BOSTONFED BANCORP INC, 8-K, 1999-08-06

BOSTONFED BANCORP INC
8-K, 1999-08-06
SAVINGS INSTITUTION, FEDERALLY CHARTERED

Previous: PHYSICIANS QUALITY CARE INC, NT 10-Q, 1999-08-06

Next: SLM FUNDING CORP, 8-K, 1999-08-06

<PAGE> 1
================================================================================

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K
CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) August 4, 1999
--------------

BOSTONFED BANCORP, INC.
-----------------------
(Exact Name of Registrant as Specified in Its Charter)

<TABLE>
<S> <C> <C>
Delaware 1-13936 52-1940834
-------- ------------ ----------
(State or other Jurisdiction of (Commission (IRS Employer
Incorporation or Organization) File Number) Identification No.)
</TABLE>

17 New England Executive Park, Burlington, Massachusetts 01803
--------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)

(617) 273-0300
--------------
(Registrant's Telephone Number, including Area Code)

Not Applicable
--------------
(Former Name or Former Address, If Changed Since Last Report)

================================================================================

<PAGE> 2

ITEM 5. OTHER EVENTS.

On August 4, 1999, BostonFed Bancorp, Inc., a Delaware corporation
("BostonFed"), entered into a Purchase and Sale Agreement (the "Purchase
Agreement") by and among BostonFed, Diversified Ventures, Inc. ("Diversified"),
Ellsmere Insurance Agency, Inc. ("Ellsmere") and Gene J. DeFeudis ("Seller").
The Purchase Agreement is filed as Exhibit 2 hereto and is incorporated herein
by reference. The Purchase Agreement provides that BostonFed will purchase all
of the outstanding capital stock of Diversified and Ellsmere in a cash
transaction.

Consummation of the sale is subject to various conditions, including
receipt of all requisite regulatory approvals. BostonFed anticipates the
transaction will close in the fourth quarter of 1999.

The press release issued by BostonFed with respect to the transaction is
filed herewith as Exhibit 99.

ITEM 7(c). FINANCIAL STATEMENTS AND EXHIBITS.

Exhibit 2 Purchase and Sale Agreement, dated as of August 4, 1999, by and
among BostonFed Bancorp, Inc., Diversified Ventures, Inc.,
Ellsmere Insurance Agency, Inc. and Gene J. DeFeudis.

Exhibit 99 Press Release issued by BostonFed Bancorp, Inc. on August 4,
1999.

<PAGE> 3

CONFORMED

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

BOSTONFED BANCORP, INC.

Dated: August 6, 1999 By: /s/ David F. Holland
--------------------------------
Name: David F. Holland
Title: President and Chief
Executive Officer

<PAGE> 4

EXHIBIT INDEX

Exhibit 2 Purchase and Sale Agreement, dated as of August 4, 1999, by and
among BostonFed Bancorp, Inc., Diversified Ventures, Inc.,
Ellsmere Insurance Agency, Inc. and Gene J. DeFeudis.

Exhibit 99 Press Release issued by BostonFed Bancorp, Inc. on August 4,
1999.

<PAGE> 1
================================================================================

PURCHASE AND SALE AGREEMENT

DATED AS OF AUGUST 4, 1999

BY AND AMONG

BOSTONFED BANCORP, INC.

DIVERSIFIED VENTURES, INC.

ELLSMERE INSURANCE AGENCY, INC.

AND

GENE J. DEFEUDIS

================================================================================

<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<S> <C>
Introductory Statement. . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . .. 1
- ----------------------

ARTICLE I - Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1
-----------------
Section 1.1. Purchase of Shares from Seller . . . . . . . . . . . . . . . . . . . . . . . . . 1
------------------------------
Section 1.2. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
--------------
Section 1.3. Purchase Price Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-------------------------
Section 1.4. Payment at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
------------------
Section 1.5. Alternative Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
---------------------

ARTICLE II - Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 3
------------------------------
Section 2.1. Disclosure Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
------------------
Section 2.2. Representations and Warranties of Seller Concerning the Transaction . . . . . . . 3
-------------------------------------------------------------------
Section 2.3. Representations and Warranties of Diversified and the Seller
------------------------------------------------------------
Concerning Diversified. . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 4
----------------------
Section 2.4. Representations and Warranties of Ellsmere and the Seller
---------------------------------------------------------
Concerning Ellsmere. . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . 14
-------------------
Section 2.5. Representations and Warranties of BostonFed . . . . . . . . . . . . . . . . . . . 21
-------------------------------------------

ARTICLE III - Conduct Pending the Closing. . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . 22
---------------------------
Section 3.1. Conduct of Diversified's Business Prior to the Effective Time . . . . . . . . . . 22
-------------------------------------------------------------
Section 3.2. Conduct of Ellsmere's Business Prior to the Effective Time . . . . . . . . . . . 22
----------------------------------------------------------
Section 3.3. Forbearance by Diversified . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
--------------------------
Section 3.4. Forbearance by Ellsmere . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
-----------------------

ARTICLE IV - Covenants. . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . .. 26
---------
Section 4.1. Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
---------------------
Section 4.2. Access and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
----------------------
Section 4.3. Supplements to Disclosure Letter . . . . . . . . . . . . . . . . . . . . . . . . 27
--------------------------------
Section 4.4. Antitakeover Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
-----------------------
Section 4.5. Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
---------------------
Section 4.6. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
---------
Section 4.7. Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . 28
-------------------------------
Section 4.8. Regulatory Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
------------------
Section 4.9. Consulting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
--------------------
Section 4.10. Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
-------------------
Section 4.11. Professional Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
-----------------
Section 4.12. Sale of Condominium and Automobile . . . . . . . . . . . . . . . . . . . . . . . 30
----------------------------------

ARTICLE V - Conditions to Consummation. . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .. 31
--------------------------
Section 5.1. Conditions to Each Party's Obligations . . . . . . . . . . . . . . . . . . . . . 31
--------------------------------------
Section 5.2. Conditions to the Obligations of BostonFed . . . . . . . . . . . . . . . . . . . 31
------------------------------------------
Section 5.3. Conditions to the Obligations of Seller . . . . . . . . . . . . . . . . . . . . . 33
---------------------------------------
</TABLE>

<PAGE> 3

<TABLE>
<S> <C>
ARTICLE VI - Termination. . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . .. 34
-----------
Section 6.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-----------
Section 6.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
---------------------

ARTICLE VII - Closing Matters. . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 35
---------------
Section 7.1. The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
-----------

ARTICLE VIII - Indemnification. . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . .. 36
---------------
Section 8.1. Indemnification by the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . 36
-----------------------------
Section 8.2 Indemnification With Respect to Certain Lawsuits . . . . . . . . . . . . . . . . 37
------------------------------------------------
Section 8.3. Notice; Defense of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
-------------------------
Section 8.4. Other Indemnification Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 38
-----------------------------

ARTICLE IX - Certain Other Matters. . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . .. 38
---------------------
Section 9.1. Certain Definitions; Interpretation . . . . . . . . . . . . . . . . . . . . . . . 38
-----------------------------------
Section 9.2. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
--------
Section 9.3. Waiver; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
-----------------
Section 9.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
------------
Section 9.5. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
-------------
Section 9.6. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
--------
Section 9.7. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
-------
Section 9.8. Entire Agreement; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
----------------------
Section 9.9. Successors and Assigns; Assignment . . . . . . . . . . . . . . . . . . . . . . . 41
----------------------------------
</TABLE>

-ii-

<PAGE> 4

PURCHASE AND SALE AGREEMENT

This is a PURCHASE AND SALE AGREEMENT, dated as of the 4th day
of August, 1999 ("AGREEMENT"), by and among BostonFed Bancorp, Inc., a Delaware
corporation ("BOSTONFED"), Diversified Ventures, Inc., d/b/a Forward Financial
Company ("DIVERSIFIED"), a Massachusetts corporation, Ellsmere Insurance
Agency, Inc., a Massachusetts insurance company ("ELLSMERE") and Gene J.
DeFeudis ("SELLER").

INTRODUCTORY STATEMENT

Seller owns in the aggregate all of the issued and outstanding
capital stock of Diversified and Ellsmere.

The Board of Directors of BostonFed has determined that this
Agreement and the transactions contemplated hereby are in the best interests of
BostonFed and in the best long-term interests of its stockholders, has
determined that this Agreement and the transactions contemplated hereby are
consistent with, and in furtherance of, its business strategies and has
approved, at a meeting of such Board of Directors or its designated committee,
this Agreement.

BostonFed desires to purchase and Seller desire to sell all of
the outstanding capital stock of Diversified and Ellsmere on the terms and
conditions set forth herein.

BostonFed, Diversified, Ellsmere and the Seller desire to make
certain representations, warranties and agreements in connection with the
transactions provided for herein and to prescribe various conditions to such
transactions.

In consideration of their mutual promises and obligations
hereunder, the parties hereto adopt and make this Agreement and prescribe the
terms and conditions hereof and the manner and basis of carrying it into
effect, which shall be as follows:

ARTICLE I
PURCHASE AND SALE

Section 1.1. Purchase of Shares from Seller. On the terms
and subject to the conditions set forth in this Agreement, at the Closing, as
hereinafter defined, Seller shall sell, transfer, convey, assign and deliver to
BostonFed or affiliates of BostonFed designated by BostonFed, free and clear of
all Share Encumbrances, as hereinafter defined, and BostonFed or such
affiliates shall purchase, acquire and accept from Seller, all outstanding
shares of capital stock, no par value per share, of Diversified ("DIVERSIFIED
CAPITAL STOCK") and all outstanding shares of capital stock, no par value per
share of Ellsmere ("ELLSMERE CAPITAL STOCK") (collectively, "CAPITAL STOCK")
and all rights existing with respect thereto. At the Closing, Seller shall
deliver to BostonFed certificates evidencing the Diversified Capital Stock and
Ellsmere

<PAGE> 5

Capital Stock duly endorsed for transfer and such other instruments as may be
reasonably requested by BostonFed to transfer full legal and beneficial
ownership of the Capital Stock to BostonFed, free and clear of all Share
Encumbrances. BostonFed shall pay the purchase price for the Shares in
accordance with the terms of this Agreement.

Section 1.2. Purchase Price. The purchase price payable
by BostonFed to Seller for the Capital Stock (the "PURCHASE PRICE") shall be
Forty Million Dollars ($40,000,000), less any salary, bonus, compensation,
dividend, distribution or other payments made by Diversified or Ellsmere to
Seller from January 1, 1999 through the Closing, as determined by Diversified's
independent auditors (of which $1,302,973 has been paid through the date
hereof) and which shall be deducted from the Purchase Price, subject to
adjustment pursuant to Section 1.3.

Section 1.3. Purchase Price Adjustment.

(a) In addition to the amount payable under Section 1.2,
BostonFed shall pay Seller:

(i) $1,000,000 in the event that the Earnings of
Diversified and Ellsmere, as defined below,
exceed $6,000,000 for the year ended December
31, 1999; and

(ii) $1,000,000 in the event that the Earnings of
Diversified and Ellsmere exceed $6,000,000
for the year ended December 31, 2000; and

(iii) $250,000 in the event that the Earnings of
Diversified and Ellsmere exceed $7,500,000
for the year ended December 31, 2001.

"EARNINGS" of Diversified and Ellsmere shall mean net income
calculated in accordance with generally accepted accounting principles,
consistently applied, minus the following items, applicable only subsequent to
Closing: (1) goodwill amortization; (2) interest expense; (3) management fees
charged by BostonFed; (4) consulting fees paid to Seller; and (5) federal
income taxes.

(b) Payment of the amounts required to be made pursuant
to Section 1.3(a) shall be made on the later of (i) January 31 of the year
following the period for which the payment is to be made or (ii) five business
days following completion of the audit of Diversified's financial statements
for the prior fiscal year, but no later than April 1 of the year following the
period for which payment is to be made.

<PAGE> 6

Section 1.4. Payment at Closing. At the Closing,
BostonFed or an affiliate of BostonFed shall cause an amount equal to the
Purchase Price to be transferred to a bank account or bank accounts designated
by Seller.

Section 1.5. Alternative Structure. BostonFed may at any
time prior to the Closing change the method of effecting the transactions or
any part thereof if and to the extent it deems such change to be necessary,
appropriate or desirable; provided, however, that no such change shall alter or
change the Purchase Price or the method or manner of payment thereof.

ARTICLE II
REPRESENTATIONS AND WARRANTIES

Section 2.1. Disclosure Letters. Prior to the execution
and delivery of this Agreement, Diversified, Ellsmere and the Seller have
delivered to BostonFed a letter (their "DISCLOSURE LETTER") setting forth,
among other things, facts, circumstances and events the disclosure of which is
required or appropriate in relation to any or all of their representations and
warranties (and making specific reference to the Section of this Agreement to
which they relate). None of BostonFed's, Seller's, Diversified's or Ellsmere's
representations, warranties and covenants contained in this Agreement shall be
deemed to be untrue or breached as a result of effects solely from actions
taken in compliance with a written request of the other party.

