<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report (Date of Earliest Event Reported):
June 4, 1999
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LETCHWORTH INDEPENDENT BANCSHARES CORPORATION
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(Exact Name of Registrant as Specified in Charter)
New York
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(State or other jurisdiction of incorporation)
0-18533
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(Commission File Number)
16-1168175
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(I.R.S. Employer Identification Number)
50 North Main Street
Castile, New York 14427
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number Including Area Code:
(716) 493-2577
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<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 2. Acquisition or Disposition of Assets.
(a) On June 4, 1999, Letchworth Independent Bancshares Corporation
("Letchworth") consummated the acquisition of a controlling interest in The
Mahopac National Bank, a national banking organization with its principal office
located at 630 Route 6, Mahopac, New York 10541 (the "Mahopac Bank"). As a
result, Letchworth now owns 1,491 shares, or 70.16%, of the issued and
outstanding shares of capital stock of the Mahopac Bank.
The acquisition referenced above was consummated in accordance
with the terms and conditions of a certain Stock Purchase Agreement, dated as of
October 31, 1998, by and among Letchworth and certain shareholders of the
Mahopac Bank (the "Stock Purchase Agreement"), and the consummation of certain
transactions contemplated by a tender offer made by Letchworth on January 21,
1999. Specifically, pursuant to the terms and conditions of the Stock Purchase
Agreement, Letchworth agreed to purchase 1,240 shares of common stock of the
Mahopac Bank from certain shareholders of the Mahopac Bank at a purchase price
of $9,700 per share. A copy of the Stock Purchase Agreement is annexed hereto as
Exhibit 2(a). In addition, on January 21, 1999, Letchworth issued a tender offer
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to the remaining shareholders of the Mahopac Bank offering to purchase all of
their shares of common stock in the Mahopac Bank on substantially the same terms
and conditions as set forth in the Stock Purchase Agreement (the "Tender Offer
Material"). A copy of the Tender Offer Material is annexed hereto as Exhibit
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2(b). Shareholders beneficially owning two hundred fifty-one (251) shares of
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common stock of the Mahopac Bank agree to sell their shares to Letchworth in
accordance with the Tender Offer Material at a purchase price of $9,700 per
share. As a result, as of the date hereof, Letchworth has purchased 1,491 of the
issued and outstanding shares of common stock, or 70.16% of the Mahopac Bank.
Shareholders owning six (6) shares of common stock of the Mahopac Bank
did not tender their shares of common stock, and shareholders owning 628 shares
of common stock (the "Spain Shareholders") have entered into an agreement with
Letchworth (the "Shareholder Agreement") pursuant to which the Spain
Shareholders will not tender their shares to Letchworth at the current time.
Pursuant to the terms and conditions of the Shareholder Agreement, on
or before December 4, 2000, Letchworth and the Spain Shareholders will implement
a procedure to determine the fair market value of a share of common stock of the
Mahopac Bank. Once determined, the Spain Shareholders shall have the right, but
not the obligation, to purchase all, but not less than all, of the shares of
common stock then owned by Letchworth for a purchase price per share (the
"Option Price") equal to the product of (i) .90 and (ii) the fair market value
of each share of common stock of the Mahopac Bank, as determined in accordance
with the Shareholder Agreement. In the event that the Spain Shareholders fail to
exercise their option within thirty (30) days from the date that the fair market
value is determined, or fail to consummate the transaction and purchase all of
the shares of common stock of the Mahopac Bank owned by Letchworth during the
"Closing Period," as that term is defined in the Shareholder Agreement, then
Letchworth shall have the right to acquire all, but not less than all, of the
shares of common stock owned by the Spain Shareholders for a purchase price per
share equal to the Option Price, as defined above. A copy of the Shareholder
Agreement is annexed hereto as Exhibit 4.
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2
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Pursuant to the terms and conditions of the Stock Purchase Agreement,
certain shareholders of the Mahopac Bank have agreed that they will not, for a
period of five (5) years from and after the closing date, directly or
indirectly, (i) compete with the Mahopac Bank within a fifty (50) mile radius of
any branch office of the Mahopac Bank, (ii) solicit or encourage any employee of
the Mahopac Bank to terminate his or her employment relationship with the
Mahopac Bank, or (iii) solicit or encourage any customer of the Mahopac Bank to
terminate its banking relationship with the Mahopac Bank. In the view of
management of Letchworth, the terms and conditions of these covenants are
important, particularly in light of the fact that certain shareholders who
entered into the Stock Purchase Agreement with Letchworth previously served on
the Board of Directors of the Mahopac Bank, and one shareholder is currently a
member of the Board of Directors of a competing institution.
The total purchase paid or to be paid by Letchworth in connection with
the acquisition of the 1,491 shares of common stock of the Mahopac Bank was an
amount equal to $14,462,700. The purchase price was calculated based upon a
sales price of $9,700 for each share of common stock purchased by Letchworth.
The payment of the purchase price was satisfied by Letchworth out of retained
earnings of Letchworth, as well as a dividend from The Bank of Castile, a
wholly-owned subsidiary of Letchworth.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
4. (a) & (b) It is impracticable to provide the required financial
statements and pro forma financial information relating to the acquisition of a
controlling interest in the Mahopac Bank by Letchworth at the time that this
Report on Form 8-K is being filed. The requisite financial statements and pro
forma financial information will be filed under cover of Form 8 as soon as
practicable, and in any event, on or before August 18, 1999.
(c) Exhibits - See Index of Exhibits.
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 thereunto duly authorized.
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION
By: /s/ James W. Fulmer
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James W. Fulmer, President and
Chief Executive Officer
Dated: June 16, 1999
3
<PAGE>
Index of Exhibits
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2(a) Stock Purchase Agreement, dated as of October 31, 1998, by and among
Registrant and certain shareholders of The Mahopac National Bank,
together with letter agreement, dated April 29, 1999, extending the
closing date for said transaction until the close of business on June
4, 1999.
2(b) Offer submitted by Registrant to the shareholders of The Mahopac
National Bank regarding the purchase of outstanding shares of common
stock of The Mahopac National Bank, dated January 21, 1999, together
with Form of Participation Notice, dated May 6, 1999, extending the
closing date until the close of business on June 4, 1999.
4 Shareholder Agreement, dated October 16, 1998, by and among
Registrant, W.D. Spain & Sons Limited Partnership, William D. Spain,
Jr., C. Compton Spain, Michael H. Spain and William D. Spain.
4
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EXHIBIT 2(a)
STOCK PURCHASE AGREEMENT
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THIS AGREEMENT made this 31st day of October, 1998, is by and among
the Shareholders of THE MAHOPAC NATIONAL BANK, a national banking organization
with its principal place of business located at 630 Route 6, Mahopac, New York
10541 (the "Bank"), listed on Schedule A annexed hereto (the "Shareholders") or
their legal representatives (the Shareholders and their legal representatives
hereinafter referred to as the "Sellers"), and LETCHWORTH INDEPENDENT BANCSHARES
CORPORATION, a New York corporation with its principal office located at 50
North Main Street, Castile, New York 14427 (the "Purchaser").
WHEREAS, each of the Sellers own the number of issued and outstanding
shares of common stock of the Bank as set forth on Schedule A; and
WHEREAS, the Sellers desire to sell and the Purchaser desires to
purchase, all of such shares at the price and subject to the terms and
conditions set forth herein;
NOW, THEREFORE, in view of the promises and in consideration of the
mutual covenants and agreements set forth herein, as well as other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Sale of Shares. Subject to the terms and conditions contained
--------------
herein, and on the basis of the representations, warranties, covenants and
agreements herein set forth, each of the Sellers agrees to sell, and the
Purchaser agrees to purchase and acquire from the Sellers, a total of 1,240
shares of common stock, par value $100.00 per share, of the Bank (the "Shares"),
representing 58.35% of the issued and outstanding shares of capital stock of the
Bank. The purchase and sale shall take place at a closing (the "Closing") to be
held on the date and at the time (the "Closing Date") and at the place
established pursuant to Section 3 of this Agreement.
2. Consideration. In consideration of the purchase of the Shares,
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the Purchaser shall pay the Sellers an aggregate purchase price (the "Purchase
Price") equal to Twelve Million Twenty-Eight Thousand and 00/100 Dollars
($12,028,000.00) in United States funds. At the Closing, the Purchaser shall
pay to each of the Sellers by the wire transfer of immediately available funds,
a portion of the Purchase Price equal to the product of (i) $9,700, and (ii) the
number of Shares owned by said Seller as set forth in Schedule "A" of this
Agreement.
3. Closing. The Closing Date shall be on the first Friday (or the
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next business day if such day is not a banking business day for banks in New
York) mutually acceptable to the parties hereto following (i) receipt of all
governmental and regulatory approvals necessary for the completion of the
transfer contemplated by this Agreement; and (ii) the expiration of all required
waiting periods, and if at all possible, on or before January 1, 1999.
Notwithstanding the foregoing, if the Closing Date is to occur during the month
of December,
<PAGE>
1998, the Sellers shall have the option of adjourning the Closing until January,
1999. In any event, the delivery of the instruments of assignment and conveyance
to be delivered by Sellers, and the delivery of the purchase price by Purchaser
(the "Closing") shall take place on the Closing Date at 10:00 a.m. (Eastern
Standard Time) at a place or in such manner as is agreed upon by the Sellers and
the Purchaser.
4. Deliveries by the Sellers. At the Closing, each of the Sellers
-------------------------
shall deliver or cause to be delivered to the Purchaser all of such Seller's
stock certificates evidencing his, her or its ownership of the Shares being
conveyed to the Purchaser pursuant to the terms and conditions of this
Agreement, together with fully executed stock powers necessary to convey the
Shares to the Purchaser free and clear of any and all liens, security interests,
or other encumbrances whatsoever.
5. Representations of the Sellers. Each of the Sellers, severally
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and not jointly, represents and warrants to the Purchaser as follows:
(a) Capitalization. The authorized capital stock of the Bank
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consists of 2,125 shares of common stock, par value $100 per share, of which
2,125 shares are validly issued and outstanding, fully paid and non-assessable.
