and conditions of this
Agreement,
at the MHC Effective Time, Westborough MHC shall merge with and
into AVB
in accordance with Massachusetts law, the separate corporate
existence
of Westborough MHC shall cease and AVB shall survive and
continue
to exist as a mutual holding company incorporated under the
laws
of The
Commonwealth of Massachusetts (AVB, as the surviving corporation
in
the MHC
Merger, is sometimes referred to in this Agreement as
"Surviving
MHC").
(b) Name. The name of Surviving MHC shall be "Assabet Valley
Bancorp."
(c) Corporate Charter and Bylaws. The corporate charter and
bylaws
of
Surviving MHC immediately after the MHC Merger shall be AVB's
Charter
and Bylaws
as in effect immediately prior to the MHC Merger, as amended as
set forth
in Section 2.1(c) of Westborough's Disclosure Schedules or as
otherwise
mutually agreed upon. The purpose of Surviving MHC shall be to
engage in
activities permitted to bank holding companies under the BHCA
and the
laws of The Commonwealth of Massachusetts.
(d) Trustees, Corporators and Officers of Surviving MHC.
Effective
as of the
MHC Effective Time, (i) all of the trustees and corporators of
Westborough MHC as of the date immediately prior to the Effective
Date
shall be
elected or appointed to the Surviving MHC Board of Trustees and
Board of
Corporators, and (ii) the officers of the Surviving MHC shall
be
the
persons serving as officers of AVB immediately prior to the
Effective
Date, plus JFM,
who shall be elected or appointed as President and Chief
Executive
Officer of the Surviving MHC.
2.2. The
Mid-Tier Merger.
(a) Surviving Corporation. Subject to the terms and conditions
of
this
Agreement, effective at the Mid-Tier Effective Time, Merger Sub
shall
merge with
and into Westborough Financial in accordance with the MBCA, the
separate
corporate existence of Merger Sub shall cease and Westborough
Financial
shall survive and continue to exist as a corporation
incorporated under the laws of The Commonwealth of
Massachusetts
(Westborough Financial, as the surviving corporation in the
Mid-Tier
Merger, is
sometimes referred to in this Agreement as "Surviving
Corporation").
(b) Name. The name of Surviving Corporation shall be "HudWest
Financial
Services, Inc."
(c) Corporate Charter and Bylaws. The corporate charter and
bylaws
of
Surviving Corporation immediately after the Mid-Tier Merger shall
be
the Merger
Sub Charter and the Merger Sub Bylaws as in effect immediately
prior to
the Mid-Tier Merger. The purpose of Surviving Corporation shall
be to
engage in activities permitted to bank holding companies under
the
BHCA and
the laws of The Commonwealth of Massachusetts.
(d) Directors and Officers of Surviving Corporation. Effective as
of
the
Mid-Tier Effective Time, the individuals specified on Annex C
hereto
shall be
elected or appointed to Surviving Corporation's Board of
Directors,
and the officers of Surviving Corporation shall be those
individuals, in such capacities, as are specified on such Annex C.
To the
extent not
specified
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<PAGE>
on such
Annex C, Assabet and Westborough agree prior to the Mid-Tier
Effective
Time to appoint or elect such officers and/or directors as
mutually
agreed upon. In any event, JFM shall be the President and CEO
of
Surviving
Corporation and a member of its Board of Directors.
2.3. The
Bank Merger.
(a) Assabet and Westborough agree to take all action necessary
and
appropriate to carry out the Bank Merger, including causing the
entering
into of an
appropriate merger agreement (the "Bank Merger Agreement"), to
cause
Westborough Bank to merge, either directly or indirectly, by use
of
one or
more interim corporations, with and into Hudson in accordance
with
applicable
laws and regulations and the terms of the Bank Merger Agreement
and as
soon as practicable after consummation of the MHC Merger and
the
Mid-Tier
Merger. The Bylaws of Hudson shall be amended as set forth in
Section
2.3(a) of Westborough's Disclosure Schedules or as otherwise
mutually
agreed upon.
(b) Effective as of the effective time of the Bank Merger (the
"Bank
Effective
Time"), nine of the directors of Westborough Financial who are
in office
as of the date immediately prior to the Effective Date (to be
chosen by
Westborough in consultation with Hudson, but one of whom shall
be JFM)
shall be elected or appointed to New Bank's Board of Directors.
The
remaining directors of New Bank shall be fifteen of the Persons (to
be
chosen by
AVB in consultation with Westborough) who are serving as
directors
of Hudson immediately prior to the Effective Date.
(c) As of the Bank Effective Time, the committees of New Bank's
Board of
Directors shall be reconstituted so that such committees shall
be
comprised
a number of directors from Westborough Financial and a number
of
directors
from Hudson as specified on Annex D hereto. To the extent not
specified
on Annex D, Assabet and Westborough shall mutually agree prior
to the
Bank Effective Time to reconstitute the committees of New
Bank's
Board of
Directors, taking into account to the extent practicable the
specific
skills, education and experience of the various designees, and
taking
into account a desire to divide among the committees the former
directors
of Westborough Financial who are joining New Bank's Board of
Directors.
Effective as of the Mid-Tier Effective Time, all officers of
Westborough Bank except for those who have entered into Payments
and
Waiver
Agreements in accordance with Section 7.12 will be offered jobs
as
officers
of New Bank at a rate of pay equal to or exceeding the rate of
pay at
Westborough Bank.
(d) As of the Bank Effective Time, JFM shall be elected or
appointed
as an
Executive Vice President and a member of the Board of Directors
of
New Bank
and a member of New Bank's Executive Committee.
2.4.
Authorized Capital Stock. The authorized capital stock of
Surviving
Corporation upon consummation of the Mid-Tier Merger shall be as
set forth in
the Merger Sub Charter immediately prior to the Mid-Tier Merger.
The total
authorized capital stock of Surviving Corporation shall be one
thousand (1,000)
shares of common stock, $0.01 par value.
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2.5.
Effect of the MHC Merger and Mid Tier Merger.
(a) At the MHC Effective Time, the effect of the MHC Merger shall
be
as
provided in this Agreement and in the applicable provisions of the
laws
of The
Commonwealth of Massachusetts. Without limiting the generality
of
the
foregoing, and subject thereto, at the MHC Effective Time, all
the
property,
rights, privileges, powers and franchises of Westborough MHC
and
AVB shall
vest in Surviving MHC, and all debts, liabilities, obligations,
restrictions, disabilities and duties of Westborough MHC and AVB
shall
become the
debts, liabilities, obligations, restrictions, disabilities and
duties of
Surviving MHC.
(b) At the Mid-Tier Effective Time, the effect of the Mid-Tier
Merger
shall be as provided in this Agreement and in the applicable
provisions
of the laws of The Commonwealth of Massachusetts. Without
limiting
the generality of the foregoing, and subject thereto, at the
Mid-Tier
Effective Time, all the property, rights, privileges, powers
and
franchises
of Westborough Financial and Merger Sub shall vest in Surviving
Corporation, and all debts, liabilities, obligations,
restrictions,
disabilities and duties of Westborough Financial and Merger Sub
shall
become the
debts, liabilities, obligations, restrictions, disabilities and
duties of
Surviving Corporation.
2.6.
Additional Actions.
(a) If, at any time after the MHC Effective Time, Surviving MHC
shall
consider that any further assignments or assurances in law or
any
other acts
are necessary or desirable to (i) vest, perfect or confirm, of
record or
otherwise, in Surviving MHC its right, title or interest in, to
or under
any of the rights, properties or assets of Westborough MHC and
AVB
acquired or to be acquired by Surviving MHC as a result of, or
in
connection
with, the MHC Merger, or (ii) otherwise carry out the purposes
of this
Agreement, Westborough MHC and AVB, and its proper officers and
directors,
shall be deemed to have granted to Surviving MHC an irrevocable
power of
attorney to execute and deliver all such proper deeds,
assignments and assurances in law and to do all acts necessary or
proper
to vest,
perfect or confirm title to and possession of such rights,
properties
or assets in Surviving MHC and otherwise to carry out the
purposes
of this Agreement, and the proper officers and directors of
Surviving
Corporation MHC are fully authorized in the name of Surviving
MHC or
otherwise to take any and all such action.
(b) If, at any time after the Mid-Tier Effective Time,
Surviving
Corporation, shall consider that any further assignments or
assurances in
law or any
other acts are necessary or desirable to (i) vest, perfect or
confirm, of
record or otherwise, in Surviving Corporation its right, title
or
interest in, to or under any of the rights, properties or assets
of
Westborough Financial and Merger Sub acquired or to be acquired
by
Surviving
Corporation as a result of, or in connection with, the Mid-Tier
Merger, or
(ii) otherwise carry out the purposes of this Agreement,
Westborough Financial and Merger Sub, and its proper officers
and
directors,
shall be deemed to have granted to Surviving Corporation an
irrevocable power of attorney to execute and deliver all such
proper
deeds,
assignments and assurances in law and to do all acts necessary
or
proper to
vest, perfect or confirm title to and possession of such
rights,
properties or
assets in Surviving Corporation and otherwise to carry out
the
purposes of this Agreement, and the proper officers and directors
of
Surviving
Corporation are fully authorized in the name of Surviving
Corporation or otherwise to take any and all such action.
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<PAGE>
2.7.
Effective Date and Effective Time; Closing.
