<PAGE>
As filed with the Securities and Exchange Commission on March 1, 1999
Registration No.333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________
CORNERSTONE BANCORP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Connecticut 06-1524044
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
______________
550 Summer Street
Stamford, CT 06901
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
______________
1986 Incentive and Non-Qualified Stock Option Plan
1996 Incentive and Non-Qualified Stock Option Plan
Directors Compensation Plan
(FULL TITLE OF THE PLANS)
______________
James P. Jakubek
Executive Vice President and Chief Operating Officer
Cornerstone Bancorp, Inc.
550 Summer Street
Stamford, CT 06901
(NAME AND ADDRESS OF AGENT FOR SERVICE)
______________
(203) 356-0111
(TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
_______
Copy to:
Leslie L. Davenport, Esq.
Shipman & Goodwin LLP
One American Row
Hartford, Connecticut 06103-2819
(860) 251-5918
______________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================================================================================================================
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF SECURITIES TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER UNIT (1) OFFERING PRICE REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01........................ 277,335 $ 18.81 $ 5,216,671.35 $ 1,450.23
- ------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(h) under the Securities
Act of 1933 based on the average of the high and low prices reported on the American Stock Exchange on February
23, 1999.
========================================================================================================================
</TABLE>
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
The Section 10(a) prospectuses being delivered by Cornerstone Bancorp, Inc.
(the "Company") to participants in the Company's 1986 Incentive and Non-
Qualified Stock Option Plan, 1996 Incentive and Non-Qualified Stock Option Plan
and Directors Compensation Plan (together, the "Plans"), as required by Rule 428
under the Securities Act of 1933, as amended (the "Securities Act"), have been
prepared in accordance with the requirements of Form S-8 and relate to shares of
Common Stock, par value $.01 per share, issued or reserved for issuance pursuant
to awards granted under the Plans. The information with respect to awards
granted under the Plans required in the Section 10(a) prospectuses is included
in documents being maintained and delivered by the Company as required by Rule
428 under the Securities Act. The Company shall provide to participants a
written statement advising them of the availability without charge, upon written
or oral request, of documents incorporated by reference herein, as is required
by Item 2 of Part I of Form S-8.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents are hereby incorporated by reference in this
registration statement:
(a) The Annual Report on Form 10-KSB of the Company's predecessor,
Cornerstone Bank, for the year ended December 31, 1997 filed with the Federal
Deposit Insurance Corporation (which includes basic and diluted earnings per
share amounts that have not been adjusted for the 10% stock dividend distributed
in 1998);
(b) The Quarterly Reports on Form 10-QSB of the Company's predecessor,
Cornerstone Bank, for the quarters ended March 31, 1998, June 30, 1998 and
September 30, 1998 filed with the Federal Deposit Insurance Corporation;
(c) The Current Report on Form 8-K of the Company's predecessor,
Cornerstone Bank, dated March 18, 1998 filed with the Federal Deposit Insurance
Corporation and the Company's Current Report on Form 8-K12G3 dated March 1,
1999; and
(d) The description of the Common Stock of Cornerstone Bank, the Company's
predecessor, contained in its Form F-1 filed with the Federal Deposit Insurance
Corporation on September 14, 1994, and of the Company's common stock contained
in its Current Report on Form 8-K12G3 dated March 1, 1999, and any amendment or
report filed for the purpose of updating such description.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), prior to the filing of a post-effective amendment which
indicates that all securities offered hereby have been sold or which deregisters
all such securities then remaining unsold, shall be deemed to be incorporated by
reference in this registration statement and to be part thereof from the date of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference in this registration statement shall be
deemed to be modified or superseded for purposes of this registration statement
to the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this registration statement.
ITEM 4. DESCRIPTION OF SECURITIES.
This Item is not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
This Item is not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation provides that the personal
liability of any director to the Company or its shareholders for monetary
damages for breach of duty as a director shall be limited to an amount equal to
the compensation received by the director for serving the Company as a director
during the year of the violation if such breach did not (1) involve a knowing
and culpable violation of law by the director; (2) enable the director or an
associate, as defined in subdivision (3) of Section 33-843 of the Connecticut
General Statutes, to receive an improper personal economic gain; (3) show a lack
of good faith and a conscious disregard for the duty of the director to the
Company under circumstances in which the director was aware that his conduct or
omission created an unjustifiable risk of serious injury to the Company; (4)
constitute a sustained and unexcused pattern of inattention that amounted to an
abdication of the director's duty to the Company; or (5) create liability under
Section 36a-58 or Section 33-757 of the Connecticut General Statutes. The
limitations summarized above, however, do not
II-1
<PAGE>
affect the ability of the Company or its stockholders to seek nonmonetary
remedies, such as an injunction or rescission, against a director for breach of
his or her fiduciary duty.
In addition, the Company's Certificate of Incorporation provides that any
person, his or her heirs, executors, or administrators may be indemnified or
reimbursed by the Company for reasonable expenses actually incurred in
connection with any action, suit or proceeding, civil or criminal, to which he
or she or they shall be made a party by reason of his or her being or having
been a director, officer, or employee of the Company or of any firm,
corporation, or organization which he or she served in any such capacity at the
request of the Company; provided, however, that no person shall be so
-----------------
indemnified or reimbursed relative to any matter in such action, suit, or
proceeding as to which he or she shall finally be adjudged to have been guilty
of or liable for gross negligence, willful misconduct or criminal acts in the
performance of his or her duties to the Company; and, provided, further, that no
-----------------
person shall be so indemnified or reimbursed relative to any matter in such
action, suit, or proceeding which has been made the subject of a compromise
settlement except with the approval of a court of competent jurisdiction, or the
holders of record of a majority of the outstanding shares of the Company, or the
Board of Directors, acting by vote of directors not parties to the same or
substantially the same action, suit, or proceeding, constituting a majority of
the whole number of directors. The foregoing right of indemnification or
reimbursement shall not be exclusive of other rights of which such persons, his
or her heirs, executors, or administrators, may be entitled as a matter of law.
The Company may, upon the affirmative vote of a majority of its Board of
Directors, purchase insurance to indemnify its directors, officers and other
employees to the extent that such indemnification is allowed in the preceding
paragraph. Such insurance may, but need not, be for the benefit of all
directors, officers or employees.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed that
in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities Act and is therefore
unenforceable.
The Company maintains insurance for officers and directors against certain
liabilities, including liabilities under the Securities Act. The effect of this
insurance is to indemnify any officer or director of the Company against
expenses, including, without limitation, attorneys' fees, judgments, fines and
amounts paid in settlement, incurred by an officer or director upon a
determination that such person acted in good faith.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
This Item is not applicable.
II-2
<PAGE>
ITEM 8. EXHIBITS.
Exhibit No. Description
- ---------- -----------
4.1 Certificate of Incorporation (Exhibit 4.1 to Cornerstone
Bancorp, Inc. Current Report on Form 8-K12G3 dated March 1,
1999). (1)
4.2 Bylaws (Exhibit 4.2 to Cornerstone Bancorp, Inc. Current Report
on Form 8-K12G3 dated March 1, 1999). (1)
5.1 Opinion of Shipman & Goodwin LLP as to the legality of the
securities being registered. (2)
23.1 Consent of Shipman & Goodwin LLP (included in Exhibit 5.1). (2)
23.2 Consent of Deloitte & Touche LLP. (2)
24.1 Power of Attorney (included in the signature page of this
registration statement). (2)
99.1 Cornerstone Bancorp, Inc. 1986 Incentive and Non-Qualified Stock
Option Plan. (2)
99.2 Cornerstone Bancorp, Inc. 1996 Incentive and Non-Qualified Stock
Option Plan. (2)
99.3 Cornerstone Bancorp, Inc. Director Compensation Plan. (2)
________________
(1) Incorporated by reference.
(2) Filed herewith.
