EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Plan") dated as of August 19,
1998, between CORNERSTONE BANK, a Connecticut stock bank (the "Bank"), and
CORNERSTONE BANCORP, INC., a Connecticut corporation ("Bancorp") organized at
the direction of the Bank pursuant to Section 36a-181 of the Connecticut General
Statutes.
RECITALS
WHEREAS, the Bank has an authorized capitalization consisting of (a)
2,000,000 shares of common stock, par value $.01 per share (the "Bank Common
Stock"), of which 1,015,994 shares are issued and outstanding and (b) 35,000
shares of preferred stock, $100 par value per share, none of which are issued
and outstanding (the "Bank Preferred Stock" and, collectively with the Bank
Common Stock, the "Bank Stock"); and
WHEREAS, Bancorp has an authorized capitalization consisting of 2,000,000
shares of Common Stock, par value $.01 per share (the "Bancorp Common Stock");
and
WHEREAS, the respective Boards of Directors of the Bank and Bancorp deem it
advisable to effect a reorganization pursuant to the Connecticut Bank Holding
Company and Bank Acquisition Act (the "Connecticut BHC Act"), Conn. Gen. Stat.
(S)36a-181 et seq. and the share exchange provisions of the Connecticut Business
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Corporation Act, Conn. Gen. Stat. (S)33-816, et seq. (together with the
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Connecticut BHC Act, the "Applicable Laws") whereby at the Effective Time (as
hereinafter defined), Bancorp will acquire all the issued and outstanding shares
of Bank Common Stock (other than shares held by the Dissenting Shareholders, as
defined in Section 1.05) and the holders of shares of Bank Common Stock (other
than the Dissenting Shareholders) will receive one share of Bancorp Common Stock
in exchange for each share of Bank Common Stock held as of the Effective Time
(the "Reorganization"); and
WHEREAS, the Board of Directors of the Bank has determined that the
Reorganization is desirable and in the best interests of its Shareholders and
directed that the Plan be submitted to the vote of the shareholders of the Bank;
WHEREAS, this Plan has been approved by the Boards of Directors of the Bank
and Bancorp, each of which has duly authorized the officers whose respective
signatures appear below to execute and deliver the Plan;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties hereto hereby agree that
the terms and conditions of the Reorganization, the mode of carrying it into
effect, and the manner of exchanging shares shall be as follows:
ARTICLE I
THE REORGANIZATION
1.01. The time at which the Reorganization shall become effective (the
"Effective Time") shall be the later of (a) the close of business on the date on
which this Plan, having been approved by the Banking Commissioner of the State
of Connecticut (the "Commissioner"), shall be filed in the office of the
Secretary of the State of the State of Connecticut or (b) the close of business
on the date on which the last of the conditions specified in Article IV hereof
shall have been satisfied or otherwise fulfilled or compliance therewith shall
have been waived.
1.02. Except as otherwise provided in Section 1.05, at the Effective Time
each share of the issued and outstanding Bank Common Stock or fraction thereof
will be acquired automatically by Bancorp, and each share of Bank Common Stock
shall, automatically and without further action on the part of the holders
thereof, be exchanged for one share of Bancorp Common Stock, which shall
thereupon be issued, fully paid and non-assessable, and each holder of Bank
Common Stock (other than the Dissenting Shareholders (as defined in Section
1.05)) shall become a shareholder of Bancorp, all in a single transaction in
accordance with the Applicable Laws and the terms and conditions of this Plan.
Except as aforesaid, each share of Bank Common Stock outstanding at the
Effective Time shall continue to be issued and outstanding, and the ownership
thereof shall automatically and without further action be transferred to and
vested in Bancorp and Bancorp shall be entitled to receive a new certificate or
certificates evidencing the ownership thereof.
1.03. Except as otherwise provided in Section 1.05, each certificate
theretofore representing shares of Bank Common Stock shall, at the Effective
Time, become and be deemed for all purposes to evidence ownership of the same
number of shares of Bancorp Common Stock, without any physical exchange thereof.
