EXHIBIT 10(A)
AGREEMENT AND PLAN OF REORGANIZATION
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AGREEMENT AND PLAN OF REORGANIZATION ("Reorganization Agreement" or
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"Agreement") dated as of July 30, 1999, by and between Letchworth Independent
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Bancshares Corporation ("Letchworth"), a New York corporation having its
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principal executive offices at 00 Xxxxx Xxxx Xxxxxx, Xxxxxxx, Xxx Xxxx and
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Xxxxxxxx Trustco, Inc. ("Trustco"), a New York corporation having its principal
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executive offices at 000 Xxxxx Xxxxx Xxxxxx, Xxxxxx, Xxx Xxxx.
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WITNESSETH
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WHEREAS, the parties hereto desire that Letchworth shall be acquired by
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Trustco through the merger ("Merger") of Letchworth with and into Trustco, with
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Trustco as the surviving corporation ("Surviving Corporation") pursuant to an
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Agreement and Plan of Merger substantially in the form attached hereto as Annex
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A ("Plan of Merger"); and
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WHEREAS, Trustco desires to operate three separate banking subsidiaries;
and
WHEREAS, upon consummation of the Merger, Trustco presently intends to
operate Xxxxxxxx County Trust Company ("TCTC Bank"), a New York-chartered trust
company and a wholly owned subsidiary of Trustco, The Bank of Castile ("The Bank
of Castile"), a New York-chartered bank and a wholly owned subsidiary of
Letchworth, and The Mahopac National Bank ("Mahopac Bank"), a national banking
association and a subsidiary of Letchworth, as three separate banking
subsidiaries; and
WHEREAS, the parties hereto desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained and intending to be
legally bound hereby, the parties hereto do hereby agree as follows:
ARTICLE 1. DEFINITIONS
1.1. "Affiliate" shall mean with respect to a specified person, a person
that directly or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the person specified.
1.2 "AMEX" shall mean the American Stock Exchange.
1.3 "Bank Holding Company Act" shall mean the Bank Holding Company Act of
1956, as amended.
1.4 "Banking Board" shall mean the New York State Banking Board.
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1.5 "The Bank of Castile" is defined in the recitals hereto.
1.6 "Claim" is defined in Section 4.13(a) hereof.
1.7 "Closing Date" shall mean the date specified pursuant to Section 4.9
hereof as the date on which the parties hereto shall close the transactions
contemplated herein.
1.8 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.9 "Commission" or "SEC" shall mean the Securities and Exchange
Commission.
1.10 "Confidentiality Agreement" is defined in Section 4.5 hereof.
1.11 "Xxxxxxxxx" is defined in Section 3.19 hereof.
1.12 "Effective Date" shall mean the date specified pursuant to Section 4.9
hereof as the effective date of the Merger.
1.13 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.14 "ERISA Affiliate" is defined in Section 2.14 and Section 3.13 hereof.
1.15 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.16 "FDIA" shall mean the Federal Deposit Insurance Act.
1.17 "FDIC" shall mean the Federal Deposit Insurance Corporation.
1.18 "Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System.
1.19 "Indemnified Parties" is defined in Section 4.13(a) hereof.
1.20 "Insurance Amount" is defined in Section 4.13(c) hereof.
1.21 "Intellectual Property" means domestic and foreign letters patent,
patents, patent applications, patent licenses, software licensed or owned, know-
how licenses, trade names, common law and other trademarks, service marks,
licenses of trademarks, trade names and/or service marks, trademark
registrations and applications, service xxxx registrations and applications and
copyright registrations and applications.
1.22 "Letchworth" is defined in the preamble of this Agreement.
1.23 "Letchworth Common Stock" is defined in Section 2.1 hereof.
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1.24 "Letchworth Employees" is defined in Section 4.11(a) hereof.
1.25 "Letchworth Financial Statements" shall mean (i) the consolidated
balance sheets of Letchworth as of March 31, 1999 and as of December 31, 1998
and 1997 and the related consolidated statements of income, cash flows and
changes in stockholders' equity (including related notes, if any) for the three
months ended March 31, 1999 and each of the three years ended December 31, 1998,
1997 and 1996, respectively, as filed by Letchworth in SEC Documents and (ii)
the consolidated balance sheets of Letchworth and related consolidated
statements of income, cash flows and changes in stockholders' equity (including
related notes, if any) as filed by Letchworth in SEC Documents with respect to
periods ended subsequent to March 31, 1999.
1.26 "Letchworth Plan" is defined in Section 2.14(a) hereof.
1.27 "Mahopac Bank" is defined in the recitals hereto.
1.28 "Mahopac Shareholders" means, collectively, W.D. Spain and Sons
Limited Partnership, Xxxxxxx X. Spain, Jr., X. Xxxxxxx Spain, Xxxxxxx X. Spain
and Xxxxxxx X. Spain.
1.29 "Material Adverse Effect" shall mean, with respect to Letchworth or
Trustco, as the case may be, a material adverse effect on the business, results
of operations or financial condition of such party and any Subsidiary of the
party taken as a whole or a material adverse effect on such party's ability to
consummate the transactions contemplated hereby; provided, however, that in
determining whether a Material Adverse Effect has occurred there shall be
excluded any effect on the referenced party the cause of which is (i) any change
in banking or similar laws, rules or regulations of general applicability or
interpretations thereof by courts or governmental authorities, (ii) any change
in generally accepted accounting principles or regulatory accounting
requirements applicable to banks, thrifts or their holding companies generally
and (iii) any action or omission of Letchworth or Trustco or any Subsidiary of
either of them taken with the prior written consent of Trustco or Letchworth, as
applicable, in contemplation of the Merger.
1.30 "XxXxxxxxx, Xxxx & Xxxxxx, Inc." is defined in Section 2.19 hereof.
1.31 "Merger" is defined in the recitals hereto.
1.32 "OCC" shall mean the Office of the Comptroller of Currency.
1.33 "Option Agreement" shall mean the Stock Option Agreement dated of even
date herewith between Letchworth and Trustco pursuant to which Letchworth will
grant Trustco the right to purchase certain shares of Letchworth Common Stock.
1.34 "Plan of Merger" is defined in the recitals hereto.
1.35 "Previously Disclosed" shall mean disclosed in a writing by either
party in (i) an SEC Document filed with the SEC after December 31, 1997 and
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before the date hereof or (ii) a disclosure schedule (the "Disclosure Schedule")
dated of even date herewith from the party making such disclosure and delivered
to the other party prior to the execution of this Agreement. Any information
disclosed by one party to the other for any purpose hereunder shall be deemed to
be disclosed for all purposes hereunder. The inclusion of any matter in
information Previously Disclosed shall not be deemed an admission or otherwise
to imply that any such matter is material for purposes of this Agreement.
1.36 "Proxy Statement" shall mean the proxy statement/prospectus (or
similar documents) together with any supplements thereto sent to the
stockholders of Letchworth and Trustco to solicit their votes in connection with
this Agreement and the Plan of Merger.
1.37 "Registration Statement" shall mean the registration statement to be
filed by Trustco with respect to the Trustco Common Stock to be issued in
connection with the Merger as declared effective by the Commission under the
Securities Act.
1.38 "Reorganization Agreement" is defined in the recitals hereto.
1.39 "Rights" shall mean warrants, options, rights, convertible securities
and other arrangements or commitments which obligate an entity to issue or
dispose of any of its capital stock, and stock appreciation rights, performance
units and other similar stock-based rights whether they obligate the issuer
thereof to issue stock or other securities or to pay cash.
1.40 "SEC Documents" shall mean all reports and registration statements
filed, or required to be filed, by a party hereto pursuant to the Securities
Laws.
1.41 "Securities Act" shall mean the Securities Act of 1933, as amended.
1.42 "Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended; and the rules and
regulations of the Commission promulgated thereunder.
1.43 "Subsidiary" or "Subsidiaries" shall mean with respect to any party,
any bank, corporation, partnership or other organization, whether incorporated
or unincorporated, which is consolidated with such party for financial reporting
purposes.
1.44 "Surviving Corporation" is defined in the recitals hereto.
1.45 "takeover proposal" is defined in Section 4.7(b)(13) hereof.
1.46 "Trustco" is defined in the preamble of this Agreement.
1.47 "TCTC Bank" is defined in the preamble of this Agreement.
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1.48 "Trustco Common Stock" is defined in Section 3.1 hereof.
1.49 "Trustco Financial Statements" shall mean (i) the consolidated balance
sheets of Trustco as of March 31, 1999 and as of December 31, 1998 and 1997 and
the related consolidated statements of income, cash flows and changes in
stockholders' equity (including related notes, if any) for the three months
ended March 31, 1999 and each of the three years ended December 31, 1998, 1997
and 1996, respectively, as filed by Trustco in SEC Documents and (ii) the
consolidated balance sheets of Trustco and related consolidated statements of
income, cash flows and changes in stockholders' equity (including related notes,
if any) as filed by Trustco in SEC Documents as of dates or with respect to
periods ended subsequent to March 31, 1999.
1.50 "Trustco Plan" is defined in Section 3.13 hereof.
1.51 "Voting Agreements" shall mean the Voting Agreements dated of even
date herewith between Trustco and the director/stockholders of Letchworth
pursuant to which such director/stockholders agree to vote their shares of
Letchworth Common Stock in favor of this Reorganization Agreement, the Plan of
Merger and the Option Agreement.
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ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF LETCHWORTH
Letchworth hereby represents and warrants to Trustco as follows:
2.1. CAPITAL STRUCTURE OF LETCHWORTH
The authorized capital stock of Letchworth consists of 5,000,000 shares of
common stock, par value $1.00 per share ("Letchworth Common Stock"), of which,
as of the date hereof, 3,466,016 shares are issued and outstanding and 86,847
shares are held in treasury. As of the date hereof, no shares of Letchworth
Common Stock are reserved for issuance, except that (i) 300,000 shares of
Letchworth Common Stock are reserved for issuance upon the exercise of stock
options heretofore granted pursuant to Letchworth's 1990 Stock Option Plan (the
"Letchworth 1990 Stock Option Plan"), (ii) 500,000 shares of Letchworth Common
Stock are reserved for issuance upon the exercise of stock options heretofore
granted pursuant to Letchworth's 1998 Stock Option Plan (the "Letchworth 1998
Stock Option Plan") and (iii) 689,737 shares of Letchworth Common Stock are
reserved for issuance pursuant to the Option Agreement. Schedule 2.1 hereto sets
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forth all currently outstanding options for the purchase of Letchworth Common
Stock, the number of shares of Letchworth Common Stock subject to such options,
whether such options are vested or unvested, the vesting schedule for unvested
options and the vesting or other treatment of all unvested options in the event
of a change of control of Letchworth. All outstanding shares of Letchworth
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable. Letchworth does not have and is not bound by any Rights which are
authorized, issued or outstanding with respect to the capital stock of
Letchworth except (i) for the Option Agreement, (ii) as Previously Disclosed,
(iii) the Shareholder Agreement defined in Section 2.3 below and (iv) as set
forth above. None of the shares of Letchworth's capital stock has been issued in
violation of the preemptive rights of any person.
2.2. ORGANIZATION, STANDING AND AUTHORITY OF LETCHWORTH
Letchworth is a duly organized corporation, validly existing and in good
standing under the laws of New York with full corporate power and authority to
carry on its business as now conducted and is duly licensed or qualified to do
business in the states of the United States and foreign jurisdictions where its
ownership or leasing of property or the conduct of its business requires such
qualification, except where the failure to be so licensed or qualified would not
have a Material Adverse Effect on Letchworth. Letchworth is registered as a bank
holding company under the Bank Holding Company Act.
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2.3. OWNERSHIP OF LETCHWORTH SUBSIDIARIES; CAPITAL STRUCTURE OF LETCHWORTH
SUBSIDIARIES
Except as Previously Disclosed, as of the date hereof, Letchworth does not
own, directly or indirectly, 5% or more of the outstanding capital stock or
other voting securities of any corporation, bank or other organization except
the Letchworth Subsidiaries as Previously Disclosed; and, with respect to
Mahopac Bank, Letchworth owns 1,491 shares of common stock of Mahopac Bank,
constituting 70.16% of all of the outstanding capital stock of Mahopac Bank,
and, subject to the terms of a Shareholder Agreement dated as of October 16,
1998 (the "Shareholder Agreement"), Letchworth has the right to acquire all of
the outstanding capital stock of Mahopac Bank owned by the Mahopac Shareholders
(currently 628 shares of common stock of Mahopac Bank). The Shareholder
Agreement has not been modified, amended or otherwise altered, and is in full
force and is enforceable by Letchworth against the parties thereto and nothing
in this Agreement, the Plan of Merger or Option Agreement, or the execution
hereof, or the performance by Letchworth or any Letchworth Subsidiary of their
respective obligations hereunder or under the Plan of Merger and/or Option
Agreement, shall in any way violate, conflict with or otherwise breach any of
the terms or provisions of the Shareholder Agreement or otherwise cause such
agreement to become unenforceable or in any way modified or amended. Except as
Previously Disclosed, the outstanding shares of capital stock or other equity
interests of each Letchworth Subsidiary have been duly authorized and validly
issued and are fully paid and (except as provided by applicable law)
nonassessable and all such shares or equity interests are directly or indirectly
owned by Letchworth free and clear of all liens, claims and encumbrances. No
Letchworth Subsidiary has or is bound by any Rights which are authorized, issued
or outstanding with respect to the capital stock or other equity interests of
any Letchworth Subsidiary and, except as Previously Disclosed, there are no
agreements, understandings or commitments relating to the right of Letchworth to
vote or to dispose of said shares. None of the shares of capital stock or other
equity interests of any Letchworth Subsidiary has been issued in violation of
the preemptive rights of any person.
2.4. ORGANIZATION, STANDING AND AUTHORITY OF LETCHWORTH SUBSIDIARIES
Each Letchworth Subsidiary is a duly organized corporation, banking
association or other organization, validly existing and in good standing under
applicable laws. Each Letchworth Subsidiary (i) has full power and authority to
carry on its business as now conducted, and (ii) is duly licensed or qualified
to do business in the states of the United States and foreign jurisdictions
where its ownership or leasing of property or the conduct of its business
requires such licensing or qualification, except where failure to be so licensed
or qualified would not have a Material Adverse Effect on Letchworth. Each
Letchworth Subsidiary has all federal, state, local and foreign governmental
authorizations necessary for it to own or lease its properties and assets and to
carry on its business as it is now being conducted, except where the failure to
be so authorized would not have a Material Adverse Effect on Letchworth. The
Bank of Castile and Mahopac Bank are each members in good standing of the
Federal Home Loan Bank of New York and each owns the requisite amount of shares
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therein. Except as Previously Disclosed, all eligible deposits issued by The
Bank of Castile and Mahopac Bank are insured by the FDIC through the Bank
Insurance Fund to the full extent permitted under applicable law.