ITEM 9. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a
II-3
<PAGE>
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Stamford, State of Connecticut, on this 17th day of
February, 1999.
By: /s/ Norman H. Reader
------------------------------------------
Norman H. Reader
President
POWER OF ATTORNEY
Know All Persons by These Presents, that each person whose signature appears
below constitutes and appoints Norman H. Reader and James P. Jakubek, and each
of them, his or her true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for him or her and in his or her name,
place and stead, in any and all capacities to sign any and all amendments
(including, without limitation, post-effective amendments) to this registration
statement, to sign any and all additional registration statements relating to
the same offering of securities as this registration statement that are filed
pursuant to Rule 462(b) of the Securities Act and to file the same, with all
exhibits thereto, and other documents in connection therewith, with full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, of their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
________________
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Norman H. Reader Director, President and Chief Executive February 17, 1999
- ------------------------------------------
(Norman H. Reader) Officer
(Chief Executive Officer)
/s/ James P. Jakubek Director, Executive Vice President and February 17, 1999
- ------------------------------------------
(James P. Jakubek) Chief Operating Officer
/s/ Leigh A. Hardisty Vice President, Chief Financial Officer February 17, 1999
- ------------------------------------------
(Leigh A. Hardisty) and Secretary
(Chief Financial Officer and Chief
Accounting Officer)
/s/ Joseph S. Field Jr. Director February 17, 1999
- ------------------------------------------
(Joseph S. Field Jr.)
Director February 17, 1999
__________________________________________
(J. James Gordon)
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Stanley A. Levine Director February 17, 1999
- ------------------------------------------
(Stanley A. Levine)
/s/ Joseph A. Maida Director February 17, 1999
- ------------------------------------------
(Joseph A. Maida)
/s/ Melvin L. Maisel Director February 17, 1999
- ------------------------------------------
(Melvin L. Maisel)
/s/ Ronald C. Miller Director February 17, 1999
- ------------------------------------------
(Ronald C. Miller)
/s/ Courtney A. Nelthropp Director February 17, 1999
- ------------------------------------------
(Courtney A. Nelthropp)
/s/ Martin Prince Director February 17, 1999
- ------------------------------------------
(Martin Prince)
Director February 17, 1999
- ------------------------------------------
(Richard M. Sontag)
Director February 17, 1999
- ------------------------------------------
(Patrick Tisano)
/s/ Dr. Joseph D. Waxberg Director February 17, 1999
- ------------------------------------------
(Dr. Joseph D. Waxberg)
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Description Numbered Page
- ---------- ----------- -------------
<S> <C>
4.1 Certificate of Incorporation (Exhibit 4.1 to Cornerstone Bancorp, Inc.
Current Report on Form 8-K12G3 dated March 1, 1999). (1)
4.2 Bylaws (Exhibit 4.2 to Cornerstone Bancorp, Inc. Current Report on
Form 8-K12G3 dated March 1, 1999). (1)
5.1 Opinion of Shipman & Goodwin LLP as to the legality of the securities
being registered. (2)
23.1 Consent of Shipman & Goodwin LLP (included in Exhibit 5.1). (2)
23.2 Consent of Deloitte & Touche LLP. (2)
24.1 Power of Attorney (included in the signature pages of this
registration statement). (2)
99.1 Cornerstone Bancorp, Inc. 1986 Incentive and
Non-Qualified Stock Option Plan. (2)
99.2 Cornerstone Bancorp, Inc. 1996 Incentive and
Non-Qualified Stock Option Plan. (2)
99.3 Cornerstone Bancorp, Inc. Director Compensation Plan. (2)
</TABLE>
_________
(1) Incorporated by reference.
(2) Filed herewith.
<PAGE>
Exhibit 5.1
Shipman & Goodwin LLP
Counselors at Law
One American Row
Hartford, CT 06103-2819
Tel: 860.251.5000
March 1, 1999
Board of Directors
Cornerstone Bancorp, Inc.
550 Summer Street
Stamford, CT 06901
Re: Registration Statement on Form S-8 (the "Registration Statement")
-----------------------------------------------------------------
Relating to Shares of Common Stock of Cornerstone Bancorp, Inc.
---------------------------------------------------------------
Issuable under its (i) 1986 Incentive and Non-Qualified Stock Option
--------------------------------------------------------------------
Plan, (ii) 1996 Incentive and Non-Qualified Stock Option Plan and
-----------------------------------------------------------------
(iii) Directors Compensation Plan
---------------------------------
Ladies and Gentlemen:
As counsel for Cornerstone Bancorp, Inc., a Connecticut corporation (the
"Company"), we are furnishing you with this opinion in connection with the
issuance of a maximum of 277,335 shares of Common Stock of the Company (the
"Shares") pursuant to the above-referenced Plans (the "Plans"), to which the
above-referenced Registration Statement relates.
As counsel to the Company, we have examined the Registration Statement and
such other documents as we have deemed necessary or appropriate in order to
express the opinion set forth below. In connection with our opinion hereinafter
given, we have examined and relied upon originals, or copies, certified or
otherwise, identified to our satisfaction, of such agreements, documents,
certificates and other statements of government officials, corporate officers
and representatives, and such other documents as we have deemed relevant and
necessary as a basis for such opinion. In such examination, we have assumed the
genuineness of all signatures and the authenticity of all documents submitted to
us as originals and the conformity with the original documents of documents
submitted to us as copies.
Based upon the foregoing, we are of the opinion that the Shares, when
issued as contemplated by the Plans and the Registration Statement, will be duly
authorized and legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not hereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act or the rules and regulations of the Securities and Exchange
Commission.
Very truly yours,
/s/ SHIPMAN & GOODWIN LLP
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Cornerstone Bancorp, Inc. on Form S-8 of our report dated February 9, 1998,
appearing in the Annual Report on Form 10-KSB for the year ended December 31,
1997 of Cornerstone Bank, predecessor to Cornerstone Bancorp, Inc.
/s/ DELOITTE & TOUCHE LLP
Stamford, Connecticut
March 1, 1999
<PAGE>
Exhibit 99.1
CORNERSTONE BANCORP, INC.
1986 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
1. Purpose. This 1986 Incentive and Non-Qualified Stock Option Plan (the
-------
"Plan") of CORNERSTONE BANCORP, INC. (the "Corporation") for key employees is
intended to advance the best interests of the Corporation by providing such
employees, who have substantial responsibility for the management and growth of
the Corporation, with additional incentive through awards of stock options
("Options").
2. Administration. The Plan shall be administered by a Stock Option
--------------
Committee (the "Committee") appointed by the Board of Directors of the
Corporation (the "Board"). The Committee shall consist of not less than three
members of the Board who are not otherwise eligible to participate in the Plan.
The Board, at its pleasure, may remove members from or add members to the
Committee. A majority of Committee members shall constitute a quorum of
members, and the actions of the majority shall be final and binding on the whole
Committee. The Committee shall have the authority, subject to the provisions of
the Plan, to determine the individuals to whom Options shall be granted
hereunder, the time or times at which Options shall be granted, and the value of
Options to be covered by such grants. The Committee shall further have the
power to interpret the Plan and to adopt rules and regulations as it may deem
advisable to carry out the Plan.
3. Stock Subject to Options. The stock subject to Options and other
------------------------
provisions of the Plan shall be shares of the Corporation's Common Stock, $.01
par value (the "Common Stock"). The total amount of the Common Stock with
respect to which Options may be granted shall not exceed in the aggregate 88,000
shares; provided that such aggregate number of shares shall be subject to
adjustment in accordance with the provisions of Paragraph 16 hereof. Such
shares may be treasury shares or authorized but unissued shares.
In the event that any outstanding Option shall expire or terminate
prior to its exercise or award in full, the shares of Common Stock allocable to
the unexercised portion of such Option may again be subject to an Option granted
under the Plan.