Section 2.2. Representations and Warranties of Seller
Concerning the Transaction. Seller represents and warrants to BostonFed with
respect to himself that, except as disclosed in the Disclosure Letter:

(a) Ownership of Shares.

(i) Seller holds of record and beneficially all
of the outstanding Diversified Capital Stock and all of the outstanding
Ellsmere Capital Stock. The Diversified Capital Stock and the Ellsmere Capital
Stock are owned by Seller free and clear of any mortgages, liens, security
interests or other encumbrances, charges, voting trusts, voting agreements,
other agreements, rights, covenants, conditions, options, warrants or
restrictions of any kind, nature or description ("SHARE ENCUMBRANCES"). At the
Closing, Seller will have, and will deliver to BostonFed, good and marketable
title to such Diversified Capital Stock and Ellsmere Capital Stock free and
clear of any Share Encumbrances.

(ii) Seller has the full and absolute right, power
and authority to assign, transfer and deliver all of the Diversified Capital
Stock and the Ellsmere Capital Stock.

(b) Authority. Seller has full power and authority to
execute and deliver this Agreement and to perform his obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of Seller,
enforceable against Seller in accordance with its terms.

<PAGE> 7

(c) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will violate any statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Seller is subject.

(d) Consents. No action, approval, consent or
authorization by any third party including, but not limited to, any action,
approval, consent or authorization by any financial institution, governmental
or quasi-governmental agency, commission, board, bureau or instrumentality, is
necessary to make this Agreement the valid and binding obligation of Seller, or
to consummate the transactions contemplated hereunder or thereunder.

(e) Brokers' Fees. Seller has no obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement except to the extent applicable
with respect to Diversified's obligations to Tucker Anthony Incorporated.

(f) Litigation. There is no action, suit proceeding or
investigation pending or threatened against Seller that questions the validity
of this Agreement or the right of Seller to enter into this Agreement or to
consummate the transactions contemplated hereby.

Section 2.3. Representations and Warranties of Diversified
and the Seller Concerning Diversified. The Seller and Diversified represent
and warrant to BostonFed that, except as disclosed in the Disclosure Letter:

(a) Organization; Qualification.

(i) Diversified is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts.

(ii) Diversified has all requisite corporate power
and authority to own, lease and operate its properties and to conduct the
business currently being conducted by it. Diversified is duly qualified and
licensed to transact business and is in good standing in each jurisdiction in
which the character of the properties owned or leased by it or the nature of
the business conducted by it makes such qualification necessary, each of which
jurisdictions is listed on the Disclosure Letter, except where the failure to
be so qualified would not have a Material Adverse Effect on Diversified.

(iii) The Restated Articles of Organization and
Bylaws of Diversified, as defined herein, delivered with the Disclosure Letter
are complete and correct as of the date hereof.

<PAGE> 8
(b) Subsidiaries.

(i) There is no corporation, partnership, joint
venture or other entity in which Diversified has, directly or indirectly, an
equity interest representing 5% or more of any class of the capital stock
thereof or other equity interests therein (individually, a "SUBSIDIARY" and
collectively, "SUBSIDIARIES").

(i) The authorized capital stock of Diversified
consists of 200,000 shares of Diversified Capital Stock. As of the date of
this Agreement: (A) 530 shares of Diversified Capital Stock were issued and
outstanding, (B) no shares of Diversified Capital Stock were reserved for
issuance, and (C) no shares of Diversified Capital Stock were held by
Diversified in its treasury. All outstanding shares of Diversified Capital
Stock are duly authorized and validly issued, fully paid and nonassessable and
not subject to any preemptive rights and there are no agreements or
understandings with respect to the voting or disposition of any such shares.

(ii) No bonds, debentures, notes or other
indebtedness having the right to vote on any matters on which stockholders of
Diversified may vote are issued or outstanding.

(iii) Diversified neither has nor is bound by any
outstanding subscriptions, options, warrants, calls, rights, convertible
securities, commitments or agreements of any character obligating Diversified
to issue, deliver or sell, or cause to be issued, delivered or sold, any
additional shares of capital stock of Diversified or obligating Diversified to
grant, extend or enter into any such subscription, option, warrant, call,
right, convertible security, commitment or agreement. As of the date hereof,
there are no outstanding contractual obligations of Diversified to repurchase,
redeem or otherwise acquire any shares of capital stock of Diversified.

(d) Authority. Diversified has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate actions on the part of Diversified. This
Agreement has been duly and validly executed and delivered by Diversified and
constitutes a valid and binding obligation of Diversified, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally and to general
principles of equity, whether applied in a court of law or a court of equity.

(e) No Violations. The execution, delivery and
performance of this Agreement by Diversified do not, and the consummation of
the transactions contemplated hereby will not constitute (i) a violation of any
law, rule or regulation or any judgment, decree, order,

<PAGE> 9
governmental permit or license of Diversified, or to which Diversified (or any
of its properties) is subject, (ii) a violation of the Restated Articles of
Organization or Bylaws of Diversified or (iii) a breach or violation of, or a
default under (or an event which, with due notice or lapse of time or both,
would constitute a default under), or result in the termination of, accelerate
the performance required by, or result in the creation of any lien, pledge,
security interest, charge or other encumbrance upon any of the properties or
assets of Diversified under, any of the terms, conditions or provisions of any
note, bond, indenture, deed of trust, loan agreement or other agreement,
instrument or obligation to which Diversified is a party, or to which any of
its properties or assets may be subject. The consummation by Diversified of
the transactions contemplated hereby will not require any approval, consent or
waiver under any such law, rule, regulation, judgment, decree, order,
governmental permit or license or the approval, consent or waiver of any other
party to any such agreement, indenture or instrument.

(f) Financial Statements. Set forth in the Disclosure
Letter are true and complete copies of:

(i) the audited consolidated balance sheets at
December 31, 1998 and 1997 and related statements of income, retained earnings
and changes in the financial position of Diversified for the three years ended
December 31, 1998;

(ii) the unaudited consolidated balance sheet,
statement of earnings and retained earnings of Diversified at June 30, 1999 and
related statement of income for the six months then ended.

The financial statements described in the foregoing clauses (i) and
(ii) are collectively referred to herein as the "DIVERSIFIED FINANCIAL
STATEMENTS." The Diversified Financial Statements were prepared from the books
and records of Diversified and fairly present the consolidated financial
position of Diversified in each case at and as of the dates indicated and the
consolidated results of operations, retained earnings and cash flows of
Diversified for the periods indicated, and except as otherwise set forth in the
notes thereto, the audited statements were prepared in accordance with
generally accepted accounting principles ("GAAP") consistently applied
throughout the periods covered thereby.

(g) Absence of Certain Changes or Events. Since December
31, 1998, (i) Diversified has not incurred any liability, except in the
ordinary course of its business consistent with past practice, (ii) Diversified
has conducted its businesses only in the ordinary and usual course of such
businesses, (iii) there has not been any Material Adverse Effect with respect
to Diversified, and (iv) there has been no change in any accounting principles,
practices or methods of Diversified other than as required by GAAP.

<PAGE> 10
no such litigation, controversy, claim, action, suit or other proceeding has
been threatened. To the best of Seller's and Diversified's knowledge, there
are no investigations, reviews or inquiries by any court or governmental agency
pending or threatened against Diversified.

(i) Absence of Regulatory Actions. Since December 31,
1995, Diversified has not been a party to any cease and desist order, consent
decree, written agreement or memorandum of understanding with, or any
commitment letter or similar undertaking to, nor has it been subject to any
action, proceeding, order or directive by, nor has it been a recipient of any
extraordinary supervisory letter from any federal, state, local or foreign
governmental authority ("GOVERNMENTAL ENTITIES"), nor has it adopted any board
resolutions at the request of any Governmental Entity, nor has it been advised
by any Governmental Entity that it is contemplating issuing or requesting (or
is considering the appropriateness of issuing or requesting) any such action,
proceeding, order, directive, written agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter, board resolutions or
similar undertaking. All laws, ordinances, rules and regulations of any
Governmental Entity have been complied with by Diversified.

(j) Taxes. All federal, state, local and foreign tax
returns required to be filed by or on behalf of Diversified have been timely
filed or requests for extensions have been timely filed and any such extension
shall have been granted and not have expired, and all such filed returns are
complete and accurate in all material respects. All taxes shown on such
returns, all taxes required to be shown on returns for which extensions have
been granted and all other taxes required to be paid by Diversified have been
paid in full or adequate provision has been made for any such taxes on
Diversified's balance sheet (in accordance with GAAP). For purposes of this
Agreement, the term "taxes" shall include, but not be limited to, all income,
franchise, gross receipts, real and personal property, real property transfer
and gains, wage and employment taxes. As of the date of this Agreement, there
is no audit examination, deficiency assessment, tax investigation or refund
litigation with respect to any taxes of Diversified, and no claim has been made
by any authority in a jurisdiction where Diversified does not file tax returns
that Diversified is subject to taxation in that jurisdiction. All taxes,
interest, additions and penalties due with respect to completed and settled
examinations or concluded litigation relating to Diversified have been paid in
full or adequate provision has been made for any such taxes on Diversified's
balance sheet (in accordance with GAAP). Diversified has not executed an
extension or waiver of any statute of limitations on the assessment or
collection of any material tax due that is currently in effect. Diversified
has withheld and paid all taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party, and Diversified has timely complied
with all applicable information reporting requirements under Part III,
Subchapter A of Chapter 61 of the IRC and similar applicable state and local
information reporting requirements. Diversified has been a validly existing S
corporation within the meaning of Sections 1361 and 1362 of the IRC and a
validly existing S corporation within the meaning of the applicable state law
statutes in the states listed in the Disclosure Letter at all times since at
least January 1, 1986, and Diversified will be an S corporation up to the
Closing.

<PAGE> 11
(k) Agreements.

(i) Set forth in the Disclosure Letter is a list
of the following contracts and other agreements to which Diversified is a
party:

(A) any agreement (or group of related
agreements) for the lease of personal property to or from any person providing
for lease payments in excess of $10,000 per annum, excluding any agreement with
clients or customers in the conduct of Diversified's regular business affairs
not specifically referenced in this subsection herein;

(B) any agreement concerning a
partnership or joint venture;

(C) any agreement (or group of related
agreements) under which it has created, incurred, assumed or guaranteed any
indebtedness for borrowed money or under which it has imposed a security
interest on any of its assets, tangible or intangible;

(D) any agreement with the Seller and
his affiliates;

(E) any bonus, profit sharing, stock
option, stock purchase, stock appreciation, deferred compensation, severance or
other plan or arrangement for the benefit of its current or former directors,
officers and employees;

(F) any agreement for the employment of
any individual on any basis providing annual compensation in excess of $50,000
or providing severance benefits;

(G) any agreement under which it has
advanced or loaned any amount to any of its directors, officers and employees;

(H) any agreement with any of its
directors, officers, employees or shareholders under which the amount of any
payment will be increased or the vesting or payment of benefits will be
accelerated by the occurrence of any of the transactions contemplated by this
Agreement;

(I) any agreement containing covenants
limiting the freedom of Diversified to compete in any line of business or with
any person or entity;

(J) any agreement with client lenders
relating to its primary line of business; and

(K) any agreement under which the
consequences of a default or termination could have a Material Adverse Effect
on Diversified.

<PAGE> 12

Diversified has delivered to BostonFed a correct and
complete copy of each written agreement listed in Section 2.3(k)(i) of the
Disclosure Letter and a written summary setting forth the terms and conditions
of each oral agreement referred to in Section 2.3(k)(i) of the Disclosure
Letter.

(ii) With respect to each agreement referred to in
Section 2.3(k)(i): (A) the agreement is legal, valid, binding, enforceable and
in full force and effect; (B) the agreement will continue to be legal, valid,
binding, enforceable and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby; and (C) no party is
in breach or default and no event has occurred which with notice or lapse of
time would constitute a breach or default, or permit termination, modification
or acceleration, under the agreement.

(iii) Diversified owns or possesses valid and
binding licenses, if applicable, or otherwise has the indefinite right to use
without payment all patents, copyrights, trade secrets, trade names,
servicemarks and trademarks used in its businesses, and Diversified has not
received any notice of conflict with respect thereto that asserts the right of
others. Diversified has performed all the obligations required to be performed
by it and are not in default under any contact, agreement, arrangement or
commitment relating to any of the foregoing.

(l) Labor Matters. Diversified is in material compliance
with all applicable laws respecting employment, retention of independent
contractors and employment practices, terms and conditions of employment and
wages and hours. Diversified is not nor has ever been a party to, nor is nor
has ever been bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization with
respect to its employees, nor is Diversified the subject of any proceeding
asserting that it has committed an unfair labor practice or seeking to compel
Diversified to bargain with any labor organization as to wages and conditions
of employment, nor is there any strike, other labor dispute or organizational
effort involving Diversified pending or, to the best of Seller's and
Diversified's knowledge, threatened.

