UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 28, 2025
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PLUMAS BANCORP
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(Exact name of registrant as specified in its charter)
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California
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000-49883
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75-2987096
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(State or other jurisdiction of
incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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5525 Kietzke Lane, Suite 100 Reno, NV
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89511
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code: (775) 756-0907
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Not Applicable
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(Former name or former address, if changed since last report.)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (See General Instruction A.2. below):
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☒
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock
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PLBC
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NASDAQ Capital Market
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Item 1.01
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Entry into a Material Definitive Agreement
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On January 28, 2025, Plumas Bancorp (the “Company” or “Plumas”) entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Cornerstone Community Bancorp (“Cornerstone”), pursuant to which Cornerstone will merge with and into the Company, with the Company as the surviving corporation (the “Merger”). The Merger Agreement contemplates that immediately after the Merger, Cornerstone’s wholly-owned subsidiary, Cornerstone Community Bank, a California state-chartered bank (“Cornerstone Bank”), will merge with and into Plumas Bank, a California state-chartered bank and wholly-owned subsidiary of the Company (“Plumas Bank”), with Plumas Bank as the surviving bank (the “Bank Merger”).
Merger Consideration
At the effective time of the Merger (the “Effective Time”), each outstanding share of Cornerstone common stock, excluding certain specified shares, will be converted into the right to receive 0.6608 shares of Plumas common stock (the “Exchange Ratio”), plus up to $9.75 in cash consideration, as may be reduced in accordance with the terms of the Merger Agreement (the “Cash Consideration”) If Cornerstone’s Adjusted Tangible Common Equity (as determined in accordance with the Merger Agreement) as of the month end prior to the Effective Time, as adjusted to reflect certain merger-related costs, is less than $42,586,066, then the Cash Consideration will be reduced by such difference on a pro rata basis based on the number of shares of Cornerstone common stock outstanding immediately prior to the Effective Time. In addition, if Cornerstone’s merger-related costs (as determined in accordance with the Merger Agreement and giving credit for any recoveries on a specific Cornerstone Bank loan) exceed $7,000,000, then the Cash Consideration will be reduced by such excess on a pro rata basis based on the number of shares of Cornerstone common stock outstanding immediately prior to the Effective Time.
Treatment of Cornerstone Stock Options
At the Effective Time, each outstanding option to purchase shares of Cornerstone common stock held by an employee of Cornerstone that will continue employment with the Company following the Effective Time or the member of the Cornerstone Board of Directors appointed to the Company’s Board of Directors pursuant to the Merger Agreement will become fully vested, will be assumed by the Company and will be converted into an option to purchase a number of shares of Plumas common stock equal to the product of (a) the total number of shares of Cornerstone common stock subject to such Cornerstone stock option immediately multiplied by (b) the Option Exchange Ratio, and the exercise price of each such option shall be equal to the exercise price of the Cornerstone option immediately prior to the Effective Time divided by the Option Exchange Ratio. “Option Exchange Ratio” means the ratio of (a) the sum of (i) the Exchange Ratio multiplied by the closing sales price of a share of Plumas common stock on the NASDAQ Stock Market on the last trading day immediately preceding the closing date of the Merger Agreement, plus (ii) the Cash Consideration, divided by (b) the closing sales price of a share of Plumas common stock on the NASDAQ Stock Market on the last trading day immediately preceding the date of the Effective Time.
At the Effective Time, each outstanding option to purchase shares of Cornerstone common stock that is not assumed by the Company will be cancelled and converted into the right to receive a cash payment equal to the product of the (i) the total number of shares of Cornerstone common stock subject to such option to purchase Cornerstone common stock and (ii) the excess, if any, of (a) the Equity Award Cashout Price over (b) the exercise price per share of Cornerstone common stock under such option. “Equity Award Cashout Price” means an amount equal to the sum of (x) the product of (a) the average closing price per share of Plumas common stock, as reported on the NASDAQ Stock Market, for the 20 trading days ending on and including the second trading day prior to the Effective Time multiplied by (b) the Exchange Ratio, plus (y) the Cash Consideration.