2.5. AUTHORIZED AND EFFECTIVE AGREEMENT
(a) Letchworth has all requisite corporate power and authority to enter
into and perform all of its obligations under this Reorganization Agreement, the
Plan of Merger and the Option Agreement. The execution and delivery of this
Reorganization Agreement, the Plan of Merger and the Option Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action in respect thereof on
the part of Letchworth, except that the affirmative vote of the holders of 66
2/3% of the outstanding shares of Letchworth Common Stock entitled to vote
thereon is required to adopt the Plan of Merger pursuant to the New York
Business Corporation Law and Letchworth's certificate of incorporation, as
amended, and Letchworth's by-laws, each as in effect on the date of this
Reorganization Agreement. The Board of Directors of Letchworth has directed that
this Reorganization Agreement and the Plan of Merger be submitted to
Letchworth's stockholders for approval at a special meeting to be held as soon
as practicable.
(b) Assuming the accuracy of the representation contained in Section
3.5(b) hereof, this Reorganization Agreement and the Plan of Merger constitute
legal, valid and binding obligations of Letchworth, enforceable against it in
accordance with their respective terms, subject as to enforceability, to
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(c) Except as Previously Disclosed, neither the execution and delivery of
this Reorganization Agreement, the Plan of Merger or the Option Agreement, nor
consummation of the transactions contemplated hereby or thereby, nor compliance
by Letchworth with any of the provisions hereof or thereof shall (i) conflict
with or result in a breach of any provision of the articles or certificate of
incorporation or association, charter or bylaws of Letchworth or any Letchworth
Subsidiary, (ii) assuming the consents and approvals contemplated by Section 4.3
hereof and the consents and approvals which are Previously Disclosed are duly
obtained, constitute or result in a breach of any term, condition or provision
of, or constitute a default under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of Letchworth or any
Letchworth Subsidiary pursuant to, any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation, or (iii) assuming the consents and
approvals contemplated by Section 4.3 hereof and the consents and approvals
which are Previously Disclosed are duly obtained, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Letchworth or any
Letchworth Subsidiary, except (in the case of clauses (ii) and (iii) above) for
such violations, rights, conflicts, breaches, creations or defaults which,
either individually or in the aggregate, would not have a Material Adverse
Effect on Letchworth.
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(d) Other than as contemplated by Section 4.3 hereof and except as
Previously Disclosed, no consent, approval or authorization of, or declaration,
notice, filing or registration with, any governmental or regulatory authority,
or any other person, is required to be made or obtained by Letchworth or any
Letchworth Subsidiary on or prior to the Closing Date in connection with the
execution, delivery and performance of this Agreement and the Plan of Merger or
the consummation of the transactions contemplated hereby or thereby. Neither
Letchworth nor any Letchworth Subsidiary is aware of any reason why the
conditions set forth in Section 5.1(b) of this Reorganization Agreement will not
be satisfied without undue delay and without the imposition of any condition or
requirement of the type referred to in the provisions thereof.
2.6. SEC DOCUMENTS; REGULATORY FILINGS
Letchworth has timely filed all SEC Documents required by the Securities
Laws and all reports and notices with The Nasdaq Stock Market ("Nasdaq")
required to be filed by the Nasdaq Marketplace Rules and the Exchange Act
(collectively, the "Nasdaq Reports"). The SEC Documents and the Nasdaq Reports
are true, complete and correct as of their respective dates, in all material
respects, and neither any SEC Documents nor any Nasdaq Reports contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein not misleading. Letchworth and
each Letchworth Subsidiary has filed all reports required by statute or
regulation to be filed with any federal or state bank regulatory agency, except
where the failure to so file would not have a Material Adverse Effect on
Letchworth, and such reports were prepared in accordance with the applicable
statutes, regulations and instructions in existence as of the date of filing of
such reports in all material respects, and none of the reports contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein not misleading.
2.7. FINANCIAL STATEMENTS; BOOKS AND RECORDS; MINUTE BOOKS
The Letchworth Financial Statements filed by Letchworth in SEC Documents
prior to the date of this Agreement fairly present in all material respects, and
the Letchworth Financial Statements filed by Letchworth after the date of this
Agreement will fairly present in all material respects the consolidated
financial position of Letchworth and its consolidated Subsidiaries as of the
dates indicated and the consolidated results of operations, changes in
stockholders' equity and cash flows of Letchworth and its consolidated
Subsidiaries for the periods then ended and each such financial statement has
been or will be, as the case may be, prepared in conformity with generally
accepted accounting principles applied on a consistent basis. The books and
records of Letchworth and each Letchworth Subsidiary fairly reflect in all
material respects the transactions to which it is a party or by which its
properties are subject or bound. Such books and records have been properly kept
and maintained and are in compliance with all applicable legal and accounting
requirements in all material respects. The minute books of Letchworth and each
Letchworth Subsidiary contain records which are accurate in all material
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respects of all corporate actions of each of their respective stockholders and
board of directors (including committees of their respective board of
directors).
2.8. MATERIAL ADVERSE CHANGE
Except as Previously Disclosed, Letchworth has not, on a consolidated basis,
suffered any change in its financial condition, results of operations or
business since December 31, 1998 which individually or in the aggregate with any
other such changes would constitute a Material Adverse Effect with respect to
Letchworth.
2.9. ABSENCE OF UNDISCLOSED LIABILITIES
Neither Letchworth nor any Letchworth Subsidiary has any liability (contingent
or otherwise), excluding contractually assumed contingencies, that is material
to Letchworth on a consolidated basis, or that, when combined with all similar
liabilities, would be material to Letchworth on a consolidated basis, except as
Previously Disclosed, as disclosed in the Letchworth Financial Statements filed
with the SEC prior to the date hereof and except for liabilities incurred in the
ordinary course of business subsequent to March 31, 1999.
2.10. PROPERTIES
Except as Previously Disclosed, Letchworth and the Letchworth Subsidiaries
have good and marketable title free and clear of all liens, encumbrances,
charges, defaults or equitable interests to all of the properties and assets,
real and personal, which, individually or in the aggregate, are material to the
business of Letchworth and its Subsidiaries taken as a whole, and which are
reflected on the Letchworth Financial Statements as of March 31, 1999 or
acquired after such date, except (i) liens for taxes not yet due and payable,
(ii) pledges to secure deposits and other liens incurred in the ordinary course
of banking business, (iii) such imperfections of title, easements and
encumbrances, if any, as are not material in character, amount or extent and
(iv) dispositions and encumbrances for adequate consideration in the ordinary
course of business. All leases pursuant to which Letchworth or any Letchworth
Subsidiary, as lessee, leases real and personal property which, individually or
in the aggregate, are material to the business of Letchworth and its
Subsidiaries taken as a whole are valid and enforceable in accordance with their
respective terms except where the failure of such lease or leases to be valid
and enforceable would not, individually or in the aggregate, have a Material
Adverse Effect on Letchworth.
2.11. LOANS
Each loan reflected as an asset in the Letchworth Financial Statements (i) is
evidenced by notes, agreements or other evidences of indebtedness which are
true, genuine and what they purport to be, (ii) to the extent secured, has been
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secured by valid liens and security interests which have been perfected, and
(iii) is the legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles, in each case other
than loans as to which the failure to satisfy the foregoing standards would not
have a Material Adverse Effect on Letchworth.
2.12. ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses reflected on the Letchworth Financial
Statements, as of their respective dates, is, to the best of Letchworth's
knowledge, adequate in all material respects to provide for possible or specific
losses, net of recoveries relating to loans previously charged off and on loans
outstanding, and (b) is, to the best of Letchworth's knowledge, in all material
respects consistent with the requirements of generally accepted accounting
principles to provide for the reasonably anticipated losses with respect to
Letchworth's loan portfolio based upon information reasonably available at the
time.
2.13. TAX MATTERS
(a) Except as Previously Disclosed, Letchworth and each Letchworth Subsidiary
have timely filed federal income tax returns for each year through December 31,
1998 and have timely filed, or caused to be filed, all other federal, state,
local and foreign tax returns (including, without limitation, estimated tax
returns, returns required under Sections 1441-1446 and 6031-6060 of the Code and
the regulations thereunder and any comparable state, foreign and local laws, any
other information returns, withholding tax returns, FICA and FUTA returns and
back up withholding returns required under Section 3406 of the Code and any
comparable state, foreign and local laws) required to be filed with respect to
Letchworth or any Letchworth Subsidiary, except where the failure to file timely
such federal income and other tax returns would not, in the aggregate, have a
Material Adverse Effect on Letchworth. All taxes due in respect of the periods
covered by such tax returns have been paid or adequate reserves have been
established for the payment of such taxes and such reserves are reflected on the
Letchworth Financial Statements, except where any such failure to pay or
establish adequate reserves would not, in the aggregate, have a Material Adverse
Effect on Letchworth and, as of the Closing Date, all taxes due in respect of
any subsequent periods (or portions thereof) ending on or prior to the Closing
Date will have been paid or adequate reserves will have been established for the
payment thereof, except where any such failure to pay or establish adequate
reserves would not, in the aggregate, have a Material Adverse Effect on
Letchworth. Except as Previously Disclosed, no material (i) audit examination,
(ii) deficiency, or (iii) refund litigation with respect to such returns or
periods has been proposed, asserted or assessed or is pending. Neither
Letchworth nor any Letchworth Subsidiary will have any liability for any such
taxes in excess of the amounts so paid or reserves or accruals so established
except where such liability would not have a Material Adverse Effect on
Letchworth.
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(b) All federal, state and local (and, if applicable, foreign) tax returns
filed by Letchworth and each Letchworth Subsidiary are complete and accurate in
all material respects. Neither Letchworth nor any Letchworth Subsidiary is
delinquent in the payment of any material tax, assessment or governmental
charge, and, except as Previously Disclosed, none of them has requested any
extension of time within which to file any tax returns in respect of any fiscal
year or portion thereof which have not since been filed. Except as Previously
Disclosed, no material deficiencies for any tax, assessment or governmental
charge have been proposed, asserted or assessed (tentatively or otherwise)
against Letchworth or any Letchworth Subsidiary which have not been settled and
paid. Except as Previously Disclosed, there are currently no agreements in
effect with respect to Letchworth or any Letchworth Subsidiary to extend the
period of limitations for the assessment or collection of any tax.
(c) Except as Previously Disclosed, neither the transactions contemplated
hereby nor the termination of the employment of any employees of Letchworth or
any Letchworth Subsidiary prior to or following consummation of the transactions
contemplated hereby could result in Letchworth or any Letchworth Subsidiary
making or being required to make any "excess parachute payment" as that term is
defined in Section 280G of the Code.
(d) Except as Previously Disclosed, neither Letchworth nor any Letchworth
Subsidiary is a party to any agreement providing for the allocation or sharing
of, or indemnification for, taxes.
(e) Except as Previously Disclosed, neither Letchworth nor any Letchworth
Subsidiary is required to include in income any adjustment in any taxable period
ending after the date hereof pursuant to Section 481(a) of the Code.
(f) Except as Previously Disclosed, neither Letchworth nor any Letchworth
Subsidiary has entered into any agreement with any taxing authority that will
bind Trustco or an affiliate thereof after the Closing Date.
(g) For purposes of this Section 2.13, references to Letchworth and any
Letchworth Subsidiary shall include predecessors thereof.
2.14. EMPLOYEE BENEFIT PLANS
(a) Schedule 2.14(a) hereto sets forth a true and complete list of (a) each
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employment agreement or change in control agreement (whether written or oral)
Letchworth or any Letchworth Subsidiary has entered into with any employee,
director or officer of Letchworth or a Letchworth Subsidiary and (b) each
Letchworth Plan. For purposes of this Reorganization Agreement, the term
"Letchworth Plan" means each bonus, deferred compensation, incentive
compensation, stock purchase, stock option, severance pay, medical, life or
other insurance, profit-sharing, or pension plan, program, agreement or
arrangement, and each other employee benefit plan, program, agreement or
arrangement, sponsored, maintained or contributed to or required to be
contributed to by Letchworth or by any trade or business, whether or not
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incorporated, that together with Letchworth or any of the Letchworth
Subsidiaries would be deemed a "single employer" under Section 414 of the Code
(an "ERISA Affiliate") for the benefit of any employee or director or former
employee or former director of Letchworth or any ERISA Affiliate of Letchworth.
(b) With respect to each of the Letchworth Plans, Letchworth has made
available to Trustco true and complete copies of each of the following
documents: (a) the Letchworth Plan and related documents (including all
amendments thereto); (b) the most recent annual reports, financial statements,
and actuarial reports, if any; (c) the most recent summary plan description,
together with each summary of material modifications, required under ERISA with
respect to such Letchworth Plan; and (d) the most recent determination letter
received from the IRS with respect to each Letchworth Plan that is intended to
be qualified under the Code.
(c) No liability under Title IV of ERISA has been incurred by Letchworth or
any ERISA Affiliate of Letchworth since the effective date of ERISA that has not
been satisfied in full, and no condition exists that presents a material risk to
Letchworth or any ERISA Affiliate of Letchworth of incurring a liability under
such Title, other than liability for premium payments to the Pension Benefit
Guaranty Corporation, which premiums have been or will be paid when due.
(d) Neither Letchworth nor any ERISA Affiliate of Letchworth, nor any of the
Letchworth Plans, nor any trust created thereunder, nor any trustee or
administrator thereof has engaged in a prohibited transaction (within the
meaning of Section 406 of ERISA and Section 4975 of the Code) in connection with
which Letchworth or any ERISA Affiliate of Letchworth could, either directly or
indirectly, incur a material liability or cost.
(e) Full payment has been made, or will be made in accordance with Section
404(a)(6) of the Code, of all amounts that Letchworth or any ERISA Affiliate of
Letchworth is required to pay under Section 412 of the Code or under the terms
of the Letchworth Plans.
(f) Except as Previously Disclosed, there has been no material adverse change
in the funded status of any Letchworth Plan that is subject to Title IV of ERISA
since the date of the information relating to such funded status contained in
the most recent Letchworth Form 10-K filed with the SEC. No reportable event
under Section 4043 of ERISA has occurred or will occur with respect to any
Letchworth Plan on or before the Closing Date other than any reportable event
occurring by reason of the transactions contemplated by this Agreement or a
reportable event for which the requirement of notice to the PBGC has been
waived.
(g) Except as Previously Disclosed, none of the Letchworth Plans is a
"multiemployer pension plan," as such term is defined in Section 3(37) of ERISA,
a "multiple employer welfare arrangement," as such term is defined in Section
3(40) of ERISA, or a single employer plan that has two or more contributing
sponsors, at least two of whom are not under common control, within the meaning
of Section 4063(a) of ERISA.