4. Eligibility. Options may be granted only to those individuals who are
-----------
key employees (including officers and directors who are also key employees) of
the Corporation or any parent or subsidiary of the Corporation (as defined in
Section 425 of the Internal Revenue Code of 1954, as amended (the "Code")) as
the Committee shall determine from time to time (the "Optionees"). Directors
who are not otherwise employees of the Corporation shall not be eligible. The
granting of Options pursuant to the Plan shall be entirely discretionary with
the Committee. Nothing in the Plan shall be deemed to give any employee any
right to participate in the Plan or to receive an Option thereunder.
An Optionee may be granted and hold more than one Option, but the
aggregate fair market value (determined at the time the Option is granted
pursuant to Paragraph 6 below) of the Common Stock for which any Options may be
granted Incentive Options (as defined below) in any one calendar year (under all
incentive stock option plans of the Corporation and any parent or subsidiary of
the Corporation) shall not exceed $100,000 plus any unused limit carryover to
such year (as defined in Sections 422A(b)(8) and 422A(c)(4) of the Code).
5. Options. Options granted under the Plan may be either incentive stock
-------
options intended to meet the requirements of Section 422A of the Code
("Incentive Options") or non-qualified stock options ("Non-Qualified Options").
6. Purchase Price. The purchase price of Common Stock covered by each
--------------
Option shall be determined by the Committee; provided however that (a) the
purchase price of Incentive Options shall not be less than the greater of (i)
twenty dollars ($20) per share, or (ii) 100% of the fair market value of the
Common Stock at the time such Incentive Option is granted; and (b) the purchase
price of Non-Qualified Options shall not be less than the greater of (i) twenty
dollars ($20) per share, or (ii) 50% of the fair market value of the Common
Stock at the
<PAGE>
time such Non-Qualified Option is granted. The fair market value of the Common
Stock shall be determined pursuant to procedures adopted by the Committee.
Anything herein to the contrary notwithstanding, no Incentive Option shall be
granted to an employee if, at the time the Incentive Option is granted, such
employee owns stock possessing more than 10% of the total combined voting power
of all classes of stock of the Corporation or a parent or subsidiary of the
Corporation, unless the Incentive Option is not exercisable after the expiration
of five (5) years from the date the Incentive Option is granted, and the
Incentive Option price is at least the greater of (i) $20 per share, or (ii)
110% of the fair market value of the Common Stock subject to the Incentive
Option at the time the Incentive Option is granted.
7. Duration of Options. No Option shall be exercisable after the
-------------------
expiration of ten (10) years from the date such Option is granted.
8. Amount Exercisable. Except as otherwise provided in this Paragraph 8
------------------
or as specified in the Option Agreement (defined below) in the discretion of the
Committee, each Optionee must remain within the continuous employ of the
Corporation or a parent or subsidiary of the Corporation for six months from the
date of the grant of an Option before the right to exercise any part of such
Option will accrue. Thereafter, each Option may be exercised, so long as it is
valid and outstanding, from time to time in part or in whole, in accordance with
the vesting schedule set forth in the Option Agreement in the discretion of the
Committee.
In the event of (a) a reorganization, merger, or consolidation of the
Corporation in which the Corporation is not the surviving corporation, (b) the
dissolution or liquidation of the Corporation, or (c) a sale or lease of fifty
percent (50%) or more, computed on the basis of book value, of the Corporation's
consolidated assets, the time at which Options then outstanding may be exercised
shall be accelerated and all such Options shall become exercisable in full on or
before a date fixed by the Committee prior to the effective time of such
reorganization, merger, consolidation, dissolution, liquidation, sale or lease
and upon such effective time any unexercised Options shall expire.
An Option may be exercised, upon the consent of the Committee, or
pursuant to the terms of a specific Option Agreement (as hereinafter defined)
between the Optionee and the Corporation, in whole or in part, at any time, and
from time to time, prior to its date of expiration.
Notwithstanding anything in this Plan to the contrary, an Optionee may
not exercise any Incentive Option while, within the meaning of Section
422A(c)(7) of the Code, there is outstanding any incentive stock option which
had been granted to the Optionee prior to the grant of such Incentive Option and
which entitled the Optionee to purchase stock of the Corporation or of any other
corporation which, on the date of the grant of such Incentive Option, is a
parent or subsidiary corporation of the Corporation or a predecessor corporation
of any such corporation.
9. Exercise of Options. Options shall be exercised by the delivery of
-------------------
written notice to the officer of the Corporation designated by the Committee
setting forth the number of shares with respect to which the Option is to be
exercised, and specifying the address to which the certificates for such shares
are to be mailed. The Option price shall be paid in full at the time of
exercise in cash by United States currency, certified check or money order or,
in the sole discretion of the Committee, by tendering to the Corporation (i)
shares of Common Stock having a fair market value, on the date of exercise,
equal to the Option price, or (ii) a combination of cash and such Common Stock
valued at such fair market value.
As promptly as practicable after receipt of such written notification
of the exercise of an Option and payment, the Corporation shall deliver to the
Optionee certificates for the number of shares with respect to which such Option
has been so exercised issued in the Optionee's name. An Optionee shall have no
rights as a stockholder with respect to shares covered by an Option until the
date of issuance of a stock certificate for such shares.
-2-
<PAGE>
10. Transferability of Options. Options shall not be transferable by the
--------------------------
Optionee otherwise than by will or under the laws of descent and distribution,
and shall be exercisable, during the Optionee's lifetime, only by the Optionee.
11. Termination of Employment, Disability or Death of Optionee. Except as
----------------------------------------------------------
may be otherwise expressly provided herein, Incentive Options shall terminate
three months after the severance of the employment relationship between the
Optionee and the Corporation, or a parent or subsidiary of the Corporation, for
any reason, for or without cause. Absence on leave approved by the Committee
shall not be considered the severance of employment. Non-Qualified Options may,
in the discretion of the Committee as specified in the Option Agreement (as
defined below), survive the termination of employment.
If, before the date of expiration of an Option, the Optionee shall
retire from the employ of the Corporation, or a parent or subsidiary of the
Corporation, for reasons of age pursuant to a retirement plan or policy of the
Corporation, or for reasons of disability as defined in Section 105(d)(4) of the
Code, (i) an Incentive Option shall terminate on the earlier of such date of
expiration or one year after the date of such retirement, and (ii) a Non-
Qualified Option may, in the discretion of the Committee as specified in the
Option Agreement (as defined below), terminate on such date of expiration
without regard to the date of such retirement or may terminate on the earlier of
the date of such expiration or one year after the date of such retirement. In
the event of such retirement, the Optionee shall have the right prior to the
termination of such Option to exercise the Option to the extent to which the
Optionee was entitled to exercise such Option immediately prior to such
retirement. If the retired Optionee shall die before the termination of the
Option, the Optionee's executors, administrators or any person or persons to
whom the Option may be transferred by will or by the laws of descent and
distribution shall have the right, at any time within the one-year period
beginning on the date of the Optionee's death, to exercise the Option to the
same extent as said retired Optionee.
In the event of the death of the holder of an Option while in the
employ of the Corporation, or a parent or subsidiary of the Corporation, and
before the date of expiration of such Option, such Option shall terminate on the
earlier of such date of expiration or one year following the date of such death.
After the death of the Optionee, the Optionee's executors, administrators or any
person or persons to whom the Option may be transferred by will or by the laws
of descent and distribution shall have the right, at any time prior to such
termination, to exercise the Option to the same extent to which the deceased
Optionee was entitled to exercise such Option immediately prior to the deceased
Optionee's death.
Notwithstanding the foregoing limitations of this Paragraph 11 upon
the exercise of an Option, an Option may be exercised, upon the consent of the
Committee, or pursuant to the terms of a specific Option Agreement (as
hereinafter defined) between the Optionee and the Corporation, in whole or in
part, at any time, and from time to time, prior to its date of expiration.
