Exhibit 2
PLAN OF REORGANIZATION AND EXCHANGE
THIS PLAN OF REORGANIZATION AND EXCHANGE (the "Plan") is made and
entered into as of the 1st day of April, 2002, by and between FIRST RELIANCE
BANK (the "Bank"), a bank formed under the laws of the State of South Carolina,
and FIRST RELIANCE BANCSHARES, INC. (the "Holding Company"), a South Carolina
corporation.
WITNESSETH
WHEREAS, the principal offices of the Bank and the Holding Company are
located at 0000 X. Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxx Xxxxxxxx; and
WHEREAS, the authorized capital stock of the Bank consists solely of
2,000,000 shares of voting common stock ("Bank Stock"), without par value, of
which 723,518 shares are issued and outstanding; and
WHEREAS, the authorized capital stock of the Holding Company consists
solely of 5,000,000 shares of voting common stock ("Holding Company Stock"), par
value $0.01 per share, of which 100 shares are issued and outstanding; and
WHEREAS, the Boards of Directors of the Bank and of the Holding Company
desire for the Bank to become a wholly-owned subsidiary of the Holding Company;
and
WHEREAS, the respective Boards of Directors of the Bank and of the
Holding Company deem it advisable and in the best interests of the Bank, the
Holding Company and the shareholders of the Bank to utilize a share exchange
(the "Share Exchange") to accomplish the holding company structure and have
approved and adopted this Plan and authorized the execution hereof; and
WHEREAS, the Board of Directors of the Holding Company has agreed to
issue the shares of Holding Company Stock which shareholders of the Bank will
receive upon consummation of the Share Exchange.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements herein contained, and for the purpose of stating the method,
terms and conditions of the Share Exchange, the mode of carrying the same into
effect, the manner and basis of converting and exchanging the shares of Bank
Stock and Holding Company Stock, and such other provisions relating to the Share
Exchange as the parties deem necessary or desirable, the parties hereto agree as
follows:
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SECTION I
THE PARTIES
The name of the corporation whose shares will be acquired is First
Reliance Bank (the Bank), and the name of the acquiring corporation is First
Reliance Bancshares, Inc. (the Holding Company).
SECTION II
TERMS AND CONDITIONS OF THE EXCHANGE
(a) Pursuant to Section 00-00-000 of the Code of Laws of South Carolina, 1976,
as amended (the "S.C. Code"), and other applicable provisions of South Carolina
law, and except as provided in Section IV below, all outstanding shares of Bank
Stock will be exchanged for shares of Holding Company Stock.
(b) As of the Effective Date (as defined below), and except as provided in
Section IV below, each issued and outstanding share of Bank Stock will be
exchanged for one share of Holding Company Stock.
(c) As of the Effective Date, the 100 shares of Holding Company Stock currently
issued and outstanding will be redeemed by the Holding Company at the price paid
therefor.
(d) Upon completion of the Share Exchange and except as provided in Section IV
below, (a) the existing shareholders of the Bank who have not perfected
dissenters' rights of appraisal under the applicable provisions of S.C. Code
s.00-00-000 et seq. (collectively, the "Dissenters' Rights Statute") will
become the only shareholders of the Holding Company, and the Holding Company
will be the sole shareholder of the Bank; and (b) the outstanding shares of
Holding Company Stock shall consist solely of the shares issued in exchange for
Bank Stock pursuant to the Plan.
(e) Any shareholder of the Bank who objects to the Share Exchange and who
properly dissents from the Share Exchange shall be entitled to exercise all
rights of dissenters arising under the Dissenters' Rights Statute.
(f) As of the Effective Date, each outstanding option granted under the
1999 First Reliance Bank Employee Stock Option Plan, shall, by virtue of the
Share Exchange and without any action on the part of the holders thereof, be
converted into an option to purchase Holding Company Stock as provided in the
1999 First Reliance Bank Employee Stock Option Plan, as amended.
(g) The Share Exchange is specifically subject to each condition stated
in Section V below.
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SECTION III
MANNER AND BASIS OF EXCHANGING SHARES OF BANK STOCK
The manner and basis of exchanging outstanding shares of Bank Stock
into shares of Holding Company Stock, excluding those shares of Bank Stock held
by shareholders who have perfected rights under the Dissenters' Rights Statute,
shall be as follows;
(a) Each share of Bank Stock outstanding immediately prior to the
Effective Date shall, by virtue of the Share Exchange and without any action on
the part of the holder or holders thereof, be converted into the right to
receive one share of Holding Company Stock.