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(h) A favorable determination letter has been issued by the Internal Revenue
Service with respect to the each of the Letchworth Plans that is intended to be
"qualified" within the meaning of Section 401(a) of the Code to the effect that
such plan is so qualified and each such Letchworth Plan satisfies the
requirements of Section 401(a) of the Code in all material respects. Each of the
Letchworth Plans that is intended to satisfy the requirements of Section 125 or
501(c)(9) of the Code satisfies such requirements in all material respects. Each
of the Letchworth Plans has been operated and administered in all material
respects in accordance with its terms and applicable laws, including but not
limited to ERISA and the Code.
(i) There are no actions, suits or claims pending, or, to the knowledge of
Letchworth, threatened or anticipated (other than routine claims for benefits)
against any Letchworth Plan, the assets of any Letchworth Plan or against
Letchworth or any ERISA Affiliate of Letchworth with respect to any Letchworth
Plan. There is no judgment, decree, injunction, rule or order of any court,
governmental body, commission, agency or arbitrator outstanding against or in
favor of any Letchworth Plan or any fiduciary thereof (other than rules of
general applicability). There are no pending or threatened audits, examinations
or investigations by any governmental body, commission or agency involving any
Letchworth Plan.
(j) Except as Previously Disclosed, the consummation of the transactions
contemplated by this Agreement will not (i) entitle any current or former
employee or director of Letchworth or any ERISA Affiliate of Letchworth to
severance pay, unemployment compensation or any similar payment, (ii) accelerate
the time of payment or vesting, or increase the amount, of any compensation due
to any such current or former employee or director, (iii) renew or extend the
term of any agreement regarding compensation for any such current or former
employee or director, or (iv) result in a "change in control" or the occurrence
of any other event specified in the agreements identified on Schedule 2.14(a)
----------------
which would entitle any party to such agreements to any payment thereunder.
2.15. CERTAIN CONTRACTS
(a) Except as Previously Disclosed, neither Letchworth nor any Letchworth
Subsidiary is a party to, or is bound by, (i) any material contract as defined
in Item 601(b)(10) of Regulation S-K of the SEC or any other material contract
or similar arrangement whether or not made in the ordinary course of business
(other than loans or loan commitments and funding transactions in the ordinary
course of business of any Letchworth Subsidiary) or any agreement restricting
the nature or geographic scope of its business activities in any material
respect, (ii) any agreement, indenture or other instrument relating to the
borrowing of money by Letchworth or any Letchworth Subsidiary or the guarantee
by Letchworth or any Letchworth Subsidiary of any such obligation, other than
instruments relating to transactions entered into in the customary course, (iii)
any agreement, arrangement or commitment relating to the employment of a
consultant who was formerly a director or executive officer or the employment,
election, retention in office or severance of any present or former director or
14
officer, or (iv) any contract, agreement or understanding with a labor union, in
each case whether written or oral.
(b) Except as Previously Disclosed, neither Letchworth nor any Letchworth
Subsidiary is in default under any material agreement, commitment, arrangement,
lease, insurance policy or other instrument whether entered into in the ordinary
course of business or otherwise and whether written or oral, and there has not
occurred any event that, with the lapse of time or giving of notice or both,
would constitute such a default, except for such defaults which would not,
individually or in the aggregate, have a Material Adverse Effect on Letchworth.
2.16. LEGAL PROCEEDINGS
Except as Previously Disclosed, there are no actions, suits or proceedings
instituted, pending or, to the knowledge of Letchworth or any Letchworth
Subsidiary, threatened (or unasserted but considered probable of assertion and
which if asserted would have at least a reasonable probability of an unfavorable
outcome) against Letchworth or any Letchworth Subsidiary or against any asset,
interest or right of Letchworth or any Letchworth Subsidiary as to which there
is a reasonable probability of an unfavorable outcome and which, if such an
unfavorable outcome was rendered, would, individually or in the aggregate, have
a Material Adverse Effect on Letchworth. To the knowledge of Letchworth or any
Letchworth Subsidiary, there are no actual or threatened actions, suits or
proceedings which present a claim to restrain or prohibit the transactions
contemplated herein or to impose any material liability in connection therewith
as to which there is a reasonable probability of an unfavorable outcome and
which, if such an unfavorable outcome was rendered, would, individually or in
the aggregate, have a Material Adverse Effect on Letchworth. There are no
actions, suits or proceedings instituted, pending or, to the knowledge of
Letchworth or any Letchworth Subsidiary, threatened (or unasserted but
considered probable of assertion and which if asserted would be reasonably
expected to have an unfavorable outcome) against any present or former director
or officer of Letchworth or any Letchworth Subsidiary, that might give rise to a
claim for indemnification and that (i) has a reasonable probability of an
unfavorable outcome and (ii) in the event of an unfavorable outcome, would,
individually or in the aggregate, have a Material Adverse Effect on Letchworth.
2.17. COMPLIANCE WITH LAWS
Except as Previously Disclosed, Letchworth and each Letchworth Subsidiary is
in compliance in all material respects with all statutes and regulations
applicable to the conduct of its business, and neither Letchworth nor any
Letchworth Subsidiary has received notification from any agency or department of
federal, state or local government (i) asserting a material violation of any
such statute or regulation, (ii) threatening to revoke any license, franchise,
permit or government authorization or (iii) restricting or in any way limiting
its operations, except for such noncompliance, violations, revocations and
15
restrictions which would not, individually or in the aggregate, have a Material
Adverse Effect on Letchworth. Neither Letchworth nor any Letchworth Subsidiary
is subject to any regulatory or supervisory cease and desist order, agreement,
directive, memorandum of understanding or commitment which could be reasonably
anticipated to have a Material Adverse Effect on Letchworth, and none of them
has received any communication requesting that they enter into any of the
foregoing.
2.18. LABOR MATTERS
With respect to their employees, neither Letchworth nor any Letchworth
Subsidiary is a party to any labor agreement with any labor organization, group
or association and has not engaged in any unfair labor practice. Since January
1, 1999 and prior to the date hereof, Letchworth and the Letchworth Subsidiaries
have not experienced any attempt by organized labor or its representatives to
make Letchworth or any Letchworth Subsidiary conform to demands of organized
labor relating to their employees or to enter into a binding agreement with
organized labor that would cover the employees of Letchworth or any Letchworth
Subsidiary. There is no unfair labor practice charge or other complaint by any
employee or former employee of Letchworth or any Letchworth Subsidiary against
any of them pending before any governmental agency arising out of Letchworth's
or such Letchworth Subsidiary's activities, which charge or complaint (i) has a
reasonable probability of an unfavorable outcome and (ii) in the event of an
unfavorable outcome would, individually or in the aggregate, have a Material
Adverse Effect on Letchworth; there is no labor strike or labor disturbance
pending or threatened against any of them; and neither Letchworth nor any
Letchworth Subsidiary has experienced a work stoppage or other labor difficulty
since January 1, 1999.
2.19. BROKERS AND FINDERS
Neither Letchworth nor any Letchworth Subsidiary, nor any of their respective
officers, directors or employees, has employed any broker, finder or financial
advisor or incurred any liability for any fees or commissions in connection with
the transactions contemplated herein or the Plan of Merger, except for
Letchworth's retention of XxXxxxxxx, Xxxx & Xxxxxx, Inc. to perform certain
financial advisory services as Previously Disclosed. Prior to the execution and
delivery of this Agreement, XxXxxxxxx, Xxxx & Xxxxxx, Inc. has delivered to the
Board of Directors of Letchworth an opinion that the Exchange Ratio is fair from
a financial point of view to the stockholders of Letchworth.
2.20. INSURANCE
Letchworth and the Letchworth Subsidiaries each currently maintains insurance
in amounts considered by Letchworth and any Letchworth Subsidiary as applicable,
to be reasonably necessary for their operations. Neither Letchworth nor any
Letchworth Subsidiary has received any notice of a material premium increase or
cancellation with respect to any of its insurance policies or bonds, and within
the last three years, neither Letchworth nor any Letchworth Subsidiary has been
refused any insurance coverage sought or applied for, and
16
Letchworth has no reason to believe that existing insurance coverage cannot be
renewed as and when the same shall expire, upon terms and conditions as
favorable as those presently in effect, other than possible increases in
premiums or unavailability in coverage that have not resulted from any
extraordinary loss experience of Letchworth or any Letchworth Subsidiary.
Schedule 2.20 hereto sets forth all currently outstanding claims against
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Letchworth or any Letchworth Subsidiary under any insurance policy. Except as
Previously Disclosed, the deposits of The Bank of Castile and Mahopac Bank are
insured by the FDIC in accordance with the FDIA, and The Bank of Castile and
Mahopac Bank have paid all assessments and filed all reports required by the
FDIA.
2.21. ENVIRONMENTAL LIABILITY
Except as Previously Disclosed, neither Letchworth nor any Letchworth
Subsidiary has received any written notice of any legal, administrative,
arbitral or other proceeding, claim or action and, to the knowledge of
Letchworth and the Letchworth Subsidiaries, there is no governmental
investigation of any nature ongoing, in each case that could reasonably be
expected to result in the imposition, on Letchworth or any Letchworth Subsidiary
of any liability arising under any local, state or federal environmental
statute, regulation or ordinance including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, which liability would have a Material Adverse Effect on Letchworth;
except as Previously Disclosed, there are no facts or circumstances which could
reasonably be expected to form the basis for any such proceeding, claim, action
or governmental investigation that would impose any such liability; and neither
Letchworth nor any Letchworth Subsidiary is subject to any agreement, order,
judgment, decree or memorandum by or with any court, governmental authority,
regulatory agency or third party imposing any such liability.
2.22. ADMINISTRATION OF TRUST ACCOUNTS
To the best of Letchworth's knowledge, each Letchworth Subsidiary has properly
administered all common trust funds and collective investment funds and all
accounts for which it acts as a fiduciary or agent, including but not limited to
accounts for which it serves as a trustee, agent, custodian, personal
representative, guardian, conservator or investment advisor, in accordance with
the terms of the governing documents and applicable state and federal law and
regulation and common law, except where the failure to do so would not,
individually or in the aggregate, have a Material Adverse Effect on Letchworth.
Neither Letchworth, any Letchworth Subsidiary, nor any director, officer or
employee of Letchworth or any Letchworth Subsidiary acting on behalf of
Letchworth or a Letchworth Subsidiary, has committed any breach of trust with
respect to any such common trust fund or collective investment fund or fiduciary
or agency account, and the accountings for each such common trust fund or
collective investment fund or fiduciary or agency account are true and correct
in all material respects and accurately reflect the assets of such common trust
fund or collective investment fund or fiduciary or agency account, except for
17
such breaches and failures to be true, correct and accurate which would not,
individually or in the aggregate, have a Material Adverse Effect on Letchworth.
2.23. INTELLECTUAL PROPERTY
Except as Previously Disclosed, Letchworth or a Letchworth Subsidiary owns the
entire right, title and interest in and to, or has valid licenses or otherwise
has the required legal rights with respect to, all of the Intellectual Property
necessary in all material respects to conduct the business and operations of
Letchworth and the Letchworth Subsidiaries as presently conducted, except where
the failure to do so would not, individually or in the aggregate, have a
Material Adverse Effect on Letchworth. None of such Intellectual Property is
subject to any outstanding order, decree, judgment, stipulation, settlement,
lien, charge, encumbrance or attachment, which order, decree, judgment,
stipulation, settlement, lien, charge, encumbrance or attachment would have a
Material Adverse Effect on Letchworth. Except as Previously Disclosed, upon
consummation of the transactions contemplated by this Reorganization Agreement
Trustco and the Trustco Subsidiaries will be entitled to continue to use all
such Intellectual Property without the payment of any fees, licenses or other
payments (other than ongoing payments required under license agreements for
software used by Letchworth or the Letchworth Subsidiaries in Previously
Disclosed amounts consistent with past practice).
2.24. ANTI-TAKEOVER PROVISIONS
No "Business Combination," "Moratorium," "Control Share" or other state anti-
takeover statute or regulation, (i) applies to the Merger, the Voting Agreements
or the Option Agreement, (ii) prohibits or restricts the ability of Letchworth
or any Letchworth Subsidiary to perform their respective obligations under this
Reorganization Agreement, or their respective ability to consummate the
transactions contemplated hereby, (iii) would have the effect of invalidating or
voiding this Reorganization Agreement, any of the Voting Agreements, or the
Option Agreement, or any provision hereof or thereof, or (iv) would subject
Trustco or any Trustco Subsidiary to any material impediment or condition in
connection with the exercise of any of its rights under this Reorganization
Agreement, any of the Voting Agreements or the Option Agreement.
2.25. INSIDER INTERESTS
All outstanding loans and other contractual arrangements (including deposit
relationships) between Letchworth or any Letchworth Subsidiary and any officer,
director or employee of Letchworth or any Letchworth Subsidiary conform to the
applicable rules and regulations and requirements of all applicable regulatory
agencies which were in effect when such loans and other contractual arrangements
were entered into. Except as set forth in Schedule 2.25, no officer, director
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or employee of Letchworth or any Letchworth Subsidiary has any material interest
in any property, real or personal, tangible or intangible, used in or pertaining
to the business of Letchworth or any Letchworth Subsidiary.
2.26. REGISTRATION OBLIGATIONS
18
Except as set forth in Schedule 2.26, neither Letchworth nor any Letchworth
-------------
Subsidiaries are under any obligation, contingent or otherwise, which will
survive the Merger by reason of any agreement to register any of its securities
under any of the Securities Laws.
2.27. CERTAIN INFORMATION
When the Registration Statement or any post-effective amendment thereto shall
become effective, and at all times subsequent to such effectiveness up to and
including the time of the Letchworth stockholders' meeting and the Trustco
stockholders' meeting to vote upon the Merger, such Registration Statement and
all amendments or supplements thereto, with respect to all information set forth
therein furnished by Letchworth relating to Letchworth and the Letchworth
Subsidiaries, (i) shall comply in all material respects with the applicable
provisions of the Securities Laws, and (ii) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading. All information concerning Letchworth and its directors, officers,
stockholders and any Subsidiaries included (or submitted for inclusion) in any
application and furnished by it pursuant to Section 4.3 of this Agreement shall
be true, correct and complete in all material respects.
2.28. YEAR 2000
The computer software operated by Letchworth and any Letchworth Subsidiary
which is material to the conduct of the business of Letchworth and any
Letchworth Subsidiary is capable of providing or is being adapted to provide
uninterrupted millennium functionality to record, store, process and present
calendar dates falling on or after January 1, 2000 in substantially the same
manner and with the same functionality as such software records, stores,
processes and presents such calendar dates falling on or before December 31,
1999, and such software and Letchworth and any Letchworth Subsidiary are
otherwise in compliance with all relevant Regulatory Authority guidance and
requirements relating to the Year 2000 computer issues including the statements
of the Federal Financial Institutions Examination Council, dated May 5, 1997,
entitled "Year 2000 Project Management Awareness," and December 1997, entitled
"Safety and Soundness Guidelines Concerning the Year 2000 Business Risk." The
costs of the adaptations referred to in this clause will not have a Material
Adverse Effect on Letchworth.