(a) Subject to the satisfaction or waiver of the conditions set
forth in
Article VIII (other than those conditions that by their nature
are to be
satisfied at the consummation of the MHC Merger, but subject to
the
fulfillment or waiver of those conditions), the parties shall
cause
articles
of merger relating to the MHC Merger (the "MHC Articles of
Merger")
to be filed with the Secretary of State of The Commonwealth of
Massachusetts pursuant to the applicable provisions of
Massachusetts Law
on (i) a
date selected by AVB after such satisfaction or waiver which is
no later
than seven Business Days after such satisfaction or waiver, or
(ii) such
other date to which the parties may agree in writing. The MHC
Merger
provided for in this Agreement shall become effective upon such
filing or
on such date as may be specified therein. The date of such
filing or
such later effective date is in this Agreement called the
"Effective
Date." The "MHC Effective Time" shall be the time of such
filings or
as set forth in such filings. The filing of the MHC Articles of
Merger
shall be made on the Closing Date.
(b) Subject to the satisfaction or waiver of the conditions set
forth in
Article VIII (other than those conditions that by their nature
are to be
satisfied at the consummation of the Mid-Tier Merger, but
subject to
the fulfillment or waiver of those conditions), the parties
shall
cause articles of merger relating to the Mid-Tier Merger (the
"Mid-Tier
Articles of Merger") to be filed with the Secretary of State of
The
Commonwealth of Massachusetts pursuant to the MBCA on the
Effective
Date. The
Mid-Tier Merger provided for in this Agreement shall become
effective
upon such filing or on such date as may be specified therein.
The "Mid-Tier
Effective Time" shall be the time of such filings or as set
forth in
such filings, which shall be immediately after the MHC
Effective
Time. The
filing of the Mid-Tier Articles of Merger shall be made on the
Closing
Date.
(c) A closing (the "Closing") shall take place on the date on
which
the MHC
Articles of Merger and the Mid-Tier Articles of Merger are to
be
filed at
10:00 a.m. Eastern Time at the principal offices of Foley Hoag
LLP,
Boston, Massachusetts, or at such other place, at such other time,
or
on such
other date as the parties may mutually agree upon (such date,
the
"Closing
Date"). At the Closing, there shall be delivered to AVB and
Westborough Financial the opinions, certificates and other
documents
required
to be delivered under Article VIII hereof.
2.8. Tax
Consequences. It is intended that each of the MHC Merger, the
Mid-Tier Merger, and the Bank Merger shall qualify as a
reorganization within
the meaning of Section 368(a) of the Code, and that this Agreement
shall
constitute a "plan of reorganization" as that term is used in
Sections 354 and
361 of the Code. From and after the date of this Agreement and
until the Closing
Date, each party hereto shall use its reasonable best efforts to
cause the MHC
Merger to qualify, and will not knowingly take any action, cause
any action to
be taken, fail to take any action or cause any action to fail to be
taken which
action or failure could prevent the MHC Merger from qualifying as
a
reorganization under Section 368(a) of the Code. Following the
Closing, no party
hereto shall knowingly take any action, cause any action to be
taken, fail to
take any action or cause any action to fail to be taken, which
action or failure
to act could cause any of the MHC Merger, the Mid-Tier Merger or
the Bank Merger
to fail to qualify as a reorganization under Section 368(a) of the
Code.
Westborough MHC and AVB each hereby agree to deliver certificates
substantially
in compliance with Internal Revenue Service published advance
ruling guidelines,
with customary exceptions and modifications thereto, to enable
counsel to
deliver the legal opinions contemplated by Section 8.1(e), which
certificates
shall be effective as of the date of such opinions.
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ARTICLE III.
CONVERSION OF SHARES; CONSIDERATION; PAYMENT PROCEDURES
3.1.
Conversion of Shares. At the Mid-Tier Effective Time, by virtue
of
the Mid-Tier Merger and without any action on the part of a holder
of Equity
Interests of Westborough Financial or Merger Sub:
(a) Each share of Westborough Financial Common Stock held of
record
immediately prior to the Mid-Tier Effective Time by Westborough
MHC,
Westborough Financial, Merger Sub, AVB or any Subsidiary of
Westborough
Financial
or of AVB shall be canceled and retired at the Mid-Tier
Effective
Time and no consideration shall be issued in exchange therefor.
(b) Each share of common stock of Merger Sub (the "Merger Sub
Common
Stock")
issued and outstanding immediately prior to the Mid-Tier
Effective
Time shall
be canceled and retired at the Mid-Tier Effective Time and
automatically converted into one validly issued, fully paid and
nonassessable share of common stock, $0.01 par value, of
Surviving
Corporation. Each certificate evidencing ownership of a number of
shares
of Merger
Sub Common Stock shall be deemed to evidence ownership of the
same
number of shares of common stock, $0.01 par value, of Surviving
Corporation.
(c) Subject to Sections 3.2 and 3.5, each of the Outstanding
Shares
(other
than shares to be canceled in accordance with Section 3.1(a))
shall
be
converted into the right to receive cash in the amount of $35.00
(the
"Per Share
Merger Consideration").
3.2.
Payment Procedures.
(a) Immediately prior to the Mid-Tier Effective Time, AVB shall
deposit,
or shall cause to be deposited, with Registrar and Transfer
Company
(the "Paying Agent"), for the benefit of the holders of
Outstanding Shares, for exchange in accordance with this Section
3.2, cash
in an
amount equal to the Aggregate Merger Consideration (such cash
shall
hereinafter be referred to as the "Exchange Fund").
(b) As soon as practicable after the Mid-Tier Effective Time, and
in
no event
later than five Business Days thereafter (which date shall be
referred
to as the "Mailing Date"), AVB shall cause the Paying Agent to
mail to
each holder of record of a Certificate or Certificates at the
Mid-Tier
Effective Time, a form letter of transmittal (which shall
specify
that delivery shall be
effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to
the
Paying
Agent) (the "Transmittal Form") containing instructions for use
in
effecting
the surrender of the Certificates. Westborough Financial shall
have the
right to approve the Transmittal Form.
(c) Each Transmittal Form shall permit the holder (or in the case
of
nominee
record holders, the beneficial owner through appropriate and
customary
documentation and instructions) to receive the Per Share Merger
Consideration for each share of Westborough Financial Common Stock.
A
Transmittal Form shall be deemed properly completed only if
accompanied by
one or
more Certificates representing all shares of Westborough
Financial
Common
Stock covered by such Transmittal Form, together with duly
executed
transmittal materials included with the
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<PAGE>
Transmittal Form. Neither AVB nor the Paying Agent shall be under
any
obligation
to notify any Person of any defect in a Transmittal Form.
(d) Upon surrender of a Certificate for exchange and cancellation
to
the Paying
Agent, together with the Transmittal Form, duly executed, the
holder of
such Certificates shall be entitled to receive in exchange
therefor a
check representing the amount of cash which such holder has the
right to
receive in respect of the Certificate surrendered pursuant to
the
provisions
of this Article III.
(e) At and after the Mid-Tier Effective Time, there shall be no
transfers
on the stock transfer books of Westborough Financial of the
shares of
Westborough Financial Common Stock which were outstanding
immediately prior to the Mid-Tier Effective Time and if, after
the
Mid-Tier
Effective Time, Certificates are presented for transfer, they
shall be
canceled against delivery of the Per Share Merger Consideration
as herein
provided.
(f) The provisions of this Article III assume that there will
be
598,171
shares of Westborough Financial Common Stock that are
Outstanding
Shares or
are issuable upon the exercise of Equity Interests through
options or
warrants or otherwise, at the Mid-Tier Effective Time. If there
is any
change in this number as of the Mid-Tier Effective Time, the
provisions
of this Article III, including the Aggregate Merger
Consideration and the Per Share Merger Consideration, will be
appropriately adjusted.
3.3.
Return of Exchange Fund. Any portion of the Exchange Fund that
remains unclaimed by the former shareholders of Westborough
Financial six months
after the Mid-Tier Effective Time shall be delivered to AVB. Any
former
shareholders of Westborough Financial who have not theretofore
complied with
this Article III shall thereafter look only to AVB for payment of
any
consideration payable as a result of the Mid-Tier Merger pursuant
to this
Agreement, without any interest thereon. None of AVB, Westborough
Financial, the
Paying Agent or any other Person shall be liable to any former
holder of shares
of Westborough Financial Common Stock for any shares of stock or
cash properly
delivered to a public official pursuant to applicable abandoned
property,
escheat or similar laws.
3.4.
Rights as Shareholders; Stock Transfers. At the Mid-Tier
Effective
Time, holders of Westborough Financial Stock shall cease to be, and
shall have
no rights as, shareholders of Westborough Financial other than to
receive the
consideration provided under this Article III. After the Mid-Tier
Effective
Time, there shall be no transfers on the stock transfer books of
Westborough
Financial or Surviving Corporation of shares of Westborough
Financial Stock.
3.5.
Dissenting Shares. Each outstanding share of Westborough
Financial
Common Stock, the holder of which has perfected his right to
dissent under the
MBCA and has not effectively withdrawn or lost such right as of the
Mid-Tier
Effective Time (the "Dissenting Shares"), shall not be converted
into or
represent a right to receive Per Share Merger Consideration.
Rather, the holder
thereof shall be entitled only such rights as are granted in
accordance with the
provisions of [SECTIONS]13.01 - 13.31, inclusive, of the MBCA.