(m) Employee Benefit Plans.

(i) Diversified's Disclosure Letter contains a
complete and accurate list of all pension, retirement, stock option, stock
purchase, stock ownership, savings, stock appreciation right, profit sharing,
deferred compensation, consulting, bonus, group insurance, severance and other
benefit plans, contracts, agreements and arrangements, including, but not
limited to, "employee benefit plans," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
incentive and welfare policies, contracts, plans and arrangements and all trust
agreements related thereto with respect to any present or former directors,
officers or other employees of Diversified (hereinafter referred to
collectively as the "DIVERSIFIED EMPLOYEE PLANS"). There has been no
announcement or commitment by Diversified to create an additional Diversified
Employee Plan, or to amend any Diversified

<PAGE> 13
Employee Plan, except for amendments required by applicable law which do not
materially increase the cost of such Diversified Employee Plan. With respect
to each Diversified Employee Plan, Diversified's Disclosure Letter contains a
true and correct copy of (A) the annual report on the applicable form of the
Form 5500 series filed with the Internal Revenue Service ("IRS") for the most
recent three plan years, if required to be filed, (B) such Diversified Employee
Plan, including amendments thereto, (C) each trust agreement, insurance
contract or other funding arrangement relating to such Diversified Employee
Plan, including amendments thereto, (D) the most recent summary plan
description and summary of material modifications thereto for such Diversified
Employee Plan, if the Diversified Employee Plan is subject to Title I of ERISA,
(E) the most recent actuarial report or valuation if such Diversified Employee
Plan is a Diversified Pension Plan (as defined below) and any subsequent
changes to the actuarial assumptions contained therein and (F) the most recent
determination letter issued by the IRS if such Diversified Employee Plan is a
Diversified Qualified Plan (as defined below).

(ii) There is no pending or, to the best of
Seller's and Diversified's knowledge, threatened litigation, administrative
action or proceeding relating to any Diversified Employee Plan. All of the
Diversified Employee Plans comply in all material respects with all applicable
requirements of ERISA, the IRC and other applicable laws. There has occurred
no "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975
of the IRC) with respect to the Diversified Employee Plans which is likely to
result in the imposition of any penalties or taxes under Section 502(i) of
ERISA or Section 4975 of the IRC upon Diversified.

(iii) No liability to the Pension Benefit Guarantee
Corporation has been or is expected by Diversified to be incurred with respect
to any Diversified Employee Plan which is subject to Title IV of ERISA
("DIVERSIFIED PENSION PLAN"), or with respect to any "single-employer plan" (as
defined in Section 4001(a) of ERISA) currently or formerly maintained by
Diversified or any entity which is considered one employer with Diversified
under Section 4001(b)(1) of ERISA or Section 414 of the IRC (an "ERISA
AFFILIATE"). No Diversified Pension Plan had an "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived, as of
the last day of the end of the most recent plan year ending prior to the date
hereof; the fair market value of the assets of each Diversified Pension Plan
exceeds the present value of the "benefit liabilities" (as defined in Section
4001(a)(16) of ERISA) under such Diversified Pension Plan as of the end of the
most recent plan year with respect to the respective Diversified Pension Plan
ending prior to the date hereof, calculated on the basis of the actuarial
assumptions used in the most recent actuarial valuation for such Diversified
Pension Plan as of the date hereof; and no notice of a "reportable event" (as
defined in Section 4043 of ERISA) for which the 30-day reporting requirement
has not been waived has been required to be filed for any Diversified Pension
Plan within the 12-month period ending on the date hereof. Diversified has not
provided, nor is required to provide, security to any Diversified Pension Plan
or to any single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of the IRC. Neither Diversified, nor any ERISA Affiliate has
contributed to any "multiemployer plan," as defined in Section 3(37) of ERISA,
on or after September 26, 1980.

<PAGE> 14

(iv) Each Diversified Employee Plan that is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) and which
is intended to be qualified under Section 401(a) of the IRC (a "DIVERSIFIED
QUALIFIED PLAN") has received a favorable determination letter from the IRS,
and Diversified is not aware of any circumstances likely to result in
revocation of any such favorable determination letter.

(v) Diversified does not have any obligations for
post-retirement or post-employment benefits under any Diversified Employee Plan
that cannot be amended or terminated upon 60 days' notice or less without
incurring any liability thereunder, except for coverage required by Part 6 of
Title I of ERISA or Section 4980B of the IRC, or similar state laws, the cost
of which is borne by the insured individuals. With respect to Diversified, for
the Diversified Employee Plans listed in Diversified's Disclosure Letter, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in any payment or series of
payments by Diversified to any person which is an "excess parachute payment"
(as defined in Section 280G of the IRC), increase or secure (by way of a trust
or other vehicle) any benefits payable under any Diversified Employee Plan or
accelerate the time of payment or vesting of any such benefit.

(n) Title to Assets. The Disclosure Letter contains a
complete and accurate list of all real property owned or leased by Diversified
(the "DIVERSIFIED REAL PROPERTY"). None of the buildings, structures or other
improvements located on the Diversified Real Property encroaches upon or over
any adjoining parcel or real estate or any easement or right-of-way.
Diversified has good and marketable title to its properties and assets
(including any intellectual property asset such as any trademark, service mark,
tradename or copyright) and property acquired in a judicial foreclosure
proceeding or by way of a deed in lieu of foreclosure or similar transfer,
other than property as to which it is lessee, in which case the related lease
is valid and in full force and effect. Each lease pursuant to which
Diversified is lessor is valid and in full force and effect and no lessee under
any such lease is in default or in violation of any provisions of any such
lease. All material tangible properties of Diversified are in a good state of
maintenance and repair, conform with all applicable ordinances, regulations and
zoning laws and are considered by Diversified to be adequate for the current
business of Diversified.

(o) Compliance with Laws. Diversified has all permits,
licenses, certificates of authority, orders and approvals of, and has made all
filings, applications and registrations with, all Governmental Entities that
are required in order to permit it to carry on its business as it is presently
conducted; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect, and, no suspension or cancellation of
any of them is threatened. Since the date of its incorporation, the corporate
affairs of Diversified have not been conducted in violation of any law,
ordinance, regulation, order, writ, rule, decree or approval of any
Governmental Entity. The business of Diversified is not being conducted in
violation of any law, ordinance, regulation, order, writ, rule, decree or
condition to approval of any Governmental Entity (including, but not limited
to, those relating to lending, credit and community reinvestment, to the extent
applicable).

<PAGE> 15
(p) Fees. Except for its agreement with Tucker Anthony
Incorporated, dated December 16, 1998, a copy of which has been provided to
BostonFed, neither Diversified, nor any of its officers, directors, employees
or agents, has employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions or finder's fees, and no
broker or finder has acted directly or indirectly for Diversified in connection
with this Agreement or the transactions contemplated hereby.

(q) Environmental Matters. None of the property
Diversified owns or leases (the "DIVERSIFIED SUBJECT PROPERTY") is in violation
in any material respect of any Environmental Law (as defined below) applicable
to it. The Diversified Subject Property (i) does not contain any underground
storage tanks, asbestos, ureaformaldehyde, polychlorinated biphenyls, solid
wastes or hazardous substances, as such terms may be defined by any applicable
Environmental Law, (ii) no part of such property has been listed or proposed
for listing on the National Priorities List pursuant to CERCLA or on a registry
or inventory of inactive hazardous waste sites maintained by any Governmental
Entity and no notices have been received by Seller alleging that Seller is a
potentially responsible person under CERCLA or any similar Environmental Law,
and (iii) there is no suit, claim, action or proceeding pending or, to the best
of Seller's and Diversified's knowledge, threatened before any Governmental
Entity in which Seller in respect of the Diversified Subject Properties may be
named as a defendant for alleged noncompliance with any applicable
Environmental Law. For purposes of this Agreement "ENVIRONMENTAL LAW" means
and includes, without limitation, any and all applicable laws, statutes,
ordinances, rules, regulations, orders or determinations of any federal, state
or local Governmental Entity now or hereafter existing pertaining to health or
to the environment, and relating to Diversified's assets.

(r) Antitakeover Provisions Inapplicable. Diversified
has taken all actions required to exempt Diversified, BostonFed and this
Agreement from any provisions of an antitakeover nature in its organization
certificates and bylaws, and the provisions of any federal or state
"antitakeover," "fair price," "moratorium," "control share acquisition" or
similar laws or regulations.

(s) Material Interests of Certain Persons. No officer
or director of Diversified, or any "associate" (as such term is defined in Rule
12b-2 under the Securities and Exchange Act of 1934, as amended (the "Exchange
Act")) of any such officer or director, has any interest in any material
contract or property (real or personal), tangible or intangible, used in or
pertaining to the business of Diversified.

(t) Insurance. In the opinion of management, Diversified
has in full force and effect insurance (including errors and omissions
liability insurance) for amounts deemed reasonable by management with, to the
best of Seller's and Diversified's knowledge, financially sound insurance
companies, against such risks as companies engaged in a similar business would,
in accordance with good business practice, customarily be insured. All of the
insurance policies and bonds maintained by Diversified are in full force and
effect, Diversified is not in

<PAGE> 16
default thereunder and all material claims thereunder have been filed in due
and timely fashion. Neither Diversified nor Seller has knowledge of
circumstances that would cause any such insurance policy to fail to be renewed
on terms materially identical to those currently in effect.

(u) Indemnification. Except as provided in the Restated
Articles of Organization or Bylaws of Diversified, Diversified is not a party
to any agreement that provides for the indemnification of any of its present or
future directors, officers, employees, agents or other persons who serve or
served in any other capacity with any other enterprise at the request of
Diversified, and, to the best of Seller's and Diversified's knowledge, there
are no claims for which any person would be entitled to indemnification under
the Restated Articles of Organization or Bylaws of Diversified, under any
applicable law or regulation or under any indemnification agreement.

(v) Books and Records. The books and records of
Diversified on a consolidated basis have been, and are being, maintained on a
historically consistent basis in accordance with applicable legal requirements
and reflect in all material respects the substance of events and transactions
that should be included therein.

(w) Corporate Documents. The minute books of Diversified
constitute a complete and correct record of all actions taken by its boards of
directors (and each committee thereof) and its stockholders.

(x) Year 2000 Matters. Diversified has completed a
review of its computer systems to identify systems that could be affected by
the "Year 2000" issue and reasonably believes it has identified all such Year
2000 problems. Diversified's management has implemented a plan which is
designed to remedy any required changes to its data processing and computer
systems. Year 2000 issues have not had, and are not reasonably expected to
have, a Material Adverse Effect on Diversified. This representation includes
products or services purchased or obtained from third parties, the failure of
which would have an adverse effect on the ability of Diversified to do
business.

(y) Undisclosed Liabilities. As of the date hereof,
Diversified has not incurred any debt, liability or obligation of any nature
whatsoever (whether accrued, contingent, absolute or otherwise and whether due
or to become due) except for (i) liabilities reflected on or reserved against
in the consolidated financial statements of Diversified as of December 31,
1998, and (ii) liabilities incurred since December 31, 1998 in the ordinary
course of business consistent with past practice that, either alone or when
combined with all similar liabilities, have not had, and would not reasonably
be expected to have, a Material Adverse Effect on Diversified.

(z) Collectibility of Accounts Receivable. All of the
accounts receivable of Diversified shown or reflected on Diversified's balance
sheet as of June 30, 1999, or existing at the date hereof were or are valid and
enforceable claims, fully collectible and subject to no setoff or counterclaim
except to the extent of reserves shown on such balance sheet. Diversified has
no

<PAGE> 17
accounts or loans receivable from any person, firm or corporation or other
entity which is affiliated with Diversified or from any director, officer or
employee of Diversified.

Section 2.4. Representations and Warranties of Ellsmere
and the Seller Concerning Ellsmere. The Seller and Ellsmere represent and
warrant to BostonFed that, except as disclosed in the Disclosure Letter:

(a) Organization; Qualification.

(i) Ellsmere is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts.

(ii) Ellsmere has all requisite corporate power
and authority to own, lease and operate its properties and to conduct the
business currently being conducted by it. Ellsmere is duly qualified and
licensed to transact business and is in good standing in each jurisdiction in
which the character of the properties owned or leased by it or the nature of
the business conducted by it makes such qualification necessary, each of which
jurisdictions is listed on the Disclosure Letter, except where the failure to
be so qualified would not have a Material Adverse Effect on Ellsmere.

(iii) The Articles of Organization and Bylaws of
Ellsmere delivered with the Disclosure Letter are complete and correct as of
the date hereof.

(b) Subsidiaries. Ellsmere has no Subsidiary.