2.29. TAX TREATMENT
As of the date of this Reorganization Agreement, Letchworth knows of no reason
relating to it or any of the Letchworth Subsidiaries which would reasonably
cause it to believe that the Merger will not qualify as tax free reorganization
under Section 368(a) of the Code.
2.30. POOLING OF INTERESTS
19
Neither Letchworth nor any Letchworth Subsidiary knows of any reason (after
consultation with its independent accountants) which would reasonably cause it
to believe that the Merger will not qualify as a pooling of interests for
financial accounting purposes.
20
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF TRUSTCO
Trustco hereby represents and warrants to Letchworth as follows:
3.1. CAPITAL STRUCTURE OF TRUSTCO
The authorized capital stock of Trustco consists of 15,000,000 shares of
common stock, par value $0.10 per share ("Trustco Common Stock"), of which, as
of the date hereof, 4,807,774 shares were issued and outstanding and 27,996
shares were held in treasury. As of the date hereof, no shares of Trustco
Common Stock are reserved for issuance, except that 254,100 shares of Trustco
Common Stock and 240,000 shares of Trustco Common Stock are reserved for
issuance upon the exercise of stock options heretofore or to be hereafter
granted pursuant to Trustco's 1992 Stock Option Plan and 1998 Stock Option Plan,
respectively. All outstanding shares of Trustco capital stock have been duly
authorized and validly issued and are fully paid and (except as provided by
applicable law) nonassessable. None of the shares of Trustco's capital stock has
been issued in violation of the preemptive rights of any person. The shares of
Trustco Common Stock to be issued in connection with the Merger have been duly
authorized and, when issued in accordance with the terms of this Reorganization
Agreement and the Plan of Merger, will be validly issued, fully paid, (except as
provided by applicable law) nonassessable and free and clear of any preemptive
rights. Except as Previously Disclosed and as set forth above, Trustco does not
have and is not bound by any Rights which are authorized, issued or outstanding
with respect to the capital stock of Trustco.
3.2. ORGANIZATION, STANDING AND AUTHORITY OF TRUSTCO
Trustco is a duly organized corporation, validly existing and in good standing
under the laws of New York, with full corporate power and authority to carry on
its business as now conducted and is duly licensed or qualified to do business
in the states of the United States and foreign jurisdictions where its ownership
or leasing of property or the conduct of its business requires such
qualification, except where the failure to be so licensed or qualified would not
have a Material Adverse Effect on Trustco. Trustco is registered as a bank
holding company under the Bank Holding Company Act.
3.3. OWNERSHIP OF TRUSTCO SUBSIDIARIES; CAPITAL STRUCTURE OF TRUSTCO
SUBSIDIARIES
Trustco has no Subsidiary other than those disclosed in its Annual Report on
Form 10-K for the year ended December 31, 1998 or any Subsidiary that is not a
significant subsidiary under the SEC's Regulation S-X. Except as Previously
Disclosed, the outstanding shares of capital stock of the Trustco Subsidiaries
have been duly authorized and validly issued and are fully paid and (except as
provided in 12 U.S.C. Section 55 or Section 114 of the New York Banking Law)
nonassessable and all such shares are directly or indirectly owned by Trustco
free and clear of all liens, claims and encumbrances. No Trustco Subsidiary has
or is bound by any Rights which are authorized, issued or outstanding with
respect to the capital stock of any Trustco Subsidiary and, except as Previously
21
Disclosed, there are no agreements, understandings or commitments relating to
the right of Trustco to vote or to dispose of said shares. None of the shares of
capital stock of any Trustco Subsidiary has been issued in violation of the
preemptive rights of any person.
3.4. ORGANIZATION, STANDING AND AUTHORITY OF TRUSTCO SUBSIDIARIES
Each Trustco Subsidiary is a duly organized corporation or banking
corporation, validly existing and in good standing under applicable laws. Each
Trustco Subsidiary (i) has full power and authority to carry on its business as
now conducted, and (ii) is duly licensed or qualified to do business in the
states of the United States and foreign jurisdictions where its ownership or
leasing of property or the conduct of its business requires such licensing or
qualification and where failure to be licensed or qualified would have a
Material Adverse Effect on Trustco. Each Trustco Subsidiary has all federal,
state, local and foreign governmental authorizations necessary for it to own or
lease its properties and assets and to carry on its business as it is now being
conducted, except where the failure to be so authorized would not have a
Material Adverse Effect on Trustco. TCTC Bank is a member in good standing of
the Federal Home Loan Bank of New York and owns the requisite amount of shares
therein. Except as Previously Disclosed, all eligible deposits issued by TCTC
Bank are insured by the FDIC through the Bank Insurance Fund to the full extent
permitted under applicable law.
3.5. AUTHORIZED AND EFFECTIVE AGREEMENT
(a) Trustco has all requisite corporate power and authority to enter into and
perform all of its obligations under this Reorganization Agreement and the Plan
of Merger. The execution and delivery of this Reorganization Agreement and the
Plan of Merger and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action
in respect thereof on the part of Trustco, except that the affirmative vote of
the holders of 66 2/3% of the outstanding shares of Trustco Common Stock
entitled to vote thereon is required to approve the Plan of Merger pursuant to
the New York Business Corporation Law and Trustco's certificate of
incorporation, as amended, and Trustco's by-laws, each as in effect on the date
of this Reorganization Agreement. The Board of Directors of Trustco has
directed that this Reorganization Agreement and Plan of Merger be submitted to
Trustco's stockholders for approval at a special meeting to be held as soon as
practicable.
(b) Assuming the accuracy of the representation contained in Section 2.5(b)
hereof, this Reorganization Agreement and the Plan of Merger constitute legal,
valid and binding obligations of Trustco enforceable against it in accordance
with their respective terms subject, as to enforceability, to bankruptcy,
insolvency and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(c) Except as Previously Disclosed, neither the execution and delivery of this
Reorganization Agreement or the Plan of Merger, nor consummation of the
22
transactions contemplated hereby or thereby, nor compliance by Trustco with any
of the provisions hereof or thereof shall (i) conflict with or result in a
breach of any provision of the articles or certificate of incorporation or
association, charter or bylaws of Trustco or any Trustco Subsidiary, (ii)
assuming the consents and approvals contemplated by Section 4.3 hereof and the
consents and approvals which are Previously Disclosed are duly obtained,
constitute or result in a breach of any term, condition or provision of, or
constitute a default under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of Trustco or any Trustco
Subsidiary pursuant to, any note, bond, mortgage, indenture, license, agreement
or other instrument or obligation, or (iii) assuming the consents and approvals
contemplated by Section 4.3 hereof and the consents and approvals which are
Previously Disclosed are duly obtained, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Trustco or any Trustco
Subsidiary, except (in the case of clauses (ii) and (iii) above) for such
violations, rights, conflicts, breaches, creations or defaults which, either
individually or in the aggregate, will not have a Material Adverse Effect on
Trustco.
(d) Except for approvals specified in Section 4.3 hereof, except as Previously
Disclosed and except as expressly referred to in this Reorganization Agreement,
no consent, approval or authorization of, or declaration, notice, filing or
registration with, any governmental or regulatory authority, or any other
person, is required to be made or obtained by Trustco or any Trustco Subsidiary
on or prior to the Closing Date in connection with the execution, delivery and
performance of this Reorganization Agreement and the Plan of Merger or the
consummation of the transactions contemplated hereby or thereby. Neither Trustco
nor any of the Trustco Subsidiaries is aware of any reason why the conditions
set forth in Section 5.1(b) of this Reorganization Agreement will not be
satisfied without undue delay and without the imposition of any condition or
requirement of the type referred to in the provisions thereof.
3.6. SEC DOCUMENTS; REGULATORY FILINGS
Trustco has timely filed all SEC Documents required by the Securities Laws and
all reports and notices with AMEX required to be filed by the AMEX rules and
regulations and the Exchange Act (collectively, the "AMEX Reports"). The SEC
Documents and the AMEX Reports are true, complete and correct as of their
respective dates, in all material respects, and neither any SEC Documents nor
any AMEX Reports contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained
therein not misleading. Trustco and each of the Trustco Subsidiaries has filed
all reports required by statute or regulation to be filed with any federal or
state bank regulatory agency, except where the failure to so file would not have
a Material Adverse Effect on Trustco, and such reports were prepared in
accordance with the applicable statutes, regulations and instructions in
existence as of the date of filing of such reports in all material respects, and
none of the reports contain any untrue statement of a material fact or omit to
23
state a material fact necessary in order to make the statements contained
therein not misleading.
3.7. FINANCIAL STATEMENTS; BOOKS AND RECORDS; MINUTE BOOKS
The Trustco Financial Statements filed by Trustco in SEC Documents prior to
the date of this Agreement fairly present in all material respects, and the
Trustco Financial Statements filed by Trustco in SEC Documents after the date of
the Agreement will fairly present in all material respects the consolidated
financial position of Trustco and its consolidated Subsidiaries as of the dates
indicated and the consolidated results of operations, changes in stockholders'
equity and cash flows of Trustco and its consolidated Subsidiaries for the
periods then ended and each such financial statement has been or will be, as the
case may be, prepared in conformity with generally accepted accounting
principles applied on a consistent basis. The books and records of Trustco and
each Trustco Subsidiary fairly reflect in all material respects the transactions
to which it is a party or by which its properties are subject or bound. Such
books and records have been properly kept and maintained and are in compliance
in all material respects with all applicable legal and accounting requirements.
The minute books of Trustco and the Trustco Subsidiaries contain records which
are accurate in all material respects of all corporate actions of each of their
respective stockholders and board of directors (including committees of each of
their respective board of directors).
3.8. MATERIAL ADVERSE CHANGE
Except as Previously Disclosed, Trustco has not, on a consolidated basis,
suffered any change in its financial condition, results of operations or
business since December 31, 1998 which individually or in the aggregate with any
other such changes would constitute a Material Adverse Effect with respect to
Trustco.
3.9. ABSENCE OF UNDISCLOSED LIABILITIES
Neither Trustco nor any Trustco Subsidiary has any liability (contingent or
otherwise), excluding contractually assumed contingencies, that is material to
Trustco on a consolidated basis, or that, when combined with all similar
liabilities, would be material to Trustco on a consolidated basis, except as
Previously Disclosed, as disclosed in the Trustco Financial Statements filed
with the SEC prior to the date hereof and except for liabilities incurred in the
ordinary course of business subsequent to March 31, 1999.
3.10. PROPERTIES
Except as Previously Disclosed, Trustco and the Trustco Subsidiaries have good
and marketable title free and clear of all liens, encumbrances, charges,
defaults or equitable interests to all of the properties and assets, real and
personal, which, individually or in the aggregate, are material to the business
of Trustco and its Subsidiaries taken as a whole, and which are reflected on the
Trustco Financial Statements as of March 31, 1999 or acquired after such date,
24
except (i) liens for taxes not yet due and payable, (ii) pledges to secure
deposits and other liens incurred in the ordinary course of banking business,
(iii) such imperfections of title, easements and encumbrances, if any, as are
not material in character, amount or extent and (iv) dispositions and
encumbrances for adequate consideration in the ordinary course of business. All
leases pursuant to which Trustco or any Trustco Subsidiary, as lessee, leases
real and personal property which, individually or in the aggregate, are material
to the business of Trustco and its Subsidiaries taken as a whole are valid and
enforceable in accordance with their respective terms except where the failure
of such lease or leases to be valid and enforceable would not, individually or
in the aggregate, have a Material Adverse Effect on Trustco.
3.11. LOANS
Each loan reflected as an asset in the Trustco Financial Statements (i) is
evidenced by notes, agreements or other evidences of indebtedness which are
true, genuine and what they purport to be, (ii) to the extent secured, has been
secured by valid liens and security interests which have been perfected, and
(iii) is the legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles, in each case other
than loans as to which the failure to satisfy the foregoing standards would not
have a Material Adverse Effect on Trustco.
3.12. ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses reflected on the Trustco Financial Statements,
as of their respective dates, is, to the best of Trustco's knowledge, adequate
in all material respects to provide for possible or specific losses, net of
recoveries relating to loans previously charged off and on loans outstanding,
and (b) is, to the best of Trustco's knowledge, in all material respects
consistent with the requirements of generally accepted accounting principles to
provide for the reasonably anticipated losses with respect to Trustco's loan
portfolio based upon information reasonably available at the time.
3.13. EMPLOYEE BENEFIT PLANS
Each of the Trustco Plans complies in all material respects with the
requirements of applicable law, including ERISA and the Code. For purposes of
this Reorganization Agreement, the term "Trustco Plan" means each bonus,
incentive compensation, severance pay, medical or other insurance program,
retirement plan, or other employee benefit plan, program, agreement or
arrangement, sponsored, maintained or contributed to by Trustco or any trade or
business, whether or not incorporated, that together with Trustco or any of the
Trustco Subsidiaries would be deemed a "single employer" under Section 414 of
the Code (an "ERISA Affiliate") or under which Trustco or any ERISA Affiliate of
Trustco has any liability or obligation. No liability under Title IV of ERISA
has been incurred by Trustco or any ERISA Affiliate of Trustco that has not been
25
satisfied in full, and no condition exists that presents a material risk to
Trustco or any ERISA Affiliate of Trustco incurring any liability under such
Title, other than liability for premium payments to the Pension Benefit Guaranty
Corporation, which premiums have been or will be paid when due. Full payment has
been made, or will be made in accordance with Section 404(a)(6) of the Code of
all amounts that Trustco or any ERISA Affiliate is required to pay under Section
412 of the Code or under the terms of the Trustco Plans, and no accumulated
funding deficiency (within the meaning of Section 412 of the Code) exists with
respect to any Trustco Plan. There has been no material adverse change in the
funded status of any Trustco Plan that is subject to Title IV of ERISA since the
date of the information relating to such funded status contained in the most
recent Trustco Form 10-K filed with the SEC.
3.14. CERTAIN CONTRACTS
(a) Except as Previously Disclosed, neither Trustco nor any Trustco
Subsidiary is a party to, or is bound by, (i) any material contract as defined
in Item 601(b)(10) of Regulation S-K of the SEC or any other material contract
or similar arrangement whether or not made in the ordinary course of business
(other than loans or loan commitments and funding transactions in the ordinary
course of business of any Trustco Subsidiary) or any agreement restricting the
nature or geographic scope of its business activities in any material respect,
or (ii) any agreement, indenture or other instrument relating to the borrowing
of money by Trustco or any Trustco Subsidiary or the guarantee by Trustco or any
Trustco Subsidiary of any such obligation, other than instruments relating to
transactions entered into in the customary course.