Westborough
Financial shall give AVB (i) prompt notice of any demands filed
pursuant to
[SECTIONS]13.01 - 13.31, inclusive, of the MBCA received by
Westborough
Financial, withdrawals of such demands, and any other instruments
served in
connection with such demands pursuant to the MBCA and
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<PAGE>
received by Westborough Financial, and (ii) the opportunity to
participate in
all negotiations and proceedings with respect to demands under the
MBCA,
consistent with the obligations of Westborough Financial
thereunder. Westborough
Financial shall not, except with the prior written consent of AVB,
(x) make any
payment with respect to, or to any Person making, any such demand,
(y) offer to
settle or settle any such demand, or (z) waive any failure to
timely deliver a
written demand in accordance with the MBCA. If any holder of
Dissenting Shares
shall fail to perfect or shall have effectively withdrawn or lost
the right to
dissent (which shares are referred to as "Unperfected Dissenting
Shares") at any
time, the Unperfected Dissenting Shares held by such holder shall
be converted
on a share-by-share basis into the right to receive the Per Share
Merger
Consideration in accordance with the applicable provisions of this
Agreement, as
AVB or the Paying Agent shall determine, without any interest
thereon. Any
payments made in respect of Dissenting Shares shall be made by
Surviving
Corporation.
3.6.
Withholding Rights. AVB (through the Paying Agent, if
applicable)
shall be entitled to deduct and withhold from any amounts otherwise
payable
pursuant to this Agreement, to any holder of Westborough Financial
Equity
Interests, such amounts as AVB is required under the Code or any
state, local or
foreign tax law or regulation thereunder to deduct and withhold
with respect to
the making of such payment, if any. Any amounts so withheld shall
be treated for
all purposes of this Agreement as having been paid to the holder of
Westborough
Financial Equity Interests in respect of which such deduction and
withholding
was made by AVB.
3.7. Stock
Options. Prior to the Mid-Tier Effective Time, Westborough
Financial shall, in accordance with the terms of the Westborough
Financial Stock
Option Plan, provide written notice to each holder of a Westborough
Financial
Option (whether or not such stock option is then vested or
exercisable), that
such Westborough Financial Option shall be, as at the date of such
notice,
exercisable in full and that such Westborough Financial Option will
be
automatically cancelled at the Mid-Tier Effective Time, and that,
if such
Westborough Financial Option is not exercised or otherwise
terminated before the
Mid-Tier Effective Time, such holder shall be entitled to receive,
in
cancellation of such Westborough Financial Option, a cash payment
from
Westborough Financial at the Closing in an amount equal to the
excess of the Per
Share Merger Consideration over the per share exercise price of
such Westborough
Financial Option, multiplied by the number of shares of Westborough
Financial
Common Stock covered by such Westborough Financial Option, subject
to any
required withholding of taxes. Subject to the foregoing, the
Westborough
Financial Stock Option Plan and all options issued and outstanding
thereunder
shall terminate at the Mid-Tier Effective Time. Westborough
Financial hereby
represents and warrants to AVB that the maximum number of shares
subject to
issuance pursuant to the exercise of stock options issued and
outstanding under
the Westborough Financial Stock Option Plan or otherwise is not and
shall not
be, at or prior to the Mid-Tier Effective Time, more than
30,290.
ARTICLE IV.
ACTIONS PENDING MERGER
4.1.
Agreements of Westborough.
(a) Westborough covenants and agrees that, except as expressly
contemplated by this Agreement, between the date of this Agreement
and the
Mid-Tier
Effective Time, unless AVB
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shall
otherwise agree in writing, (i) the business of Westborough shall
be
conducted
only in, and Westborough shall not take any action except in,
the usual,
regular and ordinary course of business and in a manner
consistent
with prudent banking practice and generally to conduct its
business
in substantially the same way as heretofore conducted, and
without
limiting the foregoing, to continue to operate in the same
geographic
markets serving the same market segments and maintain its
current
loan, deposit, banking products and service programs on
substantially the same terms and conditions, (ii) Westborough shall
use
its
reasonable best efforts to preserve the business organization
of
Westborough, to keep available the present services of the
officers,
employees
and consultants of Westborough and to preserve the current
relationships and goodwill of Westborough with customers, suppliers
and
other
Persons with which Westborough has business relationships, and
(iii)
Westborough shall take no action which would materially adversely
affect
or
materially delay the ability of Westborough to obtain any
necessary
approvals
of any Governmental Authority required for the transactions
contemplated hereby or to perform its covenants and agreements
under this
Agreement
or the Bank Merger Agreement.
(b) By way of amplification and not limitation of Section
4.1(a)
above,
except as expressly contemplated by this Agreement, Westborough
shall not
do, nor shall Westborough permit any of its Affiliates, between
the date
of this Agreement and the Mid-Tier Effective Time, directly or
indirectly, to do, or publicly announce an intention to do, any of
the
following
without the prior written consent of AVB through its
representative, its Chief Executive Officer (which consent shall
not be
unreasonably withheld):
(i) Capital Stock. Other than pursuant to the Equity Interests
set forth in Section 5.2 of Westborough's Disclosure Schedules
and
outstanding on the date of this Agreement, (i) issue, sell or
otherwise permit to become outstanding, or authorize the
creation
of, any additional shares of Westborough Financial Stock or any
other Equity Interests in Westborough, or (ii) permit any
additional
shares of Westborough Financial Stock or other Equity Interests
in
Westborough to become subject to grants of employee or director
stock options or other Equity Interests.
(ii) Dividends; Etc. (i) Make, declare, pay or set aside for
payment any dividend on or in respect of, or declare or make
any
distribution on any shares of Westborough Financial Stock,
other
than regular, quarterly cash dividends at a rate not in excess
of
$0.06 per share on Westborough Financial Common Stock, declared
and
paid in accordance with past practice (including with respect to
the
timing of such declaration and payment), or (ii) directly or
indirectly adjust, split, combine, redeem, reclassify, purchase
or
otherwise acquire, or issue any other securities in respect of,
in
lieu of, or in substitution for, any shares of its capital stock
or
any securities or obligations convertible into or exchangeable
for
any shares of its capital stock (other than pursuant to the
Equity
Interests set forth in Section 5.2 of Westborough's Disclosure
Schedules and outstanding on the date of this Agreement).
(iii) Contracts. Except as set forth in Section 4.1(b)(iii) of
Westborough's Disclosure Schedules, or except in the ordinary
course
of business consistent with past practice, as required by law,
as
expressly contemplated by this Agreement or as otherwise
permitted
under this Section 4.1, enter into or terminate any Material
Contract or amend or modify any of its existing Material
Contracts.
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<PAGE>
(iv) Hiring. Hire any Person as an employee of Westborough or
promote any employee, except (i) to satisfy contractual
obligations
existing as of the date of this Agreement and set forth in
Section
4.1(b)(iv) of Westborough's Disclosure Schedules, and (ii)
Persons
hired to fill any vacancies arising after the date of this
Agreement
and whose employment is terminable at the will of Westborough,
provided that Westborough shall not in any event hire any Person
who
would have a base salary, including any guaranteed bonus or any
similar bonus, considered on an annual basis of more than
$75,000.
(v) Benefit Plans. Enter into, establish, adopt, renew or
amend (except (i) as may be required by applicable law
including,
but not limited to, Section 409A of the Code, (ii) to satisfy
contractual obligations existing as of the date of this
Agreement
and set forth in Section 4.1(b)(v) of Westborough's Disclosure
Schedules, or (iii) as otherwise expressly contemplated by this
Agreement) any pension, retirement, stock option, stock
purchase,
savings, profit sharing, deferred compensation, consulting,
bonus,
group insurance or other employee benefit, incentive or welfare
contract, plan or arrangement, or any trust agreement (or
similar
arrangement) related thereto, in respect of any director, officer
or
employee of Westborough (provided, however, that the
restrictions
contained in this Section 4.1(b)(v) concerning renewals shall
apply
only to those Benefit Plans with a term greater than one (1)
year)
or take any action to accelerate the vesting or exercisability
of
stock options, restricted stock or other compensation or
benefits
payable thereunder except pursuant to this Agreement.
(vi) Dispositions. Sell, transfer, mortgage, encumber or
otherwise dispose of or discontinue any of its assets,
deposits,
business or properties, or cancel or release any indebtedness of
a
Person or any claims held by any Person, except in the ordinary
course of business consistent with past practice.
(vii) Compensation; Employment Agreements. Except as
contemplated by this Agreement or by Section 4.1(b)(vii) of
Westborough's Disclosure Schedules, enter into or amend or renew
any
employment, consulting, severance or similar agreements or
arrangements with any trustee, director, officer or employee of
Westborough or grant any salary or wage increase or increase
any
employee benefit (including incentive or bonus payments), except
for
(i) normal individual increases in compensation to employees in
the
ordinary course of business consistent with past practice,
provided
that such increases shall not result in an annual adjustment in
total compensation of more than 4% for any individual or 4% in
the
aggregate for all employees of Westborough, (ii) other changes
that
are required by applicable law, including, but not limited to,
Section 409A of the Code, (iii) bonuses payable pursuant to the
bonus plan for Westborough set forth (and not exceeding in the
aggregate the amount set forth) in Section 4.1(b)(vii) of
Westborough's Disclosure Schedules, and (iv) payments pursuant
to
Section 7.10(g) hereof.
(viii) Environmental. Foreclose upon or take a deed or title
to any commercial real estate without first conducting a Phase
I
environmental assessment of the property or foreclose upon any
commercial real estate if such environmental assessment
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<PAGE>
indicates the presence of Hazardous Substance in amounts which,
if
such foreclosure were to occur, could be material.
(ix) Insurance. Renew, amend or permit to expire, lapse or
terminate, or knowingly take any action reasonably likely to
result
in the creation, renewal, amendment, expiration, lapse or
termination of any insurance policies referred to in Section
5.29
hereof; provided, however, that the restrictions contained in
this
Section 4.1(b)(ix) concerning renewal shall apply only to those
insurance policies with a term greater than one (1) year or for
which a fully earned premium has been or will be or is required
to
be paid at the commencement of the coverage period (or such
renewal
coverage period).
(x) Parachute Payments.