Former shareholders of the Bank may, but shall not be required to, surrender
their certificates formerly evidencing shares of Bank Common Stock to American
Stock Transfer & Trust Company, the transfer agent for Bancorp Common Stock (the
"Transfer Agent"), and upon such surrender, or upon surrender for any other
transfer or exchange, such shareholder or the transferee, as the case may be,
shall be entitled to receive a certificate or certificates evidencing the same
number of shares of Bancorp Common Stock. The stock transfer books for Bank
Common Stock shall be closed at the Effective Time and no transfer of
outstanding shares of Bank Common Stock shall thereafter be made on such books.
1.04. If any certificate for shares of Bancorp Common Stock is to be
issued in a name other than that in which the certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance thereof
that the certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer, that such transfer otherwise be proper and that the
person requesting such transfer pay to the Transfer Agent any transfer or other
taxes payable by reason of the issuance of such new certificate in any name
other than the registered holder of the certificate surrendered, or establish to
the satisfaction of the Transfer Agent that such tax has been paid or is not
payable.
1.05. Shareholders of the Bank whose shares of Bank Common Stock would
otherwise be automatically exchanged for shares of Bancorp Common Stock by
operation of the Applicable Laws and this Plan and who validly comply with all
the requirements of Section 36a-181(c) of the Connecticut BHC Act (the
"Dissenting Shareholders") may demand in writing from the Bank payment for their
Bank Common Stock and shall receive payment therefor from the Bank in accordance
with the provisions of Section 36a-181(c) of the Connecticut BHC Act.
1.06. At the Effective Time, the shares of Bancorp Common Stock that are
outstanding immediately prior to the Effective Time shall be cancelled.
ARTICLE II
COVENANTS
2.01. The Board of Directors of each of the Bank and Bancorp have duly
approved and adopted this Plan. Subject to the provisions of Section 6.02, the
Bank shall, at a Special Meeting of Shareholders (the "Special Meeting"), cause
its shareholders to vote on this Plan and the transactions contemplated thereby
and shall use all reasonable efforts to obtain the approval by its shareholders
of this Plan and the transactions contemplated thereby.
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2.02. Subject to the provisions of Section 6.02, prior to and after the
Effective Time, the Bank and Bancorp, respectively, shall take all such action
as may be necessary or appropriate in order to effectuate the Reorganization.
2.03. Bancorp shall, with the cooperation of the Bank, take all action
necessary to (a) qualify for an exemption from the filing requirements of the
Securities and Exchange Commission (the "SEC") pursuant to Section 3(a)(12) of
the Securities Act of 1933, as amended, (the "Securities Act") or, in the
absence of such exemption, to file, or cause to be filed, a registration
statement under such Act on such form as it shall deem appropriate with respect
to the offer and sale of the Bancorp Common Stock to be issued in connection
with the Reorganization, (b) register the shares of Bancorp Common Stock
issuable in connection with the Reorganization under the Securities Exchange Act
of 1934, as amended, (c) comply with the securities and blue sky laws of all
jurisdictions which are applicable in connection with the Reorganization, (d)
obtain approval for listing on the American Stock Exchange, upon official notice
of issuance, of the shares of Bancorp Common Stock issuable in connection with
the Reorganization, (e) file an application to the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") with respect to the
approval of the Reorganization pursuant to the Bank Holding Company Act of 1956,
as amended (the "BHC Act"), and obtain such approval, and (f) file such
application as may be necessary with the Banking Commissioner with respect to
the approval of the Reorganization under the Connecticut BHC Act, and obtain
such approval.
2.04. The Bank shall, with the cooperation of Bancorp, take all action
necessary to file with the Federal Deposit Insurance Corporation (the "FDIC') a
proxy statement/prospectus (the "Proxy Statement") relating to the Special
Meeting and the issuance of the Bancorp Common Stock pursuant to this Plan.
2.05. From the date hereof to the Effective Time, (a) the Bank shall not
issue or reserve for issuance any shares of Bank Preferred Stock and (b) other
than the 100 shares of Bancorp Common Stock issued or to be issued to the Bank,
Bancorp shall not issue or reserve for issuance any shares of Bancorp Common
Stock.