Prior to the Closing, Seller shall not take any actions that will authorize the
Bank to change the number of authorized shares of capital stock of the Bank and
Seller will not vote in favor of the issuance of any options, warrants or any
other rights to purchase or acquire shares of common stock of the Bank. To the
best of Seller's knowledge, no options, warrants, or other rights to purchase or
acquire shares of common stock of the Bank now exist or are outstanding.
(b) Authority and Title to Shares. Each of the Sellers has the
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legal capacity and authority to enter into and carry out the transactions
contemplated by this Agreement and such action has been so authorized. Each of
the Sellers are and will be on the Closing Date the owners, free and clear of
any mortgage, pledge, lien, charge, security interest, adverse claims, demand
and encumbrance whatsoever, of the number of Shares set forth in Schedule "A" of
this Agreement, and on the transfer thereof at the Closing, the Purchaser will
become the registered owner of such Shares free and clear of any mortgage,
pledge, lien, charge, security interest, encumbrances, adverse claims or
demands.
(c) No Undisclosed Liabilities. To the best of each Seller's
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knowledge, the Bank is not subject to any liability, absolute or contingent or
anticipated, which in the aggregate is material and is not shown or is in excess
of the amount shown or reserved for in its financial statements, and to the best
of Seller's knowledge, on the Closing Date, the Bank will not be subject to any
such liability, other than liabilities incurred in the ordinary course of
business attributable to the period since the date of such statements.
(d) Material Changes. From the date hereof until the Closing,
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the Sellers shall not have taken or admit to take any action which materially
adversely affects the business of the Bank or the Shares being transferred
hereunder.
2
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6. Representations of the Purchaser. The Purchaser represents and
--------------------------------
warrants to each of the Sellers as follows:
(a) Organization. The Purchaser is a corporation duly
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incorporated and validly existing under the laws of the State of New York.
(b) Authority. Neither the execution and delivery of this
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Agreement nor the consummation of the transactions contemplated herein violates,
conflicts with or results in, or will violate, conflict with or result in a
breach by the Purchaser of, the terms, conditions or provisions, as applicable,
of the Purchaser's Certificate of Incorporation or By-laws or of any deed of
trust, debt instrument or loan agreement, or any other agreement affecting its
assets or operations generally or its undertaking, to which it is a party or by
which it is bound.
(c) Corporate Action. All necessary action on the part of the
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Purchaser has been taken by its Board of Directors to authorize and approve the
execution and delivery of this Agreement and the performance by the Purchaser of
its obligations hereunder. This Agreement has been duly executed and delivered
by, and constitutes a valid and binding obligation of, the Purchaser.
(d) Investment Intent. The Purchaser is acquiring the Shares for
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investment purposes and has no intention of reselling or distributing such
Shares.
7. Covenants of the Sellers.
------------------------
(a) In addition to any other covenants and agreements of the
Seller set forth herein, each of the Sellers hereby covenants and agrees that
he, she or it will not, for a period of five (5) years from and after the
Closing Date, directly or indirectly, whether as owner, principal, agent,
consultant, employee, partner, stockholder or any other capacity, directly or
indirectly, (i) compete with the Bank within a fifty (50) mile radius of any
branch office of the Bank, (ii) solicit or encourage any employee of the Bank to
terminate his or her employment relationship with the Bank, or (iii) solicit or
encourage any customer of the Bank to terminate its banking relationship with
the Bank. In addition, each of the Sellers hereby agrees that from and after the
date hereof he, she or it will not make any derogatory remarks regarding the
Bank, and, to the extent reasonably practicable, agrees to promote the business
and operations of the Bank. The foregoing notwithstanding, the Purchaser hereby
acknowledges and agrees that (xx) the provisions of clause (i) above shall not
be interpreted to prohibit the law firm of Ryder & Costello from representing
financial institutions or from representing clients in business transactions
with other financial institutions, or to prohibit Regina C. Morini from
continuing in her capacity with Country Bank, including serving on the Board of
Directors of Country Bank, and (yy) the foregoing provisions shall not be
interpreted to prohibit each of the Sellers from holding investments as a
passive investor or stockholder in other financial institutions.
3
<PAGE>
(b) Each of the Sellers hereby acknowledges and agrees that the
scope effect of the covenants contained in Section 7(a) are necessary to protect
the goodwill and other proprietary interests being acquired by the Purchaser
pursuant to the terms and conditions of this Agreement. Each of the Sellers
further acknowledge that a breach of the covenants contained in Section 7(a)
will result in irreparable and continuing damage to the Purchaser and the Bank
for which there will be no adequate remedy at law; and agrees that in the event
of any breach or threatened breach of the aforesaid covenants, the Purchaser
and/or the Bank, and their respective successors and assigns, shall be entitled
to temporary, preliminary and permanent injunctive relief (without needing to
post any bond or other security therefore) in addition to such other and further
relief as may be proper.
(c) Each of the Sellers hereby covenants and agrees that
commencing on the date hereof and continuing until the earlier to occur of (i)
the consummation of the transactions contemplated by this Agreement and (ii)
January 1, 1999, each of the Sellers shall not institute, continue or otherwise
entertain or maintain negotiations with any other party with respect to the sale
of the Shares.
8. Conditions to the Purchaser's Obligations. The obligations of the
-----------------------------------------
Purchaser hereunder are, at the option of the Purchaser, subject to the
condition that on or before the Closing Date:
(a) Sellers' Representations. The representations and
-------------------------
warranties of each of the Sellers contained in this Agreement will have been
true and correct in all material respects when made and, in addition, will be
true and correct in all material respects at and as of the Closing Date.
(b) Action by the Sellers. Each of the Sellers shall have
----------------------
caused all necessary action, if any, on the part of each such Seller to have
been taken to authorize and approve the execution and delivery of this Agreement
and the performance by said Seller of his, her or its obligations hereunder.
(c) Performance. All covenants and conditions of or to be
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performed or satisfied by all of the Sellers at or before Closing shall have
been performed or satisfied in all material respects.
(d) Documents. Each of the Sellers shall have delivered to the
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Purchaser all instruments, documents and items required to be delivered to the
Purchaser at the Closing, and performed all acts necessary or reasonably
required to effectively transfer and assign all of the Shares to the Purchaser
with a good and marketable title, free and clear of all liens or encumbrances
whatsoever.
(e) Due Diligence. The Purchaser shall have the completed all
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of its due diligence regarding the Bank that Purchaser deems reasonably
necessary in light of the transactions contemplated hereby, all to the
reasonable satisfaction of the Purchaser.
4
<PAGE>
(f) Regulatory Approvals. The Purchaser and the Bank shall have
--------------------
received all applicable regulatory approvals and consents to consummate the
transactions contemplated by this Agreement and all required waiting periods
shall have expired.
(g) Opinion of the Seller's Counsel. The Purchaser shall have
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received an opinion of the Sellers counsel, dated as of the Closing Date,
regarding the authority and capacity of each Seller to execute and deliver this
Agreement and to perform his, her or its obligations hereunder.
(h) Corporate and Shareholder Approval. The receipt by the Purchaser
----------------------------------
of all requisite corporate and shareholder approvals necessary for the
consummation of the transactions contemplated by this Agreement.
(i) Employment Agreements. Evidence, satisfactory to the Purchaser
---------------------
in its sole discretion, that the employment relationship between the Bank and
each of its senior management employees is secure.
(j) Resignation as Officer and Directors. Each of the Sellers that
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is an officer and/or director of the Bank shall have resigned as such, effective
as of the Closing Date.
9. Conditions to the Obligations of the Sellers. The obligations of
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each of the Sellers hereunder are, at the option of each Seller, subject to the
condition that on or before the Closing Date:
(a) Purchaser's Representations. The representations and warranties
---------------------------
of the Purchaser contained in this Agreement will have been true and correct in
all material respects when made and, in addition, will be true and correct in
all material respects at and as of the Closing Date.
(b) Payment of Purchase Price. The Purchaser shall have delivered
-------------------------
the purchase price to each of the Sellers in accordance with Section 2 above.
10. Indemnification. Commencing on the Closing Date and continuing
---------------
for the twelve (12) month period thereafter, each of the Sellers, severally and
not jointly, shall indemnify and hold harmless the Purchaser of and from any
loss whatsoever arising out of, under or pursuant to any loss suffered by the
Purchaser as a result of any breach of representation, warranty or covenant made
by said Seller in this Agreement and from all claims, demands, costs and
expenses in respect of the foregoing. Each of the Sellers, severally and not
jointly, agrees to pay Purchaser forthwith on demand the amount for which said
Seller is responsible by reason of the foregoing. This remedy represents the
Purchaser's sole remedy against the Sellers other than for a breach of the
covenants set forth in Section 7 above.
5
<PAGE>
11. Confidentiality. In the event that the purchase and sale of the
---------------
Shares herein provided for is not consummated, the Purchaser agrees that it will
not, directly or indirectly, use for its own purposes any information, trade
secrets or confidential data relating to the Sellers or the Bank, discovered or
acquired by the Purchaser, its representatives or auditors, as a result of the
Sellers making available to the Purchaser, its representatives or auditors, any
information relating to the Sellers or the Bank. The Purchaser further agrees
that it will not disclose, divulge or communicate orally, in writing or
otherwise, any such information, trade secrets or confidential data so
discovered or acquired to any other person, firm or corporation.
12. Finder's Fees. The Sellers and the Purchaser represent that
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there is no obligation to pay any commission, finder's fee, or similar charge in
connection with the transactions provided for in this Agreement. The Sellers
and the Purchaser will indemnify and hold each other harmless from and against
any loss, liability, and damage, including expenses, arising out of any claim
for any such commission, fee, or charge, so far as any arises by reasons of
services alleged to have been rendered to, or at the instance of, such party.
13. Expenses. Each of the parties hereto shall be responsible for
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his, her or its own expenses (including attorney's fees) incurred in connection
with the negotiation of this Agreement and the consummation of the transactions
contemplated hereby, whether or not the transactions contemplated by this
Agreement are consummated.