(A) The provisions of this Section 4.1(b)(x)(A) shall
apply to payments to or for the benefit of Persons other than
JFM, John L. Casagrande and Vickie A. Bouvier. Notwithstanding
anything to the contrary contained in this Agreement, in no
event shall Westborough or any of its Subsidiaries take any
action or
make any payments that could result, in the
reasonable opinion of AVB, Westborough and their professional
advisors, either individually or in the aggregate, in the
payment of an "excess parachute payment" within the meaning of
Section 280G of the Code or that could result, in the
reasonable opinion of Assabet or its professional advisors,
either individually or in the aggregate, in payments that
would be nondeductible pursuant to Section 162(m) of the Code;
(B) In no event shall Westborough or any of its
Subsidiaries pay (or agree to pay) to or for the benefit of
JFM, John L.
Casagrande or Vickie A. Bouvier any amount that
could be deemed to be in the nature of compensation other
than (i) regular incremental payments of his or her salary,
management bonus and fringe benefits of general applicability
at the rates and under the programs now in effect and
disclosed in Section 4.1(b)(x) of Westborough's Disclosure
Schedules, (ii) reimbursement of his or her business expenses
in the ordinary course consistent with past practices, and
(iii) payments required to be made to such individual under
the applicable Payments and Waiver Agreement (including
payments
under all "Permitted Arrangements" as defined under
the applicable Payments and Waiver Agreements).
(xi) Acquisitions. Acquire (other than by way of foreclosures
or acquisitions of control in a bona fide fiduciary capacity or
in
satisfaction of debts previously contracted in good faith) all
or
any portion of the assets, business, deposits or properties of
any
other entity, including by merging or consolidating with, or by
purchasing an Equity Interest in or a portion of the assets of,
or
by any other manner, any business or any corporation,
partnership,
joint venture, other business organization or any division
thereof,
or any material amount of assets, other than in the ordinary
course
of business consistent with past practice.
(xii) Investments. Make (i) any material investment either by
purchase of stock or securities, contributions to capital,
property
transfers, (ii) any material purchase
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<PAGE>
of any property or assets of any other Person, or (iii) any
commitment to make such an investment or purchase other than in
the
ordinary course of business consistent with past practice.
(xiii) Capital Expenditures. Other than as set forth in
Section 4.1(b)(xiii) of Westborough's Disclosure Schedules,
make
any capital expenditures other than capital expenditures in the
ordinary course of business consistent with past practice in
amounts not exceeding $25,000 individually or $100,000 in the
aggregate.
(xiv) Governing Documents. Amend the Westborough Financial
Charter or Westborough Financial Bylaws or the corporate charter
or
bylaws (or equivalent documents) of any other Westborough
entity.
(xv) Accounting Methods. Implement or adopt any change in its
accounting principles, practices or methods, other than as may
be
required by changes in laws or regulations or GAAP.
(xvi) Claims. Other than as set forth in Section 4.1(b)(xvi)
of Westborough's Disclosure Schedules, enter into any settlement
or
similar agreement with respect to any action, suit, proceeding,
order or investigation to which Westborough is or becomes a
party
after the date of this Agreement, which settlement, agreement
or
action involves payment by Westborough of an amount which
exceeds
$25,000 individually or $100,000 in the aggregate and/or would
impose any material restriction on the business of Westborough.
(xvii) Derivatives Contracts. Enter into any Derivatives
Contract.
(xviii) Indebtedness. Incur any indebtedness for borrowed
money (other than deposits, federal funds purchased, cash
management accounts, borrowings from the Federal Home Loan Bank
of
Boston and securities sold under agreements to repurchase, in
each
case in the ordinary course of business consistent with past
practice), including issuing any debt securities, or assume,
guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other Person, or
renewals
thereof, other than in the ordinary course of business
consistent
with past practice.
(xix) Taxes. Other than as set forth in Section 4.1(b)(xix)
of Westborough's Disclosure Schedules, or with the cooperation
of
and in consultation with AVB, make or change any material Tax
election, file any material amended Tax Return, enter into any
material closing agreement, settle or compromise any material
liability with respect to Taxes, agree to any material
adjustment
of any Tax attribute, file any claim for a material refund of
Taxes, or consent to any extension or waiver of the limitation
period applicable to any material Tax claim or assessment;
provided, that, for purposes of this subparagraph (xix),
"material"
shall mean affecting or relating to $250,000 of taxable income.
(xx) Lending. Make (i) any commercial or commercial real
estate loan that exceeds (or causes the total loans to one
borrower
or related group of borrowers to
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<PAGE>
exceed) $1,000,000, (ii) any unsecured loan that exceeds
$100,000,
(iii) any residential loan that exceeds $1,000,000, or (iv) any
other loan that exceeds $1,000,000.
(xxi) Charitable Foundation. Make any contributions to the
Westborough Savings Charitable Foundation, Inc.
(xxii) Investment Securities Portfolio. Other than in the
ordinary course of business, restructure or materially change
its
investment securities portfolio or its gap position, through
purchases, sales or otherwise, or the manner in which the
portfolio
is classified or reported.
(xxiii) Real Estate. Make any new or additional equity
investment in real estate or commitment to make any such
investment
or in any real estate development project, other than (i) in
connection with foreclosures, settlements in lieu of foreclosure
or
troubled loan or debt restructurings in the ordinary course of
business consistent with past practice, or (ii) as required by
agreements or instruments in effect as of the date of this
Agreement.
(xxiv) Loan and Investment Policies. Change in any material
respect its loan or investment policies and procedures, except
as
required by regulatory authorities.
(xxv) Leases. Enter into or renew, amend or terminate, or
give notice of a proposed renewal, amendment or termination of,
or
make any commitment with respect to (i) any lease, license,
contract, agreement or commitment for office space, operations
space or branch space, regardless of where located or to be
located, to which Westborough is, or may be, a party or by
which
Westborough or any Westborough property is bound, other than in
the
ordinary course and consistent with past practices, or (ii)
regardless of whether in the ordinary course or consistent with
past practices, any such lease, license, contract, agreement or
commitment involving an aggregate payment by or to Westborough
of
more than $25,000 or having a term of one year or more from the
date of execution.
(xxvi) Defaults. Commit any act or omission which constitutes
a material breach or default by Westborough under any agreement
with any Governmental Authority or under any material contract
or
material license to which Westborough is a party or by which any
of
Westborough's properties is bound.
(xxvii) Adverse Actions. Take any action that is intended or
is reasonably likely to result in (x) any of its
representations
and warranties set forth in this Agreement being or becoming
untrue
in any material respect at any time at or prior to the Mid-Tier
Effective Time, (y) any of the conditions to the MHC Merger and
the
Mid-Tier Merger set forth in Article VIII not being satisfied,
or
(z) a material violation of any provision of this Agreement or
the
Bank Merger Agreement, except, in each case, as may be required
by
applicable law or regulation.
(xxviii) Commitments. Enter into any contract with respect
to, or otherwise agree or commit to do, any of actions addressed
to
in Article IV.
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<PAGE>
4.2.
Agreements of Assabet.
(a) Assabet covenants and agrees that, except as expressly
contemplated by this Agreement, between the date of this Agreement
and
the
Mid-Tier Effective Time, unless Westborough Financial shall
otherwise
agree in
writing, (i) the business of Assabet shall be conducted only
in,
and
Assabet shall not take any action except in, the usual, regular
and
ordinary
course of business and in a manner consistent with prudent
banking
practice and generally to conduct its business in substantially
the same
way as heretofore conducted, and without limiting the
foregoing,
to
continue to operate in the same geographic markets serving the
same
market
segments and maintain its current loan, deposit, banking
products
and
service programs on substantially the same terms and conditions,
(ii)
Assabet
shall use its reasonable best efforts to preserve the business
organization of Assabet, to keep available the present services of
the
officers,
employees and consultants of Assabet and to preserve the
current
relationships and goodwill of Assabet with customers, suppliers
and other
Persons with which Assabet has business relationships, and
(iii)
Assabet shall take no action which would materially adversely
affect or
materially delay the ability of Assabet to obtain any necessary
approvals
of any Governmental Authority required for the transactions
contemplated hereby or to perform its covenants and agreements
under this
Agreement
or the Bank Merger Agreement.
(b) By way of amplification and not limitation of Section
4.2(a)
above,
except as expressly contemplated by this Agreement, Assabet
shall
not do,
nor shall Assabet permit any of its Affiliates, between the
date
of this
Agreement and the Mid-Tier Effective Time, directly or
indirectly, to do, or publicly announce an intention to do, any of
the
following
without the prior written consent of Westborough Financial
through its
representative, its Chief Executive Officer (which consent
shall not
be unreasonably withheld):
(i) Contracts. Except in the ordinary course of business
consistent with past practice, as required by law, as expressly
contemplated by this Agreement or as otherwise permitted under
this
Section 4.2, enter into or terminate any Material Contract (as
defined in Section 5.13) or amend or modify any of its existing
Material Contracts.
(ii) Hiring. Hire any Person as an employee of Assabet or
promote any employee, except (i) to satisfy contractual
obligations
existing as of the date of this Agreement and set forth in
Section
4.2(b)(ii) of Assabet's Disclosure Schedules, and (ii) Persons
hired to fill any vacancies arising after the date of this
Agreement and whose employment is terminable at the will of
Assabet, provided that Assabet shall not in any event hire any
Person who would have a base salary, including any guaranteed
bonus
or any similar bonus, considered on an annual basis of more
than
$75,000.
