PLAN OF REORGANIZATION
AND
MERGER AGREEMENT
This Plan of Reorganization and Merger Agreement (this "Merger Agreement")
is entered into as of October 20, 2004, by and between Discovery Bank ("Bank")
and DB Merger Company ("Subsidiary"), to which Discovery Bancorp ("Holding
Company") is a party, with reference to the following:
RECITALS
A. Bank is a California banking corporation with its principal office
in the City of San Marcos, County of San Diego, State of California. Subsidiary
and Holding Company are each corporations duly organized and existing under the
laws of the State of California with their principal offices in the City of San
Marcos, County of San Diego, State of California.
B. As of the date hereof, Bank has 10,000,000 shares of serial
preferred stock authorized, none of which are outstanding, 10,000,000 shares of
no par value common stock authorized, of which 1,037,298 shares are outstanding,
and 60,500 outstanding warrants to purchase shares of the common stock.
C. As of the date hereof, Subsidiary has 10,000,000 shares of no par
value common stock authorized, and at the time of the merger referred to herein
100 of such shares will be outstanding, all of which outstanding shares will be
owned by Holding Company.
D. As of the date hereof, Holding Company has 10,000,000 shares of
preferred stock authorized, none of which are outstanding, and 10,000,000 shares
of no par value common stock authorized, 200 shares of which will be outstanding
at the time of the merger referred to herein.
E. The Boards of Directors of Bank and Subsidiary have approved this
Merger Agreement and authorized its execution, and the Board of Directors of
Holding Company has approved this Merger Agreement, undertaken that Holding
Company shall join in and be bound by it, and authorized the undertakings
hereinafter made by Holding Company.
For good and valuable consideration, receipt of which is hereby
acknowledged Bank, Subsidiary and Holding Company hereby agree as follows:
AGREEMENT
Section 1. General
1.1 The Merger. On the Effective Date, Subsidiary shall be merged into
Bank, with the Bank surviving the merger (the "Surviving Corporation") and
becoming a wholly-owned subsidiary of Holding Company, and its name shall
continue to be "Discovery Bank."
1.2 Effective Date. This Merger Agreement shall become effective at the
close of business on the day (the "Effective Date") on which an executed
counterpart of this Merger Agreement shall have been filed with the Secretary of
State of the State of California in accordance with Section 1103 of the General
Corporation Law.
1.3 Articles of Incorporation, Bylaws and Charter. On the Effective
Date, the Articles of Incorporation of Bank, as in effect immediately prior to
the Effective Date, shall be and remain the Articles of Incorporation of the
Surviving Corporation; the Bylaws of Bank shall be and remain the Bylaws of the
Surviving Corporation until altered, amended or repealed; the banking charter
and certificate of authority of Bank issued by the Commissioner of the
California Department of Financial Institutions (the "Commissioner") shall be
and remain the charter and certificate of authority of the Surviving
Corporation; and the insurance of deposits coverage by the Federal Deposit
Insurance Corporation (the "FDIC") shall be and remain the deposit insurance of
the Surviving Corporation.
1.4 Directors and Officers of the Surviving Corporation. On the
Effective Date, the directors and officers of Bank immediately prior to the
Effective Date shall become the directors and officers of the Surviving
Corporation. The directors of the Surviving Corporation shall serve until the
next annual meeting of shareholders of the Surviving Corporation or until such
time as their successors are elected and have qualified.
1.5 Effect of the Merger.
(a) Assets and Rights. All rights, privileges, franchises and
property of Bank or Subsidiary, and all debts and liabilities due or to become
due to Bank or Subsidiary, including things in action and every interest or
asset of conceivable value or benefit, shall be deemed fully and finally and
without any right of reversion transferred to and vested in the Surviving
Corporation without further act or deed, and the Surviving Corporation shall
have and hold the same in its own right as fully as the same was possessed and
held by Bank or Subsidiary.
(b) Liabilities. All debts, liabilities, and obligations due or to
become due of, and all claims or demands for any cause existing against, Bank or
Subsidiary shall be and become the debts, liabilities, obligations or, and the
claims and demands against, the Surviving Corporation in the same manner as if
the Surviving Corporation had itself incurred or become liable for them.