14. Sellers' Representative.
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(a) Joseph M. Costello shall be and hereby is constituted and
appointed as agent and attorney-in-fact (the "Sellers Representative") for and
on behalf of each of the Sellers to give and receive notices and communications,
to agree to, negotiate, enter into settlements and compromises of, and comply
with orders of courts with respect to such claims, and to take all actions
necessary or appropriate in connection with the rights and obligations of the
Sellers under this Agreement. Such agency may be changed by the holders of a
majority of the Shares owned by the Sellers from time to time upon not less than
ten (10) days' prior written notice to the Purchaser. No bond shall be required
of the Sellers Representative, and the Sellers Representative shall receive no
compensation for his services. Notices or communications to or from the Sellers
Representative shall constitute notice to or from each of the Sellers.
(b) The Sellers Representative shall not be liable for any act
done or omitted hereunder as the Sellers Representative while acting in good
faith and in the exercise of reasonable judgment, and any act done or omitted
pursuant to the advice of counsel shall be conclusive evidence of such good
faith. The Sellers shall severally indemnify the Sellers Representative and hold
him harmless against any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Sellers Representative and arising
out of or in connection with the acceptance or administration of his duties
hereunder.
6
<PAGE>
(c) A decision, act, consent or instruction of the Sellers
Representative shall constitute a decision of all of the Sellers and shall be
final, binding and conclusive upon each of the Sellers, and the Purchaser may
rely upon any decision, act, consent or instruction of the Sellers
Representative as being the decision, act, consent or instruction of each and
every such Sellers. The Purchaser is hereby relieved from any liability to any
person for any acts done by it in accordance with such decision, act, consent or
instruction of the Sellers Representative.
15. Notices. All notices, requests, demands or other communications
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required or authorized or contemplated to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if hand delivered or sent
by certified or registered mail, postage prepaid, and addressed as follows:
(a) If to the Sellers, to the address maintained in the
corporate books and records of the Bank,
With a copy to:
Joseph M. Costello, Esq.
Ryder & Costello
45 Gleneida Avenue
Carmel, New York 10512
(b) If to the Purchaser:
Letchworth Independent Bancshares Corporation
50 North Main Street
Castile, New York 14427
Attn: Mr. James W. Fulmer, President
With a copy to:
Patrick J. Dalton, Esq.
Harris Beach & Wilcox, LLP
130 East Main Street
Rochester, New York 14604
or to such other address as the respective parties hereto may from time to time
designate in writing, prior to the giving of such notice. Any such notice, if
hand delivered, shall be effective upon the date of delivery, and if given by
certified or registered mail, shall be effective upon the date of sending such
notice and such document or writing shall be deemed to be received upon said
date of sending.
7
<PAGE>
16. Amendments. Neither this Agreement, nor any term of provisions
----------
hereof, may be changed, waived, discharged, or terminated orally, or in any
manner other than that by an instrument in writing, signed by all of the parties
hereto.
17. Entire Agreement. This Agreement contains the entire
----------------
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained.
18. Specific Performance. The parties hereto agree that irrevocable
--------------------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
19. Binding Effect; No Assignment. This Agreement shall be binding
-----------------------------
upon and inure to the benefit of the respective parties, and their heirs,
successors and personal representatives, and assigns, except as otherwise
provided herein. No party may assign its rights or obligations under this
Agreement without the prior written consent of the other parties hereto.
20. Waiver. Any waiver by either party of any breach of any term or
------
condition of this Agreement shall not be deemed a waiver of any other breach,
nor shall any failure to enforce any provision of this Agreement operate as a
waiver of such provisions or of any other provision, nor constitute nor be
deemed a waiver or release of any other parties for anything arising out of,
connected with or based upon this Agreement.
21. Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be deemed to be one and the same Agreement, and
shall become a binding Agreement when one or more counterparts have been signed
by each of the parties and delivered to each of the other parties.
22. Governing Law. Except for conflict of law principles, this
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Agreement shall be construed and enforced in accordance with the laws of the
State of New York.
23. Public Announcements. No public announcement regarding this
--------------------
Agreement or the transactions contemplated hereby shall be made by either party
unless such disclosure is made (a) with the mutual consent of the Purchaser and
the Sellers Representative, or (b) by advice of counsel to the disclosing party,
as required by applicable law or judicial order, and a copy of said disclosure
is provided to the other party prior to such disclosure.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto or their respective legal
representatives have caused this Agreement to be executed and delivered as of
the date first above written.
LETCHWORTH INDEPENDENT
BANCSHARES CORPORATION
By: /s/ James W. Fulmer
--------------------------------------
James W. Fulmer, President
/s/ Dolores C. Carlin ITF CELESTINE T. COSTELLO
- ------------------------------
Dolores C. Carlin
By: /s/ Dolores C. Carlin
--------------------------------------
Dolores C. Carlin, Co-Trustee
ITF CELESTINE T. COSTELLO -
RBC WILL TRUST By: /s/ Joseph M. Costello
--------------------------------------
Joseph M. Costello, Co-Trustee
By: /s/ Dolores C. Carlin
--------------------------
Dolores C. Carlin,
Co-Trustee
/s/ William J. Carlin
--------------------------------------
William J. Carlin
By: /s/ Joseph M. Costello
--------------------------
Joseph M. Costello,
Co-Trustee
/s/ Jean E. Costello
--------------------------------------
DOLORES C. CARLIN IRA, C/O MERRILL Jean E. Costello
LYNCH PRIVATE INVESTORS
By: /s/ Dolores C. Carlin /s/ Joseph M. Costello
-------------------------- --------------------------------------
Dolores C. Carlin, Trustee Joseph M. Costello, as Tenant in
Common with Mario Lubic
/s/ Joseph M. Costello /s/ Mario Lubic
- ------------------------------ --------------------------------------
Joseph M. Costello Mario Lubic, as Tenant in Common with
Joseph M. Costello
/s/ Lawrence D. Costello /s/ Maureen C. Durkin
- ------------------------------ --------------------------------------
Lawrence D. Costello Maureen C. Durkin
/s/ Regina C. Morini /s/ Susan Ryder Brassil
- ------------------------------ --------------------------------------
Regina C. Morini Susan Ryder Brassil
/s/ Leslie Smith Lawrence /s/ Leslie Smith Lawrence
- ------------------------------ --------------------------------------
Leslie Smith Lawrence Leslie Smith Lawrence, as Custodian for
Lisa Rose Lawrence
9
<PAGE>
/s/ Anne Pritchard /s/ Jennifer Ryder Raabe
- ------------------------------ --------------------------------------
Anne Pritchard Jennifer Ryder Raabe
/s/ Clayton Ryder, III THE RYDER LIVING TRUST, dated
- ------------------------------
Clayton Ryder, III August 6, 1998
/s/ Jeffrey M. Ryder By: /s/ Clayton Ryder II
- ------------------------------ ---------------------------------
Jeffrey M. Ryder Clayton Ryder II, Co-Trustee
By: /s/ Joan M. Ryder
----------------------------------
Joan M. Ryder, Co-Trustee
/s/ Timothy Ryder /s/ Jonathan Shadford
- ------------------------------ --------------------------------------
Timothy Ryder Jonathan Shadford
/s/ Stephen R. Shadford THE MARGARET R. SHADFORD TRUST
- ------------------------------
Stephen R. Shadford
By: /s/ EGAP & Company
----------------------------------
EGAP & Company, Trustee
/s/ Elizabeth Ryder Simones /s/ Constance Smith
- ------------------------------ --------------------------------------
Elizabeth Ryder Simones Constance R. Smith
10
<PAGE>
[LETCHWORTH INDEPENDENT BANCSHARES LETTERHEAD]
April 29, 1999
Joseph M. Costello, Esq.
Ryder & Costello
45 Gleneida Avenue
Carmel, New York 10512
Re: The Mahopac National Bank
-------------------------
Dear Mr. Costello:
Reference is made to that certain Stock Purchase Agreement, dated as
of October 31, 1998, by and among certain shareholders (the "Sellers") of The
Mahopac National Bank (the "Bank") and Letchworth Independent Bancshares
Corporation (the "Purchaser"), pursuant to which, the Purchaser agreed to
purchase 1,240 shares of common stock, par value $100 per share, of the Bank
from the Sellers. All capitalized terms in this letter shall have the meaning
ascribed to them in the Stock Purchase Agreement. The transactions contemplated
by the Stock Purchase Agreement were conditioned upon the Purchaser and the Bank
having received all applicable regulatory approval and consents. The parties
anticipated consummating the transaction on or before June 1, 1999.
The Purchaser has been informed by the New York Banking Department
that it will be unable to act upon the Purchaser's application prior to June 1,
1999. Accordingly, the Purchaser and the Sellers hereby agree to extend the
time in which to consummate the transactions contemplated by the Stock Purchase
Agreement until the close of business on June 4, 1999. As consideration
therefore, the Purchaser hereby agrees that the Bank should declare a dividend
(otherwise payable to the Purchaser if the transaction contemplated by the Stock
Purchase Agreement were consummated prior to June 1, 1999) in an amount equal to
$57.00 per share to the shareholders of record of the Bank on June 1, 1999,
payable on June 4, 1999.
All other terms and conditions of the Stock Purchase Agreement shall
remain in full force and effect.
Please evidence the approval of the Sellers by executing this letter
in your capacity as the Sellers Representative in the space provided below.
Upon receipt, we will offer the same opportunity to the other shareholders of
the Bank.
Sincerely,
James W. Fulmer
President and Chief Executive Officer
AGREED AND ACCEPTED:
/s/Joseph M. Costello, Esq.
- ---------------------------------
Joseph M. Costello, Esq.,
Sellers Representative
Dated: April _____, 1999
<PAGE>
The undersigned hereby agree to authorize the Board of Directors of
The Mahopac National Bank to declare a dividend in an amount equal to $57.00 per
share to all shareholders of record of The Mahopac National Bank as of June 1,
1999, such dividend to be payable on June 4, 1999.