(iii) Benefit Plans. Enter into, establish, adopt, renew or
amend (except (i) as may be required by applicable law
including,
but not limited to, Section 409A of the Code, (ii) to satisfy
contractual obligations existing as of the date of this
Agreement
and set forth in Section 4.2(b)(iii) of Assabet's Disclosure
Schedules, or (iii) as otherwise expressly contemplated by this
Agreement) any pension, retirement, stock option, stock
purchase,
savings, profit sharing, deferred compensation, consulting,
bonus,
group insurance or other employee benefit, incentive or welfare
contract, plan or arrangement, or any trust agreement (or
similar
arrangement) related thereto, in respect of any director,
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<PAGE>
officer or employee of Assabet (provided, however, that the
restrictions contained in this Section 4.2(b)(iii) concerning
renewals shall apply only to those Assabet Benefit Plans with a
term greater than one (1) year) or take any action to
accelerate
the vesting or payment of any other compensation or benefits
payable thereunder except pursuant to this Agreement.
(iv) Dispositions. Sell, transfer, mortgage, encumber or
otherwise dispose of or discontinue any of its assets,
deposits,
business or properties, or cancel or release any indebtedness of
a
Person or any claims held by any Person, except in the ordinary
course of business consistent with past practice.
(v) Compensation; Employment Agreements. Except as
contemplated by this Agreement or by Section 4.2(b)(v) of
Assabet's
Disclosure Schedules, enter into or amend or renew any
employment,
consulting, severance or similar agreements or arrangements
with
any trustee, director, officer or employee of Assabet or grant
any
salary or wage increase or increase any employee benefit
(including
incentive or bonus payments), except for (i) normal individual
increases in compensation to employees in the ordinary course
of
business consistent with past practice, provided that other than
as
set forth in Section 4.2(b)(v) of Assabet's Disclosure
Schedules,
such increases shall not result in an annual adjustment in
total
compensation of more than 4% for any individual or 4% in the
aggregate for all employees of Assabet, (ii) other changes that
are
required by applicable law, including, but not limited to,
Section
409A of the Code, or (iii) bonus payments in the ordinary course
of
business consistent with past practices.
(vi) Environmental. Foreclose upon or take a deed or title to
any commercial real estate without first conducting a Phase I
environmental assessment of the property or foreclose upon any
commercial real estate if such environmental assessment
indicates
the presence of Hazardous Substance in amounts which, if such
foreclosure were to occur, could be material.
(vii)
Insurance. Amend or permit to expire, lapse or
terminate, or knowingly take any action reasonably likely to
result
in the creation, renewal, amendment, expiration, lapse or
termination of any insurance policies referred to in Section
6.29
hereof.
(viii) Acquisitions. Acquire (other than by way of
foreclosures or acquisitions of control in a bona fide
fiduciary
capacity or in satisfaction of debts previously contracted in
good
faith) all or any portion of the assets, business, deposits or
properties of any other entity, including by merging or
consolidating with, or by purchasing an Equity Interest in or a
portion of the assets of, or by any other manner, any business
or
any corporation, partnership, joint venture, other business
organization or any division thereof, or any material amount of
assets, other than in the ordinary course of business
consistent
with past practice.
(ix) Investments. Make (i) any material investment either by
purchase of stock or securities, contributions to capital,
property
transfers, (ii) any material purchase of any property or assets
of
any other Person, or (iii) any commitment to make such an
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<PAGE>
investment or purchase other than in the ordinary course of
business consistent with past practice.
(x) Securities. Purchase any securities except securities
rated "A" or higher by either Standard & Poor's Ratings
Services or
Moody's Investors Service and otherwise in the ordinary course
of
business consistent with past practice.
(xi) Capital Expenditures. Other than as set forth in Section
4.2(b)(xi) of Assabet's Disclosure Schedules, make any capital
expenditures other than capital expenditures in the ordinary
course
of business consistent with past practice in amounts not
exceeding
$25,000 individually or $200,000 in the aggregate.
(xii) Governing Documents. Amend the AVB Charter or AVB
Bylaws or the corporate charter or bylaws (or equivalent
documents)
of any other Assabet entity.
(xiii) Accounting Methods. Implement or adopt any change in
its accounting principles, practices or methods, other than as
may
be required by changes in laws or regulations or GAAP.
(xiv) Claims. Enter into any settlement or similar agreement
with respect to any action, suit, proceeding, order or
investigation to which Assabet is or becomes a party after the
date
of this Agreement, which settlement, agreement or action
involves
payment by Assabet of an amount which exceeds $50,000
individually
or $200,000 in the aggregate and/or would impose any material
restriction on the business of Assabet.
(xv) Derivatives Contracts. Enter into any Derivatives
Contract.
(xvi) Indebtedness. Incur any indebtedness for borrowed money
(other than deposits, federal funds purchased, cash management
accounts, borrowings from the Federal Home Loan Bank of Boston
and
securities sold under agreements to repurchase, in each case in
the
ordinary course of business consistent with past practice),
including issuing any debt securities, or assume, guarantee,
endorse or otherwise as an accommodation become responsible for
the
obligations of any other Person, or renewals thereof, other than
in
the ordinary course of business consistent with past practice.
(xvii) Taxes. Other than as set forth in Section 4.2(b)(xvii)
of Assabet's Disclosure Schedules, other than with the
cooperation
of and in consultation with Westborough, make or change any
material Tax election, file any material amended Tax Return,
enter
into any material closing agreement, settle or compromise any
material
liability with respect to Taxes, agree to any material
adjustment of any Tax attribute, file any claim for a material
refund of Taxes, or consent to any extension or waiver of the
limitation period applicable to any material Tax claim or
assessment; provided, that, for purposes of this subparagraph
(xvii), "material" shall mean affecting or relating to $250,000
of
taxable income.
(xviii) Lending. Make (i) any commercial or commercial real
estate loan that exceeds (or causes the total loans to one
borrower
or related group of borrowers to
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<PAGE>
exceed) $2,000,000, (ii) any unsecured loan that exceeds
$200,000,
(iii) any residential loan that exceeds $2,000,000, or (iv) any
other loan that exceeds $2,000,000.
(xix) Charitable Foundation. Make any contributions to the
Hudson Savings Charitable Foundation, Inc.
(xx) Investment Securities Portfolio. Other than in the
ordinary course of business, restructure or materially change
its
investment securities portfolio or its gap position, through
purchases, sales or otherwise, or the manner in which the
portfolio
is classified or reported.
(xxi) Real Estate. Make any new or additional equity
investment in real estate or commitment to make any such
investment
or in any real estate development project, other than (i) in
connection with foreclosures, settlements in lieu of foreclosure
or
troubled loan or debt restructurings in the ordinary course of
business consistent with past practice, or (ii) as required by
agreements or instruments in effect as of the date of this
Agreement.
(xxii) Loan and Investment Policies. Change in any material
respect its loan or investment policies and procedures, except
as
required by regulatory authorities.
(xxiii) Leases. Enter into or renew, amend or terminate, or
give notice of a proposed renewal, amendment or termination of,
or
make any commitment with respect to (i) any lease, license,
contract, agreement or commitment for office space, operations
space or branch space, regardless of where located or to be
located, to which Assabet is, or may be, a party or by which
Assabet is or any Assabet is property is bound, other than in
the
ordinary course and consistent with past practices.
(xxiv) Defaults. Commit any act or omission which constitutes
a material breach or default by Assabet under any agreement
with
any Governmental Authority or under any material contract or
material license to which Assabet is a party or by which any of
Assabet's properties is bound.
(xxv) Adverse Actions. Take any action that is intended or is
reasonably likely to result in (x) any of its representations
and
warranties set forth in this Agreement being or becoming untrue
in
any material respect at any time at or prior to the Mid-Tier
Effective Time, (y) any of the conditions to the MHC Merger or
the
Mid-Tier Merger set forth in Article VIII not being satisfied,
or
(z) a material violation of any provision of this Agreement or
the
Bank Merger Agreement, except, in each case, as may be required
by
applicable law or regulation.
(xxvi) Commitments. Enter into any contract with respect to,
or otherwise agree or commit to do, any actions addressed in
Article IV.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF WESTBOROUGH
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<PAGE>
As a
material inducement to AVB, Hudson and Merger Sub to enter into
this
Agreement, and with the understanding that AVB, Hudson and Merger
Sub will be
relying thereon in consummating the Transactions, the Westborough
parties,
jointly and severally, hereby represent and warrant to AVB, Hudson
and Merger
Sub that except as set forth in Westborough's Disclosure Schedules
delivered by
Westborough to AVB on the date of this Agreement, the statements
contained in
this Article V are true and correct as of the date of this
Agreement and shall
be true and correct as of the Closing Date, except for
representations and
warranties made as of a specific time, which shall be true and
correct as of
such time. Westborough's Disclosure Schedules are arranged in
sections
corresponding to the sections and subsections of this Article V,
and disclosure
in one section of Westborough's Disclosure Schedules shall
constitute
disclosure for all sections of Westborough's Disclosure Schedules
only to the
extent to which the applicability of such disclosure is reasonably
apparent.
5.1.
Organization, Standing and Authority.
(a) Westborough Financial. Westborough Financial is a
corporation
duly
organized, validly existing and in good standing under the laws
of
The
Commonwealth of Massachusetts. Westborough Financial is duly
qualified
to do business and is in corporate good standing in each
jurisdiction where its ownership or leasing of property or assets,
or the
conduct of
its business, requires it to be so qualified, except when the
failure to
be so licensed or in good standing would not result in a
Material
Adverse Effect. Westborough Financial has in full force and
effect all
federal, state, local and foreign governmental authorizations
necessary
for it to own, operate or lease its properties and assets and
to carry
on its business as now conducted. Westborough Financial is a
bank
holding company registered with the Federal Reserve Board under
the
BHCA. The
Westborough Financial Charter and Westborough Financial Bylaws,
copies of
which have previously been made available to AVB, are true,
complete
and correct copies of such documents in effect as of the date
of
this
Agreement. Westborough Financial is not in violation of any
provision
of the Westborough Financial Charter or Westborough Financial
Bylaws.