(i) The authorized capital stock of Ellsmere
consists of 15,000 shares of Ellsmere Capital Stock. As of the date of this
Agreement: (A) 100 shares of Ellsmere Capital Stock were issued and
outstanding, (B) no shares of Ellsmere Capital Stock were reserved for
issuance, and (C) no shares of Ellsmere Capital Stock were held by Ellsmere in
its treasury. All outstanding shares of Ellsmere Capital Stock are duly
authorized and validly issued, fully paid and nonassessable and not subject to
any preemptive rights and there are no agreements or understandings with
respect to the voting or disposition of any such shares.

(ii) No bonds, debentures, notes or other
indebtedness having the right to vote on any matters on which stockholders of
Ellsmere may vote are issued or outstanding.

(iii) Ellsmere neither has nor is bound by any
outstanding subscriptions, options, warrants, calls, rights, convertible
securities, commitments or agreements of any character obligating Ellsmere to
issue, deliver or sell, or cause to be issued, delivered or sold, any
additional shares of capital stock of Ellsmere or obligating Ellsmere to grant,
extend or enter into any such subscription, option, warrant, call, right,
convertible security, commitment or

<PAGE> 18
agreement. As of the date hereof, there are no outstanding contractual
obligations of Ellsmere to repurchase, redeem or otherwise acquire any shares
of capital stock of Ellsmere.

(d) Authority. Ellsmere has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate actions on the part of Ellsmere. This
Agreement has been duly and validly executed and delivered by Ellsmere and
constitutes a valid and binding obligation of Ellsmere, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally and to general
principles of equity, whether applied in a court of law or a court of equity.

(e) No Violations. The execution, delivery and
performance of this Agreement by Ellsmere do not, and the consummation of the
transactions contemplated hereby will not constitute (i) a violation of any
law, rule or regulation or any judgment, decree, order, governmental permit or
license of Ellsmere, or to which Ellsmere (or any of its properties) is
subject, (ii) a violation of the Articles of Organization or Bylaws of Ellsmere
or (iii) a breach or violation of, or a default under (or an event which, with
due notice or lapse of time or both, would constitute a default under), or
result in the termination of, accelerate the performance required by, or result
in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the properties or assets of Ellsmere under, any of the
terms, conditions or provisions of any note, bond, indenture, deed of trust,
loan agreement or other agreement, instrument or obligation to which Ellsmere
is a party, or to which any of its properties or assets may be subject. Except
to the extent of the required approval of the Commissioner of Insurance for the
Commonwealth of Massachusetts, the consummation by Ellsmere of the transactions
contemplated hereby will not require any approval, consent or waiver under any
such law, rule, regulation, judgment, decree, order, governmental permit or
license or the approval, consent or waiver of any other party to any such
agreement, indenture or instrument.

(f) Financial Matters. All financial transactions of
Ellsmere have been reported on the financial records of Diversified and
Ellsmere has not prepared separate financial statements.

(g) Absence of Certain Changes or Events. Since December
31, 1998, (i) Ellsmere has not incurred any liability, except in the ordinary
course of its business consistent with past practice, (ii) Ellsmere has
conducted its businesses only in the ordinary and usual course of such
businesses, (iii) there has not been any Material Adverse Effect with respect
to Ellsmere, and (iv) there has been no change in any accounting principles,
practices or methods of Ellsmere other than as required by GAAP.

<PAGE> 19

(h) Absence of Claims. No litigation, controversy,
claim, action, suit or other legal, administrative or arbitration proceeding
before any court, governmental agency or arbitrator is pending against
Ellsmere, and, to the best of Seller's and Ellsmere's knowledge, no such
litigation, controversy, claim, action, suit or other proceeding has been
threatened. To the best of Seller's and Ellsmere's knowledge, there are no
investigations, reviews or inquiries by any court or governmental agency
pending or threatened against Ellsmere.

(i) Absence of Regulatory Actions. Since December 31,
1995, Ellsmere has not been a party to any cease and desist order, consent
decree, written agreement or memorandum of understanding with, or any
commitment letter or similar undertaking to, nor has it been subject to any
action, proceeding, order or directive by, nor has it been a recipient of any
extraordinary supervisory letter from any Governmental Entity, nor has it
adopted any board resolutions at the request of any Governmental Entity, nor
has it been advised by any Governmental Entity that it is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such action, proceeding, order, directive, written agreement,
memorandum of understanding, extraordinary supervisory letter, commitment
letter, board resolutions or similar undertaking. All laws, ordinances, rules
and regulators of any Governmental Entity have been complied with by Ellsmere.

(j) Taxes. All federal, state, local and foreign tax
returns required to be filed by or on behalf of Ellsmere have been timely filed
or requests for extensions have been timely filed and any such extension shall
have been granted and not have expired, and all such filed returns are complete
and accurate in all material respects. All taxes shown on such returns, all
taxes required to be shown on returns for which extensions have been granted
and all other taxes required to be paid by Ellsmere have been paid in full or
adequate provision has been made for any such taxes on Ellsmere's balance sheet
(in accordance with GAAP). As of the date of this Agreement, there is no audit
examination, deficiency assessment, tax investigation or refund litigation with
respect to any taxes of Ellsmere, and no claim has been made by any authority
in a jurisdiction where Ellsmere does not file tax returns that Ellsmere is
subject to taxation in that jurisdiction. All taxes, interest, additions and
penalties due with respect to completed and settled examinations or concluded
litigation relating to Ellsmere have been paid in full or adequate provision
has been made for any such taxes on Ellsmere's balance sheet (in accordance
with GAAP). Ellsmere has not executed an extension or waiver of any statute of
limitations on the assessment or collection of any material tax due that is
currently in effect. Ellsmere has withheld and paid all taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third party,
and Ellsmere has timely complied with all applicable information reporting
requirements under Part III, Subchapter A of Chapter 61 of the IRC and similar
applicable state and local information reporting requirements.

<PAGE> 20

(k) Agreements.

(i) Set forth in the Disclosure Letter is a list
of the following contracts and other agreements to which Ellsmere is a party:

(A) any agreement (or group of related
agreements) for the lease of personal property to or from any person providing
for lease payments in excess of $10,000 per annum;

(B) any agreement concerning a
partnership or joint venture;

(D) any agreement with the Seller and
his affiliates;

(F) any agreement for the employment of
any individual on any basis providing annual compensation in excess of $25,000
or providing severance benefits;

(G) any agreement under which it has
advanced or loaned any amount to any of its directors, officers and employees;

(I) any agreement containing covenants
limiting the freedom of Ellsmere to compete in any line of business or with any
person or entity;

(J) any agreement relating to its
primary line of business; and

(K) any agreement under which the
consequences of a default or termination could have a Material Adverse Effect
on Ellsmere.

Ellsmere has delivered to BostonFed a correct and
complete copy of each written agreement listed in Section 2.4(k)(i) of the
Disclosure Letter and a written summary

<PAGE> 21
setting forth the terms and conditions of each oral agreement referred to in
Section 2.4(k)(i) of the Disclosure Letter.

(ii) With respect to each agreement referred to in
Section 2.4(k)(i): (A) the agreement is legal, valid, binding, enforceable and
in full force and effect; (B) the agreement will continue to be legal, valid,
binding, enforceable and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby; and (C) no party is
in breach or default and no event has occurred which with notice or lapse of
time would constitute a breach or default, or permit termination, modification
or acceleration, under the agreement.

(iii) Ellsmere owns or possesses valid and binding
licenses, if applicable, or otherwise has the indefinite right to use without
payment all patents, copyrights, trade secrets, trade names, servicemarks and
trademarks used in its businesses, and Ellsmere has not received any notice of
conflict with respect thereto that asserts the right of others. Ellsmere has
performed all the obligations required to be performed by it and are not in
default under any contact, agreement, arrangement or commitment relating to any
of the foregoing.

(l) Labor Matters. Ellsmere is in material compliance
with all applicable laws respecting employment, retention of independent
contractors and employment practices, terms and conditions of employment and
wages and hours. Ellsmere is not nor has ever been a party to, nor is nor has
ever been bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization with
respect to its employees, nor is Ellsmere the subject of any proceeding
asserting that it has committed an unfair labor practice or seeking to compel
Ellsmere to bargain with any labor organization as to wages and conditions of
employment, nor is there any strike, other labor dispute or organizational
effort involving Ellsmere pending or, to the best of Seller's and Ellsmere's
knowledge, threatened.

(m) Employee Benefit Plans. (i) Ellsmere has no
pension, retirement, stock option, stock purchase, stock ownership, savings,
stock appreciation right, profit sharing, deferred compensation, consulting,
bonus, group insurance, severance and other benefit plans, contracts,
agreements and arrangements, including, but not limited to, "employee benefit
plans," as defined in Section 3(3) of ERISA, incentive and welfare policies,
contracts, plans and arrangements and all trust agreements related thereto with
respect to any present or former directors, officers or other employees of
Ellsmere (hereinafter referred to collectively as the "ELLSMERE EMPLOYEE
PLANS").

(ii) Ellsmere does not have any obligations for
post-retirement or post-employment benefits. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
will not result in any payment or series of payments by Ellsmere to any person
which is an "excess parachute payment" (as defined in

<PAGE> 22
Section 280G of the IRC), increase or secure (by way of a trust or other
vehicle) any benefits payable or accelerate the time of payment or vesting of
any such benefit.

(n) Title to Assets. The Disclosure Letter contains a
complete and accurate list of all real property owned or leased by Ellsmere
(the "ELLSMERE REAL PROPERTY"). None of the buildings, structures or other
improvements located on the Ellsmere Real Property encroaches upon or over any
adjoining parcel or real estate or any easement or right-of-way. Ellsmere has
good and marketable title to its properties and assets (including any
intellectual property asset such as any trademark, service mark, tradename or
copyright) and property acquired in a judicial foreclosure proceeding or by way
of a deed in lieu of foreclosure or similar transfer, other than property as to
which it is lessee, in which case the related lease is valid and in full force
and effect. Each lease pursuant to which Ellsmere is lessor is valid and in
full force and effect and no lessee under any such lease is in default or in
violation of any provisions of any such lease. All material tangible
properties of Ellsmere are in a good state of maintenance and repair, conform
with all applicable ordinances, regulations and zoning laws and are considered
by Ellsmere to be adequate for the current business of Ellsmere.

(o) Compliance with Laws. Ellsmere has all permits,
licenses, certificates of authority, orders and approvals of, and has made all
filings, applications and registrations with, all Governmental Entities that
are required in order to permit it to carry on its business as it is presently
conducted; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect, and, to the best of Seller's and
Ellsmere's knowledge, no suspension or cancellation of any of them is
threatened. Since the date of its incorporation, the corporate affairs of
Ellsmere have not been conducted in violation of any law, ordinance,
regulation, order, writ, rule, decree or approval of any Governmental Entity.
The business of Ellsmere is not being conducted in violation of any law,
ordinance, regulation, order, writ, rule, decree or condition to approval of
any Governmental Entity.

(p) Fees. Ellsmere has not employed any broker or finder
or incurred any liability for any financial advisory fees, brokerage fees,
commissions or finder's fees, and no broker or finder has acted directly or
indirectly for Ellsmere in connection with this Agreement or the transactions
contemplated hereby.

(q) Environmental Matters. None of the property Ellsmere
owns or leases (the "ELLSMERE SUBJECT PROPERTY") is in violation in any
material respect of any Environmental Law applicable to it. The Ellsmere
Subject Property does not contain any underground storage tanks, asbestos,
ureaformaldehyde, polychlorinated biphenyls, solid wastes or hazardous
substances, as such terms may be defined by any applicable Environmental Law,
(ii) no part of such property has been listed or proposed for listing on the
National Priorities List pursuant to CERCLA or on a registry or inventory of
inactive hazardous waste sites maintained by any Governmental Entity and no
notices have been received by Seller alleging that Seller is a potentially
responsible person under CERCLA or any similar Environmental Law, and (iii)
there is no suit, claim, action or proceeding pending or, to the best of
Seller's and Ellsmere's knowledge, threatened before

<PAGE> 23
any Governmental Entity in which Seller in respect of the Ellsmere Subject
Properties may be named as a defendant for alleged noncompliance with any
applicable Environmental Law.

(r) Antitakeover Provisions Inapplicable. Ellsmere has
taken all actions required to exempt Ellsmere, BostonFed and this Agreement
from any provisions of an antitakeover nature in its organization certificates
and bylaws, and the provisions of any federal or state "antitakeover," "fair
price," "moratorium," "control share acquisition" or similar laws or
regulations.

(s) Material Interests of Certain Persons. No officer
or director of Ellsmere, or any "associate" (as such term is defined in Rule
12b-2 under the Exchange Act) of any such officer or director, has any interest
in any material contract or property (real or personal), tangible or
intangible, used in or pertaining to the business of Ellsmere.