(b) Except as Previously Disclosed, neither Trustco nor any Trustco
Subsidiary is in default under any material agreement, commitment, arrangement,
lease, insurance policy or other instrument whether entered into in the ordinary
course of business or otherwise and whether written or oral, and there has not
occurred any event that, with the lapse of time or giving of notice or both,
would constitute such a default, except for such defaults which would not,
individually or in the aggregate, have a Material Adverse Effect on Trustco.
3.15. LEGAL PROCEEDINGS
Except as Previously Disclosed, there are no actions, suits or proceedings
instituted, pending or, to the knowledge of Trustco, threatened (or unasserted
but considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome) against Trustco or any Trustco
Subsidiary or against any asset, interest or right of Trustco or any Trustco
Subsidiary as to which there is a reasonable probability of an unfavorable
outcome and which, if such an unfavorable outcome was rendered, would,
individually or in the aggregate, have a Material Adverse Effect on Trustco. To
the knowledge of Trustco, there are no actual or threatened actions, suits or
proceedings which present a claim to restrain or prohibit the transactions
contemplated herein or to impose any material liability in connection therewith
as to which there is a reasonable probability of an unfavorable outcome and
26
which, if such an unfavorable outcome was rendered, would, individually or inthe
aggregate, have a Material Adverse Effect on Trustco.
3.16. COMPLIANCE WITH LAWS
Except as Previously Disclosed, each of Trustco and the Trustco
Subsidiaries is in compliance in all material respects with all statutes and
regulations applicable to the conduct of its business, and none of them has
received notification from any agency or department of federal, state or local
government (i) asserting a material violation of any such statute or regulation,
(ii) threatening to revoke any license, franchise, permit or government
authorization or (iii) restricting or in any way limiting its operations, except
for such noncompliance, violations, revocations and restrictions which would
not, individually or in the aggregate, have a Material Adverse Effect on
Trustco. None of Trustco or any Trustco Subsidiary is subject to any regulatory
or supervisory cease and desist order, agreement, directive, memorandum of
understanding or commitment which could be reasonably anticipated to have a
Material Adverse Effect on Trustco, and none of them has received any
communication requesting that they enter into any of the foregoing.
3.17. LABOR MATTERS
With respect to their employees, neither Trustco nor any Trustco Subsidiary
is a party to any labor agreement with any labor organization, group or
association and has not engaged in any unfair labor practice. Since January 1,
1999 and prior to the date hereof, Trustco and the Trustco Subsidiaries have not
experienced any attempt by organized labor or its representatives to make
Trustco or any Trustco Subsidiary conform to demands of organized labor relating
to their employees or to enter into a binding agreement with organized labor
that would cover the employees of Trustco or any Trustco Subsidiary. There is no
unfair labor practice charge or other complaint by any employee or former
employee of Trustco or any Trustco Subsidiary against any of them pending before
any governmental agency arising out of Trustco's or such Trustco Subsidiary's
activities, which charge or complaint (i) has a reasonable probability of an
unfavorable outcome and (ii) in the event of an unfavorable outcome would,
individually or in the aggregate, have a Material Adverse Effect on Trustco;
there is no labor strike or labor disturbance pending or threatened against any
of them; and neither Trustco nor any Trustco Subsidiary has experienced a work
stoppage or other labor difficulty since January 1, 1999.
3.18. TAX MATTERS
(a) Trustco and each Trustco Subsidiary have timely filed federal income
tax returns for each year through December 31, 1998 and have timely filed, or
caused to be filed, all other federal, state, local and foreign tax returns
(including, without limitation, estimated tax returns, returns required under
Sections 1441-1446 and 6031-6060 of the Code and the regulations thereunder and
any comparable state, foreign and local laws, any other information returns,
withholding tax returns, FICA and FUTA returns and back up withholding returns
required under Section 3406 of the Code and any comparable state, foreign and
27
local laws) required to be filed with respect to Trustco or any Trustco
Subsidiary, except where the failure to file timely such federal income and
other tax returns would not, in the aggregate, have a Material Adverse Effect on
Trustco. All taxes due in respect of the periods covered by such tax returns
have been paid or adequate reserves have been established for the payment of
such taxes, except where any such failure to pay or establish adequate reserves
would not, in the aggregate, have a Material Adverse Effect on Trustco and, as
of the Closing Date, all taxes due in respect of any subsequent periods (or
portions thereof) ending on or prior to the Closing Date will have been paid or
adequate reserves will have been established for the payment thereof, except
where any such failure to pay or establish adequate reserves would not, in the
aggregate, have a Material Adverse Effect on Trustco. Except as Previously
Disclosed, no material (i) audit examination, (ii) deficiency, or (iii) refund
litigation with respect to such returns or periods has been proposed or asserted
or is pending. Neither Trustco nor any Trustco Subsidiary will have any material
liability for any such taxes in excess of the amounts so paid or reserves or
accruals so established.
(b) All federal, state and local (and, if applicable, foreign) tax returns
filed by Trustco and each Trustco Subsidiary are complete and accurate in all
material respects. Neither Trustco nor any Trustco Subsidiary is delinquent in
the payment of any material tax, assessment or governmental charge, and, except
as Previously Disclosed, none of them has requested any extension of time within
which to file any tax returns in respect of any fiscal year or portion thereof
which have not since been filed. Except as Previously Disclosed, no material
deficiencies for any tax, assessment or governmental charge have been proposed,
asserted or assessed (tentatively or otherwise) against Trustco or any Trustco
Subsidiary which have not been settled, paid or accrued.
(c) Except as Previously Disclosed, neither Trustco nor any Trustco
Subsidiary is required to include in income any adjustment in any taxable period
ending after the date hereof pursuant to Section 481(a) of the Code other than
any adjustment for which it already has made an accrual.
(d) For purposes of this Section 3.18, references to Trustco and any
Trustco Subsidiary shall include predecessors thereof.
3.19. BROKERS AND FINDERS
Neither Trustco nor any Trustco Subsidiary, nor any of their respective
officers, directors or employees, has employed any broker, finder or financial
advisor or incurred any liability for any fees or commissions in connection with
the transactions contemplated herein or the Plan of Merger, except for Trustco's
retention of Xxxxxxxxx & Company to perform certain financial advisory services
as Previously Disclosed. Prior to the execution and delivery of this
Reorganization Agreement, Xxxxxxxxx & Company has delivered to the Board of
Directors of Trustco an opinion that the Merger Consideration is fair to the
stockholders of Trustco from a financial point of view.
3.20. INSURANCE
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Trustco and the Trustco Subsidiaries each currently maintains insurance in
amounts considered by Trustco and any Trustco Subsidiary as applicable, to be
reasonably necessary for their operations. Neither Trustco nor any Trustco
Subsidiary has received any notice of a material premium increase or
cancellation with respect to any of its insurance policies or bonds, and within
the last three years, neither Trustco nor any Trustco Subsidiary has been
refused any insurance coverage sought or applied for, and Trustco has no reason
to believe that existing insurance coverage cannot be renewed as and when the
same shall expire, upon terms and conditions as favorable as those presently in
effect, other than possible increases in premiums or unavailability in coverage
that have not resulted from any extraordinary loss experience of Trustco or any
Trustco Subsidiary. Except as Previously Disclosed, the deposits of TCTC Bank
are insured by the FDIC in accordance with the FDIA, and TCTC Bank have paid all
assessments and filed all reports required by the FDIA.
29
3.21. ENVIRONMENTAL LIABILITY
Neither Trustco nor any Trustco Subsidiary has received any written notice
of any legal, administrative, arbitral or other proceeding, claim or action and,
to the knowledge of Trustco and the Trustco Subsidiaries, there is no
governmental investigation of any nature ongoing, in each case that could
reasonably be expected to result in the imposition, on Trustco or any Trustco
Subsidiary of any liability arising under any local, state or federal
environmental statute, regulation or ordinance including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, which liability would have a Material Adverse Effect on
Trustco; except as Previously Disclosed, there are no facts or circumstances
which could reasonably be expected to form the basis for any such proceeding,
claim, action or governmental investigation that would impose any such
liability; and neither Trustco nor any Trustco Subsidiary is subject to any
agreement, order, judgment, decree or memorandum by or with any court,
governmental authority, regulatory agency or third party imposing any such
liability.
3.22. ADMINISTRATION OF TRUST ACCOUNTS
To the best of Trustco's knowledge, each Trustco Subsidiary has properly
administered all common trust funds and collective investment funds and all
accounts for which it acts as a fiduciary or agent, including but not limited to
accounts for which it serves as a trustee, agent, custodian, personal
representative, guardian, conservator or investment advisor, in accordance with
the terms of the governing documents and applicable state and federal law and
regulation and common law, except where the failure to do so would not,
individually or in the aggregate, have a Material Adverse Effect on Trustco.
Neither Trustco, any Trustco Subsidiary, nor any director, officer or employee
of Trustco or any Trustco Subsidiary acting on behalf of Trustco or a Trustco
Subsidiary, has committed any breach of trust with respect to any such common
trust fund or collective investment fund or fiduciary or agency account, and the
accountings for each such common trust fund or collective investment fund or
fiduciary or agency account are true and correct in all material respects and
accurately reflect the assets of such common trust fund or collective investment
fund or fiduciary or agency account, except for such breaches and failures to be
true, correct and accurate which would not, individually or in the aggregate,
have a Material Adverse Effect on Trustco.
3.23. INTELLECTUAL PROPERTY
Except as Previously Disclosed, Trustco or a Trustco Subsidiary owns the
entire right, title and interest in and to, or has valid licenses or otherwise
has the required legal rights with respect to, all of the Intellectual Property
necessary in all material respects to conduct the business and operations of
Trustco and the Trustco Subsidiaries as presently conducted, except where the
failure to do so would not, individually or in the aggregate, have a Material
Adverse Effect on Trustco. None of such Intellectual Property is subject to any
30
outstanding order, decree, judgment, stipulation, settlement, lien, charge,
encumbrance or attachment, which order, decree, judgment, stipulation,
settlement, lien, charge, encumbrance or attachment would have a Material
Adverse Effect on Trustco.
3.24. INSIDER INTERESTS
All outstanding loans and other contractual arrangements (including deposit
relationships) between Trustco or any Trustco Subsidiary and any officer,
director or employee of Trustco or any Trustco Subsidiary conform to the
applicable rules and regulations and requirements of all applicable regulatory
agencies which were in effect when such loans and other contractual arrangements
were entered into. Except as set forth in Schedule 3.24, no officer, director
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or employee of Trustco or any Trustco Subsidiary has any material interest in
any property, real or personal, tangible or intangible, used in or pertaining to
the business of Trustco or any Trustco Subsidiary.
3.25. CERTAIN INFORMATION
When the Registration Statement or any post-effective amendment thereto
shall become effective, and at all times subsequent to such effectiveness up to
and including the time of the Letchworth Stockholders' Meeting and the Trustco
Stockholders' Meeting (each as defined in Section 4.1 hereof) to vote upon the
Merger, such Registration Statement and all amendments or supplements thereto,
with respect to all information set forth therein furnished by Trustco relating
to Trustco and the Trustco Subsidiaries, (i) shall comply in all material
respects with the applicable provisions of the Securities Laws, and (ii) shall
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements contained
therein not misleading. All information concerning Trustco and its directors,
officers, stockholders and any Subsidiaries included (or submitted for
inclusion) in any application and furnished by it pursuant to Section 4.3 of
this Agreement shall be true, correct and complete in all material respects.
3.26. YEAR 2000
The computer software operated by Trustco or any Trustco Subsidiary which
is material to the conduct of Trustco's or any Trustco Subsidiary's business is
capable of providing or is being adapted to provide uninterrupted millennium
functionality to record, store, process and present calendar dates falling on or
after January 1, 2000 in substantially the same manner and with the same
functionality as such software records, stores, processes and presents such
calendar dates falling on or before December 31, 1999, and such software and
Trustco or any Trustco Subsidiary is otherwise in compliance with all relevant
Regulatory Authority guidance and requirements relating to the Year 2000
computer issues including the statements of the Federal Financial Institutions
Examination Council, dated May 5, 1997, entitled "Year 2000 Project Management
Awareness," and December 1997, entitled "Safety and Soundness Guidelines
Concerning the Year 2000 Business Risk." The costs of the adaptations referred
to in this clause will not have a Material Adverse Effect on Trustco.
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3.27. TAX TREATMENT
As of the date of this Agreement, Trustco knows of no reason relating to it
or any of the Trustco Subsidiaries which would reasonably cause it to believe
that the Merger will not qualify as a tax-free reorganization under Section
368(a) of the Code.
3.28. MERGER CONSIDERATION
Trustco has unissued shares of Trustco Common Stock and shares of Trustco
Common Stock held in its treasury that are not reserved for any other purpose
sufficient to provide the Stock Consideration, as such term is defined in the
Plan of Merger.
3.29 POOLING OF INTERESTS
Neither Trustco nor any Trustco Subsidiary knows of any reason (after
consultation with its independent accounts) which would reasonably cause it to
believe that the Merger will not qualify as a pooling of interests for financial
accounting purposes.
ARTICLE 4. COVENANTS
4.1. STOCKHOLDERS' MEETING
4.1.1 Letchworth shall call a meeting of its stockholders (the
"Letchworth Stockholders' Meeting") as soon as practicable after the
Registration Statement is declared effective by the SEC for the purposes of
voting upon this Reorganization Agreement, Plan of Merger, the Option Agreement
and taking such other actions as may be necessary so as to consummate the
transactions contemplated hereby and thereby and shall schedule such meeting
based on consultation with Trustco. Except to the extent legally required for
the discharge by Letchworth's Board of Directors of their fiduciary duties, as
determined by such board of directors after having received the advise of legal
counsel to Letchworth and the advice of Letchworth's financial advisor, after
the receipt by Letchworth of a takeover proposal (as defined in Section
4.7(13)), Letchworth's Board of Directors shall recommend to its stockholders'
that at the Letchworth Stockholders' Meeting its stockholders approve this
Reorganization Agreement and the Option Agreement and vote in favor of and
approve the Merger and adopt the Plan of Merger.
4.1.2 Trustco shall call a meeting of its stockholders (the "Trustco
Stockholders' Meeting") as soon as practicable after the Registration Statement
is declared effective by the SEC for the purposes of voting upon this
Reorganization Agreement and Plan of Merger and taking such other actions as may
be necessary so as to consummate the transactions contemplated hereby and
thereby. Trustco shall schedule the Trustco Stockholders' Meeting based on
32
consultation with Letchworth. Except to the extent legally required for the
discharge by Trustco's Board of Directors of their fiduciary duties as
determined by such board of directors after consultation with Trustco's legal
counsel, Trustco's Board of Directors shall recommend to its stockholders' that
at the Trustco Stockholders' Meeting its stockholders approve this
Reorganization Agreement and vote in favor of and approve the Merger and adopt
the Plan of Merger.