The minute books of Westborough Financial contain, in all
material
respects, true and accurate records of all meetings held and
corporate
actions taken since January 1, 2003 of Westborough Financial's
shareholders and the Westborough Financial Board (including
committees of
the
Westborough Financial Board), other than minutes which have not
been
prepared
as of the date of this Agreement.
(b) Westborough MHC. Westborough MHC is a mutual holding
company
duly
organized, validly existing and in good standing under the laws
of
The
Commonwealth of Massachusetts. Westborough MHC is duly qualified
to
do
business and is in corporate good standing in each jurisdiction
where
its
ownership or leasing of property or assets, or the conduct of
its
business,
requires it to be so qualified, except when the failure to be
so
licensed or in good standing would not result in a Material
Adverse
Effect.
Westborough MHC has in full force and effect all federal,
state,
local and
foreign governmental authorizations necessary for it to own,
operate or
lease its properties and assets and to carry on its business
as now
conducted. Westborough MHC is a bank holding company registered
with the
Federal Reserve Board under the BHCA. The Westborough MHC
Charter
and Westborough MHC Bylaws, copies of which have previously
been
made
available to AVB, are true, complete and correct copies of such
documents
in effect as of the date of this Agreement. Westborough MHC is
not in
violation of any provision of the Westborough MHC Charter or
Westborough MHC Bylaws. The minute books of
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<PAGE>
Westborough MHC contain, in all material respects, true and
accurate
records of
all meetings held and corporate actions taken since January 1,
2003 of
Westborough MHC's shareholders and the Westborough MHC Board of
Trustees
(including committees of the Westborough MHC Board of
Trustees),
other than
minutes which have not been prepared as of the date of this
Agreement.
(c) Westborough Bank. Westborough Bank is a stock form savings
bank
duly
organized and validly existing under the laws of The Commonwealth
of
Massachusetts. Westborough Bank is duly qualified to do business
and is
in corporate
good standing in each jurisdiction where its ownership or
leasing of
property or assets, or the conduct of its business, requires
it to be
so qualified, except when the failure to be so licensed or in
good
standing would not result in a Material Adverse Effect.
Westborough
Bank has
in full force and effect all federal, state, local and foreign
governmental authorizations necessary for it to own, operate or
lease its
properties
and assets and to carry on its business as now conducted. The
Westborough Bank Charter and Westborough Bank Bylaws, copies of
which
have
previously been made available to AVB, are true, complete and
correct
copies of such documents in effect as of the date of this
Agreement. Westborough
Bank is not in violation of any provision of the
Westborough Bank Charter or Westborough Bank Bylaws. The minute
books of
Westborough Bank contain, in all material respects, true and
accurate
records of
all meetings held and corporate actions taken since January 1,
2003 of
Westborough Bank's shareholders and the Westborough Bank Board
of
Directors
(including committees of the Westborough Bank Board of
Directors), other than minutes which have not been prepared as of
the
date of
this Agreement. The deposit accounts of Westborough Bank are
insured by
the Deposit Insurance Fund maintained by the FDIC and the
Deposit
Insurance Fund of the Depositors Insurance Fund of
Massachusetts
in the manner
and to the maximum extent provided by applicable law, and
Westborough Bank has paid all deposit insurance premiums and
assessments
required
by applicable laws and regulations. Westborough Bank is not
obligated
to make any payments for premiums and assessments and it has
filed all
reports required by the FDIC. No proceedings for the revocation
or
termination of such deposit insurance are pending or, to the
best
knowledge
of Westborough, threatened.
5.2. Westborough
Financial Capital Stock. Westborough MHC is a mutual
holding company and has no authorized capital stock. The authorized
capital
stock of Westborough Financial consists solely of 5,000,000 shares
of
Westborough Financial Common Stock, of which 1,027,893 shares are
held by
Westborough MHC and 567,881 shares are Outstanding Shares as of the
date of
this Agreement, and 1,000,000 shares of Westborough Financial
Preferred Stock,
of which no shares are outstanding. As of the date of this
Agreement, no shares
of Westborough Financial Common Stock were held in treasury by
Westborough
Financial. No shares of Westborough Financial Stock are held by
Westborough
Financial's Subsidiaries. The outstanding shares of Westborough
Financial Stock
have been duly authorized and validly issued and are fully paid
and
non-assessable, and free of preemptive rights, with no personal
liability
attaching to the ownership thereof, and none of the outstanding
shares of
Westborough Financial Stock have been issued in violation of the
preemptive
rights of any Person. Section 5.2 of Westborough's Disclosure
Schedules sets
forth, for each Westborough Financial Option, the name of the
grantee, the date
of the grant, the status of the option grant as qualified or
non-qualified
under Section 422 of the Code, the number of shares of Westborough
Financial
Common Stock subject to each option, the number of shares of
Westborough
Financial Common Stock subject to options that are currently
exercisable and
the exercise price per share. Except as set forth in the preceding
two
sentence(s), there are no shares of Westborough Financial Stock
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reserved for issuance, Westborough Financial does not have any
options,
warrants or other Equity Interests issued or outstanding, and
Westborough
Financial does not have any commitment to authorize, issue or sell
any
Westborough Financial Stock or other Equity Interests in
Westborough Financial.
There are no outstanding contractual obligations of Westborough
Financial to
repurchase, redeem or otherwise acquire any shares of capital stock
of, or
other Equity Interests in, Westborough Financial or to provide
funds to, or
make any investment (in the form of a loan, capital contribution or
otherwise)
in, any Subsidiary of Westborough Financial. Except for restricted
shares
issued pursuant to the Westborough Financial Services, Inc. 2001
Recognition
and Retention Plan, all of which vest upon a change of control,
there are no
shares of Westborough Financial Common Stock outstanding which are
subject to
vesting over time or upon the satisfaction of any condition
precedent, or which
are otherwise subject to any right or obligation of repurchase or
redemption on
the part of Westborough Financial.
5.3.
Subsidiaries.
(a) (1) Westborough MHC has disclosed in Section 5.3(a) of
Westborough's Disclosure Schedules a list of all of its
Subsidiaries,
together
with the jurisdiction of organization of each such Subsidiary
and the
percentage and type of equity security owned or controlled by
Westborough MHC, (2) Westborough MHC owns approximately 64.5% of
the
issued and
outstanding shares of Westborough Financial, and Westborough
Financial
owns, directly or indirectly, all the issued and outstanding
equity
securities of each of its Subsidiaries (including Westborough
Bank), and
all of such equity securities are duly authorized, validly
issued,
fully paid, nonassessable and free of preemptive rights, with
no
personal
liability attaching to the ownership thereof, (3) no equity
securities
of any of its Subsidiaries are or may become required to be
issued
(other than to Westborough Financial) by reason of any Equity
Interest
or otherwise, (4) there are no contracts, commitments,
understandings or arrangements by which any of its Subsidiaries is
or may
be bound
to sell or otherwise transfer any of its equity securities
(other
than to Westborough Financial or any of its wholly-owned
Subsidiaries), (5) there are no contracts, commitments,
understandings,
or
arrangements relating to Westborough Financial's rights to vote or
to
dispose of
such securities, (6) all the equity securities of Westborough
Financial's Subsidiaries held by Westborough Financial or its
Subsidiaries are fully paid and nonassessable and are owned by
Westborough Financial or its Subsidiaries free and clear of any
Liens,
and (7)
there are no outstanding contractual obligations of any
Subsidiary
of Westborough Financial to repurchase, redeem or otherwise
acquire
any shares of capital stock of, or other Equity Interests in,
Westborough Financial or any such Subsidiary or to provide funds
to, or
make any investment
(in the form of a loan, capital contribution or
otherwise)
in, any such Subsidiary of Westborough Financial.
(b) Except for securities and other interests held in a
fiduciary
capacity
and beneficially owned by third parties or taken in
consideration of debts previously contracted, Westborough Financial
does
not own
beneficially, directly or indirectly, any equity securities or
similar
interests of any Person or any interest in a partnership or
joint
venture of
any kind other than Westborough Bank and its Subsidiaries and
stock in
the Federal Home Loan Bank of Boston.
(c) Each of Westborough Bank's Subsidiaries has been duly
organized
and is
validly existing in good standing under the laws of the
jurisdiction of its organization and is duly qualified
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<PAGE>
to do
business and is in good standing in the jurisdictions where its
ownership
or leasing of property or the conduct of its business requires
it to be
so qualified, except when the failure to be so licensed or in
good
standing would not result in a Material Adverse Effect.
(d) The corporate charter and bylaws, or equivalent
organizational
documents,
of each of Westborough Bank's Subsidiaries, copies of which
have
previously been made available to AVB, are true, correct and
complete
copies of such documents in effect. No Westborough Bank
Subsidiary
is in violation of any provision of its corporate charter,
bylaws or
equivalent organizational documents. The minute books of each
of
Westborough Bank's Subsidiaries contain, in all material
respects,
true and
accurate records of all meetings held and corporate actions
taken
since January 1, 2003 of its shareholders and Board of
Directors
(including
committees of its Board of Directors), other than minutes
which have
not been prepared as of the date of this Agreement.
5.4.