(c) Creditor's Rights and Liens. All rights of creditors of Bank
or Subsidiary, and all liens upon the property of Bank or Subsidiary, shall be
preserved unimpaired, limited in lien to the property affected by the liens
immediately prior to the time of the merger.
(d) Pending Actions. Any action or proceeding pending by or
against Bank or Subsidiary shall not be deemed to have abated or been
discontinued, but may be prosecuted to judgment with the right to appeal or
review as in other cases as if the merger had not taken place or the Surviving
Corporation may be substituted for Bank or Subsidiary, as the case may be.
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(e) Further Assistance. Bank and Subsidiary each agree that at any
time, or from time to time, as and when requested by the Surviving Corporation,
or by its successors and assigns, it will execute and deliver, or cause to be
executed and delivered in its name by its last acting officers, or by the
corresponding officers of the Surviving Corporation, all such conveyances,
assignments, transfers, deeds or other instruments, and will take or cause to be
taken such further or other action as the Surviving Corporation, its successors
or assigns may deem necessary or desirable in order to evidence the transfer,
vesting or devolution of any property right, privilege or franchise or to vest
or perfect in or confirm to the Surviving Corporation, its successors and
assigns, title to and possession of all the property, rights, privileges,
powers, immunities, franchises and interests referred to in this Section 1 and
otherwise to carry out the intent and purposes thereof.
Section 2. Capital Stock of the Surviving Corporation.
2.1 Stock of Subsidiary. The shares of common stock of Subsidiary issued
and outstanding immediately prior to the Effective Date shall thereupon be
converted into and exchanged by Holding Company for 100 shares of fully paid
common stock of Bank as the Surviving Corporation.
2.2 Stock of Discovery Bank. All shares of common stock of Bank issued
and outstanding immediately prior to the Effective Date shall upon the Effective
Date, by virtue of the merger and without any action on the part of the holders
thereof, be exchanged for and converted into an equal number of shares of fully
paid and nonassessable common stock of Holding Company.
2.3 Exchange of Stock. Upon the merger becoming effective:
(a) The shareholders of Bank of record at the time the merger
becomes effective, for each share of common stock of Bank then held by them,
shall be allocated and entitled to receive one share of the common stock of
Holding Company;
(b) Holding Company shall issue the shares of its common stock
which the shareholders of Bank shall be entitled to receive; and
(c) Outstanding certificates representing shares of the common
stock of Bank shall thereafter represent shares of the common stock of Holding
Company, and such certificates may, but need not, be exchanged by the holders
thereof, after the merger becomes effective, for new certificates for the
appropriate number of shares bearing the name of Holding Company.
2.4 Other Rights to Stock. Upon and by reason of the merger becoming
effective:
(a) The options to purchase shares of common stock of Bank which
have been granted by Bank pursuant to its Stock Option Plan shall be deemed to
be options granted by Holding Company with the same terms and conditions and for
the same number of shares of common stock of Holding Company. Holding Company
shall issue replacement stock options for shares of its common stock so that
appropriate adjustments to reflect this merger may be
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made to (i) the class and number of shares of common stock available for options
under the Stock Option Plan and (ii) the class and number of shares and the
price per share of the common stock subject to options outstanding under Bank's
Stock Option Plan.
(b) The warrants to purchase shares of common stock of Bank issued
pursuant to Bank's 2003 Unit Offering shall be deemed to be warrants granted by
Holding Company with the same terms and conditions and for the same number of
shares of common stock of Holding Company. Outstanding certificates representing
Bank's warrants shall thereafter represent Holding Company warrants and such
certificates may, but need not, be exchanged by the holders thereof, after the
merger becomes effective, for new certificates for the appropriate number of
warrants bearing the name of Holding Company. Holding Company shall issue shares
of its common stock upon exercise of the warrants, making appropriate
adjustments to reflect this merger.
(c) From time to time, as and when required by the provisions of
any agreement to which Bank or Holding Company shall become a party after the
date hereof providing for the issuance of shares of common stock or other equity
securities of Bank or Holding Company in connection with a merger into Bank or
any other banking institution or other corporation, Holding Company will issue
in accordance with the terms of any such agreement shares of its common stock or
other equity securities as required by such agreement or in substitution for the
shares of common stock or other equity securities of Bank required to be issued
by such agreement, as the case may be, which the shareholders of any other such
banking institution or other corporation shall be entitled to receive by virtue
of any such agreement.