12. Substitute Options. Options may be granted by the Committee under
------------------
this Plan from time to time in substitution of options held by employees of
other corporations who are about to become employees of the Corporation as the
result of a merger or consolidation of the employing corporation with the
Corporation, or the acquisition by the Corporation of the assets of the
employing corporation, or the acquisition by the Corporation of stock of the
employing corporation as a result of which it becomes subsidiary of the
Corporation. The terms and conditions of the substitute Options so granted may
vary from the terms and conditions set forth in this Plan to such extent as the
Board at the time of grant may deem appropriate to conform, in whole or in part,
to the provisions of the options in substitution for which they are granted, but
no such variation shall be such as to affect the status of any substitute
Incentive Option as an incentive stock option under the Code.
13. Written Agreement. Each Option granted hereunder shall be embodied in
-----------------
a written Option Agreement which shall be subject to the terms and the
conditions prescribed herein, and shall be signed by the Optionee and by an
officer of the Corporation for and on behalf of the Corporation. Incentive
Options and Non-Qualified Options may not be granted in the same Option
Agreement. An Option Agreement shall contain
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<PAGE>
such other provisions as the Committee in its discretion shall deem advisable so
long as the same are not contrary or inconsistent with the terms and provisions
of the Plan.
14. Requirements of Law. The Corporation shall not be required to sell or
-------------------
issue any shares under any Option if the issuance of such shares shall
constitute a violation by the Optionee or the Corporation of any provisions of
any law or regulation of any governmental authority. Specifically in connection
with the Securities Act of 1933, as amended from time to time (the "Act"), upon
exercise of any Option, unless a registration statement under such Act is in
effect with respect to the shares of Common Stock covered by such Option, the
Corporation shall not be required to issue such shares unless the Committee has
received evidence satisfactory to it to the effect that the holder of such
Option is acquiring such shares for investment and not with a view to the
distribution thereof. Any determination in this connection by the Committee
shall be final, binding and conclusive. The Corporation may, but shall in no
event be obligated to, register any securities covered hereby pursuant to the
Act. The Corporation shall not be obligated to take any other affirmative
action in order to cause the exercise of an Option or the issuance of shares
pursuant to an Option to comply with any law or regulation of any governmental
authority.
15. Employment Obligation. The granting of any Option shall not impose
---------------------
upon the Corporation any obligation to employ or continue to employ any
Optionee; and the rights of the Corporation to terminate the employment of any
officer or other employee shall not be diminished or affected by reason of the
fact that an Option has been granted to such person.
16. Changes in the Corporation's Capital Structure. The existence of
----------------------------------------------
outstanding Options shall not affect in any way the right or power of the
Corporation or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Corporation's capital
structure or its business, or any merger or consolidation of the Corporation, or
any issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Common Stock or the rights thereof, or the dissolution or
liquidation of the Corporation, or any sale or transfer of all or any part of
its assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
In the event of the complete liquidation or dissolution of a
subsidiary of the Corporation, or in the event that such corporation ceases to
be a subsidiary, any unexercised Options theretofore granted to Optionees
employed by such subsidiary shall be deemed cancelled unless such Optionees
shall become employed by the Corporation or by another subsidiary on the
occurrence of such event.
Notwithstanding any other provisions of the Plan, the Committee may
make provisions for the adjustment of the number and class of shares covered by
each outstanding Option and the Option prices in the event of changes in the
outstanding Common Stock by reason of stock dividends, split-ups, spin-offs,
recapitalizations, mergers, consolidations, combinations or exchanges of shares
and the like.
17. Amendment or Termination of Plan. The Board may modify, revise or
--------------------------------
terminate this Plan at any time and from time to time, provided, however, that
without the approval of the holders of at least a majority of the outstanding
shares of Common Stock, the Board may not (a) change the aggregate number of
shares which may be issued pursuant to the provisions of the Plan or to any
individual (except pursuant to adjustment provisions provided below); (b) reduce
the Option price at which Options may be granted; or (c) change the class of
employees eligible to receive Options; provided, however, that the Board shall
have the power to make such changes in the Plan and in the administrative
provisions hereunder or in any outstanding Incentive Option as in the opinion of
counsel for the Corporation may be necessary or appropriate from time to time to
enable the Incentive Options granted pursuant to the Plan to continue to qualify
as incentive stock options under Section 422A of the Code and the regulations
which may be issued thereunder.
18. Effective Date of Plan. The Plan shall become effective and shall be
----------------------
deemed to have been adopted on the date of its adoption by the Board or approval
by the shareholders of the Corporation, whichever is earlier. No Option shall
be granted pursuant to the Plan after February 18, 1996. [March 1, 1999]
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<PAGE>
Exhibit 99.2
CORNERSTONE BANCORP, INC.
1996 INCENTIVE AND NON-QUALIFIED
STOCK OPTION PLAN
This 1996 Incentive and Non-Qualified Stock Option Plan (the "Plan") of
Cornerstone Bancorp, Inc. (the "Company") enables the Company to design a
flexible compensation package in order to attract and retain those officers,
directors and other key employees and other individuals who will most
effectively advance the interests of the Company and its shareholders. Under
this Plan, the Company may grant incentive stock options, non-qualified stock
options (collectively, "Options") and stock appreciation rights ("SARs").
I. GENERAL
1. STOCK SUBJECT TO PLAN. The stock subject to Options and other provisions
---------------------
of the Plan shall be the shares of the Company's authorized but unissued or
reacquired Common Stock, $0.01 par value (the "Common Stock"). The total amount
of the Common Stock with respect to which Options and SARs may be granted shall
not exceed 176,000 shares, reduced by the number of shares subject to
outstanding stock options granted under the Company's 1986 Incentive and Non-
Qualified Stock Option Plan (the "1986 Plan"); provided that such aggregate
number of shares shall be subject to adjustment in accordance with the
provisions of Section VI(4) hereof. If an Option or SAR (collectively, "Awards")
granted under the Plan or under the 1986 Plan shall expire or terminate for any
reason without having been exercised or otherwise realized in full, the shares
subject to the unexercised or terminated Award shall be considered to be
available for additional grants for purposes of the limitation on the aggregate
number of shares subject to this Plan.
2. ADMINISTRATION The Plan shall be administered by a Stock Option
--------------
Committee (the "Committee") appointed by the Board of Directors of the Company
(the "Board"). The Committee shall consist of not less than three (3) members of
the Board. Each director on the Committee shall qualify as a "disinterested
person" as defined in Rule 16b-3 of the Securities and Exchange Commission, or
as defined in such other applicable rules as may be promulgated from time to
time relating to the grant of options to directors and officers of the Company.
Each member of the Committee shall be a person who is not an employee of the
Company. The Board, at its pleasure, may remove members from or add members to
the Committee. A majority of the Committee shall constitute a quorum of members,
and the actions of the majority shall be final and binding on the whole
Committee. The Committee is authorized to determine the officers, and other key
employees and other individuals to whom Awards shall be granted, to determine
the number of shares to be covered by each Award, the terms and conditions of
each Award, to amend any Award, accelerate any vesting period or exchange any
such grant with a new grant, in each case with the grantee's consent, to make
all determinations required or provided under the Plan, to establish rules and
regulations pertaining to participation and administration of the Plan, and to
interpret the Plan; provided however, that the Board of Directors or the
Committee shall have no discretion to determine the non- employee Directors who
will receive Awards, the number of shares of Common Stock subject to such
Awards, or the terms and time upon which shares of Common Stock may be acquired
pursuant to such Awards.