4.2. PROXY STATEMENT; REGISTRATION STATEMENT
As promptly as practicable after the date hereof, Trustco and Letchworth
shall cooperate in the preparation of the Proxy Statement to be mailed to the
stockholders of Letchworth and Trustco in connection with this Reorganization
Agreement and the transactions contemplated hereby and to be filed by Trustco as
part of the Registration Statement. Trustco will advise Letchworth, promptly
after it receives notice thereof, of the time when the Registration Statement or
any post-effective amendment thereto has become effective or any supplement or
amendment has been filed, of the issuance of any stop order, of the suspension
of qualification of the Trustco Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction, or the initiation or threat of
any proceeding for any such purpose, or of any request by the SEC for the
amendment or supplement of the Registration Statement or for additional
information. Trustco shall take all actions necessary to register or qualify the
shares of Trustco Common Stock to be issued in the Merger pursuant to all
applicable state "blue sky" or securities laws and shall maintain such
registrations or qualifications in effect for all purposes hereof. Trustco shall
apply for approval to list the shares of Trustco Common Stock to be issued in
the Merger on the AMEX, subject to official notice of issuance, prior to the
Effective Date.
4.3. APPLICATIONS
As promptly as practicable after the date hereof, and after a reasonable
opportunity for review by counsel to Letchworth, Trustco shall submit any
requisite applications for prior approval of, and notices with respect to, the
transactions contemplated herein and in the Plan of Merger (i) to the Federal
Reserve Board pursuant to Section 3 of the Bank Holding Company Act and the Bank
Merger Act, (ii) to the OCC pursuant to 12 C.F.R. Section 5.33(g)(3), and (iii)
to the New York Banking Board pursuant to Section 142 of the New York Banking
Law, and the regulations promulgated thereunder, and each of the parties hereto
shall, and they shall cause their respective subsidiaries to, submit any
applications, notices or other filings to any other state or federal government
agency, department or body the approval of which is required for consummation of
the Merger.
4.4. BEST EFFORTS
(a) Subject to the terms and conditions of this Reorganization Agreement,
Trustco and Letchworth shall each use its reasonable best efforts in good faith,
and each of them shall cause its Subsidiaries to use their reasonable best
33
efforts in good faith, to (i) furnish such information as may be required in
connection with the preparation of the documents referred to in Sections 4.2 and
4.3 above, and (ii) take or cause to be taken all action necessary or desirable
on its part so as to permit consummation of the Merger at the earliest possible
date, including, without limitation, (1) obtaining the consent or approval of
each individual, partnership, corporation, association or other business or
professional entity whose consent or approval is required for consummation of
the transactions contemplated hereby, provided that neither Letchworth nor any
Letchworth Subsidiary shall agree to make any payments or modifications to
agreements in connection therewith without the prior written consent of Trustco,
which consent shall not be unreasonably withheld and (2) requesting the delivery
of appropriate opinions, consents and letters from its counsel, investment
advisors and independent auditors. Subject to the terms and conditions of this
Reorganization Agreement, no party hereto shall take or fail to take, or cause
or permit its Subsidiaries to take or fail to take, or to the best of its
ability permit to be taken or omitted to be taken by any third persons, any
action that would substantially impair the prospects of completing the Merger
pursuant to this Reorganization Agreement and the Plan of Merger, that would
materially delay such completion, that would adversely affect the qualification
of the Merger as a reorganization within the meaning of Section 368(a) of the
Code or that would adversely affect the qualification of the Merger for pooling
of interests accounting treatment under generally accepted accounting
principles; provided that nothing herein contained shall preclude Trustco from
exercising its rights under the Option Agreement. In the event that either party
has taken any action, whether before, on or after the date hereof, that would
adversely affect such qualification, each party shall take such action as the
other party my reasonably request to cure such effect to the extent curable
without a Material Adverse Effect on either of the parties.
(b) Letchworth shall give prompt notice to Trustco, and Trustco shall give
prompt notice to Letchworth, of (i) the occurrence, or failure to occur, of any
event which occurrence or failure would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Closing Date and (ii) any
material failure of Letchworth or Trustco, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder, and each party shall use all reasonable efforts to remedy such
failure.
(c) From the date of this Agreement through the Effective Date, Letchworth
shall, and shall cause the Letchworth Subsidiaries to, provide such assistance
to Trustco as shall be reasonably necessary to assist Trustco in converting and
transferring as soon as practicable after the Effective Date all information
concerning the loans, deposits and other assets and liabilities of Letchworth
and the Letchworth Subsidiaries into Trustco's own data processing system. After
execution of this Agreement, Letchworth shall provide Trustco with computer file
instructions with respect to the information in its data processing system
regarding the loans, deposits and the other assets and liabilities of Letchworth
and the Letchworth Subsidiaries, together with operational procedures designed
to implement the transfer of such information to Trustco. After execution of
34
this Reorganization Agreement, Letchworth and Trustco shall each designate an
individual to serve as liaison concerning the transfer of data processing
information and other similar operational matters and to consult as to whether
and when Letchworth will proceed with its pending data processing conversion.
(d) Each party shall provide and shall request its auditors to provide the
other party with such historical financial information regarding it (and related
audit reports and consents) as the other party may reasonably request for
securities disclosure purposes.
4.5. INVESTIGATION AND CONFIDENTIALITY
(a) Letchworth and Trustco each will keep the other advised of all
material developments relevant to its business and to the consummation of the
transactions contemplated herein and in the Plan of Merger. Trustco and
Letchworth each may make or cause to be made such investigation of the financial
and legal condition of the other as such party reasonably deems necessary or
advisable in connection with the transactions contemplated herein and in the
Plan of Merger, provided, however, that such investigation shall be reasonably
related to such transactions and shall not interfere unnecessarily with normal
operations. Trustco and Letchworth agree to furnish the other and the other's
advisors with such financial data and other information with respect to its
business and properties as such other party shall from time to time reasonably
request. No investigation pursuant to this Section 4.5 shall affect or be deemed
to modify any representation or warranty made by, or the conditions to the
obligations to consummate the Merger of, any party hereto.
(b) Letchworth and Trustco shall, and shall cause their respective
Subsidiaries and each of their respective directors, officers, attorneys and
advisors to, maintain the confidentiality of all information obtained in such
investigation which is not otherwise publicly disclosed by the other parties,
said undertaking with respect to confidentiality to survive any termination of
this Reorganization Agreement pursuant to Section 6.1 hereof. Letchworth and
Trustco shall hold all information furnished by the other party or any of such
party's Subsidiaries or representatives pursuant to this Section 4.5 in
confidence to the extent required by, and in accordance with, the provisions of
the confidentiality agreement executed between Letchworth and Trustco in January
1999 (the "Confidentiality Agreement"). In the event of termination of this
Agreement each party shall return to the furnishing party or destroy and certify
the destruction of all information previously furnished in connection with the
transactions contemplated by this Agreement.
4.6. PRESS RELEASES
Letchworth and Trustco shall agree with each other as to the form and
substance of any press release related to this Reorganization Agreement and the
Plan of Merger or the transactions contemplated hereby or thereby, and shall
consult each other as to the form and substance of other public disclosures
related thereto, provided, however, that nothing contained herein shall prohibit
35
any party, following notification to the other parties, from making any
disclosure which is required by applicable law or AMEX or NASDAQ rules.
4.7. ACTIONS PENDING THE MERGER
(a) Prior to the Closing Date, and except as otherwise provided for by
this Reorganization Agreement, the Plan of Merger, the Option Agreement, or
consented to or approved by Trustco, Letchworth shall, and shall cause each of
the Letchworth Subsidiaries to, use its reasonable best efforts to preserve its
properties, business and relationships with customers, employees and other
persons.
(b) Prior to the Closing Date, Letchworth shall not, and shall not permit
any of the Letchworth Subsidiaries to, except with the prior written consent of
Trustco or except as Previously Disclosed or expressly contemplated or permitted
by this Agreement, the Plan of Merger, or the Option Agreement:
(1) carry on its business other than in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted;
(2) in the case of Letchworth only, declare, set aside, make or pay
any dividend or other distribution in respect of its capital stock other than
its regular quarterly cash dividends on Letchworth Common Stock in amounts not
in excess of $.09 per share;
(3) issue any shares of its capital stock or permit any treasury
shares to become outstanding other than pursuant to the Option Agreement or
Rights outstanding at the date hereof;
(4) incur any additional debt obligation or other obligation for
borrowed money other than in the ordinary course of business consistent with
past practice;
(5) issue, grant or authorize any Rights or effect any
recapitalization, reclassification, stock dividend, stock split or like change
in capitalization, or redeem, repurchase or otherwise acquire any shares of its
capital stock except for Trust Account Shares and debt previously contracted
shares ("DPC Shares"); provided however, that in order to fulfill such
obligations, Letchworth shall acquire the necessary shares of Letchworth Common
Stock solely through open market purchases or the use of treasury shares
previously acquired by Letchworth in open market purchases;
(6) amend its articles or certificate of incorporation or association
or bylaws; impose, or suffer the imposition, on any share of stock of any
Letchworth Subsidiary held by Letchworth of any lien, charge or encumbrance, or
permit any such lien, charge or encumbrance to exist;
(7) merge with any other corporation, savings association or bank or
permit any other corporation, savings association or bank to merge into it or
consolidate with any other corporation, savings association or bank; acquire
36
control over any other firm, bank, corporation, savings association or
organization or create any Subsidiary;
(8) except in the ordinary course of business, waive or release any
material right or cancel or compromise any material debt or claim;
(9) liquidate or sell or dispose of any material assets or acquire
any material assets; make any material capital expenditure (for purposes of this
subsection (b)(9) of Section 4.7 "material capital expenditure" shall mean
expenditures in excess of $50,000 in any instance or $150,000 in the aggregate);
or establish new branches or other similar facilities, close existing branches
or similar facilities or enter into or modify any leases or other contracts
relating thereto;
(10) increase the rate of compensation of, pay or agree to pay any
bonus to, or provide any other employee benefit or incentive to, any of its
directors, officers or employees except in a manner consistent with past
practice; enter into, modify or extend, or permit to be renewed, any employment
or severance contracts with any of its present or former directors, officers or
employees (except as may be required by applicable law and except with respect
to the executive supplemental income agreements to be entered into by and
between Letchworth and the individuals identified in Schedule 4.7(b)(10);
-------------------
provided however, that Trustco shall have the right to approve the terms and
conditions of the executive supplemental income agreements prior to their
execution, which approval shall not be unreasonably withheld);
(11) change its lending, investment, asset/liability management or
other material banking policies in any material respect except as may be
required by changes in applicable law; make any loans or extend any credit,
except in the ordinary course of business consistent with its lending policies
and past practice;
(12) change its methods of accounting in effect at December 31, 1998,
except as required by changes in generally accepted accounting principles
concurred in by its independent certified public accountants, or change any of
its methods of reporting income and deductions for federal income tax purposes
from those employed in the preparation of its federal income tax returns for the
year ended December 31, 1998, except as required by changes in law;
(13) authorize or permit any of its officers, directors, employees or
agents to directly or indirectly solicit, initiate or encourage any inquiries
relating to, or the making of any proposal which constitutes, a "takeover
proposal" (as defined below), or, except to the extent legally required for the
discharge of the fiduciary duties of its Board of Directors, recommend or
endorse any takeover proposal, or participate in any discussions or
negotiations, or provide third parties with any nonpublic information, relating
to any such inquiry or proposal or otherwise facilitate any effort or attempt to
make or implement a takeover proposal; provided, however, that Letchworth may
communicate information about any such takeover proposal to its stockholders if,
in the judgment of Letchworth's Board of Directors, after consultation with
37
outside legal counsel and financial advisor, such communication is necessary in
order to comply with its fiduciary duties to Letchworth's stockholders required
under applicable law. Letchworth will take all actions necessary or advisable to
inform the appropriate individuals or entities referred to in the first sentence
hereof of the obligations undertaken herein. Letchworth will notify Trustco
immediately if any such inquiries or takeover proposals are received by, any
such information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, Letchworth, and Letchworth will
promptly inform Trustco in writing of all of the relevant details with respect
to the foregoing. As used in this Agreement, "takeover proposal" shall mean any
tender or exchange offer, proposal for a merger, consolidation or other business
combination involving Letchworth or any Letchworth Subsidiary or any proposal or
offer to acquire in any manner 25% or more of the voting power of Letchworth, or
25% or more of the assets of, Letchworth or any Letchworth Subsidiary other than
the transactions contemplated or permitted by this Reorganization Agreement, the
Plan of Merger and the Option Agreement; or
(14) agree to do any of the foregoing.
4.8. CERTAIN POLICIES
Prior to the Effective Date, Letchworth shall, consistent with generally
accepted accounting principles and on a basis mutually satisfactory to it and
Trustco, modify and change its loan, litigation and real estate valuation
policies and practices (including loan classifications and levels of reserves)
so as to be applied on a basis that is consistent with that of Trustco;
provided, however, that Letchworth shall not be obligated to take any such
action pursuant to this Section 4.8 unless and until (i) Trustco irrevocably
acknowledges to Letchworth in writing that all conditions to its obligation to
consummate the Merger have been satisfied and (ii) Trustco irrevocably waives in
writing any and all rights that it may have to terminate this Reorganization
Agreement and Plan of Merger.
4.9. CLOSING; ARTICLES OF MERGER
The transactions contemplated by this Reorganization Agreement and the Plan
of Merger shall be consummated at a closing to be held at the offices of the law
firm of Xxxxxx Beach & Xxxxxx, LLP, 000 Xxxx Xxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx on
the first business day following satisfaction of the conditions to consummation
of the Merger set forth in Article 5 hereof (other than such conditions relating
to the actions to be taken at the Closing) or such later date as may be agreed
upon by the parties hereto. In connection with such Closing Trustco and
Letchworth shall execute the Certificate of Merger substantially in the form
attached hereto as Annex B ("Certificate of Merger") and shall cause the
-------
Certificate of Merger to be delivered to the New York Department of State in
accordance with Section 904(a) of the New York Business Corporation Law. The
Merger shall be effective at the time and on the date the Certificate of Merger
38
is filed by the New York Department of State (the "Effective Date").
4.10. AFFILIATES
Letchworth and Trustco shall cooperate and use their best efforts to
identify those persons who may be deemed to be "affiliates" of Letchworth within
the meaning of Rule 145 promulgated by the Commission under the Securities Act.