(t) Insurance. In the opinion of management, Ellsmere has
in full force and effect insurance (including errors and omissions liability
insurance) for amounts deemed reasonable by management with, to the best of
Seller's and Ellsmere's knowledge, financially sound insurance companies,
against such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured. All of the
insurance policies and bonds maintained by Ellsmere are in full force and
effect, Ellsmere is not in default thereunder and all material claims
thereunder have been filed in due and timely fashion. Neither Ellsmere nor
Seller has knowledge of circumstances that would cause any such insurance
policy to fail to be renewed on terms materially identical to those currently
in effect.

(u) Indemnification. Except as provided in the Articles
of Organization or Bylaws of Ellsmere, Ellsmere is not a party to any agreement
that provides for the indemnification of any of its present or future
directors, officers, employees, agents or other persons who serve or served in
any other capacity with any other enterprise at the request of Ellsmere, and,
to the best of Seller's and Ellsmere's knowledge, there are no claims for which
any person would be entitled to indemnification under the Articles of
Organization or Bylaws of Ellsmere, under any applicable law or regulation or
under any indemnification agreement.

(v) Books and Records. The books and records of Ellsmere
on a consolidated basis have been, and are being, maintained by Diversified in
accordance with applicable legal requirements and reflect in all material
respects the substance of events and transactions that should be included
therein.

(w) Corporate Documents. The minute books of Ellsmere
constitute a complete and correct record of all actions taken by its boards of
directors (and each committee thereof) and its stockholders.

(x) Year 2000 Matters. Ellsmere has completed a review
of its computer systems to identify systems that could be affected by the "Year
2000" issue and reasonably

<PAGE> 24
believes it has identified, tested and remedied all such Year 2000 problems.
Ellsmere's management has implemented a plan which has remedied any required
changes to its data processing and computer systems. Year 2000 issues have not
had, and are not reasonably expected to have, a Material Adverse Effect on
Ellsmere. This representation includes products or services purchased or
obtained from third parties, the failure of which would have an adverse effect
on the ability of Ellsmere to do business.

(y) Undisclosed Liabilities. As of the date hereof,
Ellsmere has not incurred any debt, liability or obligation of any nature
whatsoever (whether accrued, contingent, absolute or otherwise and whether due
or to become due) except for (i) liabilities reflected on or reserved against
in the consolidated financial statements of Diversified as of December 31,
1998, and (ii) liabilities incurred since December 31, 1998 in the ordinary
course of business consistent with past practice that, either alone or when
combined with all similar liabilities, have not had, and would not reasonably
be expected to have, a Material Adverse Effect on Ellsmere.

(z) Collectibility of Accounts Receivable. All of the
accounts receivable of Ellsmere shown or reflected on Ellsmere's balance sheet
as of June 30, 1999, or existing at the date hereof were or are valid and
enforceable claims, fully collectible and subject to no setoff or counterclaim.
Ellsmere has no accounts or loans receivable from any person, firm or
corporation or other entity which is affiliated with Ellsmere or from any
director, officer or employee of Ellsmere.

(aa) Insurance Relationships. Ellsmere has written and
duly executed agreements with insurance carriers to transact the lines of
business which it has been transacting through the date hereof and which it
will transact through the Closing Date, all of which appointments are in full
force and effect, and which are listed on the Disclosure Letter.

All of the accounts payable of Ellsmere due to insurance carrier
markets (including any insurance agencies through which such Ellsmere brokers
business) have been paid in full. No insurance carrier or market which
conducts business has given notice of its intent to terminate any existing
agreements with Ellsmere, nor is Ellsmere aware of any threatened termination
of any existing agreement or market or of any insurance carrier or market
objecting to the performance at Ellsmere under any agreement.

Section 2.5. Representations and Warranties of BostonFed.
BostonFed represents and warrants to Seller that:

(a) Organization and Authority. BostonFed is a
corporation duly organized, validly existing and in good standing under the
laws of the Delaware, and BostonFed has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted, to execute and deliver this Agreement and to perform
the obligations to be performed by it hereunder and thereunder, and to
consummate the transactions contemplated hereby.

<PAGE> 25
(b) Corporate Action; No Conflict. The execution,
delivery and performance by BostonFed of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of BostonFed. This Agreement has
been duly and validly executed and delivered by BostonFed and is the valid and
binding obligation of BostonFed, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally and to general principles of equity,
whether applied in a court of law or a court of equity. Neither the execution,
delivery or performance by BostonFed of this Agreement, nor the consummation by
BostonFed of the transactions contemplated hereby, nor compliance by BostonFed
with any provision hereof or thereof will (i) conflict with or result in a
breach of any provision of the Certificate of Incorporation or Bylaws of
BostonFed or, (ii) assuming receipt of all required approvals of Governmental
Entities, violate any provision of law, statute, rule or regulation or any
order, writ, injunction, permit, judgment or decree of any court or other
governmental or regulatory authority applicable to BostonFed.

(c) Acquisition for Investment. BostonFed is not
acquiring the Diversified Capital Stock or the Ellsmere Capital Stock with a
view to or for sale in connection with any distribution of such Shares within
the meaning of the Securities Act of 1933, as amended.

(d) Available Funds. BostonFed has currently available
to it without restriction the funds necessary for payment of the Purchase
Price.

ARTICLE III
CONDUCT PENDING THE CLOSING

Section 3.1. Conduct of Diversified's Business Prior to
the Effective Time. Except as expressly provided in this Agreement, during the
period from the date of this Agreement to the Closing Date, Diversified shall,
and Seller shall cause Diversified to, use commercially reasonable efforts to
(i) conduct its business in the regular, ordinary and usual course consistent
with past practice; (ii) maintain and preserve intact its business
organization, properties, leases, licenses, officers, contracts, employees and
advantageous business relationships and retain the services of its officers and
key employees, (iii) take no action which would adversely affect or delay the
ability of Seller, Diversified or BostonFed to perform their respective
covenants and agreements on a timely basis under this Agreement, and (iv) take
no action that results in or is reasonably likely to have a Material Adverse
Effect on Diversified.

Section 3.2. Conduct of Ellsmere's Business Prior to the
Effective Time. Except as expressly provided in this Agreement, during the
period from the date of this Agreement to the Closing Date, Ellsmere shall, and
Seller shall cause Ellsmere to, use commercially reasonable efforts to (i)
conduct its business in the regular, ordinary and usual course consistent with
past practice; (ii) maintain and preserve intact its business organization,
properties, leases, licenses, officers, contracts, employees and advantageous
business relationships and retain the services of its officers and key
employees, (iii) take no action which

<PAGE> 26
would adversely affect or delay the ability of Seller, Ellsmere or BostonFed to
perform their respective covenants and agreements on a timely basis under this
Agreement, and (iv) take no action that results in or is reasonably likely to
have a Material Adverse Effect on Ellsmere.

Section 3.3. Forbearance by Diversified. Without limiting
the covenants set forth in Section 3.1 hereof, except as otherwise provided in
this Agreement and except to the extent required by law or regulation or any
Governmental Entity, during the period from the date of this Agreement to the
Closing, Diversified shall not and Seller shall not permit Diversified to,
without the prior written consent of BostonFed:

(a) change any provisions of the Restated Articles of
Organization or Bylaws of Diversified;

(b) issue any shares of capital stock or issue, grant or
sell any option, warrant, call, commitment, stock appreciation right, right to
purchase or agreement of any character relating to the authorized or issued
capital stock of Diversified or split, combine, reclassify or adjust any shares
of its capital stock or otherwise change its capitalization;

(c) make, declare or pay any cash or stock dividend or
make any other distribution on, or directly or indirectly redeem, purchase or
otherwise acquire, any shares of its capital stock or any securities or
obligations convertible into or exchangeable for any shares of its capital
stock;

(d) (i) sell, transfer, mortgage, encumber or otherwise
dispose of any of its material properties, leases or assets to any individual,
corporation or other entity or (ii) cancel, release or assign any indebtedness
of any such individual, corporation or other entity;

(e) increase in any manner the compensation or fringe
benefits of any of its employees or directors, other than general increases in
compensation in the ordinary course of business consistent with past practice;
pay any pension or retirement allowance not required by any existing plan or
agreement to any such employees or directors, or become a party to, amend or
commit itself to fund or otherwise establish any trust or account related to
any Diversified Employee Plan with or for the benefit of any employee or
director; voluntarily accelerate the vesting of any stock options or other
compensation or benefit; make any discretionary contribution to any Diversified
Employee Plan; enter into any employment contract or increase the costs to
Diversified or any Subsidiary of Diversified of any Diversified Employee Plan;
make any salary or bonus payments or any other form of compensation (except for
existing insurance plans) to Seller from the date hereof until Closing;

(f) change its method of accounting as in effect at
December 31, 1998, except as required by changes in GAAP as concurred in by
Diversified's independent auditors or revise its methodology for determining
the adequacy of its loss provision or reverse any portion of its existing loss
provision or reserve loss;

<PAGE> 27
(g) settle any claim, action or proceeding involving any
liability of Diversified for money damages in excess of $50,000 or impose
material restrictions upon the operations of Diversified;

(h) acquire or agree to acquire, by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets, in each
case which are material, individually or in the aggregate, to Diversified,
except in satisfaction of debts previously contracted;

(i) organize, capitalize, lend to or otherwise invest in
any subsidiary;

(j) elect to the Board of Directors of Diversified any
person who is not a member of the Board of Directors of Diversified as of the
date of this Agreement;

(k) establish or commit to establish any new office or
branch or close or commit to close any existing office or branch;

(l) change its investment portfolio other than in the
ordinary course of business consistent with past practice;

(m) incur any additional debt or borrowings;

(n) as to loans originated by Diversified to be
maintained in its own portfolio, make, renegotiate, renew, increase, extend or
purchase any loan, lease, advance, credit enhancement, or other extension of
credit, or make any commitment respecting any of the foregoing except in
conformity with existing lending practices in amounts not to exceed $500,000 to
any individual borrower;

(o) enter into, renew, amend or terminate any existing
contract or agreement (excluding any agreements with new client lenders that
contain substantially similar rates and terms as Diversified's existing
operating agreements) or make any change in any of its contracts or agreements,
other than with respect to those involving aggregate payments of less than, or
the provision of goods and services with a market value of less than, $20,000
per annum and other than contracts or agreements otherwise covered in this
Section 3.3;

(p) hire any new employee with an annual total
compensation payment in excess of $50,000 or enter into any employment
contract; or

(q) agree or make any commitment to take any action that
is prohibited by this Section 3.3.

<PAGE> 28

Section 3.4. Forbearance by Ellsmere. Without limiting
the covenants set forth in Section 3.2 hereof, except as otherwise provided in
this Agreement and except to the extent required by law or regulation or any
Governmental Entity, during the period from the date of this Agreement to the
Closing, Ellsmere shall not, without the prior written consent of BostonFed:

(a) change any provisions of the Articles of Organization
or Bylaws of Ellsmere;

(b) issue any shares of capital stock or issue, grant or
sell any option, warrant, call, commitment, stock appreciation right, right to
purchase or agreement of any character relating to the authorized or issued
capital stock of Ellsmere or split, combine, reclassify or adjust any shares of
its capital stock or otherwise change its capitalization;

(d) (i) sell, transfer, mortgage, encumber or otherwise
dispose of any of its material properties, leases or assets to any individual,
corporation or other entity (ii) cancel, release or assign any indebtedness of
any such individual, corporation or other entity;

(e) increase in any manner the compensation or fringe
benefits of any of its employees or directors, other than general increases in
compensation in the ordinary course of business consistent with past practice;
pay any pension or retirement allowance not required by any existing plan or
agreement to any such employees or directors, or become a party to, amend or
commit itself to fund or otherwise establish any trust or account related to
any Ellsmere Employee Plan with or for the benefit of any employee or director;
voluntarily accelerate the vesting of any stock options or other compensation
or benefit; make any discretionary contribution to any Ellsmere Employee Plan;
enter into any employment contract or increase the costs to Ellsmere or any
Subsidiary of Ellsmere of any Ellsmere Employee Plan; make any salary or bonus
payments or any other form of compensation (except for existing insurance
plans) to Seller from the date hereof until Closing;

(f) change its method of accounting as in effect at
December 31, 1998, except as required by changes in GAAP as concurred in by
Ellsmere's independent auditors;

(g) settle any claim, action or proceeding involving any
liability of Ellsmere for money damages in excess of $25,000 or impose material
restrictions upon the operations of Ellsmere;

(h) acquire or agree to acquire, by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other

<PAGE> 29
manner, any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets, in each case which are material, individually or in the
aggregate, to Ellsmere, except in satisfaction of debts previously contracted;

(i) organize, capitalize, lend to or otherwise invest in
any subsidiary;

(j) elect to the Board of Directors of Ellsmere any
person who is not a member of the Board of Directors of Ellsmere as of the date
of this Agreement;

(k) incur any additional debt or borrowings;

(l) enter into, renew, amend or terminate any existing
contract or agreement (including any agreements with new client lenders) or
make any change in any of its contracts or agreements, other than with respect
to those involving aggregate payments of less than, or the provision of goods
and services with a market value of less than, $20,000 per annum and other than
contracts or agreements covered by Section 3.3(g);

(m) hire any new employee with an annual total
compensation payment in excess of $50,000 or enter into any employment
contract; or

(n) agree or make any commitment to take any action that
is prohibited by this Section 3.4.