3. ELIGIBILITY AND PARTICIPATION. Awards may be granted to any person who,
-----------------------------
at the time the Award is granted, is an employee (the "Optionees") of the
Company or any parent or subsidiary of the Company (as defined in Section 424
(f) of the Internal Revenue Code of 1986, as amended (the "Code"), as the
Committee shall determine from time to time. The granting of Awards pursuant to
the Plan shall be entirely discretionary with the Committee. Nothing in the Plan
shall be deemed to give any employee or Director any right to participate in the
Plan or to receive an Award thereunder. An Optionee may be granted and hold more
than one Option, but the aggregate fair market value (determined at the time the
Option is granted pursuant to Paragraph 4 below) of the Common Stock for which
any Optionee may be granted Incentive Options (defined below) in any one
calendar year (under all incentive stock option plans of the Company and any
parent or subsidiary of the Company) shall not exceed $100,000 plus any unused
limit
<PAGE>
carryover to such year (as defined in Sections 422A(b)(8) and 422A(c)(4) of the
Code). NQOs (as described below) may be granted to members of the Board of
Directors who are not otherwise employees of the Company on the date of grant
and have not been employees of the Company at any time since the beginning of
the one-year period preceding service on the Board ("Director Optionees") duly
consistent with the terms and conditions under Section IV hereof.
4. GRANTING OF OPTIONS. Options granted to Optionees under the Plan may be
-------------------
either Incentive Stock Options ("ISO") or Non-qualified Stock Options ("NQO") or
Stock Appreciation Rights ("SAR"). The Committee shall have the authority to
grant ISOs, NQOs, or SARs to any Optionee. Options granted to Director
Optionees may only be NQOs and may only be granted in accordance with Section IV
hereof
It is intended that the ISOs granted hereunder shall constitute Incentive
Stock Options within the meaning of Section 422 of the Code and shall be subject
to the federal income tax treatment described in Section 421 of the Code.
Anything in the Plan to the contrary notwithstanding, no provision of the Plan
relating to ISOs shall be interpreted, amended or altered so as to disqualify
the Plan under Section 422 of the Code.
II. INCENTIVE STOCK OPTIONS
1. GRANTING OF INCENTIVE STOCK OPTIONS. Each ISO granted under this Plan
-----------------------------------
shall be evidenced by a written option agreement (together with written
agreements representing NQOs, the "Option Agreement") containing provisions
which are not inconsistent with the Plan, including the following:
(a) Each ISO shall state the number of shares of Common Stock to which the
ISO relates and the purchase price of each share of Common Stock subject
thereto, which shall be based on the fair market value of the shares of Common
Stock as of the date granted, as determined pursuant to the guidelines contained
in Sections 422(c)(1) and (7) of the Code and the Treasury Regulations
thereunder. For purposes of this Plan, the fair market value ("Fair Market
Value") of the Common Stock shall be determined at a particular date in the
following manner: if the stock is listed or admitted to trading on a national
securities exchange, the fair market value per share shall be the closing price
of the Company's Common Stock reported by such exchange for such date (or, if no
closing price was reported for such date, then the closing price for the next
preceding date for which a closing price was reported); if the stock is not then
listed or admitted to trading on a national securities exchange, the fair market
value shall be determined by the Committee on the basis of such factors as it
deems relevant.
(b) The purchase price of the Common Stock covered by the ISO shall be
determined by the Committee and shall be stated in the Option Agreement and
shall not be less than: (i) 100% of the Fair Market Value of the Common Stock
at the time such ISO is granted, or (ii) the par value of the Common Stock,
whichever is greater. With respect to employees who, at the time of the
granting of the ISO, own, or are deemed to own by virtue of the attribution
rules of Code Section 424(d), more than 10% of the total combined voting power
of all classes of stock of (i) the Company, or (ii) its subsidiaries, the
purchase price of each share of stock subject to an ISO under this Plan shall be
at least 110% of the Fair Market Value of such share on the date the ISO is
granted.
(c) The purchase price shall be paid in full at the time of the exercise
in cash by United States currency, certified check or money order or, in the
sole discretion of the Committee, by tendering to the Company (i) shares of
common stock having a fair market value, on the date of exercise, equal to the
Option price, or (ii) a combination of cash and such Common Stock valued at such
fair market value. The fair market value of the Common Stock shall be the
closing price of the Common Stock as of the close of business on the date such
shares are tendered to the Company for exercise of an Option. Surrender of such
shares shall be evidenced by the delivery of certificate(s) representing such
shares in such manner, and endorsed in such form, or accompanied by stock powers
endorsed in such form, as the Committee may determine.
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<PAGE>
(d) The terms of each ISO shall be for such period as the Committee shall
determine, but not more than ten (10) years (or five (5) years in the case of an
Option granted to a 10% shareholder) from the date of grant, thereof, and shall
be subject to earlier termination as hereinafter provided. If the original term
of any Option is less than ten (10) years (or five (5) years in the case of an
Option granted to a 10% shareholder) from the date of grant, the Option prior to
its expiration may be amended, with the approval of the Committee and the
employee or director, to extend the term to not more than ten (10) years (or
five (5) years in the case of an Option granted to a 10% shareholder) from the
original date of granting of such Options. Except as otherwise required by law,
such extension shall not constitute the grant of a new Option and the purchase
price specified in such Option need not be modified.
(e) (1) Options shall not be transferable by the Optionee otherwise than
by will or under the laws of descent and distribution, and shall be exercisable,
during the Optionee's lifetime, only by Optionee, except in the case of the
Disability of the Optionee, in which case the Optionee's Representative may
exercise the ISO, as provided below.
(2) As used in the Plan: (i) the term "Disability" shall have the
meaning set forth in Section 22(e)(3) of the Code and shall be determined,
together with the date of its occurrence, by the Committee. If requested by the
Committee, the Optionee shall be examined by a physician selected or approved by
the Company; and (ii) the term "Optionee's Representative" shall mean: (a) in
the event of the Disability of the Optionee, the Optionee or the Optionee's duly
appointed legal guardian or legal representative; and (b) in the event of the
death of the Optionee, the personal representative of the Optionee's estate, or
any person who acquired the right to exercise an Option by bequest or
inheritance.
(f) (1) Except as otherwise provided in this Paragraph or as specified in
the Option Agreement, in the discretion of the Committee, each Optionee must be
an employee or director of the Company or a parent or subsidiary of the Company
at the date of the grant of an Option before the right to exercise any part of
such Option will accrue. Thereafter, each Option may be exercised, so long as
it is valid, outstanding and not expired, from time to time in part or in whole,
in accordance with the vesting schedule set forth in the Option Agreement in the
discretion of the Committee. Except as may be otherwise expressly provided
herein, ISOs shall terminate three months after the severance of the employment
relationship between the employee and the Company, or the incumbency of a
director of the Company, or a parent or subsidiary of the Company, for any
reason, without cause.
(2) If the Optionee dies within three months after termination
without cause of employment with the Company or its subsidiaries (other than
from termination resulting from a Disability), then the Optionee's
Representative may exercise, to the extent that the Optionee was entitled to do
so on the date of the termination of the Optionee's employment, such Optionee's
ISO at any time within the period ending on the first anniversary of the
Optionee's death. If the Optionee dies within one month after termination of
employment, for cause, with the Company or its subsidiaries (other than from
termination resulting from a Disability), then the Optionee's Representative may
exercise, to the extent that the Optionee was entitled to do so on the date of
the termination of the Optionee's employment, such Optionee's ISO at any time
within the one month period from the date of termination of employment for
cause.
(g) (1) If the termination of employment of the Optionee results from
death or disability, and if such death or disability occurs while the Optionee
is employed by the Company or its subsidiaries, then upon such termination of
employment, the Optionee's Representative may exercise any ISO, to the extent of
any unexercised shares, and to the extent the Optionee was entitled to do so at
the termination of his employment, at any time within one year after disability
or death.
(2) If the Optionee's employment terminates as a result of disability
and the Optionee dies within one year after termination, the Optionee's
Representative may exercise such Optionee's ISO to the extent of any unexercised
shares, and to the extent the Optionee was entitled to do so at the termination
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<PAGE>
of his employment, at any time within the period ending on the first anniversary
of the Optionee's termination.
(h) Notwithstanding any of the foregoing, in no event shall an ISO be
exercisable in whole or in part after the termination date provided in the
Optionee's Option Agreement.