(b) As of the Effective Date, each certificate theretofore representing
one or more outstanding shares of Bank Stock shall be deemed for all corporate
purposes to evidence only the right to receive a certificate representing an
equal number of shares of Holding Company Stock, plus a right to receive certain
dividends paid with respect to Holding Company Stock as described in Section
III(d)(iii) below.
(c) A letter of transmittal shall be mailed to each Bank shareholder as
of the close of business on the date immediately preceding the Effective Date.
Upon receipt of the letter of transmittal, each holder of a certificate or
certificates theretofore representing one or more shares of Bank Stock shall
surrender such certificates to the Bank, as exchange agent, together with a
properly completed and signed letter of transmittal, and shall receive in
exchange therefor a certificate representing the appropriate number of shares of
Holding Company Stock, subject to the restrictions and conditions of this Plan.
(d) Until a former Bank shareholder surrenders his, her or its Bank
Stock certificate or certificates to the Bank (or suitable arrangements are made
to account for any lost, stolen or destroyed certificates according to the
Bank's usual procedures), the shareholder:
(i) shall not be issued a certificate representing the shares of
Holding Company Stock which such Bank Stock certificate
entitles the shareholder to receive;
(ii) shall not have any voting rights in respect of the shares of
Holding Company Stock which such Bank Stock certificate
entitles the shareholder to receive; and
(iii) shall not be paid dividends or other distributions in respect
of the shares of Holding Company Stock which such Bank Stock
certificate may entitle the shareholder to receive; provided,
however, that such dividends or distributions shall be
retained by the Holding Company, without interest, for the
shareholder's account until surrender of such Bank Stock
certificate.
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SECTION IV
ACQUISITION OF DISSENTERS' BANK STOCK
Any shareholder of the Bank who fully complies with the Dissenters'
Rights Statute shall be paid by the Bank an amount of cash (as determined under
the Dissenters' Rights Statute) for his, her or its shares of Bank Stock. The
shares of Bank Stock so acquired by the Bank shall be canceled and not exchanged
for Holding Company Stock.
SECTION V
CONDITIONS PRECEDENT TO CONSUMMATION OF THE SHARE EXCHANGE
This Plan is subject to, and consummation of the Share Exchange is
conditioned upon, the fulfillment prior to the Effective Date of each of the
following conditions:
(a) Approval of the Plan by the affirmative vote of the holders of at least
two-thirds of the outstanding shares of the Bank entitled to vote thereon.
(b) The number of shares held by shareholders who have perfected dissenters'
rights pursuant to the Dissenters' Rights Statute shall not be deemed by the
parties hereto to make consummation of this Plan inadvisable and, in any event,
shall not exceed 36,165 shares.
(c) Procurement of each action, consent, approval or ruling, governmental or
otherwise, which is, or in the opinion of counsel for the Bank may be, necessary
to permit or enable the Bank, upon and after the Share Exchange, to conduct all
or any part of the business and activities conducted by the Bank prior to the
Share Exchange.
(d) The receipt by the Bank of a written opinion of special counsel to the Bank
that for federal income tax purposes no gain or loss will be recognized by a
Bank shareholder who exchanges his, her or its Bank Stock solely for Holding
Company Stock, as provided by this Plan.
SECTION VI
EFFECTIVE DATE
The Share Exchange shall be effective as of the date (the "Effective
Date") the articles of share exchange are filed in the office of the South
Carolina Secretary of State in accordance with the applicable provisions of the
S. C. Code.
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SECTION VII
LOCATION, ARTICLES AND BYLAWS, MANAGEMENT
AND IDENTITY OF THE BANK
On the Effective Date,
(a) The principal office of the Bank shall be located at 0000 X. Xxxxxxxx
Xxxxxx, Xxxxxxxx, Xxxxx Xxxxxxxx or such other location where the Bank is
located immediately prior to the Effective Date.
(b) The Charter, Articles of Incorporation and Bylaws of the Bank shall not
be changed as a result of the Share Exchange.