Board Representation
The Merger Agreement provides that the Company will appoint to the Boards of Directors of the Company and Plumas Bank, as of the Effective Time, one individual serving as a director of Cornerstone on the date of the Merger Agreement, who shall be mutually agreeable to the Company and Cornerstone, and who shall qualify as an “independent” director of the Company under applicable NASDAQ rules.
Termination
The Merger Agreement contains certain termination rights for both the Company and Cornerstone, including if (i) the Merger is not consummated by November 1, 2025, subject to a 65-day extension if the consummation is delayed due to the need to receive then-pending regulatory approvals, (ii) the required regulatory approvals are not obtained, (iii) the approval of Cornerstone’s is not obtained, or (iv) there has been a breach by the other party that is not cured such that the applicable closing conditions are not satisfied.
The Merger Agreement provides certain additional termination rights related to competing acquisition proposal for Cornerstone and further provides that a termination fee of $2,528,000 will be payable by Cornerstone in the event of a termination of the Merger Agreement under certain circumstances.
Other Terms; Closing Conditions
The Merger Agreement contains various customary representations, warranties and covenants by the Company and Cornerstone. Cornerstone has agreed to conduct its business in the ordinary course and forbear from taking certain actions while the transaction is pending. Consummation of the transactions contemplated by the Merger Agreement is subject to customary conditions, including, among others, approval by the Cornerstone shareholders and receipt of required regulatory approvals.
The representations, warranties and covenants contained in the Merger Agreement were made only for purposes of the Merger Agreement and as of specific dates, were solely for the benefit of the parties to the Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the parties thereto or any of their respective subsidiaries or affiliates.
Shareholder Agreements
Simultaneously with the execution of the Merger Agreement, certain shareholders of Cornerstone entered into a Shareholder Agreement (the “Shareholder Agreement”), pursuant to which each has agreed, among other things, to vote his or her shares of Cornerstone common stock in favor of the Merger Agreement and the transactions contemplated thereby.
The foregoing summary of the Merger Agreement or the Shareholder Agreement do not purport to be complete and is qualified in its entirety by the text of the Merger Agreement, attached hereto as Exhibit 2.1, and Exhibit A to the Merger Agreement, respectively, and are incorporated herein by reference.
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Item 7.01
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Regulation FD Disclosure
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On January 29, 2025, the Company and Cornerstone issued a joint press release announcing the execution of the Merger Agreement. A copy of the press release is attached to this report as Exhibit 99.1 and is incorporated herein by reference. In addition, the Company has prepared an investor presentation regarding the transactions contemplated by the Merger Agreement, which it expects to use in connection with presentations to analysts and investors. The presentation is attached to this report as Exhibit 99.2 and is incorporated herein by reference.
The information in this Item 7.01 and Exhibits 99.1 and 99.2 is furnished and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor will it be deemed incorporated by reference in any filing under the Securities Act, except as may be expressly set forth by specific reference in such document or filing.
Forward-Looking Statements
This Current Report on Form 8-K, including its exhibits, may contain forward-looking statements regarding the Company, Plumas Bank, Cornerstone, Cornerstone Bank, and the proposed Merger, including but not limited to certain plans, expectations, projections and statements about the benefits of the proposed Merger, the timing of completion of the Merger, and other statements that are not historical facts. Such statements are subject to numerous assumptions, risks, and uncertainties. All statements other than statements of historical fact, including statements about beliefs and expectations, are forward-looking statements. Forward-looking statements may be identified by words such as “expect,” “anticipate,” “believe,” “intend,” “estimate,” “plan,” “target,” “goal,” or similar expressions, or future or conditional verbs such as “will,” “may,” “might,” “should,” “would,” “could,” or similar variations. The forward-looking statements are intended to be subject to the safe harbor provided by the Private Securities Litigation Reform Act of 1995.