/s/ C. Compton Spain
------------------------------------------
C. Compton Spain
/s/ Michael H. Spain
------------------------------------------
Michael H. Spain
/s/ William D. Spain, Jr.
------------------------------------------
William D. Spain, Jr.
<PAGE>
EXHIBIT 2(b)
LETCHWORTH INDEPENDENT
BANCSHARES CORPORATION
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
THE MAHOPAC NATIONAL BANK
At a Purchase Price of $9,700.00 Per Share
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M.,
ON FRIDAY, FEBRUARY 26, 1999, UNLESS THE TENDER OFFER IS EXTENDED.
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION, a New York corporation (the
"Purchaser"), hereby offers to purchase all outstanding shares of common stock,
par value $100.00 per share (the "Shares"), of The Mahopac National Bank
(the"Bank") at a purchase price of $9,700.00 per share, upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which together constitute the "Offer"). Stockholders of
the Company are referred to herein as the "Stockholders."
There is no active trading market for the Shares.
____________________
THE OFFER IS CONDITIONED UPON
THE RECEIPT BY THE BANK AND
THE PURCHASER OF ALL APPLICABLE
GOVERNMENTAL AND REGULATORY APPROVALS
REQUIRED FOR THE ACQUISITION
OF THE SHARES BY THE PURCHASER.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION"), NOR HAS THE COMMISSION PASSED UPON
THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY
OF THE INFORMATION CONTAINED IN THIS OFFER TO PURCHASE. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
____________________
The date of this Offer to Purchase is January 21, 1999
____________________
<PAGE>
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares in any jurisdiction in which the making of the
Offer or acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, the Purchaser may, in its discretion, take such action
as it may deem necessary to make the Offer in any such jurisdiction and extend
the Offer to holders of Shares in such jurisdiction.
No person has been authorized to give any information or make any
representations in connection with the Offer other than those contained in this
Offer to Purchase or in the Letter of Transmittal. If given or made, such
recommendation and such information and representations must not be relied upon
as having been authorized by the Purchaser.
The Offer is being made by the Purchaser in reliance on certain exemptions
from the registration requirements of the Securities Act of 1933, as amended.
The Purchaser will not pay any commission or other remuneration to any broker,
dealer, salesman or other person for soliciting tenders of Shares. Regular
employees of the Purchaser may solicit sales from the holders of Shares, but
they will not receive additional compensation therefor.
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. Terms of the Offer 5
2. Acceptance for Payment and Payment 5
3. Procedure for Tendering Shares 6
4. Withdrawal Rights 6
5. Present Intention of Certain Persons with Regard to the Transaction 7
</TABLE>
2
<PAGE>
To the Holders of Common Stock of
The Mahopac National Bank:
INTRODUCTION
Letchworth Independent Bancshares Corporation
Letchworth Independent Bancshares Corporation, a New York corporation (the
"Purchaser"), is a bank holding company with one subsidiary, The Bank of
Castile. The Bank of Castile is a full service, community oriented commercial
bank that offers a full range of commercial and consumer banking services to
municipalities, businesses and individuals. During 1997, The Bank of Castile
was approved by its regulators to amend its charter to allow it to offer trust
and investment services.
The Bank of Castile conducts its operations through its main office located
in Castile, New York, and at its eleven (11) branch offices in towns situated in
and around the areas commonly known as The Letchworth State Park in the Genesee
Valley Region of New York State. Specifically, it has branch offices in the
towns of Arcade, Avon, Batavia, Caledonia, Castile, Gainesville, Geneseo, LeRoy,
Perry, York (Retsof), and Warsaw.
Purpose of the Offer.
The Offer is being made by the Purchaser to acquire all of the Shares. As
of the date of the Offer, the Purchaser has entered into a definitive agreement
with members of the Ryder/Costello families, pursuant to which all of the Shares
owned by members of the Ryder/Costello families will be acquired by the
Purchaser at a purchase price of $9,700 per share. In addition, all of the
Share owned by members of the Spain family (who own 628 Shares) have elected not
to sell their shares to the Purchaser at the current time. Instead, members of
the Spain family and the Purchaser have entered into a Shareholder Agreement
pursuant to which members of the Spain family shall have the right to acquire
all of the Purchaser's shares of common stock of the Bank in approximately two
(2) years for an amount equal to the product of (i) the "Exercise Price" and
(ii) the number of shares of common stock owned by the Purchaser. In the event
that members of the Spain family do not exercise this option, the Purchaser has
the right to acquire all of the Shares owned by members of the Spain family for
an amount equal to the product of (i) the Exercise Price and (ii) the number of
shares of common stock owned by the members of the Spain family. It is
currently anticipated that the Purchaser will acquire all of the Shares owned by
members of the Spain family in approximately two (2) years. The "Exercise
Price" is an amount equal to the product (i) .90, and (ii) a fraction, the
numerator of which is equal to the "fair market value" of all shares of common
stock of the Bank as of the eighteen (18) month anniversary of the Closing Date,
and the denominator of which is equal to the total number of issued and
outstanding shares of common stock of the Bank as of said anniversary date. The
"fair market value" shall be an amount equal to the price which could be
obtained for a sale of all of the issued and outstanding shares of common stock
of the Bank in a single transaction, all as determined as of the eighteen (18)
month anniversary of the Closing Date in accordance with the appraisal
procedures set forth in the Shareholder Agreement.
Stockholders do not have dissenters' right as a result of the Offer.
However, Stockholders who do not tender Shares pursuant to the Offer will be
entitled to certain rights to dissent and demand appraisal of their Shares in
connection with any merger that might be pursued by the Purchaser.
The Offer:
Offer Price $9,700 per share of common stock.
Expiration Date 5:00 p.m. on Friday, February 26, 1999, unless
extended.
Number of Shares As of the date of this Offer to Purchase, the Company
Outstanding had issued and outstanding 2,125 Shares, 1,240 (58.35%)
of which are currently held of record by members of the
Ryder/Costello families and 628 (29.55%) of which are
currently held of record by members of the Spain
family.
3
<PAGE>
Withdrawal Rights Tenders may be withdrawn at any time before the
Expiration Date. See "Withdrawal Rights."
How to Tender Stockholders desiring to tender all or any portion
of their Shares should complete and sign the
Letter of Transmittal and mail or deliver the
Letter of Transmittal to Harris Beach & Wilcox,
LLP, together with all other required documents,
including the certificates for the Shares being
tendered. All such documents and certificates will
be held in escrow by Harris Beach & Wilcox, LLP
until the first to occur of (i) the tender is
withdrawn, or (ii) the closing date. See
"Procedure For Tendering Shares."
Acceptance of Tenders Subject to the terms and conditions of the Offer,
and subject to the receipt of all of the
governmental and regulatory approvals, Shares
validly tendered and not withdrawn will be
accepted on the Expiration Date. THE OFFER IS
CONDITIONED UPON THE RECEIPT BY THE BANK AND THE
PURCHASER OF ALL APPLICABLE GOVERNMENTAL AND
REGULATORY APPROVALS REQUIRED FOR THE ACQUISITION
OF THE SHARES BY THE PURCHASER.
Closing Date The closing for all of the Shares tendered in
connection with this Offer shall be on the first
Friday (or the next business day if such day is
not a banking business day for banks in New York)
mutually acceptable to the Purchaser and members
of the Ryder/Costello families following (i) the
receipt of all governmental and regulatory
approvals necessary for the completion of the
transfer contemplated by the Offer; and (ii) the
expiration of all waiting periods required by the
regulators (the "Closing Date"). It is currently
anticipated that the Closing Date will occur on or
before April 1, 1999.
Trading There is no present trading market for the Shares.
4
<PAGE>
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. Terms of the Offer.
Upon the terms and subject to the conditions set forth in the Offer, the
Purchaser will accept for payment and pay for, at the time and in the manner set
forth in Section 2, all Shares that are validly tendered by the Expiration Date
and not withdrawn as provided in Section 4. The term "Expiration Date" shall
mean 5:00 P.M., Eastern Standard time, on Friday, February 26, unless the
Purchaser shall have extended the period of time for which the Offer is open, in
which event the term "Expiration Date" shall mean the latest time and date at
which the Offer, as so extended by the Purchaser, shall expire. Stockholders
will receive written notification of any extension, delay, termination, waiver
or amendment.
The Bank has provided the Purchaser with the Bank's stockholder list
containing the names and addresses of the record holders of the Shares for the
purpose of disseminating the Offer to holders of Shares. This Offer to Purchase
and the related Letter of Transmittal will be mailed to all record holders of
Shares other than the members of the Ryder/Costello families (all of whom have
already executed an agreement to sell all of their Shares to the Purchaser) and
members of the Spain family.
2. Acceptance for Payment and Payment.
Upon the terms and subject to the conditions of the Offer (including if the
Offer is extended or amended, the terms and conditions of the Offer as so
amended), the Purchaser will accept for payment and pay for all Shares validly
tendered by the Expiration Date and not withdrawn, as soon as practicable after
(i) the receipt by the Bank and the Purchaser of all applicable governmental and
regulatory approvals, and (ii) the expiration of all waiting periods required by
the regulators.
For purposes of the Offer, the Purchaser shall be deemed to have accepted
for payment Shares validly tendered and not withdrawn if, as and when the
Purchaser gives oral or written notice to the stockholder tendering such Shares
of (i) its acceptance of the tender of such Shares and (ii) the receipt by the
Bank and the Purchaser of all applicable governmental and regulatory approvals.
In all cases, upon the terms and subject to the conditions of the Offer, payment
for Shares accepted for payment pursuant to the Offer will be transmitted by the
Purchaser to the tendering Stockholders. In all cases, however, payment for
Shares accepted for payment pursuant to the Offer will be made only after timely
receipt by the Purchaser of (i) certificates for such Shares, (ii) the Letter of
Transmittal, properly completed and duly executed, and (iii) any other documents
required by the Letter of Transmittal. For a description of the procedure for
tendering Shares pursuant to the Offer, see Section 3. Under no circumstances
will the Purchaser pay interest on the consideration paid for the Shares by
reason of any delay in making such payment.