ARTICLE IV
COVENANTS

Section 4.1. Acquisition Proposals. From and after the
date hereof until the earlier of the Closing Date or the termination of this
Agreement pursuant to Section 6.1 of this Agreement, without the express
written consent of BostonFed, Seller shall not and shall neither cause nor
permit either Diversified or Ellsmere, directly or indirectly, to (i) solicit,
initiate discussions or engage in negotiations with any person other than
BostonFed (whether such negotiations are initiated by either Diversified or
Ellsmere or otherwise) relating to the possible acquisition, whether by way of
merger, reorganization, purchase of capital stock, purchase of assets or
otherwise (any such acquisition being referred to in this Section 4.1 as an
"ACQUISITION TRANSACTION"), of any interest in either Diversified or Ellsmere
or any Subsidiary, (ii) provide information with respect to either Diversified
or Ellsmere or any Subsidiary to any person other than BostonFed in connection
with a possible Acquisition Transaction or (iii) enter into a transaction with
any person other than BostonFed concerning a possible Acquisition Transaction.
If Seller, Diversified or Ellsmere receives an unsolicited offer or proposal
relating to a possible Acquisition Transaction, Seller shall immediately notify
BostonFed and provide information to BostonFed as to the identity of the party
making any such offer or proposal and the specific terms of such offer or
proposal.

<PAGE> 30
Section 4.2. Access and Information. (i) From and after
the date hereof until the Closing, Diversified and Ellsmere shall, and Seller
shall provide and shall cause Diversified and Ellsmere to, provide BostonFed,
its employees, consultants and representatives, including, without limitation,
its attorneys, accountants and financial advisors, reasonable access to the
facilities of Diversified and Ellsmere to make such investigations of the
property and plant and such examination of the books, personnel and additional
financial and operating data and other information relating to Diversified and
Ellsmere (including, without limitation, all documents, or copies thereof,
listed in the Disclosure Letter, and all files, records and papers of any and
all proceedings and matters listed in the Disclosure Letter) as BostonFed may
reasonably request on reasonable notice, and cause its officers, employees,
consultants, agents, accountants and attorneys to cooperate fully with
BostonFed and its representatives in connection with such review and
examination and to make full disclosure to BostonFed of all facts affecting the
financial condition and operations of Diversified and Ellsmere; provided,
however, that any such investigation or examination shall not affect or
otherwise diminish or obviate in any respect any of the representations and
warranties of Diversified and Ellsmere or Seller. BostonFed, Diversified and
Ellsmere will not, and will cause its representatives not to, use any
information obtained pursuant to this Section 4.2 for any purpose unrelated to
the consummation of the transactions contemplated by this Agreement. Subject
to the requirements of applicable law, BostonFed will keep confidential, and
will cause its representatives to keep confidential, all information and
documents obtained pursuant to this Section 4.2 unless such information (a) was
already known to such party or an affiliate of such party, other than pursuant
to a confidentiality agreement or other confidential relationship, (b) becomes
available to such party or an affiliate of such party from other sources not
known by such party to be bound by a confidentiality agreement or other
obligation of secrecy, (c) is disclosed with the prior written approval of the
other party or (d) is or becomes readily ascertainable from published
information or trade sources. In the event that this Agreement is terminated
or the transactions contemplated by this Agreement shall otherwise fail to be
consummated, BostonFed shall promptly cause all copies of documents or extracts
thereof containing information and data as to Diversified and Ellsmere to be
returned to Diversified and Ellsmere.

(ii) From and after the date hereof until the Closing,
Diversified and Ellsmere shall, and Seller shall cause Diversified and Ellsmere
to, provide BostonFed, a monthly unaudited consolidated balance sheet,
statement of income, retained earnings, cash flows of Diversified and Ellsmere,
for such month and for the current fiscal year to date, as soon as practicable
after the end of each month, and in any event within thirty (30) days
thereafter.

Section 4.3. Supplements to Disclosure Letter. Prior to
the Closing, Seller, Diversified and Ellsmere shall promptly supplement or
amend the Disclosure Letter with respect to any matter arising after the date
of this Agreement and prior to Closing, which, if existing or occurring on the
date of this Agreement, would have been required to be set forth or described
in such Disclosure Letter. No supplement or amendment of the Disclosure Letter
made pursuant to this Section shall be deemed to constitute a cure of any
breach of any representation or warranty made by Seller pursuant to this
Agreement unless such supplement or amendment is consented to

<PAGE> 31
in writing by BostonFed, which consent may be withheld by BostonFed in its sole
discretion for any reason; provided, however, that if Diversified, Ellsmere or
the Seller supplement or amend the Disclosure Letter and BostonFed fails to
consent as provided above, BostonFed's sole and exclusive remedy shall be its
right to terminate this Agreement as provided in Section 6.1; and provided
further, that if Diversified, Ellsmere or the Seller supplement or amend the
Disclosure Letter and BostonFed proceeds to close the transactions contemplated
by this Agreement, BostonFed shall be deemed to have consented to such
supplement or amendment as a cure of any representation or warranty to which
the Disclosure Letter relates.

Section 4.4. Antitakeover Provisions. Diversified and
Ellsmere shall, and Seller shall cause Diversified and Ellsmere to, take all
steps required by any relevant federal or state law or regulation or under any
relevant agreement or other document to exempt or continue to exempt
Diversified, Ellsmere, BostonFed and the Agreement from any provisions of an
antitakeover nature in Diversified's and Ellsmere's organization certificates
and bylaws and the provisions of any federal or state antitakeover laws.

Section 4.5. Additional Agreements. Subject to the terms
and conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take promptly, or cause to be taken promptly, all actions
and to do promptly, or cause to be done promptly, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement as expeditiously as
possible, including using efforts to obtain all necessary actions or
non-actions, extensions, waivers, consents and approvals from all applicable
Governmental Entities, effecting all necessary registrations, applications and
filings (including, without limitation, filings under any applicable state
securities laws) and obtaining any required contractual consents and regulatory
approvals.

Section 4.6. Publicity. Diversified, Ellsmere and
BostonFed shall consult with each other prior to issuing any press releases or
otherwise making public statements with respect to the transactions
contemplated hereby and in making any filings with any Governmental Entity or
with any national securities exchange with respect thereto and shall consult
with each other in advance regarding the timing and manner in which the
officers and employees of Diversified and Ellsmere are notified of the
transactions contemplated herein.

Section 4.7. Notification of Certain Matters. Each of
BostonFed, Seller, Diversified and Ellsmere shall give prompt notice to the
other of: (i) any event or notice of, or other communication relating to, a
default or event that, with notice or lapse of time or both, would become a
default, received by Diversified, Ellsmere or BostonFed subsequent to the date
of this Agreement and prior to the Closing Date, under any contract material to
the financial condition, properties, businesses or results of operations of
Diversified, Ellsmere or BostonFed taken as a whole to which Diversified,
Ellsmere or BostonFed is a party or is subject; and (ii) any event, condition,
change or occurrence which individually or in the aggregate has, or which, so
far as reasonably can be foreseen at the time of its occurrence, is reasonably
likely to result in a Material Adverse Effect on Diversified and Ellsmere or
BostonFed. Each of Diversified,

<PAGE> 32
Ellsmere and BostonFed shall give prompt notice to the other party of any
notice or other communication from any third party alleging that the consent of
such third party is or may be required in connection with any of the
transactions contemplated by this Agreement.

Section 4.8. Regulatory Filings.

(a) BostonFed shall use its best efforts to submit as
soon as practicable after the date hereof but not later than twenty (20)
business days hereafter, any requisite applications for, or requests for waiver
of, the requisite regulatory approvals, and each of the parties hereto shall,
and they shall cause their respective subsidiaries to, submit any applications,
notices or other filings to any other Governmental Entity the approval of which
is required for consummation of the transactions contemplated herein. All such
filings shall be fully disclosed to Seller in advance and Seller shall have two
(2) business days for review prior to filing.

(b) As soon as practicable after the date hereof, each of
the parties hereto shall, and they shall cause their respective subsidiaries
to, use its best efforts to obtain any consent, authorization or approval of
any third party that is required to be obtained in connection with the
transactions contemplated herein.

Section 4.9. Consulting Agreement. At Closing, Seller and
BostonFed or a subsidiary thereof (as determined by BostonFed) shall enter into
a consulting agreement in a form attached hereto as Exhibit A.

Section 4.10. Certain Tax Matters.

(a) Section 338(h) Election. The Seller will join, at
BostonFed's option, with Diversified and Ellsmere in making an election under
Section 338(h) of the IRC (and any corresponding election under state, local,
and foreign tax law) with respect to the purchase and sale of the stock of
Seller hereunder (a "Section 338(h) Election"). Seller will include any
income, gain, loss, deduction, or other tax item resulting from the Section
338(h) Election on their tax returns to the extent permitted by applicable law.
Seller shall also pay any tax imposed on Diversified or Ellsmere attributable
to the making of the Section 338(h) Election, including, but not limited to,
(i) any tax imposed under Section 1374 of the IRS, (ii) any tax imposed under
Reg. Section 1.338(h)(10)-1(e)(5), or (iii) any state, local or foreign tax
imposed on Diversified's or Ellsmere's gain, and Seller shall indemnify
BostonFed, and its subsidiaries against any adverse consequences arising out of
any failure to pay any such taxes.

(b) Allocation of Purchase Price. BostonFed,
Diversified, Ellsmere and Seller agree that, as between Diversified and
Ellsmere, the Purchase Price will be allocated based on the appropriate
determination by BostonFed's independent auditors for all purposes (including
tax and financial accounting). BostonFed, Diversified, Ellsmere, their
subsidiaries and Seller will file all tax returns (including amended returns
and claims for refund) and information reports in a manner consistent with such
allocation.

<PAGE> 33
(c) Tax Periods Ending on or before the Closing Date.
BostonFed shall review all tax returns for Diversified and Ellsmere for all
periods ending on or prior to the Closing Date prior to the filing thereof. To
the extent that Seller, Diversified or Ellsmere has any tax liability based on
the monthly net income of Diversified or Ellsmere subsequent to October 31,
1999 and prior to the Closing, and Diversified, Ellsmere or Seller pays such
taxes (whether paid before or after the Closing), BostonFed shall reimburse
Diversified or Ellsmere or Seller, as applicable, for the payment of such taxes
to the extent such taxes represent 43.19% (or tax rates in effect at that time)
of the monthly net income of Diversified and Ellsmere. In addition to the
above, to the extent the purchase and sale contemplated under this Agreement is
not closed by December 1, 1999, BostonFed and, collectively, Seller and
Diversified shall agree to divide equally the net after-tax income of
Diversified and Ellsmere for the period beginning December 1, 1999 and ending
on the Closing Date.

(d) Cooperation on Tax Matters. BostonFed, Diversified
and Ellsmere and their Subsidiaries and Seller shall cooperate fully, as and to
the extent reasonably requested by the other party, in connection with the
filing of tax returns pursuant to this Section and any audit, litigation or
other proceeding with respect to taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a mutually convenient basis
to provide additional information and explanation of any material provided
hereunder. Diversified and Ellsmere and Seller agrees (a) to retain all books
and records with respect to tax matters pertinent to Diversified and Ellsmere
relating to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by
BostonFed or Seller, any extensions thereof) of the respective taxable periods,
and to abide by all record retention agreements entered into with any taxing
authority, and (b) to give the other party reasonable written notice prior to
transferring, destroying or discarding any such books and records and, if the
other party so requests, Diversified and Ellsmere or Seller, as the case may
be, shall allow the other party to take possession of such books and records.

(ii) BostonFed and Seller further agree, upon request, to
use their best efforts to obtain any certificate or other document from any
governmental authority or any other person as may be necessary to mitigate,
reduce or eliminate any tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).

Section 4.11. Professional Fees. Diversified agrees to pay
at or prior to Closing all professional fees and expenses (including but not
limited to investment advisor, legal and accounting fees) incurred by
Diversified, Ellsmere and the Seller at or prior to Closing and Diversified,
Ellsmere and Seller agree that such professional fees and expenses shall not
exceed $550,000.

Section 4.12. Sale of Condominium and Automobile.
Diversified agrees to sell the real property located at Orleans, Massachusetts
and the 1998 Lexus automobile to Seller at

<PAGE> 34
Closing for consideration of One Dollar ($1.00), provided that the net book
value of such assets does not exceed $120,000. In addition, Diversified
assigns to Seller all of its rights and rights of action relating to
transactions involving Multinational Systems Corporation and Advanced Risk
Corporation, including its rights of actions against such parties or other
parties associated with such transactions.