ARTICLE III
BANK EMPLOYEE BENEFIT PLANS AND SHAREHOLDER STOCK PURCHASE PLAN
3.01. At the Effective Time, Bancorp shall automatically and without
further action on its part adopt, and assume the rights and obligations of the
Bank under, the Cornerstone Bank 1996 Incentive and Non-Qualified Stock Option
Plan, the Cornerstone Bank 1986 Incentive and Non-Qualified Stock Option Plan,
the Directors Compensation Plan, and the Cornerstone Bank Dividend Reinvestment
and Stock Purchase Plan (collectively, the "Bank Stock Plans"), as the Bank
Stock Plans are then in effect (subject to certain conforming amendments
necessitated by the change in sponsorship of such plans). The Bank Stock Plans
shall, pursuant to their terms, thereafter apply only to shares of Bancorp
Common Stock in the same manner as they theretofore applied to shares of Bank
Common Stock. Bancorp shall reserve for issuance a sufficient number of shares
of Bancorp Common Stock in order to fulfill its obligations pursuant to this
Section 3.01 and shall take such action as it deems necessary or advisable to
permit the issuance of such shares under applicable state and federal securities
laws and rules and regulations thereunder. Approval of this Plan by the
shareholders of the Bank shall be deemed to be approval of the Bank Stock Plans
by the shareholders of Bancorp.
3.02. At the Effective Time, all rights and options then outstanding under
the Bank Stock Plans, which immediately prior thereto had given the holder
thereof the right to purchase shares of Bank Common Stock, shall, automatically
and without further action on the part of the holder thereof, be converted into
rights and options giving the holder thereof the right to purchase the same
number of shares of Bancorp Common Stock at the same exercise price per share,
and containing such other terms and conditions, as pertained under the rights
and options outstanding under the Bank Stock Plans immediately prior to the
Effective Time.
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ARTICLE IV
CONDITIONS
4.01. The consummation of the Reorganization is subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) This Plan and the transactions contemplated hereby shall have
received the approval by affirmative vote of the holders of at least two-
thirds of the outstanding shares of Bank Common Stock entitled to vote at
the Special Meeting or any adjournment thereof;
(b) All regulatory approvals and authorizations, including without
limitation, the approvals of (i) all state securities law agencies which
have jurisdiction over the offer and sale of Bancorp Common Stock
pursuant to the Reorganization, (ii) the Federal Reserve Board under the
BHC Act (iii) the Commissioner under the Connecticut BHC Act, and (iv)
all other consents, approvals and permissions necessary to permit
consummation of the Reorganization, shall have been received and shall be
in full force and effect and all waiting periods required in connection
with any such approvals shall have expired;
(c) The issuance by the Bancorp of its securities shall qualify for
an exemption from the filing requirements of the SEC pursuant to Section
3(a)(12) of the Securities Act, or, in the absence of such exemption, a
registration statement shall have been declared effective under the
Securities Act and at the Effective Time no stop order shall have been
issued and no proceedings therefor shall have been initiated or
threatened by the SEC;
(d) The Proxy Statement shall have been filed in accordance with the
rules and regulations of the FDIC and shall have been mailed to the
shareholders of the Bank in accordance with such rules and regulations;
(e) The Bank and the Bancorp shall have received an opinion of their
tax advisor with respect to the tax consequences of the Plan and the
transactions contemplated hereby;
(f) The Bank shall have determined that the number of shares of Bank
Common Stock owned by Dissenting Shareholders shall not make consummation
of the Reorganization inadvisable;
(g) The Bancorp Common Stock shall have been accepted as a substitute
listing by the American Stock Exchange; and
(h) The Plan shall have been filed with the Secretary of the State of
the State of Connecticut after approval thereof by the Commissioner.