If the Purchaser increases the consideration to be paid for the Shares
pursuant to the Offer or pursuant to the agreement with the members of the
Ryder/Costello families, the Purchaser will pay such increased consideration for
all Shares purchased pursuant to the Offer whether or not such Shares were
tendered prior to or after such increase in consideration.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if share certificates are submitted for more Shares than are
tendered, certificates for such unpurchased or untendered Shares will be
returned without expense to the tendering Stockholder, as promptly as
practicable following the expiration or termination or withdrawal of the Offer.
5
<PAGE>
3. Procedure for Tendering Shares.
To tender Shares pursuant to the Offer, certificates for the Shares to be
tendered, a properly completed and duly executed Letter of Transmittal and any
other documents required by the Letter of Transmittal must be received by the
Purchaser at the offices of Harris Beach & Wilcox, LLP, 130 East Main Street,
Rochester, New York 14604 (Attn: Patrick J. Dalton, Esq.).
The method of delivery of Shares, the Letter of Transmittal and all other
required documents, including certificates for Shares tendered, is at the option
and risk of the tendering Stockholder. If certificates for Shares are sent by
mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after (i) timely
receipt by the Purchaser of share certificates for such Shares, (ii) a properly
completed and duly executed Letter of Transmittal, together with any required
signature guarantees, (iii) any other documents required by the Letter of
Transmittal, (iv) the receipt of any applicable governmental and regulatory
approvals, and (v) the expiration of all waiting periods required by the
regulators.
All questions as to the form of documents and the validity, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
will be determined by the Purchaser, in its sole discretion, whose determination
shall be final and binding on all parties. The Purchaser reserves the absolute
right to reject any or all tenders of Shares determined by it not to be in
proper form or the acceptance for payment of or payment for which may, in the
opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right to waive any defect or irregularity in any tender of Shares.
The Purchaser will be under no duty to give any notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification.
The tender of Shares pursuant to the procedure described above will
constitute an agreement between the tendering Stockholder and the Purchaser upon
the terms and subject to the conditions of the Offer.
All Stockholders should consult with their own tax advisor as to the
particular tax consequences of the Offer to them, including the applicability
and effect of any state, local and foreign tax laws.
4. Withdrawal Rights.
Tenders of Shares made pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date. Thereafter, such tenders are irrevocable, except
that they may be withdrawn after June 1, 1999 unless theretofore accepted for
payment as provided in this Offer to Purchase.
For withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Purchaser at Harris Beach &
Wilcox, LLP, 130 East Main Street, Rochester, New York 14604 (Attn: Patrick J.
Dalton, Esq.) (Facsimile (716) 232-6925) and must specify: (i) the name of the
person who tendered the Shares to be withdrawn, (ii) the name of the registered
holder of the Shares (if different from the tendering Stockholder), (iii) the
numbers of the particular certificates evidencing the Shares to be withdrawn,
and (iv) the number of Shares to be withdrawn. Withdrawals may not be
rescinded, and Shares withdrawn will thereafter be deemed not validly tendered
for purposes of the Offer. Shares withdrawn, however, may be re-tendered by
again following the procedure described in Section 3 at any time prior to the
Expiration Date.
6
<PAGE>
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination shall be final and binding. The Purchaser will
be under no duty to give notification of any defect or irregularity in any
notice of withdrawal or incur any liability for failure to give any such
notification.
5. Present Intention of Certain Persons with Regard to the Transaction.
The present intention of the Purchaser is to acquire all of the shares of
common stock of the Bank. As of the date of the Offer, the Purchaser has
entered into a definitive agreement with members of the Ryder/Costello families,
pursuant to which all of the Shares owned by members of the Ryder/Costello
families will be acquired by the Purchaser at a purchase price of $9,700 per
share. In addition, all of the Share owned by members of the Spain family (who
own 628 Shares) have elected not to sell their shares to the Purchaser at the
current time. Instead, members of the Spain family and the Purchaser have
entered into a Shareholder Agreement pursuant to which members of the Spain
family shall have the right to acquire all of the Purchaser's shares of common
stock of the Bank in approximately two (2) years for an amount equal to the
product of (i) the "Exercise Price" and (ii) the number of shares of common
stock owned by the Purchaser. In the event that members of the Spain family do
not exercise this option, the Purchaser has the right to acquire all of the
Shares owned by members of the Spain family for an amount equal to the product
of (i) the Exercise Price and (ii) the number of shares of common stock owned by
the members of the Spain family. It is currently anticipated that the Purchaser
will acquire all of the Shares owned by members of the Spain family in
approximately two (2) years. The "Exercise Price" is an amount equal to the
product (i) .90, and (ii) a fraction, the numerator of which is equal to the
"fair market value" of all shares of common stock of the Bank as of the eighteen
(18) month anniversary of the Closing Date, and the denominator of which is
equal to the total number of issued and outstanding shares of common stock of
the Bank as of said anniversary date. The "fair market value" shall be an
amount equal to the price which could be obtained for a sale of all of the
issued and outstanding shares of common stock of the Bank in a single
transaction, all as determined as of the eighteen (18) month anniversary of the
Closing Date in accordance with the appraisal procedures set forth in the
Shareholder Agreement.
7
<PAGE>
PARTICIPATION NOTICE
May 6, 1999
CHECK APPLICABLE
BOX BELOW
1. ELECTION TO AMEND TENDER OFFER
The undersigned:
A. Hereby agrees that the terms of the Tender Offer "
pursuant to which Letchworth Independent [_]
Bancshares Corporation has agreed to purchase all
of the shares of common stock that the undersigned
owns in The Mahopac National Bank (the "Bank") are
hereby amended by extending the deadline until the
close of business on June 4, 1999. The undersigned
further acknowledges and agrees that all other
terms and conditions set forth in the Tender Offer
material originally forwarded on January 21, 1999
remain in full force and effect. As consideration
for the extension of the closing deadline, the
undersigned acknowledges that the Bank will
declare a dividend in the amount of $57.00 per
share to shareholders of record of the Bank on
June 1, 1999, said dividend to be payable on June
4, 1999.
B. Does not agree to amend the terms and conditions
of " the Tender Offer. As such, please return all [_]
materials currently being held in escrow by Harris
Beach & Wilcox, LLP to the undersigned at your
earliest convenience.
__________________________________________
Name of Stockholder (please print)
__________________________________________
Signature
__________________________________________
Name of Person Signing (please print)
__________________________________________
Title
Dated: May ____, 1999
<PAGE>
EXHIBIT 4
SHAREHOLDER AGREEMENT
THIS AGREEMENT is made this 16th day of October, 1998, by and among
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION, a New York corporation with its
principal office located at 50 North Main Street, Castile, New York 14427
("Letchworth"), and W. D. SPAIN AND SONS LIMITED PARTNERSHIP, a New York limited
partnership, c/o Spain & Spain, P.C. 671 Route Six, Mahopac, New York, WILLIAM
D. SPAIN, JR., an individual residing at 191 East Lake Boulevard, Mahopac, New
York 10541, C. COMPTON SPAIN, an individual residing at 620 North Lake
Boulevard, Mahopac, New York 10541, MICHAEL H. SPAIN, an individual residing at
Gypsy Trial Road, Carmel, New York 10512, and WILLIAM D. SPAIN, an individual
residing at 616 North Lake Boulevard, Mahopac, New York 10541 ("Spain
Shareholders"). The Spain Shareholders and Letchworth are collectively referred
to as the "Shareholders" of the Mahopac National Bank ("Bank").
WHEREAS, Letchworth is seeking to acquire between 1,240 and 1,497 shares of
the total 2,125 issued and outstanding shares of capital stock of the Bank; and
WHEREAS, as a condition precedent to the acquisition of such shares of
stock by Letchworth, Letchworth requires that an agreement be executed defining
the rights and obligations of the parties with respect to the transfer of,
and/or required disposition of, the shares of capital stock of the Bank owned by
the Shareholders; and
WHEREAS, after giving effect to the acquisition of such shares by
Letchworth, shares of capital stock (the "Stock") of the Bank will be owned by
the Shareholders in accordance with the following:
Letchworth 1,240 to 1,497
Spain Shareholders 628
WHEREAS, Letchworth and the Spain Shareholders desire that an agreement be
executed defining the rights and obligations of the parties with respect to the
transfer and/or required disposition of the shares of Stock of the Bank;
NOW, THEREFORE, in consideration of the premises and mutual promises herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged by each of the parties hereto, the parties
hereto hereby agree as follows:
Section 1. General Provisions.
------------------
1.1 Restrictions on Disposition. No Shareholder shall encumber,
---------------------------
hypothecate or transfer, by sale, gift, bequest, assignment,
operation of law or otherwise any shares of Stock now or
hereafter owned by him or it except in accordance with this
Agreement. Notwithstanding the foregoing, the parties hereto
hereby acknowledge and agree that eighty-five (85) shares of
Stock owned by the Spain Shareholders are presently
encumbered by a purchase money lien, and that the terms of
this Agreement shall not prohibit the continuation of said
lien. If no provision of this Agreement governs the proposed
disposition then such disposition shall be prohibited by
this Agreement, except with the prior written consent of all
other parties to this Agreement.
-1-
<PAGE>
1.2 Condition Precedent for Transfer. No Shareholder shall
--------------------------------
effect, in any manner, any transfer of any shares of Stock
permitted under this Agreement unless the transferee, as a
condition precedent to such transfer, consents in writing to
the continuance of the terms and conditions of this
Agreement by dating and executing a counterpart copy hereof
and delivering it to the Bank with copies to the
Shareholders.
1.3 Shareholder's Vote. Throughout the term of this Agreement,
------------------
each Shareholder hereby agrees to vote all shares of Stock
owned by such Shareholder in favor of the election of each
of the following individuals to the Board of Directors of
the Bank: (i) the election of three (3) individuals
nominated by the Spain Shareholders and reasonably
acceptable to Letchworth, it being agreed that William D.
Spain, Jr., C Compton Spain and Michael H. Spain are
acceptable (ii) The election of three (3) individuals
nominated by Letchworth and reasonably acceptable to the
Spain Shareholders, and (iii) Steven Garner or any successor
Chief Executive Officer of the Bank.