ARTICLE V
CONDITIONS TO CONSUMMATION

Section 5.1. Conditions to Each Party's Obligations. The
respective obligations of BostonFed, Diversified, Ellsmere and the Seller to
effect the transactions contemplated by this Agreement shall be subject to the
satisfaction of the following conditions:

(a) The parties hereto shall have received all consents
and approvals of Governmental Entities and private third parties required for
or in connection with the execution and delivery by the parties of this
Agreement and the consummation by BostonFed, Diversified, Ellsmere and the
Seller of the transactions contemplated hereby, and all statutory waiting
periods shall have expired; provided however, that none of such approvals shall
contain any condition or requirement that would so materially and adversely
impact the economic or business benefits to BostonFed or, collectively,
Diversified and Ellsmere of the transactions contemplated hereby that, had such
condition or requirement been known, such party would not, in its reasonable
judgment, have entered into this Agreement.

(b) No party hereto shall be subject to any order, decree
or injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the transactions contemplated by this Agreement
and no Governmental Entity shall have instituted any proceeding for the purpose
of enjoining or prohibiting the consummation of the transactions contemplated
by this Agreement.

(c) No statute, rule or regulation shall have been
enacted, entered, promulgated, interpreted, applied or enforced by any
Governmental Entity which prohibits, restricts or makes illegal consummation of
the transactions contemplated by this Agreement.

Section 5.2. Conditions to the Obligations of BostonFed.
The obligations of BostonFed to effect the transactions contemplated by this
Agreement shall be further subject to the satisfaction of the following
additional conditions, any one or more of which may be waived by BostonFed:

(a) Diversified, Ellsmere and the Seller each shall have
performed and complied in all material respects with all terms, covenants and
conditions required by this Agreement to be performed or complied with by them
on or before the Closing Date, and the representations and warranties of
Diversified, Ellsmere and the Seller contained in this Agreement shall be true
and correct in all material respects as of the Closing Date as though

<PAGE> 35
made at and as of the Closing Date (except as to any representation or warranty
which specifically relates to an earlier date) and BostonFed shall have
received a certificate from Seller and the chief executive officers of
Diversified and Ellsmere dated as of the Closing Date to such effect.

(b) BostonFed shall have received certificates (such
certificates to be dated as of a day as close as practicable to the Closing
Date) from appropriate authorities as to the corporate existence and good
standing of Diversified and Ellsmere.

(c) BostonFed shall have received from counsel to
Diversified and Ellsmere an opinion, dated as of the Closing Date, in form and
substance satisfactory to BostonFed, to the effect that:

(i) Diversified is a corporation duly
incorporated, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts, and Ellsmere is a corporation duly incorporated,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts;

(ii) Upon payment for and delivery of the
Diversified Capital Stock and the Ellsmere Capital Stock by seller with all
necessary endorsements in accordance with the terms of the Purchase and Sale
Agreement, and assuming BostonFed is acquiring the Diversified Capital Stock
and the Ellsmere Capital Stock in good faith without notice of any adverse
claim, and with all necessary approvals from Governmental Entities, BostonFed
will be the owner of the Diversified Capital Stock and the Ellsmere Capital
Stock, free and clear of any adverse claim;

(iii) The Diversified Capital Stock and the
Ellsmere Capital Stock are owned of record by Seller;

(iv) All of Diversified's and Ellsmere's
outstanding shares of capital stock have been duly authorized and validly
issued and are fully paid and non-assessable; and

(v) There are no outstanding options, warrants,
conversion rights, rights, or commitments to which either Diversified or
Ellsmere is a party or by which either Diversified or Ellsmere is bound
providing for the issuance of additional shares of the capital stock of
Diversified and Ellsmere, respectively.

(vi) The execution and delivery of the Purchase
and Sale Agreement and the consummation of the transactions contemplated
thereby have been duly and validly authorized by all necessary action on the
part of each of the Seller, Diversified and Ellsmere, and the Purchase and Sale
Agreement constitutes the legal, valid and binding agreement of each of the
Seller, Diversified and Ellsmere, enforceable in accordance with its terms,
subject to all necessary approvals from Governmental Entities, bankruptcy,
fraudulent conveyance, insolvency, moratorium, reorganization or other laws
heretofore or hereafter enacted relating to

<PAGE> 36
or affecting the rights of creditors generally, and by equitable principles
limiting the right to obtain specific performance or other similar equitable
relief (regardless of whether such enforceability is considered in a proceeding
in equity or at law).

(d) Diversified will furnish a certificate dated as of
the Closing Date, executed by its Chief Executive Officer, certifying that it
has: (i) completed a review and assessment of all areas within its business
and operations that could be adversely affected by Year 2000 issues (as that
term is contemplated within the financial institutions industry); (ii) has
identified all such Year 2000 issues; (iii) has completed changes to its
operations and assets required to ensure that such Year 2000 issues will not
adversely affect its business and operations, or those of BostonFed, on or
after January 1, 2000; and (iv) tested all such changes to ensure that such
issues will not adversely affect its business and operations, or those of
BostonFed, on or after January 1, 2000.

(e) Seller shall have received from counsel to BostonFed
an opinion dated as of the Closing Date, in form and substance satisfactory to
the Seller, to the effect, with respect to BostonFed, of the matters set forth
in Section 5.2(c)(i) and (vi).

Section 5.3. Conditions to the Obligations of Seller. The
obligations of Seller to effect the transactions contemplated by this Agreement
shall be further subject to the satisfaction of the following additional
conditions, any one or more of which may be waived by the Seller:

(a) BostonFed shall have performed and complied in all
material respects with all terms, covenants and conditions required by this
Agreement to be performed or complied with by it on or before the Closing Date,
and the representations and warranties of BostonFed contained in this Agreement
shall be true and correct in all material respects as of the Closing Date as
though made at and as of the Closing Date (except as to any representation or
warranty which specifically relates to an earlier date) and Seller shall have
received a certificate from the chief executive officer of BostonFed dated as
of the Closing Date to such effect.

(b) Seller shall have received certificates (such
certificates to be dated as of a day as close as practicable to the Closing
Date) from appropriate authorities as to the corporate existence and good
standing of BostonFed.

(c) At the Closing, Seller shall have been paid pursuant
to the terms and conditions of the two (2) outstanding promissory notes by and
between Diversified and Seller dated January 19, 1998 and January 26, 1998,
respectively. BostonFed reserves the right, at its option, to make such
payment through the use of available funds of Diversified.

<PAGE> 37
ARTICLE VI
TERMINATION

Section 6.1. Termination. This Agreement may be
terminated, and the transactions contemplated hereby abandoned, at or prior to
the Closing Date:

(a) by the mutual consent of BostonFed, Diversified,
Ellsmere and the Seller, if the Board of Directors of each so determines by
vote of a majority of the members of its entire Board; or

(b) by BostonFed, or, collectively, by Diversified,
Ellsmere and the Seller, by written notice to the other party, if either (i)
any approval, consent or waiver of a Governmental Entity required to permit
consummation of the transactions contemplated hereby shall have been finally
and unappealably denied or contains a condition or requirement that would so
materially and adversely impact the economic or business benefits to BostonFed
or, collectively, Diversified and Ellsmere, that had such condition or
requirement been known, such party would not, in its reasonable judgment, have
entered into this Agreement or (ii) any governmental authority of competent
jurisdiction shall have issued a final, unappealable order enjoining or
otherwise prohibiting consummation of the transactions contemplated by this
Agreement; or

(c) by BostonFed, or, collectively, by Diversified,
Ellsmere and the Seller, in the event that the Closing does not occur prior to
February 15, 2000, unless the failure of the Closing to occur by such time is
due to the breach of any representation, warranty or covenant contained in this
Agreement by the party seeking to terminate; or

(d) by BostonFed, or, collectively, by Diversified,
Ellsmere and the Seller, (provided that the party seeking termination is not
then in material breach of any representation, warranty, covenant or other
agreement contained herein), in the event of (i) a failure to perform or comply
by the other party with any covenant or agreement of such other party contained
in this Agreement, which failure or non-compliance is willful and material (in
that the financial effect of such breach is in excess of $500,000) in the
context of the transactions contemplated by this Agreement, or (ii) any
inaccuracies, omissions or breach in the representations, warranties, covenants
or agreements of the other party contained in this Agreement the circumstances
as to which either individually or in the aggregate are, or reasonably could be
expected to be, material (in that the financial effect of such inaccuracy,
omission or breach is in excess of $500,000) on such other party; in either
case which has not been or cannot be cured within 30 calendar days after
written notice thereof is given by the party seeking to terminate to such other
party; or

(e) by BostonFed, by written notice to Seller,
Diversified or Ellsmere, in the event that there has occurred since the date of
this Agreement an event, condition, change or occurrence which, individually or
in the aggregate, has had or could reasonably be expected to result in, a
Material Adverse Effect on Diversified or Ellsmere.

<PAGE> 38

Section 6.2. Effect of Termination.

(a) In the event of termination of this Agreement by
either BostonFed or Seller as provided in Section 6.1, this Agreement shall
forthwith become void and have no effect, and there shall be no liability on
the part of any party hereto or their respective officers and directors, except
(i) the last three sentences of Section 4.2(i), and Sections 9.6 and 9.7, shall
survive any termination of this Agreement, and (ii) that notwithstanding
anything to the contrary contained in this Agreement, no party shall be
relieved or released from any liabilities or damages arising out of its willful
breach of any provision of this Agreement.

(b) Notwithstanding anything in this Agreement to the
contrary, in the event that this Agreement is terminated by either party
without right hereunder, then the terminating party shall pay to the other a
termination fee of Four Million Dollars ($4,000,000) plus out-of-pocket
expenses relating to this Agreement within two (2) business days of
termination. In addition, notwithstanding anything in this Agreement to the
contrary, in the event that this Agreement is terminated by either party
pursuant to Section 6.1(d),then the terminating party shall be paid by the
other party a termination fee of Four Million ($4,000,000) plus out-of-pocket
expenses relating to this Agreement within two (2) business days of
termination.

ARTICLE VII
CLOSING MATTERS

Section 7.1. The Closing.

(a) The purchase and sale (the "CLOSING") contemplated
under this Agreement shall take place at the offices of BostonFed, located at
17 New England Executive Park, Burlington, Massachusetts, or at such other
place as the parties shall mutually agree upon, at 10:00 A.M. local time on the
date that is five (5) business days following the receipt of the last required
approval of any Governmental Entity or the expiration of the last applicable
waiting period, whichever is later, or such other time or other earlier date as
the parties shall mutually agree upon. The date the Closing takes place is
herein referred to as the "CLOSING DATE." The Closing shall be effective as
of the close of business on the Closing Date.

(b) At the Closing, BostonFed shall transfer to a bank
account or bank accounts designated by Seller, by wire transfer, the amount
specified in Section 1.2 hereof.

(c) At the Closing and effective on the Closing Date,
Seller shall execute and deliver (or cause to be executed and delivered) to
BostonFed (i) the certificates evidencing the Shares duly endorsed for transfer
and otherwise in form acceptable for transfer in accordance with this
Agreement, (ii) the opinion and certificates described in Section 5.2 hereof
and (iii) all other documents, instruments and writings required to be
delivered to BostonFed on or prior to the Closing Date pursuant to this
Agreement.

<PAGE> 39
(d) At the Closing and effective on the Closing Date,
BostonFed shall deliver the certificates and opinions described in Section 5.3
hereof.

ARTICLE VIII
INDEMNIFICATION

Section 8.1. Indemnification by the Seller. Seller agrees
to indemnify and hold BostonFed and affiliates and their respective officers,
directors, partners, stockholders, employees, agents and representatives
(individually an "INDEMNIFIED PARTY" and collectively the "INDEMNIFIED
PARTIES") harmless from and against any damages, liabilities, losses
(including, without limitation, diminution in value), taxes, fines, penalties,
costs, interest and expenses (including, without limitation, reasonable fees
and expenses of counsel and experts) of any kind or nature whatsoever (whether
or not arising out of third-party claims and including all amounts paid in
investigation, defense or settlement of the foregoing) (collectively, "LOSSES")
which may be sustained or suffered by any of them arising out of or based upon
any of the following matters:

(a) common law fraud by Diversified, Ellsmere or Seller
in connection with any of their representations, warranties or covenants under
this Agreement or any agreement, document or instrument contemplated hereby or
in any certificate, schedule or exhibit delivered pursuant hereto or thereto,
or otherwise in connection with the transactions contemplated hereby;

(b) any breach of any representation, warranty or
covenant of Diversified, Ellsmere or any Seller under this Agreement or under
any agreement, document or instrument contemplated hereby, or in any
certificate, schedule or exhibit delivered pursuant hereto or thereto, or by
reason of any claim, action or proceeding asserted or instituted growing out of
any matter or thing constituting such a breach;

(c) the activities, conduct, business or operation of
Diversified or Ellsmere prior to the Closing that are not in the ordinary
course of business and are not related to any disclosed asserted claims against
Diversified or Ellsmere, or arising out of facts, events or circumstances
regarding Diversified or Ellsmere existing prior to the Closing (including,
without limitation, whether or not disclosure of such facts, events or
circumstances was made herein or on the Schedules hereto); or

(d) liabilities and obligations for any taxes incurred by
Diversified or Ellsmere with respect to any period ending on or before the date
of the Closing (or, for any period beginning before and ending after the date
of the Closing, liabilities and obligation for Taxes to the extent allocable to
the portion of such period beginning before and ending on the date of the
Closing), and any adverse consequences or Losses arising out of or relating to
any failure to pay any such taxes.