(c) The directors and officers of the Bank shall not be changed as a result
of the Share Exchange and shall serve until their respective successors are
elected or appointed pursuant to the Bylaws of the Bank or until their earlier
retirement, death or disability.
(d) The corporate identity of the Bank will not be changed as a result of
the Share Exchange.
SECTION VIII
TERMINATION
If:
(a) The number of shares of Bank Stock voted against the Share Exchange
shall make consummation of the Share Exchange inadvisable in the opinion of the
Board of Directors of the Bank or the Board of Directors of the Holding Company;
or
(b) Any action, suit, proceeding or claim has been instituted, made or
threatened relating to the Share Exchange which shall make consummation of the
Share Exchange inadvisable in the opinion of the Board of Directors of the Bank
or the Board of Directors of the Holding Company; or
(c) Any action, consent, approval, opinion or ruling required to be
provided by Section V of this Plan shall not have been obtained; or
(d) For any other reason consummation of the Share Exchange is deemed
inadvisable in the opinion of the Board of Directors of the Bank or the Board of
Directors of the Holding Company;
then this Plan may be terminated at any time before consummation of the Share
Exchange by written notice, approved or authorized by the Board of Directors of
the party wishing to terminate, to the other party. Upon termination by written
notice as provided by this Section VIII, this Plan shall be void and of no
further effect; and, except
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as provided in Section IX, there shall be no liability by reason of this Plan or
the termination hereof on the part of the Bank, the Holding Company or any of
their respective directors, officers, employees, agents or shareholders.
SECTION IX
EXPENSES
If the Share Exchange becomes effective, the Bank and the Holding
Company shall each pay their own expenses, if any, incurred in this transaction.
If the Share Exchange does not become effective, the Bank shall pay all
reasonable and necessary expenses associated with the transaction proposed
herein.
SECTION X
AMENDMENT; WAIVER
(a) At any time before or after approval and adoption hereof by the
shareholders of the Bank, this Plan may be amended by agreement among the Bank
and the Holding Company; provided, however, that after the approval and adoption
of this Plan by the shareholders of the Bank, no amendment changing Section II
or III hereof shall be valid without having been approved by the shareholders of
the Bank in the manner required for approval of this Plan.
(b) A waiver by a party hereto of any breach of a term or condition of
this Plan shall not operate as a waiver of any other breach of such term or
condition or of any other term or condition on a future occasion, nor shall
failure to enforce any term or condition operate as a waiver or release of any
other right, in law or in equity, or claim which a party may have against
another party for anything arising out of, connected with, or based upon this
Plan. A waiver shall be effective only if evidenced by a writing signed by the
party entitled to the benefit of the term or condition of this Plan which is to
be waived.
SECTION XI
FURTHER ACTIONS
From time to time, as and when requested by the other party or by its
successors or assigns, each party hereto shall execute and deliver or cause to
be executed and delivered all such instruments and documents, and shall take or
cause to be taken all such other actions, as the requesting party or its
successors and assigns may deem necessary or desirable in order to confirm and
otherwise to carry out the intent and purposes of this Plan.
SECTION XII
COUNTERPARTS; HEADINGS; GOVERNING LAW
This Plan may be executed simultaneously in any number of counterparts,
each of which shall be deemed an original, but all of which shall constitute one
and the same
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instrument. The title of this Plan and the headings herein set out are for
convenience of reference only and shall not be deemed a part of this Plan. This
Plan shall be governed by and construed in accordance with the laws of the State
of South Carolina.
IN WITNESS WHEREOF, the parties hereto have caused this Plan of
Reorganization and Exchange to be executed by their duly authorized officers and
delivered, all as of the day and year first above written.
WITNESSES: FIRST RELIANCE BANK
/s/ A. Xxxx Xxxxxx By: /s/ F. R. Xxxxxxxx, Jr.
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F. R. Xxxxxxxx, Jr.
/s/ Xxxx X. Xxxxxxx Its: President and Chief Executive Officer
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FIRST RELIANCE BANCSHARES, INC.
/s/ A. Xxxx Xxxxxx By: /s/ F. R. Xxxxxxxx, Jr.
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F. R. Xxxxxxxx, Jr.
/s/ Xxxx X. Xxxxxxx Its: President and Chief Executive Officer
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