1.4 Chairman of the Board. Throughout the term of this
---------------------
Agreement, each of the Shareholders hereby agrees to take
any and all steps necessary to ensure that the Board of
Directors nominates and elects William D. Spain, Jr. as the
Chairman of the Board of Directors of the Bank.
1.5 Membership on Letchworth Board of Directors. Throughout the
-------------------------------------------
term of this Agreement, Letchworth hereby agrees to take any
and all steps necessary to enable one of the Spain
Shareholders to be elected and/or appointed to the Board of
Directors of Letchworth. In addition, each of the other
Spain Shareholders shall be invited to attend all of the
meetings of the Board of Directors of Letchworth.
Section 2. Voluntary Lifetime Transfers.
----------------------------
2.1 Transfers by Letchworth.
-----------------------
(a) The parties thereto hereby covenant and agree to take
any and all steps necessary to commence the following
process on the "Trigger Date," as defined below, to
determine the purchase price for each share of Stock.
For purposes of this Agreement, the term "Trigger Date"
shall mean the eighteen (18) month anniversary of the
date that Letchworth actually consummates the
acquisition of its shares of Stock from the members of
the Costello family and the Ryder family. The purchase
price shall be determined in accordance with Section
2.2 below.
(b) The Spain Shareholders shall have thirty (30) days from
the date that the purchase price for each share of
Stock is determined (the "Option Period") to agree to
purchase all, but not less than all, of the shares of
Stock owned by Letchworth by giving written notice to
Letchworth and fixing a closing date for the purchase
of such shares not more than ninety
-2-
<PAGE>
(90) days thereafter, or thirty (30) days after all
necessary regulatory approvals are obtained, which ever is
later (the "Closing Period"). In the event that the Spain
Shareholders exercise their option hereunder, the purchase
price to be paid by the Spain Shareholders shall be paid in
accordance with Section 2.3(a) below.
(c) Notwithstanding any provision to the contrary set forth
herein, (i) the Spain Shareholders shall have the right to
assign any and all of their rights and obligations under
Section 2.1(b) to the Bank, and (ii) Letchworth shall have
the right to assign any and all of its rights and
obligations under Section 2.1(d) to the Bank.
(d) The parties hereto hereby acknowledge and agree that time is
of the essence. As a result, if at the end of the Option
Period the Spain Shareholders have not agreed to purchase
the shares, or if at the end of the Closing Period the Spain
Shareholders (or the Bank if the Spain Shareholders' rights
have been assigned under Section 2.1(c) above) have not
acquired all of the shares of Stock owned by Letchworth for
any reason whatsoever, then Letchworth shall have the option
(the "Letchworth Option") to acquire all, but not less than
all, of the shares of Stock owned by all of the Spain
Shareholders at the purchase price for each share as
determined in accordance with Section 2.2 below. In the
event that Letchworth exercises the Letchworth Option, the
purchase price shall be paid in accordance with Section
2.3(b) below. Letchworth shall have thirty (30) days from
the "Spain Option Termination Date," as defined below, to
exercise the Letchworth Option by giving written notice (the
"Letchworth Option Notice") to the Spain Shareholders and
setting a closing date for the purchase of the shares of
Stock owned by the Spain Shareholders not more than thirty
(30) days after all necessary approvals, regulatory and
otherwise, have been obtained by Letchworth. In connection
therewith, all of the Shareholders hereby covenant and agree
to assist and cooperate, and to use their best efforts to
enable, Letchworth and/or the Bank to obtain any and all
approvals, regulatory or otherwise, necessary to enable the
consummation of the transactions contemplated by this
Section 2.1(d). For purposes of this Agreement, the "Spain
Option Termination Date" shall mean the date that the Option
Period expires or, in the event that the Spain Shareholders
have exercised their option to acquire the shares of Stock
owned by Letchworth, the date on which the Closing Period
expires.
(e) In the event that the Spain Shareholders (or the Bank if
said rights to purchase have been assigned to the Bank in
accordance with Section 2.1(c) above) fail to purchase all
of the shares of Stock owned by Letchworth in accordance
with the provisions of Section 2.1(b) above, and Letchworth
fails to exercise the Letchworth Option as set forth at
Section 2.1(d) above, the parties hereto hereby covenant and
agree to take any and all steps necessary to enable the Bank
to retain the services
-3-
<PAGE>
of a reputable investment banker to market and sell the Bank
to a third party. Such investment banker shall solicit bids
to purchase the Bank from interested financial institutions
and other potential acquirers. Once at least three bona fide
---- ----
bids are received, the investment banker shall present the
bids to Letchworth and the Spain Shareholders, who shall
meet and seek to agree on which bid to accept. If the
parties shall be unable to agree, then the bid presenting
the highest dollar purchase price per share of Stock that is
payable in cash or freely tradeable securities at the
closing, shall prevail.
(f) The investment banker to conduct the sale of the Bank
pursuant to Section 2.1(e) shall be selected in the
following manner. First, Letchworth and the Spain
Shareholders shall each select not less than four investment
bankers who are experienced in providing investment banking
services in connection the mergers and acquisitions of
financial institutions and who satisfy the standards set
forth in Section 2.2(c). If there is any duplication between
the two lists, then the investment banker to handle the
transaction shall be selected by random selection among
those investment bankers on both lists. If there is no
duplication, then Letchworth shall strike from the list
provided by the Spain Shareholders all but one of the names
and the Spain Shareholders shall do likewise to the list
presented by Letchworth, and then the investment banker to
conduct the sale shall be selected by random selection from
among the two remaining names.
2.2 Purchase Price.
--------------
(a) Whenever under this Agreement the purchase price of any
shares of Stock of the Bank, or any interest therein, must
be determined, then the same shall be determined by
appraisal pursuant to the terms of this Section 2.2. The
valuation shall be based upon the "fair market value" of all
of the Stock, determined as the price which could be
obtained for a sale of all of the issued and outstanding
shares of Stock of the Bank in a single transaction as part
of a merger or acquisition transaction. No discount for
illiquidity, time delays or difficulty in obtaining
regulatory approval or similar factors should be considered
in determining the "fair market value". The purchase price
for each share of Stock shall be an amount equal to the
product of (i) .90 (i.e., 90%), and (ii) a fraction, the
numerator of which is equal to the "fair market value" of
all shares of Stock, as determined by the appraiser
described in Section 2.2(b) below, and the denominator of
which is equal to the total number of issued and outstanding
shares of Stock of the Bank as of the "Trigger Date," as
defined in Section 2.1(a) above.
(b) Upon the occurrence of any event requiring a determination
of the purchase price of any shares of Stock of the Bank,
each party involved in the transaction shall select an
appraiser to determine the value of the
-4-
<PAGE>
Stock being sold. The appraisers shall be selected and
written notice of the selection to the other party shall be
given within twenty (20) days after the "Trigger Date," as
defined below. If either party fails to designate an
appraiser within such twenty (20) day period, then, if such
failure continues for a period of ten (10) days after notice
and demand from the other party, the party failing to
designate an appraiser shall forfeit its right to designate
an appraiser, whereupon all future appraisal determinations
shall be based upon the appraisal by the one appraiser duly
selected by the other party pursuant to this Section 2.2(b).
(c) In order to be qualified to be selected as an appraiser
pursuant to Section 2.2(b), the appraiser must be
experienced in the appraisal of financial institutions and
must have provided at least two (2) appraisals or fairness
opinions during the previous two years in connection with
stock offerings, mergers, acquisitions or similar
transactions for banks, savings institutions or their
holding companies which required the filing of a
Registration Statement under the Securities Act of 1933, as
amended (the "Securities Act").
(d) The two (2) appraisers selected by the parties pursuant to
Section 2.2(b) above shall prepare their appraisals of the
"fair market value" of the shares of Stock of the Bank,
which appraisals shall be completed within sixty (60) days
after their selection. If the appraised values of the shares
of Stock differ by less than ten percent (10%) of the higher
of the two appraisals, then the "fair market value" of all
of the shares of Stock for the purposes of this Agreement
shall be equal to the mean average of the two appraisals. If
the two appraisals differ by more than ten percent (10%) of
the higher of the two appraisals, then the two appraisers
shall meet to seek to reconcile their differences, and if
they shall adjust their appraisals so that the appraisals
differ by less than 10% of the higher appraisal, then the
"fair market value" of all of the shares of Stock for the
purposes of this Agreement shall be equal to the mean
average of the two appraisals, as adjusted. If the
appraisers shall not so reconcile their differences within
fifteen (15) days after the end of the sixty (60) day period
during which the appraisal is required to be completed, then
the two appraisers shall select a third appraiser,
satisfying the qualification requirements of Section 2.2(c)
above, who shall thereupon render its own appraisal of the
"fair market value" of all of the shares of Stock, which
appraisal shall be deemed to be the "fair market value" of
all of the shares of Stock; provided, however, that in the
event that the third appraiser determines the "fair market
value" to be less than the lowest "fair market value"
determined by the other two appraisers, the lowest "fair
market value" determined by the other two appraisers shall
be deemed to be the "fair market value" of all of the shares
of Stock, and provided, further, that in the event the third
appraiser determines that the "fair market value" is greater
than the highest "fair market value" determined by the other
two appraisers, then the highest "fair market
-5-
<PAGE>
value" determined by the other two appraisers shall be
deemed to be the "fair market value" of all of the shares of
Stock of the Bank.
(e) All appraisals pursuant to this Section shall be as of the
Trigger Date; provided, however, that once an appraised
value is determined with respect to any option, right or
obligation, that appraised value shall continue to be
effective and not adjusted with respect to all future
options, rights or obligations flowing from the event
requiring a determination of the purchase price. Therefore,
for example, once the purchase price is determined for
purposes of the option of the Spain Shareholders in Section
2.1(b), that same purchase price shall apply to the
Letchworth Option pursuant to Section 2.1(d).