Letchworth shall use its best efforts to cause each person so identified to
deliver to Trustco, no later than 30 days prior to the Effective Date, a written
Affiliate Agreement substantially in the form attached hereto as Annex C.
-------
4.11. LETCHWORTH EMPLOYEES; DIRECTORS AND MANAGEMENT
(a) On or after the Effective Date, to the extent permitted by applicable
law, all persons who are employed by Letchworth and/or any of the Letchworth
Subsidiaries on such date (collectively "Letchworth Employees") shall continue
to participate in the Letchworth Plans. This Section 4.11(a) shall not be
construed (i) to limit Letchworth's ability to terminate any Letchworth Plan at
the request of Trustco prior to or on the Effective Date, (ii) to limit
Trustco's ability to terminate or amend any Letchworth Plan after the Effective
Date or (iii) to limit Trustco's ability to merge any Letchworth Plan with and
into a Trustco Plan. All Letchworth Employees who become participants in a
Trustco Plan shall, for purposes of determining eligibility for and vesting of
such employee benefits only (and not for pension benefit accrual purposes) and,
if applicable and permitted under the Trustco Plan(s), for purposes of
satisfying any waiting periods concerning "preexisting conditions" and the
satisfaction of any "copayment" or deductible requirements, be given credit for
service with Letchworth or a Letchworth Subsidiary or any predecessor thereto
prior to the Effective Date. Trustco presently intends that the employee
benefits made available after the Effective Date to Letchworth Employees who
participate in the Letchworth Plans will, when taken as a whole, remain
comparable to those available under the Letchworth Plans in affect as of the
date of this Agreement. This Section 4.11(a) shall not be construed (i) to limit
the ability of Trustco and its Affiliates to terminate the employment of any
employee or to review employee benefit programs (including any employee benefit
programs included in a Letchworth Plan or a Trustco Plan) from time to time and
to make such changes as they deem appropriate or (ii) to require Trustco or its
affiliates to provide employees or former employees of Letchworth or any of its
Subsidiaries with post-retirement medical benefits more favorable than those
provided under the Letchworth Plan or, in the case of a terminated or merged
Letchworth Plan, more favorable than those provided to new hires at Trustco. No
provision of this Section 4.11(a) shall create any third party beneficiary
rights to any employee or former employee of Letchworth or a Letchworth
Subsidiary (including any beneficiary or dependent thereof) in respect of
continued employment (or resumed employment) or any other matter.
(b) Trustco agrees to honor the employee agreements identified on Schedule
--------
4.11(b) (the "Continuing Employment Agreements"), such that Xxxxx X. Xxxxxx
-------
shall remain chairman of the board of directors of The Bank of Castile and Xx.
Xxxxxx X. Xxxxxxxx shall remain president and chief executive officer of The
Bank of Castile. With respect to the Continuing Employment Agreements, the
39
provisions of this Section 4.11(b) are intended to be for the benefit of and
shall be enforceable by, those individuals who are parties to such agreements
and their respective heirs and representatives. Notwithstanding anything to
contrary herein, Trustco agrees that the Continuing Employment Agreement of Xx.
Xxxxx X. Xxxxxx may be amended by Trustco for the sole and limited purposes of
permitting the assignment of such agreement from The Bank of Castile to Trustco,
identifying Xx. Xxxxxx as the President of Trustco, and describing the duties
associated with such position.
(c) From and after the Effective Date, the Letchworth Employees shall be
eligible to participate in the Trustco 1998 Stock Option Plan subject to the
terms and conditions of such plan, including but not limited to requirements of
eligibility thereunder.
40
4.12 BOARD OF DIRECTORS OF TRUSTCO
From and after the Effective Date, Trustco's Board of Directors shall take
all requisite action to elect as directors of Trustco as of the Effective Date
Xxxxx X. Xxxxxx, Xxxxxxx X. Spain Jr. and Xxxxx Xxxxxx.
4.13 INDEMNIFICATION
(a) From and after the Effective Date, Trustco shall indemnify, defend and
hold harmless each person who is now, or who has been at any time prior to the
date of this Agreement or who becomes prior to the Effective Date, a director or
officer of Letchworth (the "Indemnified Parties") against all losses, claims,
damages, costs, expenses (including attorneys' fees), liabilities or judgments
or amounts that are paid in settlement (which settlement shall require the prior
written consent of Trustco, which consent shall not be unreasonably withheld) of
or in connection with any claim, action, suit, proceeding or investigation,
whether civil, criminal or administrative (each, a "Claim"), in which an
Indemnified Party is, or is threatened to be made, a party or witness in whole
or in part on or arising in whole or in part out of, or pertaining to (i) the
fact that such person is or was a director or officer of Letchworth or any
Letchworth Subsidiary or (ii) this Agreement, the Plan of Merger, the Option
Agreement or any of the transactions contemplated hereby, regardless of whether
such Claim is asserted or claimed before, or at or after, the Effective Date, to
the fullest extent permitted under applicable state or federal law in effect as
of the date hereof. Any Indemnified Party wishing to claim indemnification
under this Section 4.13(a), upon learning of any Claim, shall promptly notify
Trustco (but the failure to so notify Trustco shall not relieve it from any
liability which it may have under this Section 4.13(a), except to the extent
such failure materially prejudices Trustco). In the event of any such Claim
(whether arising before or after the Effective Date), (1) Trustco shall have the
right to assume the defense thereof (in which event the Indemnified Parties will
cooperate in the defense of any such matter) and upon such assumption Trustco
shall not be liable to any Indemnified Party for any legal expenses of other
counsel or any other expenses subsequently incurred by any Indemnified Party in
connection with the defense thereof, except that if Trustco elects not to assume
such defense, or counsel for the Indemnified Parties reasonably advises the
Indemnified Parties that there are issues which raise conflicts of interest
between Trustco and the Indemnified Parties, the Indemnified Parties may retain
counsel reasonably satisfactory to them, and Trustco shall pay the reasonable
fees and expenses of such counsel for the Indemnified Parties, (2) Trustco shall
be obligated pursuant to this paragraph to pay for only one firm of counsel for
all Indemnified Parties, (3) Trustco shall not be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld) and (4) Trustco shall have no obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final and nonappealable,
that indemnification of such Indemnified Party in the manner contemplated hereby
is prohibited by applicable law. Trustco's obligations under this Section
4.13(a) continue in full force and effect for a period of six years from the
41
Effective Date, provided, however, that all rights to indemnification in respect
of any Claim asserted or made within such period shall continue until the final
disposition of the Claim.
(b) Trustco agrees that all rights to indemnification and all limitations
on liability existing in favor of the directors, officers and employees of
Letchworth and any Letchworth Subsidiary (the "Covered Parties") as provided in
their respective certificates of incorporation, by-laws or similar governing
documents as in effect as of the date of this Reorganization Agreement with
respect to matters occurring prior to the Effective Date shall survive the
Merger and shall continue in full force and effect, and shall be honored by such
entities or their respective successors as if they were the indemnifying party
hereunder, without any amendment thereto, for a period of six years from the
Effective Date; provided, however, that all rights to indemnification in respect
of any Claim asserted or made within such period shall continue until the final
disposition of the Claim; provided, further, however, that nothing contained in
this Section 4.13(b) shall be deemed to preclude the liquidation, consolidation
or merger of Letchworth or any Letchworth Subsidiary, in which case all of such
rights to indemnification and limitations on liability shall be deemed to so
survive and continue notwithstanding any such liquidation, consolidation or
merger.
(c) Trustco, from and after the Effective Date will use its best efforts
directly or indirectly to cause the persons who served as directors or officers
of Letchworth on or before the Effective Date to be covered by Letchworth's
existing directors' and officers' liability insurance policy (provided that
Trustco may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions which are not less advantageous than
such policy) but in no event shall any insured person be entitled under this
Section 4.13(c) to insurance coverage more favorable than that provided to him
or her in such capacities at the date hereof with respect to acts or omissions
resulting from their service as such on or prior to the Effective Date. Such
insurance coverage, if reasonably available at a reasonable cost relative to the
coverage obtained, shall commence on the Effective Date and will be provided for
a period of no less than six years after the Effective Date; provided, however,
that in no event shall Trustco be required to expend more than the current
amount expended by Letchworth (the "Insurance Amount") to maintain or procure
insurance coverage pursuant hereto and further provided that the Insurance
Amount shall be deemed reasonable for purposes of this Section 4.13(c).
Letchworth agrees to renew any such existing insurance or to purchase any
"discovery period" insurance provided for thereunder at Trustco's request.
(d) In the event Trustco or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Trustco
assume the obligations set forth in this section.
42
(e) The provisions of Section 4.13(a), (b) and (c) are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and their
respective heirs and representatives.
4.14. INTENTIONALLY OMITTED
4.15. DIVIDENDS
After the date of this Agreement, each of Trustco and Letchworth shall
coordinate with the other for the declaration of any dividends in respect of
Trustco Common Stock and Letchworth Common Stock and the record dates and
payment dates relating thereto, it being the intention of the parties hereto
that holders of Trustco Common Stock or Letchworth Common Stock shall not
receive two dividends, or fail to receive one dividend, for any single calendar
quarter with respect to their shares of Trustco Common Stock and/or Letchworth
Common Stock and any shares of Trustco Common Stock any such holder receives in
exchange therefor in the Merger.
4.16. ADVISORS TO THE BOARD
Unless prohibited by applicable law, promptly following the Effective Date,
Trustco shall cause X.X. Xxx Xxxxxxx and Xxxxxxx Spain to be appointed as
advisors to Trustco's Board of Directors to serve in such capacity until such
time as Trustco's Board of Directors shall determine. It is anticipated that the
advisors' function will be to, among other things, advise Trustco's Board of
Directors on deposit and lending activities in The Bank of Castile's and Mahopac
Bank's market areas. Each advisor shall be paid meeting attendance fees of $250;
provided, however, that notwithstanding anything else in this Section 4.16, no
attendance fees shall be paid for meetings not actually attended.
ARTICLE 5. CONDITIONS PRECEDENT
5.1. CONDITIONS PRECEDENT - TRUSTCO AND LETCHWORTH
The respective obligations of the parties to effect the Merger shall be
subject to satisfaction or waiver of the following conditions at or prior to the
Closing Date:
(a) All corporate action necessary to authorize the execution, delivery
and performance of this Reorganization Agreement and the Plan of Merger and
consummation of the transactions contemplated hereby and thereby shall have been
duly and validly taken, and the stockholders of Letchworth and Trustco shall
have approved this Reorganization Agreement and voted in favor of the Merger and
shall have adopted the Plan of Merger;
(b) The parties hereto shall have received all regulatory approvals
required or mutually deemed necessary in connection with the transactions
contemplated by this Reorganization Agreement and the Plan of Merger, all notice
periods and waiting periods required after the granting of any such approvals
shall have passed and all conditions contained in any such approval required to
43
have been satisfied prior to consummation of such transactions shall have been
satisfied, provided, however, that no such approval shall have imposed any
condition or requirement which, in the reasonable opinion of the Board of
Directors of Trustco or Letchworth so materially and adversely affects the
anticipated economic and business benefits to Trustco or Letchworth,
respectively, of the transactions contemplated by this Agreement as to render
consummation of such transactions inadvisable;
(c) The Registration Statement (including any post-effective amendment
thereto) shall be effective under the Securities Act, and no proceeding shall be
pending, or to the knowledge of Trustco, threatened by the Commission to suspend
the effectiveness of such Registration Statement, and Trustco shall have
received all state securities or "Blue Sky" permits or other authorizations, or
confirmations as to the availability of an exemption from registration
requirements as may be necessary;
(d) To the extent that any lease, license, loan, financing agreement or
other contract or agreement to which Letchworth or any Letchworth Subsidiary is
a party requires the consent of or waiver from the other party thereto as a
result of the transactions contemplated by this Agreement, such consent or
waiver shall have been obtained, unless the failure to obtain such consents or
waivers, individually or in the aggregate, would not have a Material Adverse
Effect on Letchworth;
(e) None of the parties hereto shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the transactions contemplated by this
Reorganization Agreement and the Plan of Merger and there shall be no action or
proceeding by or before any such court or agency that, in the judgment of
Letchworth or Trustco, with the advice of their respective counsel, shall
present a bona fide claim to restrain, prohibit or invalidate the transactions
contemplated hereby;
(f) The shares of Trustco Common Stock that may be issued in the Merger
shall have been approved for listing on AMEX, subject to official notice of
issuance; and
(g) Trustco and Letchworth shall have received an opinion of Xxxxxx Beach
& Xxxxxx, LLP, in form and substance which is customary in transactions of the
nature contemplated by this Agreement, dated as of the Effective Date,
substantially to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion which are consistent with the state of
facts existing on the Effective Date, the Merger shall be treated for federal
income tax purposes as a reorganization or part of a reorganization within the
meaning of Section 368(a) of the Code, and that, provided the Merger is such a
reorganization, the exchange of Letchworth Common Stock to the extent exchanged
for Trustco Common Stock will not give rise to recognition of gain or loss for
federal income tax purposes to the stockholders of Letchworth, except to the
extent that cash is received in lieu of fractional share interests of Trustco
Common Stock, and the Merger will not give rise to recognition of gain or loss
44
for federal income tax purposes to Trusto. In rendering the opinion described in
this subsection (g), Xxxxxx Beach & Xxxxxx, LLP will rely on representations and
facts as provided by Trustco and Letchworth, including without limitation the
standard representations set forth in Revenue Procedure 86-42, 1986-2 C.B. 722.
5.2. CONDITIONS PRECEDENT - LETCHWORTH
The obligations of Letchworth to effect the Merger shall be subject to
satisfaction of the following additional conditions at or prior to the Closing
Date unless waived by Letchworth pursuant to Section 6.4 hereof:
(a) The representations and warranties of Trustco set forth in Article 3
hereof shall be true and correct in all material respects as of the date of this
Reorganization Agreement and as of the Closing Date as though made on and as of
the Closing Date (or on the date when made in the case of any representation and
warranty which specifically relates to an earlier date), except as otherwise
contemplated by this Reorganization Agreement or consented to in writing by
Letchworth; provided, however, that (i) in determining whether or not the
condition contained in this paragraph (a) shall be satisfied, no effect shall be
given to any exceptions in such representations and warranties relating to
materiality or Material Adverse Effect and (ii) the condition contained in this
paragraph (a) shall be deemed to be satisfied unless the failure of such
representations and warranties to be so true and correct constitute,
individually or in the aggregate, a Material Adverse Effect on Trustco;
(b) Trustco shall have in all material respects performed all obligations
and complied with all covenants required by this Reorganization Agreement and
the Plan of Merger to be performed or complied with at or prior to the Closing
Date;
(c) Trustco shall have delivered to Letchworth a certificate, dated the
Closing Da te and signed by its Chairman, CEO, Executive Vice President or
Senior Vice President to the effect that the conditions set forth in paragraphs
(a) and (b) of this section have been satisfied;
(d) Letchworth shall have received from PricewaterhouseCoopers, L.L.P.
letters dated not more than five days prior to (i) the effective date of the
Registration Statement and (ii) the Closing Date, with respect to certain
financial information regarding Trustco, each in form and substance which is
customary in transactions of the nature contemplated by this Agreement;
(e) Within five days of mailing the Prospectus/Proxy Statement, Letchworth
shall have received, if requested by Letchworth, an opinion from XxXxxxxxx, Xxxx
& Xxxxxx, Inc. to the effect that the Exchange Ratio is fair from a financial
point of view to the stockholders of Letchworth; and
45
(f) Letchworth shall have received an opinion of Xxxxxx Beach & Xxxxxx,
LLP counsel to Trustco, dated as of the Closing Date, in a form mutually
acceptable to the parties related to the representations in Section 3.5(a).