Corporate Power. Westborough has the requisite corporate power
and
authority to carry on its business as it is now being conducted and
to own,
lease or operate all its properties and assets; and Westborough has
the
requisite corporate power and authority to execute, deliver and
perform its
obligations under this Agreement and to consummate the
transactions
contemplated hereby, subject to (i) receipt of all necessary
approvals of
Governmental Authorities, (ii) the approval of this Agreement by
the holders of
two-thirds of the outstanding shares of Westborough Financial
Common Stock,
(iii) the approval of this Agreement by a two-thirds vote of the
corporators of
Westborough MHC, and (iv) any other approvals set forth in Section
5.4 of
Westborough's Disclosure Schedules.
5.5.
Corporate Authority. Subject to (i) the approval of this
Agreement
by the holders of two-thirds of the outstanding shares of
Westborough Financial
Common Stock, (ii) the approval of this Agreement by two-thirds of
the
corporators of Westborough MHC, and (iii) any other approvals set
forth in
Section 5.4 of Westborough's Disclosure Schedules, this Agreement
and the
transactions contemplated hereby have been authorized by all
necessary
corporate action of Westborough. The execution and delivery of this
Agreement
and the other Transaction Documents, and the consummation of the
transactions
contemplated hereby and thereby, have been declared advisable by,
and have been
duly and validly approved by the requisite vote of, the Westborough
MHC Board
of Trustees and the Westborough Financial Board. The Westborough
Financial
Board (i) has directed that this Agreement and the transactions
contemplated
hereby, including the Mid-Tier Merger, be submitted to the
shareholders of
Westborough Financial for approval at a meeting of such
shareholders, and (ii)
has recommended that the shareholders of Westborough Financial
approve this
Agreement and the transactions contemplated hereby. The Westborough
parties
have duly executed and delivered this Agreement and, assuming
due
authorization, execution and delivery by AVB, Hudson and Merger
Sub, this
Agreement is a valid and legally binding obligation of the
Westborough parties,
enforceable in accordance with its terms (except as enforceability
may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium,
fraudulent transfer and similar laws of general applicability
relating to or
affecting creditors' rights or by general equity principles).
5.6.
Regulatory Approvals; No Defaults.
(a) No consents or approvals of, or waivers by, or filings or
registrations with, any Governmental Authority or with any third
party
are
required to be made or obtained by
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<PAGE>
Westborough in connection with the execution, delivery or
performance by
the
Westborough parties of this Agreement or the Bank Merger
Agreement,
as
applicable, or to consummate the Transactions and the other
transactions contemplated hereby and thereby, except for (A)
filings of
applications or notices with, and approvals or waivers by, the
Federal
Reserve
Board, the FDIC, the Massachusetts Bank Commissioner, the
Depositors
Insurance Fund of Massachusetts, the Massachusetts Board and
the MHPF,
as required, (B) filings with the SEC and state securities
authorities in connection with the solicitation of proxies from
Westborough Financial's shareholders for approval of the Mid-Tier
Merger,
(C) the
filing of Articles of Merger with the Secretary of State of The
Commonwealth of Massachusetts pursuant to the MBCA, (D) the
approval of
this
Agreement by the holders of two-thirds of the outstanding shares
of
Westborough Financial Common Stock, and (E) such corporate
approvals and
such
consents or approvals of, or waivers by, or filings or
registrations
with,
certain of the foregoing federal and state banking agencies in
connection
with the MHC Merger and the Bank Merger. As of the date of
this
Agreement, Westborough is not aware of any reason why the
approvals
set forth
above and referred to in Section 8.1(c) will not be received in
a timely
manner and without the imposition of a condition, restriction
or
requirement of the type described in Section 8.1(c), or that
the
requisite
approval of Westborough Financial's shareholders will not be
obtained.
(b) Subject to receipt of the approvals referred to in Section
5.6(a),
and the expiration of related waiting periods, the execution,
delivery
and performance of this Agreement and the Bank Merger
Agreement,
as
applicable, by the Westborough parties, and the consummation of
the
Transactions and the other transactions contemplated hereby and
thereby
do not and
will not (A) constitute a breach or violation of, or a default
under (or,
with notice or lapse of time, or both, would constitute a
default
under), or give rise to any Lien, any acceleration of remedies
or
performance or any right of termination under, any law, rule or
regulation
or any judgment, decree, order, governmental permit or
license,
or agreement, indenture, note, bond, mortgage, deed of trust,
lease or
instrument of Westborough, or to which Westborough or any of
its
properties
or assets is subject, affected or bound (whether as issuer,
guarantor,
obligor or otherwise), (B) constitute a breach or violation
of, or a
default under, the corporate charter or bylaws (or similar
governing
documents) of Westborough, or (C) require any consent or
approval
under any such law, rule, regulation, judgment, decree, order,
governmental permit or license, agreement, indenture, note,
bond,
mortgage,
deed of trust, lease or instrument.
5.7.
Financial Statements; Reports.
(a) SEC Reports. Westborough Financial's Annual Reports on Form
10-KSB for
the fiscal years ended September 30, 2005, September 30, 2004
and
September 30, 2003 and all other reports (including reports on
Form
10-QSB and
Form 8-K), registration statements, definitive proxy
statements
or information statements filed or to be filed by it
subsequent
to September 30, 2003 with the SEC (collectively, Westborough
Financial's "SEC Documents"), as of the date filed or to be filed
and as
amended
prior to the date of this Agreement, (A) complied or will
comply
in all
material respects as to form with the applicable requirements
under the
Securities Act or the Exchange Act, as the case may be, and (B)
did not
and will not contain any untrue statement of a material fact or
omit to
state a material fact required to be stated therein or
necessary
to make
the statements therein, in the light of the circumstances under
which they
were made, not misleading, except that information as of a
later date
shall be deemed to modify information as of an earlier date,
and (C)
each of the balance sheets contained in or incorporated by
reference
into any such
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<PAGE>
SEC
Document (including the related notes and schedules thereto)
fairly
presents,
or will fairly present, the consolidated financial position of
Westborough Financial and its Subsidiaries as of its date, and (D)
each
of the
consolidated statements of income and changes in shareholders'
equity and
cash flows or equivalent statements in such SEC Documents
(including
any related notes and schedules thereto) fairly presents, or
will
fairly present, the consolidated results of operations, changes
in
shareholders' equity and changes in cash flows, as the case may be,
of
Westborough Financial and its Subsidiaries for the periods to which
they
relate, in
each case in accordance with GAAP consistently applied during
the
periods involved (subject, in the case of unaudited interim
statements, to normal fiscal year-end adjustments). Each of the
consolidated financial statements of Westborough Financial and
its
Subsidiaries, including, in each case, the notes thereto, contained
in
the
Westborough Financial SEC Documents comply, and the financial
statements
to be filed with the SEC by Westborough Financial after the
date of
this Agreement will comply, with applicable accounting
requirements and with the published rules and regulations of the
SEC with
respect
thereto. The books and records of Westborough Financial and its
Subsidiaries have been, and are being, maintained in accordance
with GAAP
and
applicable legal and regulatory requirements. None of
Westborough
Financial's Subsidiaries is required to file any form, report or
other
document
with the SEC.
(b) Westborough MHC Financial Statements. The audited balance
sheets of
Westborough MHC at September 30, 2005, 2004 and 2003, and the
related
statements of operations, changes in retained earnings and cash
flows
(along with the report of the independent auditors and notes
thereto),
and the unaudited balance sheet and statements of operations,
changes in
retained earnings and cash flows as of and for the nine months
ended June
30, 2006, in each case included in Section 5.7(b) of
Westborough's Disclosure Schedules, fairly present the financial
position
of
Westborough MHC as at such dates and the results of its operations
for
the
periods then ended in accordance with GAAP, subject, in the case
of
the
unaudited financial statements, to normal recurring year-end
audit
adjustments (none of which will be material) and the absence of
footnotes.
(c) Westborough Reports. Except as set forth in Section 5.7(c)
of
Westborough's Disclosure Schedules, since January 1, 2003,
Westborough
MHC,
Westborough Financial and their Subsidiaries have timely filed,
and
subsequent
to the date of this Agreement will timely file, all reports,
registrations
and statements, together with any amendments required to be
made with
respect thereto, that were and are required to be filed with
(i) the
Federal Reserve Board, (ii) the FDIC, and (iii) 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, registrations and statements,
together
with any amendments thereto and the Westborough Financial SEC
Documents,
are collectively referred to in this Agreement as the
"Westborough Reports") and have paid all fees and assessments due
and
payable in
connection with any of the foregoing. As of the date filed or
to be filed and
as amended prior to the date of this Agreement, the
Westborough Reports complied and, with respect to filings made
after the
date of
this Agreement, will at the date of filing comply, in all
material
respects with all of the statutes, rules and regulations
enforced
or promulgated by the regulatory authority with which they were
filed.
Westborough Financial has made available to AVB true and
complete
copies of
all amendments and modifications that have not been filed by
Westborough Financial with the SEC to all agreements, documents and
other
instruments that previously had been filed by Westborough Financial
with
the SEC
and are currently in effect. Except for normal periodic
examinations
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<PAGE>
conducted
by a Bank Regulator in the regular course of the business of
Westborough MHC, Westborough Financial and their Subsidiaries,
since
January 1,
2000, no Bank Regulator has initiated any proceeding or, to
the best
knowledge of Westborough, investigation into the business or
operations
of Westborough MHC, Westborough Financial or any of their
Subsidiaries. Except as set forth in Section 5.7(c) of
Westborough's
Disclosure
Schedules, Westborough MHC, Westborough Financial and their
Subsidiaries have resolved all material violations, criticisms
or
exceptions
by any Bank Regulator with respect to any such normal periodic
examination.