2.3. Payment of Purchase Price.
-------------------------
(a) In the event that the shares of Stock owned by Letchworth
are purchased by the Spain Shareholders pursuant to Section
2.1(b), or by the Bank as a result of the provisions of
Section 2.1(c), at the closing, (i) the purchaser of said
shares of Stock (either the Spain Shareholders or the Bank,
as the case may be) shall deliver to Letchworth an amount
equal to the purchase price for such Shares by the wire
transfer of immediately available funds to a bank account
designated by Letchworth, and (ii) Letchworth shall deliver
such shares of Stock, together with a corresponding stock
power transferring all right, title and interest to such
Shares to the Spain Shareholders (or allocating the Shares
to each of the Spain Shareholders in accordance with written
instructions signed by the Spain Representative), free and
clear of any and all liens, security interests or
encumbrances whatsoever.
(b) In the event that the shares of Stock owned by the Spain
Shareholders are purchased by Letchworth pursuant to the
provisions of Section 2.1(d) above, at the closing,
Letchworth shall deliver to each of the Spain Shareholders a
certain number of shares of common stock, par value $1.00
per share, of Letchworth (the "Letchworth Common Stock"),
all in accordance with the terms and conditions of Section 5
below; provided, however, that each of the Spain
Shareholders shall have the right to receive, in lieu of a
number of shares of Letchworth Common Stock of equal value
(as determined in accordance with Section 5 below), an
amount equal to up to thirty percent (30%) of the purchase
price due and owing said Spain Shareholder for the shares of
Stock owned by said Spain Shareholder by the wire transfer
of immediately available funds to a bank account designated
by each such Spain Shareholder. In any event, at the
closing, the Spain Shareholders shall deliver the shares of
Stock, together with a corresponding stock power
transferring all right, title and interest to the shares of
Stock to Letchworth, free and clear of any and all liens,
security interests or encumbrances whatsoever.
-6-
<PAGE>
Section 3. Covenant Not to Compete.
-----------------------
3.1 As additional consideration for the payment of any
Shareholder's shares of Stock pursuant to the terms and
conditions set forth in this Agreement, each of the
Shareholders hereby agrees that throughout the term of this
Agreement and for a period of three (3) years from and after
the closing date for said shares of Stock, neither the
selling Shareholder nor any person, firm or corporation
directly or indirectly controlling, controlled by or under
common control with said selling Shareholder, shall, without
the prior written consent of the Bank, (i) directly or
indirectly, manage, operate, join, control or participate or
become interested in, or be connected with, as a partner,
stockholder (except as a stockholder of a public
corporation, provided that such stockholdings are not in the
aggregate greater than 1% of the issued and outstanding
stock of any class of capital stock of such corporation),
employee, investor or otherwise, any banking business or
operation of any business or operation providing the same or
equivalent services as the Bank, conducted wholly or partly
within a fifty (50) mile radius of any then operating branch
office of the Bank, (ii) solicit or encourage any employee
of the Bank to terminate his or her employment relationship
with the Bank, or (iii) solicit or encourage any customer of
the Bank to terminate its banking relationship with the
Bank. In addition, each of the Shareholders agree not to
make any derogatory remarks regarding the Bank, and, to the
extent reasonably practicable, to promote the business and
operations of the Bank. The foregoing provisions
notwithstanding, the parties hereto hereby acknowledge and
agree that the provisions of clause (i) above shall not be
interpreted to prohibit the Spain Shareholders from
representing financial institutions or from representing
clients in business transactions with other financial
institutions.
3.2 Confidential Information.
------------------------
(a) Each of the Shareholders hereby agree that they will
not at any time after execution of this Agreement,
disclose or authorize anyone else to disclose or use or
make known for their own or another's benefit, any
"confidential information, knowledge, or data" of the
Bank, in any way acquired by them during the term of
their respective affiliation with the Bank. For
purposes of this Agreement, the term "confidential
information, knowledge, or data" of the Bank shall
include but not be limited to, the terms and conditions
of this Agreement, as well as any other matters not
readily available to the public which are:
(i) of a technical nature such as but not limited to
methods, know-how, formulae, compositions,
drawings, blueprints, compounds, processes,
discoveries, machines, inventions, computer
programs, and similar items;
-7-
<PAGE>
(ii) of a business nature such as but not limited to
information about sales or lists of customers,
prices, costs, purchasing, profits, markets,
product strengths and weaknesses; and
(iii) pertaining to future developments such as but not
limited to research and development, or future
marketing or merchandising plans or ideas of the
Bank.
(b) Immediately upon termination of his or its status as a
shareholder of the Bank, each Shareholder shall deliver
to the Bank all copies of data, information and
knowledge, including without limitation, all documents,
correspondence, specifications, blueprints, notebooks,
reports, sketches, formulae, computer programs, sales
and other manuals, price lists, customer lists,
samples, and all other materials and copies thereof
relating in any way to the business of the Bank in any
way obtained by said Shareholder from the date of their
affiliation with the Bank and which remain in his or
its possession or under his or its control.
3.3 Remedies. Each of the Shareholders hereby agree that
--------
monetary damages would be an inadequate remedy for any
breach or threatened breach of the terms and conditions of
this Section 3 and that, in the event of any such breach or
threatened breach, injunctive relief will be necessary to
prevent irreparable injury to the Bank and the remaining
Shareholders. Accordingly, each of the Shareholders hereby
agree that in addition to any other relief to which the Bank
and the remaining Shareholders may be entitled, any court
having jurisdiction may enter an appropriate injunctive
order or other equitable relief to prevent such breach or
threatened breach. In addition, the above should not be
interpreted to limit the availability of injunctive or other
equitable relief to cases of breach or threatened breach of
this Section 3 and to limit remedies for the breach or
threatened breach of any other provisions, it being
specifically agreed that the Bank and the remaining
Shareholders shall be entitled to all remedies available
under law or equity with respect to such breaches or
threatened breaches.
Section 4. Option to the Spain Shareholders. Notwithstanding any provision
--------------------------------
to the contrary set forth herein, Letchworth hereby grants to the
Spain Shareholders the right and option (the "Spain Option") to
purchase up to seventy-eight (78) shares (the "Option Shares") of
Stock owned by Letchworth; provided, however, that in the event
that Letchworth acquires less than seventy-eight (78) shares of
Stock from John Spain, the number of Option Shares subject to the
Spain Option shall be limited to the number of shares of Stock
actually acquired by Letchworth from John Spain. The Spain Option
shall be exercisable at any time during the term of this
Agreement, and the exercise price for the purchase of the Option
Shares shall be an amount equal to the purchase price that
Letchworth paid John Spain when it acquired such shares. The
Spain Shareholders shall exercise the Spain Option by giving
written notice thereof to Letchworth, which notice shall include
a closing date for the acquisition of the Option Shares. At the
closing, (i) the Spain Shareholders shall deliver the purchase
price for the Option Shares to Letchworth by the wire transfer of
immediately available funds to a bank account
-8-
<PAGE>
designated by Letchworth, and (ii) Letchworth shall deliver the
Option Shares, together with a corresponding stock power
transferring all right, title and interest to the Option Shares,
to the Spain Shareholders (or allocating the Option Shares to
each of the Spain Shareholders in accordance with written
instructions signed by the Spain Representative), free and clear
of any and all liens, security interests or encumbrances
whatsoever. The Spain Option may not be assigned, transferred,
pledged or hypothecated in any way, and shall not be assignable
by operation of law or otherwise; provided, however, that in the
event of the death of any of the Spain Shareholders, their
respective rights and obligations under the Spain Option shall
pass under the descendant's Will or the laws of descent and
distribution. Any transfer, pledge, hypothecation or other
disposition of the Spain Option, or any attempt thereof, contrary
to the provisions hereof, or the levy of any execution,
attachment or similar process upon the Spain Option or the rights
hereunder, shall be null and void and without effect.
Section 5. Issuance of Letchworth Common Stock.
-----------------------------------
5.1(a) In the event that Letchworth acquires the shares of
Stock owned by the Spain Shareholders pursuant to the
terms and conditions of this Agreement, at the closing,
Letchworth shall, subject to the right of each Spain
Shareholder set forth in Section 2.3(b) above, deliver
to the Spain Shareholders a certain number of shares of
Letchworth Common Stock determined in accordance with
the foregoing. The number of shares of Letchworth
Common Stock to be delivered to all of the Spain
Shareholders shall be equal to the aggregate purchase
price payable to the Spain Shareholders divided by the
"Conversion Price," as defined below. For purposes
hereof, the "Conversion Price" shall mean the average
of the last quoted price for the Letchworth Common
Stock on the NASDAQ System during the thirty (30) days
on which trades occur immediately prior to the date
that Letchworth delivers the Letchworth Option Notice
to the Spain Shareholders in accordance with Section
2.1(d) above. The Conversion Price, as so determined,
shall be equitably adjusted for all stock splits,
reverse stock splits, stock dividends (including any
dividend or distribution convertible into Letchworth
Common Stock), reorganizations, recapitalization, spin-
offs and capital distributions and other similar
transactions which occur after the determination of the
Conversion Price.
(b) No fraction of a share of Letchworth Common Stock will
be issued under this Section 5.1, but in lieu thereof,
each Spain Shareholder who would otherwise be entitled
to a fraction of a share of Letchworth Common Stock
shall receive from Letchworth an amount of cash
(rounded to the nearest whole cent) equal to the
product of (i) such fraction, and (ii) the Conversion
Price.
5.2 Exemption from Registration. The Spain Shareholders
---------------------------
hereby acknowledge and agree that the shares of
Letchworth Common Stock to be issued under this
Agreement shall be issued in a transaction exempt from
registration under the Securities Act by reason of
Section 4(2) thereof. In connection therewith, each of
the Spain Shareholders, jointly and severally,
represents and warrants to
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<PAGE>
Letchworth, which representations and warranties shall
survive throughout the term of this Agreement, as
follows:
(a) Suitable Investor. Each Spain Shareholder
-----------------
(together with such Spain Shareholder's financial
and other advisors, if any) has such knowledge and
expertise in financial and business matters that
he or it is capable of evaluating the merits and
risks of the exchange of his shares of Stock for
shares of Letchworth Common Stock pursuant to the
terms and conditions of this Agreement. Each Spain
Shareholder has the ability to bear the economic
risk of the investment in Letchworth Common Stock.