(i) Options shall be exercised by the delivery of written notice to the
officer of the Company designated by the Committee setting forth the number of
shares with respect to which the Option is to be exercised, and specifying the
address to which the certificates for such shares are to be mailed. Payment in
full of the Option exercise price shall accompany such written notice as set
forth in Section l(c) above.
As promptly as practical after receipt of such written notification of the
exercise of an Option and payment, the Company shall deliver to the Optionee
certificates for the number of shares with respect to which such Option has been
so exercised issued in the Optionee's name. An Optionee shall have no rights as
a shareholder with respect to shares covered by an Option until such shares
shall have been fully issued in the name of such holder.
2. $100,000 PER YEAR LIMITATION. An Optionee may be granted and hold more
----------------------------
than one ISO, but the aggregate fair market value (determined at the time the
Option is granted) of the Common Stock for which any Optionee may be granted
ISOs in any one calendar year (under all incentive stock option Plans of the
Company and any parent or subsidiary of the Company) shall not exceed $100,000
plus any unused limit carryover to such year (as defined in Sections 422A(b)(8)
and 422A(c)(4) of the Code).
III. NON-QUALIFIED OPTIONS
---------------------
1. GRANTING OF NON-QUALIFIED OPTIONS. Each NQO granted under this Plan shall
---------------------------------
be evidenced by a written option agreement containing provisions that are not
inconsistent with this Plan, including the following:
(a) The term of each Option shall be for such period as the Committee
shall determine, but not more than ten (10) years (or five (5) years in the case
of an Option granted to a 10% shareholder) from the date of grant, thereof, and
shall be subject to earlier termination as hereinafter provided. If the original
term of any Option is less than ten (10) years (or five (5) years in the case of
an Option granted to a 10% shareholder) from the date of grant, the Option prior
to its expiration may be amended, with the approval of the Committee and the
employee or director, to extend the term to not more than ten (10) years (or
five (5) years in the case of an Option granted to a 10% shareholder) from the
original date of granting of such Options. Except as otherwise required by law,
such extension shall not constitute the grant of a new Option and the purchase
price specified in such Option need not be modified. Each NQO shall state the
number of shares of Common Stock to which the NQO relates and the purchase price
of each share of Common Stock subject thereto. The purchase price of the Common
Stock covered by the NQO shall be determined by the Committee and shall be
stated in the Option Agreement and shall not be less than: (i) 85% of the Fair
Market Value of the Common Stock at the time such NQO is granted; or (ii) the
par value of the Common Stock, whichever is greater.
(b) (1) Except as otherwise provided in this Paragraph or as specified in
the Option Agreement, in the discretion of the Committee, each Optionee must be
an employee or director of the Company or a parent or subsidiary of the Company
at the date of the grant of an Option before the right to exercise any part of
such Option will accrue. Thereafter, each Option may be exercised, so long as
it is valid, outstanding and not expired, from time to time in part or in whole,
in accordance with the vesting schedule set forth in the Option Agreement in the
discretion of the Committee. Except as may be otherwise expressly provided
herein, NQOs shall terminate three months after the severance of the employment
relationship between the employee and the Company, or the incumbency of a
director of the Company, or a parent or subsidiary of the Company, for any
reason, without cause. Except as may be otherwise expressly
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<PAGE>
provided herein, NQOs shall terminate one month after the severance of the
employment relationship between the employee and the Company, or the incumbency
of a director of the Company, or a parent or subsidiary of the Company, for
cause.
(2) If the Optionee dies within three months after termination of
employment, without cause, with the Company or its subsidiaries (other than from
termination resulting from a Disability), then the Optionee's Representative may
exercise, to the extent that the Optionee was entitled to do so on the date of
the termination of the Optionee's employment, such Optionee's NQOs at any time
within the period ending on the first anniversary of the Optionee's death. If
the Optionee dies within one month after termination of employment, for cause,
with the Company or its subsidiaries (other than from termination resulting from
a Disability), then the Optionee's Representative may exercise, to the extent
that the Optionee was entitled to do so on the date of the termination of the
Optionee's employment, such Optionee's NQOs at any time within the one month
period from the date of termination of employment for cause.
(c) (1) If the termination of employment of the Optionee results from
death or disability and if such death or disability occurs while the Optionee is
employed by the Company or its subsidiaries, then upon such termination of
employment, the Optionee's Representative may exercise any NQO, to the extent
the Optionee was entitled to do so at the termination of his employment, at any
time within one year after disability or death.
(2) If the Optionee dies within one year after termination of
employment with the Company or its subsidiaries as a result of disability, then
the Optionee's Representative may exercise, to the extent that the Optionee was
entitled to do so on the date of the termination of the Optionee's employment,
such Optionee's NQOs at any time within one year after the date of disability.
(d) Notwithstanding any of the foregoing, in no event shall an NQO be
exercisable in whole or in part after the termination date provided in the
Optionee's Option Agreement.
(e) Options shall not be transferable by the Optionee otherwise than by
will or under the laws of descent and distribution, and shall be exercisable
during the Optionee's lifetime, only by Optionee, except in the case of the
Disability of the Optionee, in which case the Optionee's Representative may
exercise the NQO.
(f) The Option price shall be paid in full at the time of the exercise in
cash by United States currency, certified check or money order or, in the sole
discretion of the Committee, by tendering to the Company (i) shares of Common
Stock having a Fair Market Value, on the date of exercise, equal to the Option
price, or (ii) a combination of cash and such Common Stock valued at such fair
market value.
(g) Options shall be exercised by the delivery of written notice to the
officer of the Company designated by the Committee setting forth the number of
shares with respect to which the Option is to be exercised, and specifying the
address to which the certificates for such shares are to be mailed. Payment in
full of the Option exercise price shall accompany such written notice as set
forth in Section (f) above. As promptly as practical after receipt of such
written notification of the exercise of an Option and payment, the Company shall
deliver to the Optionee certificates for the number of shares with respect to
which such Option has been so exercised issued in the Optionee's name. An
Optionee shall have no rights as a shareholder with respect to shares covered by
an Option until such shares shall have been fully issued in the name of such
holder.
IV. DIRECTOR NON-QUALIFIED OPTIONS
1. GENERAL. Notwithstanding anything contrary contained in this Plan,
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Director Optionees may only receive NQOs at the time, in the amount and upon
terms and conditions not inconsistent with this
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<PAGE>
Section IV ("Director NQOs"). Other terms and conditions of Director NQOs not
set forth in this Section IV shall be governed by Section III and other
applicable provisions of the Plan.
2. GRANT OF OPTIONS AND OPTION PRICE. Upon the effective date of the Plan,
----------------------------------
each Director Optionee shall be granted Director NQOs for a number of shares of
Common Stock equal to 250 times the number of years of service as a Director of
the Company, but for not less than 250 shares nor more than 2,500 shares.
Thereafter, subject to availability of shares under the Plan, at the first
meeting of the Board of Directors following the Annual Meeting of Shareholders
in each year, commencing in 1997, each Director Optionee shall be granted
Directors NQOs for 250 shares of Common Stock. The per share price to be paid
by a Director Optionee for the shares of Common Stock shall be the Fair Market
Value at the date of the granting of the NQO.
3. TERM OF DIRECTOR NQOs. Director NQOs granted to Director Optionees who, on
---------------------
the date of grant, have not less than five (5) full consecutive years of service
as a Director, shall be exercisable in whole or in part during a period
commencing on the date of the grant and ending on the tenth anniversary of the
date of each such grant. Director NQOs granted to Director Optionees who, on
the date of the grant, have fewer than five (5) full consecutive years of
service as a Director, shall be exercisable in whole or in part during a period
commencing on the fifth anniversary of the date on which service as a Director
began and ending on the tenth anniversary of the date of each such grant.