<PAGE> 40
Section 8.2 Indemnification With Respect to Certain
Lawsuits. Seller agrees to indemnify and hold harmless Diversified and
BostonFed from any judgment resulting from claims asserted against Diversified
by Salem Five Cents Savings Bank and Cambridge Savings Bank relating to
transactions involving Multinational Systems Corporation and Advanced Risk
Corporation. In this connection, Seller shall have the right and obligation to
defend such claims in the name of and on behalf of Diversified, in a manner of
his discretion, at his expense, with counsel of his selection, and to resolve
such claims, by trial or settlement or otherwise, as he may determine.
Diversified and BostonFed shall cooperate with Seller in the defense of such
claims, and shall make available its employees, records and facilities, as
Seller may reasonably request. Any action or threatened action (including
lawsuits) taken by Salem Five Cents Savings Bank and Cambridge Savings Bank
arising out of their respective relationships with Diversified relating to
transactions involving Multinational Systems Corporation and Advanced Risk
Corporation. Immediately prior to or concurrent with the Closing, Seller will
place in escrow at a mutually agreeable institution, as escrow agent, pursuant
to a Confidential Escrow Agreement (to be executed upon Closing) mutually
satisfactory to Seller and BostonFed, a form of which is attached hereto as
Exhibit B, the amount stated in the Confidential Escrow Agreement (the "ESCROW
FUND") or other collateral acceptable to Buyer. The Escrow Fund shall only be
utilized as released by the escrow agent upon certification by BostonFed as to
the amount and purpose for such release and certification by BostonFed that
such funds will be used for the sole purpose of covering Losses relating to
actions (including lawsuits) initiated by Salem Five Cents Savings Bank or
Cambridge Savings Bank or upon settlement of the above referenced actions. In
addition, Seller agrees to use his best efforts to diligently resolve any and
all legitimate third party claims related to these lawsuits and agrees to fully
cooperate with Buyer in the defense of any actions or threatened actions taken
by or related to Salem Five Cents Savings Bank and Cambridge Savings Bank
arising out of their respective relationships with Diversified.

Section 8.3. Notice; Defense of Claims. An Indemnified
Party may make claims for indemnification hereunder by giving written notice
thereof to the indemnifying party within the period in which indemnification
claims can be made hereunder. If indemnification is sought for a claim or
liability asserted by a third party, the Indemnified Party shall also give
written notice thereof to the indemnifying party promptly after it receives
notice of the claim or liability being asserted, but the failure to do so shall
not relieve the indemnifying party from any liability except to the extent that
it is prejudiced by the failure or delay in giving such notice. Such notice
shall reasonably summarize the bases for the claim for indemnification and any
claim or liability being asserted by a third party. Within thirty (30) days
after receiving such notice the indemnifying party shall give written notice to
the Indemnified Party stating whether it disputes the claim for indemnification
and whether it will defend against any third party claim or liability at its
own cost and expense. If the indemnifying party fails to give notice that it
disputes an indemnification claim within thirty (30) days after receipt of
notice thereof, it shall be deemed to have accepted and agreed to the claim,
which shall become immediately due and payable. The indemnifying party shall be
entitled to direct the defense against a third party claim or liability with
counsel selected by it (subject to the consent of each indemnified party, which
consent shall not be unreasonably withheld) as long as the indemnifying party
is conducting a good faith and

<PAGE> 41
diligent defense. Each indemnified party shall at all times have the right to
fully participate in the defense of a third party claim or liability at its own
expense directly or through counsel; provided, however, that if the named
parties to the action or proceeding include either both the indemnifying party
and/or one or more Indemnified Parties and an Indemnified Party is advised that
representation of both parties by the same counsel would be inappropriate under
applicable standards of professional conduct, an Indemnified Party may engage
separate counsel at the expense of the indemnifying party. If no such notice of
intent to dispute and defend a third party claim or liability is given by the
indemnifying party, or if such good faith and diligent defense is not being or
ceases to be conducted by the indemnifying party, the indemnified party shall
have the right, at the expense of the indemnifying party, to, after three (3)
business days notice to the indemnifying party of its intent to do so,
undertake the defense of such claim or liability (with counsel selected by the
indemnified party), and to compromise or settle it, exercising reasonable
business judgment. If the third party claim or liability is one that by its
nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available such information and assistance as the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense, at the expense of the indemnifying party.

Section 8.4. Other Indemnification Matters. The Seller,
Diversified, Ellsmere and BostonFed agree to treat any indemnity payment made
pursuant to this Agreement as an adjustment to the Purchase Price for federal,
state, local and foreign income tax purposes. Indemnification pursuant to this
Article VIII shall be the exclusive remedy for monetary damages available to
the Indemnified Parties, other than for claims with respect to common law
fraud.

ARTICLE IX
CERTAIN OTHER MATTERS

Section 9.1. Certain Definitions; Interpretation.

(a) When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of,
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for ease of reference
only and shall not affect the meaning or interpretation of this Agreement.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed followed by the words "without limitation." Any
singular term in this Agreement shall be deemed to include the plural, and any
plural term the singular. Any reference to gender in this Agreement shall be
deemed to include any other gender.

(b) For purposes of this Agreement:

(i) the term "PERSON" means an individual,
corporation, limited liability company, partnership, association, trust,
unincorporated organization or other entity.

<PAGE> 42

(ii) the term "MATERIAL ADVERSE EFFECT" means an
effect which is material and adverse to the business, financial condition or
results of operations of Diversified, Ellsmere or BostonFed, as the context may
dictate, and their Subsidiaries (as defined herein) taken as a whole.

(iii) the term "KNOWLEDGE" shall mean, with respect
to a party hereto, actual knowledge of the party, in the case of the Seller, or
of the members of the Board of Directors of that party, its counsel or any
officer of that party with the title ranking not less than senior vice
president.

Section 9.2. Survival. The representations, warranties,
agreements and covenants made herein shall survive any investigation made by
BostonFed and the Closing until the second anniversary of the Closing, except
for the representations and warranties made in Section 2.2, Sections 2.3(c),
(d) and (j) and Sections 2.4(c), (d) and (j), which shall survive indefinitely.

Section 9.3. Waiver; Amendment. Prior to the Closing,
any provision of this Agreement may be: (i) waived in writing by the party
benefitted by the provision or (ii) amended or modified at any time (including
the structure of the transaction) by an agreement in writing between the
parties hereto.

Section 9.4. Counterparts. This Agreement may be
executed in counterparts each of which shall be deemed to constitute an
original, but all of which together shall constitute one and the same
instrument.

Section 9.5. Governing Law. This Agreement shall be
governed by, and interpreted in accordance with, the laws of the Commonwealth
of Massachusetts, without regard to conflicts of laws principles.

Section 9.6. Expenses. Each party hereto will bear all
expenses incurred by it in connection with this Agreement and the transactions
contemplated hereby except as contemplated by Section 6.2(b).

Section 9.7. Notices. All notices, requests,
acknowledgments and other communications hereunder to a party shall be in
writing and shall be deemed to have been duly given when delivered by hand,
overnight courier or facsimile transmission (confirmed in writing) to such
party at its address or facsimile number set forth below or such other address
or facsimile transmission as such party may specify by notice (in accordance
with this provision) to the other party hereto.

If to Seller, to the address set forth below his name on the
signature page of this Agreement.

<PAGE> 43
If to Diversified, to:

Diversified Ventures, Inc.
360 Church Street
Northboro, MA 01532
Attention: Chief Executive Officer
Facsimile: (508) 393-5971

With copies to:

Michael P. Angelini, Esq.
Bowditch & Dewey, LLP
311 Main Street
Worcester, MA 01608
Facsimile: (508) 798-3537

If to Ellsmere, to:

Ellsmere Insurance Agency, Inc.
360 Church Street
Northboro, MA 01532
Attention: Chief Executive Officer
Facsimile: (508) 393-5971

With copies to:

Michael P. Angelini, Esq.
Bowditch & Dewey, LLP
311 Main Street
Worcester, MA 01608
Facsimile: (508) 798-3537

If to BostonFed, to:

BostonFed Bancorp, Inc.
17 New England Executive Park
Burlington, Massachusetts 01803
Facsimile: (718) 221-7594
Attention: David F. Holland
Chairman of the Board and Chief
Executive Officer

<PAGE> 44
With copies to:

Douglas P. Faucette, Esq.
Lawrence M.F. Spaccasi, Esq.
Muldoon, Murphy & Faucette LLP
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Facsimile: (202) 966-9409

Section 9.8. Entire Agreement; etc. This Agreement,
together with the Disclosure Letter, represents the entire understanding of the
parties hereto with reference to the transactions contemplated hereby and
supersedes any and all other oral or written agreements heretofore made. All
terms and provisions of this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
Nothing in this Agreement is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.

Section 9.9. Successors and Assigns; Assignment. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided, however, that this
Agreement may not be assigned by either party hereto without the written
consent of the other party.

<PAGE> 45
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers as of the 4th day of
August, 1999.

BOSTONFED BANCORP, INC.

By: /s/ David F. Holland
------------------------------------------
David F. Holland
Chairman of the Board and
Chief Executive Officer

DIVERSIFIED VENTURES, INC.

By: /s/ Gene J. DeFeudis
------------------------------------------
Gene J. DeFeudis
Chairman of the Board

ELLSMERE INSURANCE AGENCY, INC.

By: /s/ Gene J. DeFeudis
------------------------------------------
Gene J. DeFeudis
Chairman of the Board

SELLER

/s/ Gene J. DeFeudis
-------------------------------
Gene J. DeFeudis
63 Cherry Street
Northboro, MA 01532

<PAGE> 1

FOR IMMEDIATE RELEASE August 4, 1999

Contact: Amy L. Timmerman, Investor Relations - 781-221-6396
John A. Simas, EVP and CFO - 781-221-6307
FAX: (781) 221-7594

Burlington, MA.-BostonFed Bancorp, Inc., a $1.195 billion holding company,
(AMEX-BFD) (the "Company"), the parent of Boston Federal Savings Bank, a $1.047
billion, federally-chartered stock savings bank, and Broadway National Bank, a
$137 million, national chartered commercial bank, announced today that it has
entered into a definitive agreement to acquire Diversified Ventures, Inc., d/b/a
Forward Financial Company, ("Forward Financial") in a 100% cash transaction. As
part of the transaction, the Company is also acquiring Ellsmere Insurance
Agency, Inc., a Massachusetts licensed insurance agency with limited operations.
Forward Financial is a privately held mortgage company headquartered in
Northborough, Massachusetts. The transaction is subject to regulatory approval
and is expected to close in the fourth quarter of 1999. The tax-deductible
transaction premium will be approximately $20 million and will be amortized over
15 years. The transaction premium reflects a multiple of approximately 6.5 times
Forward Financial's estimated 1999 after-tax earnings. BostonFed expects the
transaction to be accretive to both GAAP and cash earnings in the first year.

David F. Holland, Chairman and Chief Executive Officer said, "We are pleased to
aquire Forward Financial, a company with a 25-year proven track record that will
complement and expand our existing mortgage businesses. This acquisition
provides a unique opportunity to generate increased revenue and diversify our
lending operations."

Forward Financial originates high quality loans primarily direct with consumers
purchasing or refinancing manufactured homes, recreational vehicles and leased
equipment and does not compete in "sub-prime" lending markets. Forward Financial
originates and sells loans to third party client lenders. Forward Financial's
national consumer lending niche provides its client lenders with the means to
diversify their loan portfolios without having to develop an in-house
origination capability. Forward Financial currently originates approximately 60%
of its loan origination volume in the Northeast and operates in 19 states across
the United States. It is expected that Forward Financial will operate as a
separate subsidiary and continue to conduct its business under its current
management.

This release may contain certain forward-looking statements which are based on
management's current expectations regarding economic, legislative, and
regulatory issues that may impact the Company's and its affiliates' earnings in
future periods. Factors that could cause future results to vary materially from
current management expectations include, but are not limited to, general
economic conditions, changes in interest rates, deposit flows, real estate
values, and competition; changes in accounting principles, policies, or
guidelines; changes in legislation or regulation; and other economic,
competitive, governmental, regulatory and technological factors affecting the
Company's operations, pricing, products and services.