(d) Disclosure Controls and Procedures. Westborough Financial
has
established and maintains disclosure controls and procedures as
required
by Rule
13a-15 under the Exchange Act. As of the end of the period
covered by
each applicable SEC Document, Westborough Financial has
conducted
an evaluation under the supervision and with the participation
of its
management, including Westborough Financial's Chief Executive
Officer
and Chief Financial Officer, of the effectiveness of the design
and
operation of its disclosure controls and procedures, and has
concluded
that its disclosure controls and procedures are effective to
ensure
that information required to be disclosed in its SEC Document
is
made known
to them by others within Westborough Financial on a timely
basis, and
in accordance with the requirements of the SEC's rules,
regulations and forms. There are no significant deficiencies in
the
design or
operation of Westborough Financial's internal controls, there
are no
material weaknesses in Westborough Financial's internal
controls,
and there
has been no fraud, whether or not material, that involved
management
of Westborough Financial or any of its Subsidiaries who have a
significant role in Westborough Financial's internal controls.
5.8.
Absence of Undisclosed Liabilities. Except for those liabilities
set
forth in Section 5.8 of Westborough's Disclosure Schedules or those
liabilities
that are appropriately reflected or reserved against in the balance
sheets of
Westborough Financial's SEC Documents, and for liabilities incurred
in the
ordinary course of business consistent with past practice or in
connection with
this Agreement, or the transactions contemplated hereby, since
January 1, 2003,
none of Westborough MHC, Westborough Financial nor any of their
Subsidiaries
has incurred any obligation or liability (contingent or otherwise)
that, either
alone or when combined with all similar liabilities, has had, or
could
reasonably be expected to have, a Material Adverse Effect on
Westborough.
5.9.
Absence of Certain Changes or Events. Since September 30, 2005,
except as set forth in Section 5.9 of Westborough's Disclosure
Schedules or
reflected in Westborough Financial's SEC Documents, there has not
been (a)
either individually or in the aggregate, any Material Adverse
Effect and, to
the best knowledge of Westborough, no fact or condition exists
which is
reasonably likely to cause such a Material Adverse Effect in the
future, (b)
any material damage, destruction or loss with respect to any
property or asset
of Westborough, (c) any change by Westborough in its accounting
methods,
principles or practices, other than changes required by applicable
law or GAAP
or regulatory accounting as concurred in by Westborough
independent
accountants, (d) any revaluation by Westborough of any asset,
including,
without limitation, writing off of notes or accounts receivable,
other than in
the ordinary course of business consistent with past practice, (e)
any entry by
Westborough into any contract or commitment (other than with
respect to Loans,
as hereinafter defined) of more than $30,000 or with a term of more
than one
(1) year that is not terminable without penalty, (f) any
declaration, setting
aside or payment of any dividend or distribution in respect of any
capital
stock of
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<PAGE>
Westborough or any redemption, purchase or other acquisition of any
of its
securities, (g) any increase in or establishment of any bonus,
insurance,
severance, deferred compensation, pension, retirement, profit
sharing, stock
option (including, without limitation, the granting of stock
options, stock
appreciation rights, performance awards, or restricted stock
awards), stock
purchase or other employee benefit plan, or any other increase in
the
compensation payable or to become payable to any trustees,
directors or
officers of Westborough, or any grant of severance or termination
pay, or any
contract or arrangement entered into to make or grant any severance
or
termination pay, any payment of any bonus, or the taking of any
other material
action not in the ordinary course of business with respect to the
compensation
or employment of trustees, directors, officers or employees of
Westborough, (h)
any strike, work stoppage, slowdown or other labor disturbance, (i)
any
material election made by Westborough for federal or state income
tax purposes,
(j) any change in the credit policies or procedures of Westborough,
the effect
of which was or is to make any such policy or procedure materially
less
restrictive in any material respect, (k) any material liability or
obligation
of any nature (whether accrued, absolute, contingent or otherwise
and whether
due or to become due), including, without limiting the generality
of the
foregoing, liabilities as guarantor under any guarantees or
liabilities for
taxes, other than in the ordinary course of business consistent
with past
practice, (l) any forgiveness or cancellation of any indebtedness
or
contractual obligation other than in the ordinary course of
business consistent
with past practice, (m) except with respect to funds borrowed by
Westborough
from the Federal Home Loan Bank, any mortgage, pledge, lien or
lease of any
assets, tangible or intangible, of Westborough with a value in
excess of
$25,000 in the aggregate, (n) any acquisition or disposition of any
assets or
properties having a value in excess of $25,000, or any contract for
any such
acquisition or disposition entered into other than loans and
investment
securities, or (o) any lease of real or personal property entered
into, other
than in connection with foreclosed property or in the ordinary
course of
business consistent with past practice.
5.10.
Litigation. Except as set forth in Section 5.10 of
Westborough's
Disclosure Schedules, there is no claim, suit, hearing,
arbitration, action,
proceeding (public or private) or investigation of any nature
pending or, to
the knowledge of Westborough, threatened, against Westborough or
challenging
the validity or propriety of the transactions contemplated by this
Agreement,
nor is there any judgment, decree, injunction, rule, award or order
of any
legal or administrative body or arbitrator outstanding against
Westborough
having, or which insofar as reasonably can be foreseen, in the
future could
have, any such effect or restricting, or which could restrict, its
ability to
conduct business in any material respect in any area. Westborough
is not aware
of any facts which could reasonably give rise to any such claim,
suit, action,
investigation or other proceeding.
5.11.
Regulatory Matters.
(a) Westborough is not a party to or is subject to any order,
decree,
agreement, memorandum of understanding or similar arrangement
with, or a
commitment letter or similar submission to, order to cease and
desist
with, or extraordinary supervisory letter from, any federal or
state
governmental agency or authority charged with the supervision
or
regulation
of financial institutions or issuers of securities, or engaged
in the
insurance of deposits or the supervision or regulation of it
(collectively, the "Westborough Regulatory Authorities"). No
Westborough
Regulatory
Authority has either issued any order or directive
specifically naming or referring to
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<PAGE>
Westborough or required Westborough to adopt any board resolution,
which
order,
directive or board resolution is currently in effect and
restricts
materially
the conduct of Westborough's business, or in any manner
relates to
its capital adequacy, loan loss allowances or reserves, credit
policies,
management or overall safety and soundness or its ability to
perform
its obligations hereunder. Except as set forth in Section
5.11(a)
of
Westborough's Disclosure Schedules, Westborough is not a party to
any
agreement
or arrangement entered into in connection with the consummation
of a
federally assisted acquisition of a depository institution
pursuant
to which
Westborough is entitled to receive financial assistance or
indemnification from any Governmental Authority. Westborough has
paid all
assessments made or imposed by any Westborough Regulatory
Authority.
(b) Westborough has not been advised by, and has no knowledge
of
facts
which would reasonably be expected to give rise to an advisory
notice by,
any Westborough Regulatory Authority that such Westborough
Regulatory
Authority is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such
order,
decree,
agreement, memorandum of understanding, cease and desist order,
extraordinary supervisory letter, order, directive or board
resolution
referred
to in Section 5.11(a).
5.12.
Compliance with Laws. Westborough:
(a) is in material compliance with all federal, state, local
and
foreign
statutes, laws, regulations, ordinances, rules, judgments,
orders
or decrees
applicable thereto or to the employees conducting such
businesses, including, without limitation, the Equal Credit
Opportunity
Act, the
Fair Housing Act, the Community Reinvestment Act, the Home
Mortgage
Disclosure Act and all other applicable fair lending laws and
other laws
relating to discriminatory business practices;
(b) has all permits, licenses, franchises, authorizations,
orders
and
approvals of, and has made all filings, applications and
registrations with, all Governmental Authorities that are required
in
order to
permit Westborough to own or lease its properties and to
conduct
its
business as presently conducted; all such permits, licenses,
certificates of authority, orders and approvals are in full force
and
effect
and, to Westborough's knowledge, no suspension or cancellation
of
any of
them is threatened; and
(c) has received, since December 31, 2000, no notification or
communication from any Governmental Authority (A) asserting
that
Westborough is not in material compliance with any of the
statutes,
regulations or ordinances which such Governmental Authority
enforces or
(B)
threatening to revoke any license, franchise, permit or
governmental
authorization (nor, to Westborough's knowledge, do any grounds for
any of
the
foregoing exist).
5.13.
Material Contracts; Defaults.
(a)
Except for documents listed in Section 5.13 of Westborough's
Disclosure
Schedules or listed as exhibits to Westborough Financial's
Annual
Report on Form 10-KSB for the year ended September 30, 2005 or
filed with
Westborough Financial's Quarterly Report on Form 10-QSB for
the
quarters ended December 31, 2005, March 31, 2006 or June 30, 2006,
or
filed with
any Westborough Financial Form 8-K that was filed with the SEC
since
September 30, 2005, none of Westborough MHC, Westborough Bank
or
Westborough Financial is a party to, bound by or
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<PAGE>
subject to
any agreement, contract, arrangement, commitment or
understanding (whether written or oral):
(i) that is a "Material Contract" within the meaning of Item
601(b)(10) of the SEC's Regulation S-K (whether or not filed as
an
exhibit to an SEC document);
(ii) that materially restricts the conduct of business by
Westborough;
(iii) that is material to the financial condition, results of
operations or business of Westborough;
(iv) that provides for the lease of real property;
(v)
relating to the employment, including, without
limitation, employment as a consultant, of any Person, or the
election or retention in office, or severance of any present or
former trustee, director or officer of Westborough;
(vi) with any labor union, or other employee representative
or group of employees of Westborough;
(vii) by and between Westborough and/or any Affiliate
thereof;
(viii) which, upon the consummation of the transactions
contemplated by this Agreement or the Bank Merger Agreement
will
result in any payment (whether of severance pay or otherwise)
becomi