(b) Receipt of Information. Each Spain Shareholder has
----------------------
reviewed a copy of the most recent quarterly and
annual documents required to be filed by
Letchworth with the Securities and Exchange
Commission, and has had an opportunity to discuss
Letchworth's business, management and financial
affairs with Letchworth's management.
(c) Purchase for Own Account. Each Spain Shareholder
------------------------
is acquiring shares of Letchworth Common Stock for
his own account and not with a view to, or for
resale in connection with, any distribution
thereof in violation of applicable law, and each
Spain Shareholder has no present intention of
selling, granting any participation in , or
otherwise distributing the same in violation of
applicable laws. Each Spain Shareholder
understands that the shares of Letchworth Common
Stock to be received by him pursuant to this
Agreement have not been registered under the
Securities Act by reason of a specific exemption
from the registration provisions of the Securities
Act that depends upon, among other things, the
bona fide nature of his investment intent and the
accuracy of his representations, warranties and
covenants as expressed herein. He understands that
the shares of Letchworth Common Stock to be
received by him pursuant to this Agreement are
characterized as "restricted securities" under the
Securities Act inasmuch as they are being acquired
from Letchworth in a transaction not involving a
public offering and that under such laws and
applicable regulations such shares may be resold
without registration under the Securities Act only
in certain limited circumstances. Each Spain
Shareholder acknowledges that the shares of
Letchworth Common Stock must be held indefinitely
unless subsequently registered under the
Securities Act or an exemption from such
registration is available. Each Spain Shareholder
is aware of the provisions of Rule 144 under the
Securities Act which permit limited resale of
shares purchased in a private placement subject to
the satisfaction of certain conditions, including
the existence of a public market for the shares,
the availability of certain current public
information about Letchworth, the resale occurring
not less than one year after a party has purchased
and paid for the security to be sold, the sale
being effected through a "broker's transaction" or
in transactions directly with a "market maker" (as
provided by Rule 144(f) under the Securities
-10-
<PAGE>
Act) and the number of shares being sold during
any three-month period not exceeding specified
limitations.
(d) Legends. It is understood that each certificate
-------
representing shares of Letchworth Common Stock
received by the Spain Shareholders pursuant to
this Agreement shall bear a legend substantially
to the following effect (in addition to any legend
required under applicable state securities laws):
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED
ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED
UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED
AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY
AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED."
Section 6. Covenants of Letchworth.
-----------------------
Letchworth covenants and agrees that, except with
respect to the transactions contemplated by this Agreement or the
acquisition of between 1,240 and 1,497 shares of Stock, it shall
take no action which will render it impermissible, under
generally acceptable accounting principles and policies of the
Securities and Exchange Commission for any acquirer of the Bank
to treat the acquisition of the Bank as a "pooling" for financial
statement purposes.
Section 7. Spain Representative.
--------------------
(a) William D. Spain, Jr. shall be and hereby is
constituted and appointed as agent and attorney-in-fact
(the "Spain Representative") for and on behalf of each
of the Spain Shareholders to give and receive notices
and communications, to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration
and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take
all actions necessary or appropriate in connection with
the rights and obligations of the Spain Shareholders
under this Agreement. Such agency may be changed by the
holders of a majority of the shares of Stock owned by
the Spain Shareholders from time to time upon not less
than ten (10) days' prior written notice to Letchworth.
No bond shall be required of the Spain Representative,
and the Spain Representative shall receive no
compensation for his services. Notices or
communications to or from the Spain Representative
shall constitute notice to or from each of the Spain
Shareholders.
(b) The Spain Representative shall not be liable for any
act done or omitted hereunder as the Spain
Representative while acting in good faith and in the
exercise of reasonable judgment, and any act done or
omitted pursuant to the advice of counsel shall be
conclusive evidence of such good faith. The Spain
-11-
<PAGE>
Shareholders shall severally indemnify the Spain
Representative and hold him harmless against any loss,
liability or expense incurred without gross negligence
or bad faith on the part of the Spain Representative
and arising out of or in connection with the acceptance
or administration of his duties hereunder.
(c) A decision, act, consent or instruction of the Spain
Representative shall constitute a decision of all of
the Spain Shareholders and shall be final, binding and
conclusive upon each of the Spain Shareholders, and
Letchworth may rely upon any decision, act, consent or
instruction of the Spain Representative as being the
decision, act, consent or instruction of each and every
such Spain Shareholder. Letchworth is hereby relieved
from any liability to any person for any acts done by
it in accordance with such decision, act, consent or
instruction of the Spain Representative.
Section 8. Endorsement on Stock Certificates. During the term of this
---------------------------------
Agreement, a legend shall be endorsed on the back of each
certificate for Stock hereunder issued by the Bank to any
shareholder or transferee thereof whose Stock is subject to the
terms of this Agreement, which legend shall read substantially as
follows:
"Any sale, assignment, transfer, pledge or other disposition of
the shares of Stock represented by this certificate is restricted
by, and subject to, the terms and provisions of a certain
Shareholder Agreement, dated as of the ___ day of October, 1998.
A copy of said Agreement is on file with the Secretary of the
Bank. By acceptance of this Certificate, the holder hereof agrees
to be bound by the terms of this Agreement."
Section 9. Termination.
-----------
9.1 Conditions of Termination. This Agreement shall
-------------------------
terminate upon the occurrence of any of the following
events:
(a) Bankruptcy, receivership or dissolution of the
Bank;
(b) The purchase by the Bank of all of the Stock of
the Shareholders and the payment in full of the
purchase price therefor;
(c) The voluntary agreement of the Shareholders;
(d) The purchase by Letchworth of all of the Shares of
Stock owned by the Spain Shareholders, or the
purchase by the Spain Shareholders of all of the
shares of Stock owned by Letchworth;
(e) The sale of all or substantially all of the assets
of the Bank or the merger of the Bank with or into
another company; or
(f) The sale of all of the shares of Stock owned by
the Shareholders to a third party in accordance
with the provisions of Section 2.1(e) above.
-12-
<PAGE>
9.2 Deletion of Legend. Upon termination of this Agreement, the
------------------
Secretary of the Bank shall, upon tender of the certificates
of Stock, delete the legend endorsed thereon pursuant to the
preceding section.
Section 10. Notices. All notices, offers, acceptances, requests and other
-------
communications hereunder shall be in writing and shall be deemed
to have been duly given if delivered personally or by commercial
delivery service, or mailed by certified or registered mail
(return receipt requested) or sent via facsimile (with
acknowledgment of complete transmission) to the Bank and the
Shareholders at the address set forth at the outset of this
Agreement, with a copy to Harris Beach & Wilcox, LLP, 130 East
Main Street, Rochester, New York 14604, Attention: Patrick J.
Dalton, Esquire, or to such other address as any party hereto
shall designate in writing to the other parties.
Section 11. Specific Performance. The parties hereto agree that irreparable
--------------------
damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or
in equity.
Section 12. Successors and Assigns. The terms of this Agreement shall be
----------------------
binding upon and shall inure to the benefit of, and shall be
enforceable by, the successors and assigns of the parties hereto
and the holders from time to time of any shares of capital stock
of the Bank.
Section 13. New Shareholders. Any person or entity which hereafter acquires,
----------------
in any manner, any shares of capital stock of the Bank shall
become a party to this Agreement by dating and executing a
counterpart copy hereof and delivering it to the Bank, with
copies to the Shareholders. In such event, such person or entity
shall be deemed a "Shareholder" hereunder, bound by all of the
terms and conditions hereof and entitled to the benefits
hereunder as of the date of his or its execution.
Section 14. Arbitration. Any and all disputes or controversies whether of law
-----------
or fact of any nature whatsoever arising from or respecting this
Agreement shall be decided by arbitration by the American
Arbitration Association and in accordance with the rules and
regulations of that Association. Arbitration shall take place in
the City of Albany, State of New York, or any other location
mutually agreeable to the parties. Reasonable notice of a time
and place of arbitration shall be given to all persons, other
than the parties, as shall be required by law, in which case such
persons or their authorized representatives shall have the right
to attend and/or participate in all the arbitration hearings in
such matter as the law shall require.
Section 15. Severability. In the event that any provision of this Agreement
------------
or the application thereof becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the
remainder of this Agreement will continue in full force and
effect and the application of such provision to other persons or
circumstances will be interpreted so
-13-
<PAGE>
as reasonably to effect the intent of the parties hereto. The
parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or
unenforceable provision.
Section 16. Effect. This Agreement represents the entire agreement among the
------
parties with respect to the subject matter hereof and supersedes
all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof. No
amendment, change or modification of any term or provision of
this Agreement shall be effective unless in writing and signed by
all of the parties hereto.
Section 17. Execution of Counterparts. This Agreement may be executed in one
-------------------------
or more counterparts, all of which shall be considered one and
the same Agreement, and shall become a binding Agreement when one
or more counterparts have been signed by each of the parties and
delivered to each of the other parties.
Section 18. Applicable Law. Except for conflict of law principles, this
--------------
Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the date first above written.
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION,
Shareholder
By: /s/ James W. Fulmer
---------------------------------------------
James W. Fulmer, President and
Chief Executive Officer
W. D. SPAIN AND SONS LIMITED PARTNERSHIP
By: /s/ William D. Spain, Jr.
---------------------------------------------
William D. Spain, Jr., General Partner
By: /s/ C. Compton Spain
---------------------------------------------
C. Compton Spain, General Partner
By: /s/ Michael H. Spain
---------------------------------------------
Michael H. Spain, General Partner
/s/ William D. Spain, Jr.
-------------------------------------------------
William D. Spain, Jr. Shareholder
/s/ C. Compton Spain
-------------------------------------------------
C. Compton Spain, Shareholder
/s/ Michael H. Spain
-------------------------------------------------
Michael H. Spain, Shareholder
/s/ William D. Spain
-------------------------------------------------
William D. Spain, Shareholder
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