V. STOCK APPRECIATION RIGHTS
1. GRANTING OF STOCK APPRECIATION RIGHTS. Stock Appreciation Rights ("SARs")
-------------------------------------
related to all or any portion of an ISO or NQO may be granted by the Committee
to any Optionee in connection with the grant of an Option or any unexercised
portion thereof held by an Optionee at any time and from time to time during the
term of the Option. Each SAR shall be subject to such terms and conditions
(which may include limitations as to the time when such SAR becomes exercisable
and when it ceases to be exercisable that are more restrictive than the
limitations on the exercise of the Option to which it relates) not inconsistent
with the provisions of this Article V, as shall be determined by the Committee
and included in the Option Agreement relating to such Option and SAR, subject in
any event, however, to the following terms and conditions of this Section:
(a) No SAR shall be exercisable with respect to such related Option or
portion thereof unless such Option or portion thereof shall itself be
exercisable at that time. An SAR shall be exercised only upon surrender of the
related Option or portion thereof in respect of which the SAR is then being
exercised.
(b) On exercise of an SAR, an Optionee shall be entitled to receive an
amount equal to the product of (i) the amount by which the Fair Market Value per
share of the shares to which such exercisable Option relates on the date the
Option is surrendered exceeds the Option price, and (ii) the number of shares to
which the surrendered Option relates with respect to which the SAR shall have
been exercised. If the Common Stock is listed on a securities exchange, the
Fair Market Value per share shall be the closing price of the Common Stock as of
the close of business on the date the SAR is exercised.
(c) The Committee shall have the sole discretion either (i) to determine
the form in which payment in settlement of an SAR will be made (i.e. cash,
shares of Common Stock or any combination thereof), or (ii) to consent to or
disapprove the election of the Optionee to receive cash in full or partial
settlement of the SARs, such consent or approval to be given at any time after
the election to which it relates. If settlement of an SAR, or portion thereof,
is to be made in the form of shares of Common Stock, the number of shares of
Common Stock to be distributed shall be the largest whole number obtained by
dividing the cash sum otherwise distributable in respect of such settlement by
the Fair Market Value per share of a share on the date of exercise of the SAR.
The value of any fractional share shall be paid in cash.
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<PAGE>
(d) If the related Option is exercised in whole or in part, then the
SAR with respect to the shares of Common Stock purchased pursuant to such
exercise (but not with respect to any unpurchased shares) shall be terminated as
of the date of exercise.
(e) An SAR shall not be transferable or assignable by the Optionee
other than by will or the laws of descent and distribution, and shall not be
transferred other than together with the Option to which it relates. An SAR
shall be exercisable during the Optionee's lifetime only by the Optionee, or, if
the Optionee has a disability, by the Optionee's Representative.
(f) If the Optionee ceases to be an employee of the Company or its
subsidiaries for any reason, each outstanding SAR shall be exercisable for such
period and to such extent as the related Option or portion thereof to which it
relates.
VI. MISCELLANEOUS
1. VESTING. The Committee, in its sole discretion, may provide in an Option
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Agreement, that an Option shall vest and become exercisable in installments.
The Committee may, in its sole discretion, permit the acceleration of the time
to exercise one or more installments of any Option.
2. OPTIONAL PAYMENT. The Committee, with the consent of the Optionee or
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Director Optionee, may elect in the case of an Option which is exercisable, upon
the exercise of such Option, to pay the Optionee on a per share basis either:
(i) cash equal to the excess of the Fair Market Value of shares to which the
exercisable Option pertains on the date of the exercise of the Options over the
exercise price under the Option, or (ii) cash equal to the excess of the Fair
Market Value of the shares to which such exercisable Option relates on the date
the Option is exercised over the Fair Market Value on the date the Option was
granted. If the Committee deems it necessary or advisable at any time in order
to carry out an acquisition or sale of assets, merger or a securities offering,
the Company may purchase any Option granted hereunder, without the consent of
the Optionee or Director Optionee and without regard to any vesting period under
the Option, for a price calculated in accordance with subsection (i) of this
paragraph as if the Option were being exercised at such time.
3. ACCELERATION ON CERTAIN CHANGES.
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(a) In the event of (i) a reorganization, merger, or consolidation of the
Company in which the Company is not the surviving corporation, (ii) the
dissolution or liquidation of the Company, (iii) a sale or lease of fifty
percent (50%) or more, computed on the basis of book value, of the Company's
consolidated assets, or (iv) a Change of Control, the time at which the Options
then outstanding may be exercised shall be accelerated and all such Options
shall become exercisable in full on or before a date fixed by the Committee
prior to the effective time of such reorganization, merger, consolidation,
dissolution, liquidation, sale or lease, or Change of Control and upon such
effective time any unexercised Options shall expire.
An Option may be exercised, upon the consent of the Committee, or pursuant
to the terms of a specific Option Agreement (as hereinafter defined) between the
Optionee and the Company, in whole or in part, at any time, and from time to
time, prior to its date of expiration.
(b) For purposes hereof, a "Change of Control" shall be deemed to have
taken place if (i) any person becomes the beneficial owner of twenty-five
percent (25%) or more of the total number of voting shares of the Company; (ii)
any person that holds revocable or irrevocable proxies, as to the election or
removal of directors of the Company, for twenty-five percent (25%) or more of
the total number of voting shares of the Company; (iii) any person has entered
into an agreement or received an option for the acquisition of, beneficial
ownership of twenty-five percent (25%) or more of the total number of voting
shares of the Company, whether or not the requisite approval for such
acquisition has been received under the applicable laws or the respective
regulations issued hereunder; or (iv) as the result of or in connection
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with any cash tender or exchange offer, merger, or other business combination,
sale of assets or contested election, or any combination of the foregoing
transactions, the persons who were directors of the Company before such
transaction shall cease to constitute at least two-thirds (2/3) of the Board of
Directors of the Company or any successor corporation. For purposes of this
Section, a "person" includes an individual, corporation, partnership, trust,
association, joint venture, pool, syndicate, unincorporated organization, joint-
stock company or similar organization or group acting in concert. For purposes
of this Section, a person shall be deemed to be a beneficial owner as that term
is used in Rule 13d-3 under the Securities Exchange Act of 1934.
4. ADJUSTMENTS. The existence of outstanding Options shall not affect in
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any way the right or power of the Company or its shareholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stock ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
In the event of the complete liquidation or dissolution of a subsidiary of
the Company, or in the event that such corporation ceases to be a subsidiary,
any unexercised Options theretofore granted to Optionees employed by such
subsidiary shall be deemed cancelled unless such Optionees shall become employed
by the Company or by any other subsidiary on the occurrence of such event.
Notwithstanding any other provision of the Plan, the Committee may make
provisions for the adjustment of the number and class of shares covered by each
outstanding Option and the Option prices, in the event of changes in the
outstanding Common Stock by reason of stock dividends, split-ups, spin-offs,
recapitalizations, mergers, consolidations, combinations or exchanges of shares
and the like.
5. USE OF PROCEEDS. All proceeds received by the Company under this Plan
---------------
shall be used for its general corporate purposes.
6. CONVERSION OF ISOs INTO NQOs; TERMINATION OF ISOs. The Committee, at the
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written request of any Optionee, may in its discretion take such actions as may
be necessary to convert such Optionee's ISOs (or any portions thereof) that have
not been exercised on the date of conversion into NQOs at any time prior to the
expiration of such ISOs. Such actions may include, but shall not be limited to,
extending the exercise period or reducing the exercise price of the appropriate
installments of such Options, at the time of such conversion, the Committee
(with the consent of the Optionee) may impose such conditions on the exercise of
the resulting NQOs as the Committee in its discretion may determine, provided
that such conditions shall not be inconsistent with this Plan. Nothing in the
Plan shall be deemed to give any Optionee the right to have such Optionee's ISOs
converted into NQOs, and no such conversion shall occur until and unless the
Committee takes appropriate action. The Committee, with the consent of the
Optionee, may also terminate any portion of any ISO that has not been exercised
at the time of such conversion.