Section 3. Approvals
3.1 Shareholder Approval. This Merger Agreement shall be submitted to
the shareholders of Bank and Subsidiary for approval in accordance with the
applicable provisions of the law.
3.2 Dissenters' Rights. The provisions of Chapter 13, Section 1300 et
seq. of the General Corporation Law of California (dissenters' rights) shall not
apply to the shareholders of the Bank.
3.3 Regulatory Approvals. The parties shall proceed expeditiously and
cooperate fully in the procurement of any other consents and approvals and in
the taking of any other action, and the satisfaction of all other requirements
prescribed by law or otherwise, necessary or desirable for consummation of this
merger and plan of reorganization on the terms herein provided, including,
without being limited to, those consents and approvals referred to in Section
4.1(b).
Section 4. Conditions Precedent, Termination and Payment of Expenses
4.1 Conditions Precedent to the Merger. Consummation of the merger is
conditional upon:
(a) Approval of this Merger Agreement by the shareholders of Bank
and Subsidiary, as required by law;
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(b) Obtaining all other consents and approvals, and the
satisfaction of all other requirements prescribed by law which are necessary for
consummation of the merger, including, but not limited to, approval of the FDIC,
the Commissioner and the Board of Governors of the Federal Reserve System;
(c) Obtaining all consents or approvals, governmental or
otherwise, which are, or in the opinion of counsel for Bank may be, necessary to
permit or enable the Surviving Corporation, upon and after the merger, to
conduct all or any part of the business and activities of Bank up to the time of
the merger, in the manner in which such activities and business are then
conducted;
(d) Bank's obtaining for Holding Company, prior to the Effective
Date, a letter, in form and substance satisfactory to Holding Company's counsel,
signed by each person who is an "affiliate" of Bank for purposes of Rule 145 of
the Securities and Exchange Commission to the effect that: (i) such person will
not dispose of any shares of Holding Company's common stock to be received
pursuant to the merger, in violation of the Securities Act or the rules and
regulations of the SEC promulgated thereunder, or in any event prior to such
time as financial results covering at least 30 days of post-merger combined
operations have been published; and (ii) such person consents to the placing of
a legend on the certificate(s) evidencing such shares referring to the issuance
of such shares in a transaction to which Rule 145 is applicable and to giving of
stop-transfer instructions to Holding Company's transfer agent with respect to
such certificate(s); and
(e) Performance by each party hereto of all of its obligations
hereunder to be performed prior to the merger becoming effective.
4.2 Termination of the Merger. If any condition in Section 4.1 has not
been fulfilled, or, in the opinion of a majority of the Board of Directors of
any of the parties:
(a) any action, suit, proceeding or claim has been instituted,
made or threatened relating to the proposed merger which makes consummation of
the merger inadvisable; or
(b) for any other reason consummation of the merger is deemed
inadvisable; then this Merger Agreement may be terminated at any time before the
merger becomes effective. Upon termination, this Merger Agreement shall be void
and of no further effect, and there shall be no liability by reason of this
Merger Agreement or the termination thereof on the part of the parties or their
respective directors, officers, employees, agents or stockholders.
4.3 Expenses of the Merger. All of the expenses of the merger, including
filing fees, printing costs, mailing costs, accountant's fees and legal fees
shall be borne by the Surviving Corporation. In the event the merger is
abandoned for any reason, the expenses shall be paid by the Bank.
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IN WITNESS WHEREOF, the parties hereto have caused this Plan of
Reorganization and Merger Agreement to be executed by their duly organized
officers as of the day and year first above written.
DISCOVERY BANK
By: /s/ James P. Kelly, II
------------------------
James P. Kelly, II,
President
By: /s/ Robert Cairns
------------------------
Robert Cairns,
Secretary
DB MERGER COMPANY
By: /s/ James P. Kelly, II
----------------------
James P. Kelly, II,
President
By: /s/ Robert Cairns
------------------------
Robert Cairns,
Secretary
DISCOVERY BANCORP
By: /s/ James P. Kelly, II
----------------------
James P. Kelly, II,
President
By: /s/ Robert Cairns
------------------------
Robert Cairns,
Secretary
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