5.3. CONDITIONS PRECEDENT - TRUSTCO
The obligations of Trustco to effect the Merger shall be subject to
satisfaction of the following additional conditions at or prior to the Closing
Date unless waived by Trustco pursuant to Section 6.4 hereof:
(a) The representations and warranties of Letchworth set forth in Article
2 hereof shall be true and correct in all material respects as of the date of
this Reorganization Agreement and as of the Closing Date as though made on and
as of the Closing Date (or on the date when made in the case of any
representation and warranty which specifically relates to an earlier date),
except as otherwise contemplated by this Reorganization Agreement or consented
to in writing by Trustco; provided, however, that (i) in determining whether or
not the condition contained in this paragraph (a) shall be satisfied, no effect
shall be given to any exceptions in such representations and warranties relating
to materiality or Material Adverse Effect and (ii) the condition contained in
this paragraph (a) shall be deemed to be satisfied unless the failure of such
representations and warranties to be so true and correct constitute,
individually or in the aggregate, a Material Adverse Effect on Letchworth;
(b) Letchworth shall have in all material respects performed all
obligations and complied with all covenants required by this Reorganization
Agreement and the Plan of Merger to be performed or complied with at or prior to
the Closing Date;
(c) Letchworth shall have delivered to Trustco a certificate, dated the
Closing Date and signed by its Chairman, President and Chief Executive Officer
or any Executive Vice President to the effect that the conditions set forth in
paragraphs (a) and (b) of this section have been satisfied;
(d) Trustco shall have received from KPMG, L.L.P. letters dated not more
than five days prior to (i) the effective date of the Registration Statement and
(ii) the Closing Date, with respect to certain financial information regarding
Letchworth, each in form and substance which is customary in transactions of the
nature contemplated by this Agreement;
(e) Trustco shall have received from KPMG, L.L.P. a letter, in the form
then customarily issued by such accountants in transactions of this type, to the
effect that the Merger will qualify for pooling of interests accounting
treatment;
(f) Simultaneous with the execution and delivery of this Agreement, (i)
the directors of Letchworth who are stockholders of Letchworth shall have
executed and delivered to Trustco Voting Agreements substantially in the form
attached as Annex D and (ii) the Option Agreement shall be executed and
-------
delivered by Letchworth to Trustco; and
46
(g) Trustco shall have received an opinion of Mackenzie, Smith, Xxxxx,
Xxxxxxx & Xxxxxx, LLP counsel to Letchworth, dated as of the Closing Date, in a
form mutually acceptable to the parties related to the representations in
Section 2.5(a).
ARTICLE 6. TERMINATION, WAIVER AND AMENDMENT
6.1. TERMINATION
This Reorganization Agreement and the Plan of Merger may be terminated,
either before or after approval by the stockholders of Letchworth and Trustco:
(a) At any time on or prior to the Effective Date, by the mutual consent
in writing of the parties hereto;
(b) At any time on or prior to the Closing Date, by Trustco in writing, if
Letchworth has, or by Letchworth in writing, if Trustco has, in any material
respect, breached (i) any covenant or agreement contained herein or in the Plan
of Merger or (ii) any representation or warranty contained herein, and in either
case if (x) such breach has not been cured by the earlier of 30 days after the
date on which written notice of such breach is given to the party committing
such breach or the Closing Date and (y) such breach would entitle the non-
breaching party not to consummate the transactions contemplated hereby under
Article V hereof;
(c) At any time, by any party hereto in writing, if the applications for
prior approval referred to in Section 4.3 hereof have been denied, and the time
period for appeals and requests for reconsideration has run, or if any
governmental entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the Merger;
(d) At any time, by any party hereto in writing, if the stockholders of
Letchworth or the stockholders of Trustco do not approve the transactions
contemplated herein at the special meetings duly called for that purpose;
(e) By any party hereto in writing, if the Closing Date has not occurred
by the close of business on June 30, 2000 unless the failure of the Closing to
occur by such date shall be due to the failure of the party seeking to terminate
this Agreement to perform or observe the covenants and agreements set forth
herein; or
(f) By Letchworth, upon the execution by Letchworth of a definitive
agreement relating to a takeover proposal (as defined in Section 4.7(b)(13)),
provided that (i) Letchworth shall have complied with its obligations under
Section 4.7(b)(13) hereof, (ii) the Board of Directors of Letchworth shall have
determined, after having received the advice of legal counsel to Letchworth and
the advice of Letchworth's financial advisor, that such action is necessary for
the Board of Directors to act in a manner consistent with its fiduciary duties
under applicable law and (iii) concurrent with its notification of termination,
47
Letchworth will wire to an account designated by Trustco $3.0 million in
immediately available funds.
(g) Subject to Trustco's rights hereunder, by Letchworth, in writing, if
(i) the Average Trustco Stock Price (as hereinafter defined) is less than $29.22
and (ii) the Average Trustco Stock Price has declined as a percentage from the
---
Base Trustco Stock Price (as hereinafter defined) by more than 15% in excess of
the total Percentage Decline in the Value component of the SNL Bank Stock Index
(All Publicly Traded Commercial Banks). The "Average Trustco Stock Price" means
the average (rounded down to the nearest whole cent) of the closing sale price
of one share of Trustco Common Stock on AMEX for 10 consecutive full trading
days (after the date of this Reorganization Agreement and prior to the Effective
Date). The "Base Trustco Stock Price" means $34.38. The "Percentage Decline in
the SNL Bank Stock Index" means the difference, expressed as a percentage, of
the SNL Bank Stock Index, between the day prior to the execution of this
Reorganization Agreement and the last full trading day included in that
computation of the Average Trustco Stock Price which reflected an Average
Trustco Stock Price of less than $29.22. The foregoing right of termination
notwithstanding, in the event Letchworth exercises its right to terminate
pursuant to this Section 6.1(g), Trustco shall have the option to proceed with
the Merger and the transactions contemplated in this Agreement by agreeing to
the "amended Exchange Ratio". The "amended Exchange Ratio" shall be the quotient
obtained by dividing $23.00 by the Average Trustco Stock Price, determined based
on the 10 consecutive full trading days immediately preceding the date Trustco
shall have exercised its option; provided, however, that in no event shall
Trustco have the right to exercise its option if the amended Exchange Ratio is
greater than .85. Trustco's option to accept the amended Exchange Ratio and
proceed with the Merger and the transactions contemplated by this Agreement
shall be exercised by written notice to Letchworth within 5 business days of
receipt by Trustco of written notice of Letchworth's intent to terminate
pursuant to this subsection (g).
(h) By Letchworth in writing, upon the execution by Trustco of a
definitive agreement relating to a takeover proposal (as herein defined); and,
in the event of a termination by Letchworth pursuant to this subsection (h) of
Section 6.1, immediately after receipt of notification of termination, Trustco
will pay Letchworth $1.0 million in immediately available funds. For purposes of
this subsection (h) of Section 6.1, the term "takeover proposal" shall mean any
tender or exchange offer, proposal for a merger, consolidation or other business
combination involving Trustco or any Trustco Subsidiary or any proposal or offer
to acquire in any manner 25% or more of the voting power of Trustco or 25% or
more of the assets of Trustco or any Trustco Subsidiary.
6.2. EFFECT OF TERMINATION
In the event this Reorganization Agreement and the Plan of Merger is
terminated pursuant to Section 6.1 hereof, this Reorganization Agreement and the
Plan of Merger shall become void and have no effect, except that (i) the
provisions relating to confidentiality and expenses set forth in Sections 4.5
and 7.1 hereof, respectively, shall survive any such termination and (ii) a
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termination pursuant to Section 6.1(b)(i) or (b)(ii) shall not relieve the
breaching party from liability for an uncured willful breach of such covenant or
agreement or representation or warranty giving rise to such termination.
6.3. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
All representations, warranties and covenants in this Reorganization
Agreement and the Plan of Merger or in any instrument delivered pursuant hereto
or thereto shall expire on, and be terminated and extinguished at, the Effective
Date other than covenants that by their terms are to survive or be performed
after the Effective Date, provided that no such representations, warranties or
covenants shall be deemed to be terminated or extinguished so as to deprive
Trustco or Letchworth (or any director, officer or controlling person thereof)
of any defense in law or equity which otherwise would be available against the
claims of any person, including, without limitation, any stockholder or former
stockholder of either Trustco or Letchworth, the aforesaid representations,
warranties and covenants being material inducements to the consummation by
Trustco and Letchworth of the transactions contemplated herein.
6.4. WAIVER
Except with respect to any required stockholder or regulatory approval,
Trustco and Letchworth, respectively, by written instrument signed by an
executive officer of such party, may at any time (whether before or after
approval of this Reorganization Agreement and the Plan of Merger by the
stockholders of Trustco and Letchworth) extend the time for the performance of
any of the obligations or other acts of Letchworth, on the one hand, or Trustco,
on the other hand, and may waive (i) any inaccuracies of such parties in the
representations or warranties contained in this Agreement, the Plan of Merger or
any document delivered pursuant hereto or thereto, (ii) compliance with any of
the covenants, undertakings or agreements of such parties, or satisfaction of
any of the conditions precedent to its obligations, contained herein or in the
Plan of Merger or (iii) the performance by such parties of any of its
obligations set out herein or therein; provided, however, that no such waiver
executed after approval of this Reorganization Agreement and the Plan of Merger
by the stockholders of Trustco or Letchworth shall change the number of shares
of Trustco Common Stock into which each share of Letchworth Common Stock shall
be converted pursuant to the Merger.
6.5. AMENDMENT OR SUPPLEMENT
This Reorganization Agreement and the Plan of Merger may be amended or
supplemented at any time only by mutual agreement of the parties hereto or
thereto. Any such amendment or supplement must be in writing and approved by
their respective boards of directors and/or officers authorized thereby and
shall be subject to the proviso in Section 6.4 hereto.
ARTICLE 7. MISCELLANEOUS
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7.1. EXPENSES
Each party hereto shall bear and pay all costs and expenses incurred by it
in connection with the transactions contemplated in this Reorganization
Agreement, including fees and expenses of its own financial consultants,
accountants and counsel, except that Trustco shall pay 60% and Letchworth shall
pay 40% of all printing and mailing costs and filing fees associated with the
Registration Statement and the Proxy Statement.
7.2. AGREEMENT
This Reorganization Agreement, the Plan of Merger and the Option Agreement
contain the entire agreement between the parties with respect to the
transactions contemplated hereunder and thereunder and supersede all prior
arrangements or understandings with respect thereto, written or oral, other than
documents referred to herein or therein and the Confidentiality Agreements.
Notwithstanding any provision of any of the aforementioned agreements, the
parties agree that, subject to the limitations set forth in Section 4.4(a)
relating to acts or omissions that would adversely affect the qualification of
the Merger for pooling of interests, Trustco may purchase Letchworth Common
Stock in open market or negotiated transactions prior to the Effective Date, not
to exceed 5% of the outstanding Letchworth Common Stock and subject to any
applicable legal restrictions. The terms and conditions of this Reorganization
Agreement and the Plan of Merger shall inure to the benefit of and be binding
upon the parties hereto and thereto and their respective successors. Except as
specifically set forth herein, or in the Plan of Merger, nothing in this
Reorganization Agreement or the Plan of Merger, expressed or implied, is
intended to confer upon any party, other than the parties hereto and thereto,
and their respective successors, any rights, remedies, obligations or
liabilities. This Reorganization Agreement and the Plan of Merger, taken
together, shall constitute a plan of reorganization within the meaning of
Section 368 of the Code.
7.3. NO ASSIGNMENT
No party hereto may assign any of its rights or obligations under this
Reorganization Agreement to any other person.
7.4. NOTICES
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent by
facsimile transmission or overnight express or by registered or certified mail,
postage prepaid, addressed as follows:
If to Letchworth:
Letchworth Independent Bancshares Corporation, 00 Xxxxx Xxxx Xxxxxx,
Xxxxxxx, Xxx Xxxx 00000, Attention: Xx. Xxxxx X. Xxxxxx, President and Chief
Executive Officer, Facsimile No: (000) 000-0000.
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With a required copy to:
Mackenzie, Smith, Xxxxx, Xxxxxxx & Xxxxxx, LLP, 000 Xxxxx Xxxxxx Xxxxxx,
Xxxxx 000, Xxxxxxxx, Xxx Xxxx 00000, Attention: Xxxxxx Xxxxx, Esquire, Facsimile
No. (000) 000-0000.
If to Trustco:
Xxxxxxxx Trustco, Inc., 000 Xxxxx Xxxxx Xxxxxx, Xxxxxx, Xxx Xxxx 00000,
Attention: Xxxxx X. Xxxxxx, President and Chief Executive Officer, Facsimile No.
(000) 000-0000.
With a required copy to:
Xxxxxx Beach & Xxxxxx, LLP, 000 Xxxx Xxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx
00000, Attention: Xxxxxx X. Xxxxxxx, Esquire, Facsimile No. (000) 000-0000.
7.5. CAPTIONS
The captions contained in this Reorganization Agreement are for reference
purposes only and are not part of this Reorganization Agreement.
7.6. COUNTERPARTS
This Reorganization Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
7.7. GOVERNING LAW
This Reorganization Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and entirely to be performed within such jurisdiction, except to the extent
federal law may be applicable.
[Remainder of this page left intentionally blank.]
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Reorganization Agreement to be executed in counterparts
by their duly authorized officers and their corporate seal to be hereunto
affixed and attested by their officers thereunto duly authorized, all as of the
day and year first above written.
XXXXXXXX TRUSTCO, INC.
Attest:___________________ By:____________________________
Xxxxx X. Xxxxxx, President and
Chief Executive Officer
(SEAL)
LETCHWORTH INDEPENDENT
BANCSHARES CORPORATION
Attest:___________________ By:____________________________
Xxxxx X. Xxxxxx, President and
Chief Executive Officer
(SEAL)
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