Factors that could cause or contribute to results differing from those in or implied in the forward-looking statements include but are not limited to the occurrence of any event, change or other circumstances that could give rise to the right of the Company or Cornerstone to terminate the Merger Agreement; the outcome of any legal proceedings that may be instituted against the Company or Cornerstone; delays in completing the Merger; the failure to obtain necessary regulatory approvals (and the risk that such approvals impose conditions that could adversely affect the combined company or the expected benefits of the Merger); the failure of Cornerstone to obtain its requisite shareholder approval or of the Company or Cornerstone to satisfy any of the other conditions to the Merger on a timely basis or at all; the ability to complete the Merger and integration of the Company and Cornerstone successfully; costs being greater than anticipated; cost savings being less than anticipated; changes in economic conditions; the risk that the Merger disrupts the business of the Company, Cornerstone or both; difficulties in retaining senior management, employees or customers; and other factors that may affect the future results of the Company or Cornerstone. Further information on the Company’s risk factors is contained in the Company’s filings with the Securities and Exchange Commission, including the Form 10-K for the year ended December 31, 2023. Any forward-looking statement made by the Company in this report or the exhibits attached to this report speaks only as of the date on which it is made.
The Company, Plumas Bank, Cornerstone and Cornerstone Bank undertake no obligation to revise or publicly release any revision or update to these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.
Additional Information about the Merger and Where to Find It
Investors and security holders are urged to carefully review and consider each of the Company’s public filings with the Securities and Exchange Commission (the “SEC”), including but not limited to its Annual Reports on Form 10-K, its Proxy Statements, Current Reports on Form 8-K and Quarterly Reports on Form 10-Q. The documents filed by the Company with the SEC may be obtained free of charge at the Company’s website at www.plumasbank.com or at the SEC’s website at www.sec.gov. These documents may also be obtained free of charge from the Company by requesting them in writing to Plumas Bancorp, 5525 Kietzke Lane, Suite 100, Reno, Nevada 89511, Attention: Shareholder Relations, or by telephone at (775) 786-0907.
The Company intends to file a registration statement on Form S-4 with the SEC which will include a proxy statement/prospectus that will be distributed to the shareholders of Cornerstone in connection with their vote on the Merger Agreement. Before making any voting or investment decision, investors and security holders of Cornerstone are urged to carefully read the entire proxy statement/prospectus when it becomes available, as well as any amendments or supplements, because they will contain important information about the proposed transaction. Investors and security holders will be able to obtain the proxy statement/prospectus free of charge from the SEC’s website, from the Company’s website or by requested them from the Company by mail as described in the paragraph above. The proxy statement/prospectus and other relevant materials (when they become available) may be obtained by Cornerstone shareholders free of charge by contacting Matt Moseley, the President and CEO of Cornerstone, at 192 Hartnell Avenue Redding, California 96002 or (530) 222-1460.
Participants in the Solicitation
The Company and certain of its directors and executive officers, and Cornerstone and certain of their respective directors, executive officers and certain other members of management and employees, may be deemed participants in the solicitation of proxies in favor of approving the Merger Agreement. Information regarding Plumas’s directors and executive officers is available in Plumas’s definitive proxy statement for its 2024 annual meeting of shareholders filed with the SEC on April 4, 2024, which is available free of charge from Plumas upon request as described above. Other information regarding Cornerstone directors and executive officers, and other participants in the solicitation of proxies in respect of the proposed transaction and a description of their direct and indirect interests will be contained in the proxy statement/prospectus and other relevant materials to be filed with the SEC. Free copies of these documents, when available, may be obtained as described in the above section.