ARTICLE V
BOARD OF DIRECTORS AND OFFICERS
5.01. On and after the Effective Time and until changed in the manner
prescribed by law, the Board of Directors of Bancorp shall be divided into three
classes, Class I, Class II and Class III, as nearly equal in number as is
reasonably possible. Other than the initial directors in Class I and Class II
who will serve for one-year terms and two-year terms, respectively, each
director shall be elected for a three-year term, with one class of directors
being elected at each annual meeting of shareholders. In the event of any
increase or decrease in the authorized number of directors, directorships will
be apportioned among the classes by the Registrant's Board of Directors to
ensure that no one class has more than one director more than any other class,
to the extent possible. The Bancorp Board of Directors shall consist of: Class
I directors (whose terms expire in 1999) Xxxxxx X. Field, Jr., J. Xxxxx Xxxxxx,
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Xxxxxxxx X. Xxxxxxxxx and Xxxxxxx X. Xxxxxx; Class II directors (whose terms
expire in 2000) Xxxxxxx X. Xxxxxx, Xxxxxx X. Xxxxxx, Xxxxxx Xxxxxx, Xxxxxxx
Xxxxxx and Xx. Xxxxxx X. Xxxxxxx, M.D.; and Class III directors (whose terms
expire in 2001) Xxxxx X. Xxxxxxx, Xxxxxx X. Xxxxx, Xxxxxx X. Xxxxxx and Xxxxxx
X. Reader, each of the whom is a current director in identical classes of the
Bank. Xxxxxx X. Reader shall be the President and Chief Executive Officer of
Bancorp, Xxxxx X. Xxxxxxx shall be Executive Vice President and Chief Operating
Officer, Xxxx X. Reader shall be Senior Vice President and Xxxxx X. Xxxxxxxx
shall be Vice President, Chief Financial Officer and Secretary.
ARTICLE VL
AMENDMENT AND TERMINATION
6.01. At any time prior to the Effective Time, the Bank and Bancorp may,
by written agreement, amend, modify or supplement this Plan; provided, however,
that no such amendment, modification or supplement which, in the sole judgment
of the Bank's Board of Directors, would have a materially adverse effect upon
the rights of the Bank's shareholders, may be effected without the approval of
such shareholders.
6.02. The Plan may be abandoned by either the Bank or Bancorp at any time
before the Effective Time in the event that:
(a) The number of shares of Bank Common Stock owned by Dissenting
Shareholders, as defined in Subsection 1.05, shall make consummation of
the Reorganization inadvisable in the opinions of the Bank or Bancorp;
(b) Any action, suit, proceeding or claim has been instituted,
made or threatened relating to the Plan which shall make consummation of
the Reorganization inadvisable in the opinion of the Bank or Bancorp; or
(c) For any other reason consummation of the Reorganization is
inadvisable in the opinion of the Bank or Bancorp.
Such abandonment shall be effected by written notice by the Bank or Bancorp
to the other of them, and shall be authorized or approved by the Board of
Directors of the party giving such notice. Upon the giving of such notice, the
Plan shall be terminated and there shall be no liability hereunder or on account
of such on the part of the Bank or Bancorp or the Directors, officers,
employees, agents or shareholders of either of them. In the event of
abandonment of the Plan, the Bank shall pay the fees and expenses incurred by
itself and Bancorp in connection with the Plan and the proposed Reorganization.
If either party hereto gives written notice of termination to the other party
pursuant to this section, the party giving such written notice shall
simultaneously furnish a copy thereof to the Banking Commissioner.
ARTICLE VII
MISCELLANEOUS
7.01. This Plan (a) constitutes the entire agreement, and supersedes all
other prior agreements and understandings, both written and oral, among the
parties hereto with respect to the subject matter hereof; (b) is not intended to
confer upon any person not a party hereto any rights or remedies hereunder; (c)
shall not be assigned, by operation of law or otherwise, by any party without
the express consent of the other party; (d) shall be binding upon and inure to
the benefit of the respective successors and permitted assigns of the parties
hereto; (e) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of Connecticut without
giving effect to any choice of law doctrines that would make applicable the law
of any other state; and (f) may be executed in two or more counterparts, each of
which, when so executed, shall be deemed to be an original, and all of which
together shall constitute a single agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Plan to be executed
and attested to by their respective officers thereunto duly authorized as of the
date first above written.
CORNERSTONE BANK
By ____________________________
Its
Attest:
_____________________________
Its Secretary
CORNERSTONE BANCORP, INC.
By_____________________________
Its
Attest:
_____________________________
Its Secretary
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