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 ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
("Letchworth"), and W. D. SPAIN AND SONS LIMITED PARTNERSHIP, a New York limited
partnership, c/o Spain & Spain, P.C. ▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇. SPAIN, JR., an individual residing at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇. ▇▇▇▇▇▇▇ SPAIN, an individual residing at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. SPAIN, an individual residing at
Gypsy ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇▇▇▇ ▇. SPAIN, an individual
residing at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("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-
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 ▇▇▇▇▇▇▇ ▇.
Spain, Jr., C ▇▇▇▇▇▇▇ Spain and ▇▇▇▇▇▇▇ ▇. Spain are
acceptable (ii) The election of three (3) individuals
nominated by Letchworth and reasonably acceptable to the
Spain Shareholders, and (iii) ▇▇▇▇▇▇ ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇ ▇. 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 ▇▇▇▇▇▇▇▇ 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-
(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-
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-
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-
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-
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-
(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 ▇▇▇▇ ▇▇▇▇▇, 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 ▇▇▇▇ ▇▇▇▇▇. 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 ▇▇▇▇ ▇▇▇▇▇ 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-
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
-9-
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-
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) ▇▇▇▇▇▇▇ ▇. 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-
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-
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 ▇▇▇▇▇▇ Beach & ▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, 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-
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/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President and
Chief Executive Officer
W. D. SPAIN AND SONS LIMITED PARTNERSHIP
By: /s/ ▇▇▇▇▇▇▇ ▇. Spain, Jr.
---------------------------------------------
▇▇▇▇▇▇▇ ▇. Spain, Jr., General Partner
By: /s/ ▇. ▇▇▇▇▇▇▇ Spain
---------------------------------------------
▇. ▇▇▇▇▇▇▇ Spain, General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. Spain
---------------------------------------------
▇▇▇▇▇▇▇ ▇. Spain, General Partner
/s/ ▇▇▇▇▇▇▇ ▇. Spain, Jr.
-------------------------------------------------
▇▇▇▇▇▇▇ ▇. Spain, Jr. Shareholder
/s/ ▇. ▇▇▇▇▇▇▇ Spain
-------------------------------------------------
▇. ▇▇▇▇▇▇▇ Spain, Shareholder
/s/ ▇▇▇▇▇▇▇ ▇. Spain
-------------------------------------------------
▇▇▇▇▇▇▇ ▇. Spain, Shareholder
/s/ ▇▇▇▇▇▇▇ ▇. Spain
-------------------------------------------------
▇▇▇▇▇▇▇ ▇. Spain, Shareholder
-14-