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Item 9.01
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Financial Statements and Exhibits
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* Certain schedules and similar attachments omitted pursuant to Item 601(b)(2) of Regulation S-K promulgated by the SEC. The Company agrees to furnish a copy of any omitted schedule or exhibit to the SEC upon request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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PLUMAS BANCORP
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Dated: January 29, 2025
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By:
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/s/ Richard L. Belstock
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Name: Richard L. Belstock
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Title: Chief Financial Officer
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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
DATED AS OF JANUARY 28, 2025
BY AND BETWEEN
PLUMAS BANCORP
AND
CORNERSTONE COMMUNITY BANCORP
TABLE OF CONTENTS
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Page |
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| ARTICLE I CERTAIN DEFINITIONS |
2 |
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1.01 |
Certain Definitions |
2 |
| ARTICLE II THE MERGER |
12 |
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2.01 |
The Merger |
12 |
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2.02 |
Closing Date and Effective Time; Closing |
13 |
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2.03 |
Bank Merger |
13 |
| ARTICLE III CONSIDERATION AND EXCHANGE PROCEDURES |
13 |
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3.01 |
Conversion of Shares |
13 |
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3.02 |
Exchange Procedures |
14 |
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3.03 |
Rights as Shareholders |
17 |
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3.04 |
No Fractional Shares |
17 |
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3.05 |
Anti-Dilution Provisions |
17 |
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3.06 |
Withholding Rights |
17 |
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3.07 |
Cornerstone Equity Awards |
17 |
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3.08 |
Potential Adjustments to Cash Considerations |
19 |
| ARTICLE IV ACTIONS PENDING ACQUISITION |
19 |
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4.01 |
Forbearances of Cornerstone |
19 |
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4.02 |
Forbearances of Plumas |
25 |
| ARTICLE V REPRESENTATIONS AND WARRANTIES |
25 |
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5.01 |
Disclosure Schedules |
25 |
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5.02 |
Standard |
25 |
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5.03 |
Representations and Warranties of Cornerstone |
26 |
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5.04 |
Representations and Warranties of Plumas |
53 |
| ARTICLE VI COVENANTS |
58 |
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6.01 |
Reasonable Best Efforts |
58 |
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6.02 |
Cornerstone Shareholder Approval |
59 |
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6.03 |
Registration Statement |
60 |
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6.04 |
Regulatory Filings |
60 |
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6.05 |
Press Releases |
60 |
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6.06 |
Access; Information |
61 |
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6.07 |
No Solicitation; Acquisition Proposals |
62 |
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6.08 |
Certain Policies |
64 |
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6.09 |
Nasdaq Listing |
64 |
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6.10 |
Indemnification |
64 |
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6.11 |
Benefit Plans |
68 |
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6.12 |
Appointment of Director |
69 |
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6.13 |
Notification of Certain Matters |
69 |
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6.14 |
Estoppel Letters; Title Insurance |
70 |
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6.15 |
Antitakeover Statutes |
70 |
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6.16 |
Consents |
70 |
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6.17 |
Federal Home Loan Bank Borrowings |
70 |
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6.18 |
Shareholder Litigation and Protests |
70 |
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6.19 |
Closing Financial Statements |
71 |
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6.20 |
Customer Notices |
71 |
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6.21 |
Professional Fees and Expenses |
72 |
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6.22 |
Environmental Matters. |
72 |
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6.23 |
Tax Treatment |
73 |
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6.24 |
Assumption of Cornerstone Subordinated Notes |
73 |
| ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER |
73 |
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7.01 |
Conditions to Each Party’s Obligation to Effect the Merger |
73 |
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7.02 |
Conditions to Obligation of Cornerstone |
74 |
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7.03 |
Conditions to Obligation of Plumas |
74 |
| ARTICLE VIII TERMINATION |
76 |
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8.01 |
Termination |
76 |
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8.02 |
Effect of Termination and Abandonment |
77 |
| ARTICLE IX MISCELLANEOUS |
79 |
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9.01 |
Survival |
79 |
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9.02 |
Waiver; Amendment |
79 |
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9.03 |
Counterparts |
79 |
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9.04 |
Governing Law |
79 |
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9.05 |
Expenses |
79 |
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9.06 |
Notices |
80 |
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9.07 |
Entire Understanding; Limited Third Party Beneficiaries |
81 |
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9.08 |
Severability |
81 |
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9.09 |
Interpretation |
81 |
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9.10 |
Assignment |
82 |
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9.11 |
Alternative Structure |
82 |
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9.12 |
Confidential Supervisory Information. |
82 |
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9.13 |
Enforcement of the Agreement |
82 |
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9.14 |
Delivery by Facsimile or Electronic Transmission |
82 |
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| EXHIBIT A |
Form of Shareholder Agreement |
A-1 |
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| EXHIBIT B |
Agreement of Merger |
B-1 |
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| EXHIBIT C |
Bank Merger Agreement |
C-1 |
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of January 28, 2025 by and between Plumas Bancorp, a California corporation (“Plumas”), and Cornerstone Community Bancorp, a California corporation (“Cornerstone,” and together with Plumas, the “Parties” and each a “Party”).