7. WITHHOLDING If any state, federal, or local income taxes, employment
-----------
taxes, Federal Insurance Contributions Act ("F.I.C.A.") withholdings or other
amounts are required by applicable law or governmental regulation to be withheld
from the Optionee's salary, wages or other enumeration in connection with the
exercise of an Option or a Disqualifying Disposition (as defined in Section 8
below), the Optionee shall advance in cash to the Company, or to any subsidiary
of the Company which employs or employed the Optionee, the amount of such
withholdings, unless a different withholdings arrangement, including the use of
Common Stock, is authorized by the Committee (and permitted by law), provided,
however, that with respect to persons subject to Section 16 of the Securities
Exchange Act of 1934 (the "1934 Act"), any such withholding arrangement shall be
in compliance with any applicable provisions of Rule 16b-3 promulgated under
Section 16 of the 1934 Act. For purposes hereof, the value of the shares
withheld for purposes of payroll withholding she be the Fair Market Value of the
Common Stock. If the Fair Market Value of the shares withheld is less than the
amount of payroll withholdings required, the Optionee
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may be required to advance the difference in cash to the Company or its
subsidiary. The Committee in its discretion may condition the exercise of an
Option on the Optionee's payment of such additional withholding.
8. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. Each Optionee who receives
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an ISO must agree to notify the Company in writing immediately after the
Optionee makes a Disqualifying Disposition of any shares acquired pursuant to
the exercise of an ISO. As used herein, the term "Disqualifying Disposition"
shall mean any disposition (including any sale) of such shares before the later
of (i) two years after the date the Optionee was granted the ISO, or (ii) one
year after the date the Optionee acquired shares by exercising the ISO. If the
Optionee has died before such stock is sold, these holding period requirements
do not apply and no Disqualifying Disposition can occur thereafter.
9. SUBSTITUTE OPTIONS. Options may be granted by the Committee under this
------------------
Plan from time to time in substitution of options held by employees of other
corporations who are about to become employees of the Company as a result of a
merger or consolidation of the employing corporation with the Company, or the
acquisition by the Company of the assets of the employing corporation, or the
acquisition by the Company of stock of the employing corporation as a result of
which it becomes a subsidiary of the Company. The terms and conditions of the
substitute Options so granted may vary from the terms and conditions set forth
in this Plan to such extent as the Board at the time of grant may deem
appropriate to conform, in whole or in part, to the provisions of the options in
substitution for which they are granted, but no such variation shall be such as
to affect the status of any substitute ISO as an incentive stock option under
the Code.
10. WRITTEN AGREEMENT. Each Option granted hereunder shall be embodied in a
-----------------
written Option Agreement which shall be subject to the terms and the conditions
prescribed herein, and shall be signed by the Optionee and by an officer of the
Company for and on behalf of the Company. ISOs and NQOs may not be granted in
the same Option Agreement. An Option Agreement shall contain such other
provisions as the Committee in its discretion shall deem advisable, so long as
the same are not contrary or inconsistent with the terms and provisions of the
Plan.
11. REQUIREMENTS OF LAW. The Company shall not be required to sell or issue
-------------------
any shares under any Option if the issuance of such shares shall constitute a
violation by the Optionee or the Company of any provisions of law or regulation
of any governmental authority. Specifically in connection with the Securities
Act of 1933, as amended from time to time (the "Act"), upon exercise of any
Option, unless a registration statement under such Act is in effect with respect
to the shares of Common Stock covered by such Option, the Company shall not be
required to issue such shares unless the Committee has received evidence
satisfactory to it to the effect that the holder of such Option is acquiring
such shares for investment and not with a view to the distribution thereof Any
determination in this connection by the Committee shall be final, binding and
conclusive. The Company may, but shall in no event be obligated, to register
any securities covered hereby pursuant to the Act. The Company shall not be
obligated to take any other affirmative action in order to cause the exercise of
an Option or the issuance of shares pursuant to an Option to comply with any law
or regulation of any governmental authority.
12. EMPLOYMENT OBLIGATION. The granting of any Option shall not impose upon
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the Company any obligation to employ or continue to employ any Optionee; and the
rights of the Company to terminate the employment of any officer, director or
any other employee shall not be diminished or affected by reason of the fact
that an option has been granted to such person.
13. AMENDMENT OR TERMINATION OF PLAN. The Board may modify, revise or
--------------------------------
terminate this Plan at any time and from time to time, provided, however, that
(i) the provisions of Article IV may not be amended more than once every six (6)
months, other than to comport with changes in the Code, the Employee Retirement
Income Security Act, or the rules thereunder, and (ii) without approval of the
holders of at least a majority of the outstanding shares of Common Stock, the
Board may not (a) change the
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aggregate number of shares which may be issued pursuant to the provisions of the
Plan or to any individual (except pursuant to adjustment provisions provided
below); (b) reduce the Option price at which Options may be granted; (c) change
the class of employees or directors eligible to receive Options; or (d) make any
changes of a nature that requires shareholder approval in order to ensure the
compliance of the Plan with Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, or such similar rule as may apply to the Plan, provided however,
that the Board shall have the power to make such changes in the Plan and in the
administrative provisions hereunder or in any outstanding Incentive Option as in
the opinion of counsel for the Company may be necessary or appropriate from time
to time to enable the ISOs granted pursuant to the Plan to continue to qualify
as incentive stock options under Section 422A of the Code and the regulations
which may be issued thereunder.
14. EFFECTIVE DATE OF PLAN. The Plan shall become effective and shall be
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deemed to have been adopted on the date of its adoption by the Board, subject to
ratification by the shareholders of Cornerstone Bank and shall supersede the
1986 Plan which was terminated by the Board, except for any outstanding Options
previously granted under the 1986 Plan. No Option shall be granted pursuant to
the Plan more than ten (10) years after the adoption of the Plan. Any Option
outstanding under this Plan at the termination of the Plan shall remain in
effect until it shall have been exercised in full or shall have expired.
[March 1, 1999]
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Exhibit 99.3
CORNERSTONE BANCORP, INC.
DIRECTOR COMPENSATION PLAN
Under the terms of the plan, non-officer directors of Cornerstone Bancorp,
Inc. (the "Company") and of any of its subsidiaries are compensated for their
attendance at meetings of the Board of Directors and Committees either with cash
or, at their option, with authorized but unissued shares of the Company's Common
Stock; provided that non-officer directors of the Company who are also non-
officer directors of subsidiaries will not receive any compensation for their
attendance at meetings of the board or committees of any subsidiaries. Each non-
officer director receives a credit for attendance at regular Board and Committee
meetings, which is Two Hundred Dollars ($200.00) for each regular Board meeting
and for each Committee meeting attended. Such amounts may be adjusted by a
majority vote of the Board of the Company.
Each non-officer director must elect by the first Board meeting after any
Annual Meeting of the Company whether he or she wishes to be paid in cash or
Common Stock for the period ending at the next Annual Meeting. Directors who
wish to be paid in cash will receive a check for attendance at each Board
meeting. The check will be based upon attendance at Board and Committee meetings
for the prior month. For those directors who elect payment in stock, the number
of shares of Common Stock will be equal to such director's credits for regular
Board and Committee meetings divided by the closing price of the stock or par
value of the Common Stock, whichever is greater, as of the date of the regular
Board Meeting for the period following the prior regular Board meeting up to and
including the current Board Meeting. No fractional shares will be issued. Cash
payments in lieu of fractional shares and certificates will be distributed on
the last business day of May of each year.
The Board of Directors of the Company may terminate the plan at any time by
a majority vote of the Board of Directors. The Board of Directors of the Company
may amend the plan by a majority vote of the Board of Directors. The Board of
Directors of the Company is prohibited from making a material amendment to the
plan without affirmative vote, in person or by proxy, of the holders of record
of at least a majority of all outstanding shares of the Common Stock.
March 1, 1999