RECITALS
WHEREAS, upon the terms and subject to the conditions of this Agreement and in accordance with the California General Corporation Law (the “CGCL”), Cornerstone will merge with and into Plumas (the “Merger”), with Plumas as the surviving corporation in the Merger (sometimes referred to in such capacity as the “Surviving Corporation”).
WHEREAS, immediately following the Merger, Cornerstone Community Bank, a California state-chartered bank and a wholly-owned subsidiary of Cornerstone (“Cornerstone Bank”), will merge with and into Plumas Bank, a California state-chartered bank and wholly-owned subsidiary of Plumas (“Plumas Bank”), with Plumas Bank as the surviving bank (the “Bank Merger”).
WHEREAS, the respective boards of directors of Plumas and Cornerstone have determined that this Agreement and the transactions contemplated hereby are fair to and in the best interests of their respective companies and their respective shareholders, as applicable, and have approved, adopted and declared advisable this Agreement and the transactions contemplated hereby, including the Merger, all upon the terms and subject to the conditions set forth herein.
WHEREAS, it is the intention of the Parties that the Merger be treated as a “reorganization” under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and that this Agreement constitute a “plan of reorganization” within the meaning of Section 1.368-2(g) of the Treasury Regulations.
WHEREAS, as material inducement to Plumas to enter into this Agreement, and simultaneously with the execution of this Agreement, certain shareholders of Cornerstone are entering into agreement, substantially in the form attached to this Agreement as Exhibit A (collectively, the “Shareholder Agreements”), pursuant to which they agree, among other things, to vote their shares of Cornerstone Common Stock in favor of adopting and approving this Agreement, not to compete with Plumas or Plumas Bank, and not to solicit the customers or employees of Plumas and Plumas Bank subject to the terms and limitations therein.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants, representations, warranties and agreements contained herein the Parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01 Certain Definitions. The following terms are used in this Agreement with the meanings set forth below:
“ACL” has the meaning set forth in Section 5.03(y).
“Acquisition Proposal” means (A) any proposal, offer or inquiry with respect to a merger, joint venture, partnership, consolidation, dissolution, liquidation, tender offer, recapitalization, reorganization, share exchange, business combination or similar transaction involving Cornerstone or any of its Subsidiaries that if consummated, would result in any Person (or the shareholders of any Person) owning 10% or more of the total voting power of Cornerstone or the surviving entity in a merger involving such party or the resulting parent company of such surviving entity and (B) any proposal or offer to acquire in any manner, directly or indirectly, 10% or more of the total voting power of any class of equity securities of Cornerstone or those of any of its Subsidiaries or 10% or more of Cornerstone’s consolidated total assets (including equity securities of its Subsidiaries), in each case other than the transactions contemplated by this Agreement.
“Adjusted Merger Related Expenses” means the Merger Related Expenses less the amount of the Specified Loan Recoveries, if any.
“Adjusted Tangible Common Equity” means Cornerstone’s total shareholders’ equity (i) excluding intangible assets, (ii) excluding any changes in accumulated other comprehensive income or loss from December 31, 2024, including but not limited to changes to the valuation of the Cornerstone (or Cornerstone Bank) investment portfolio attributed to ASC 320, whether upward or downward, (iii) excluding increases in shareholder equity resulting from the exercise of stock options following the date of this Agreement, (iv) less Merger Related Expenses not paid or accrued and (v) adding back up to $7,000,000 in Merger Related Expenses on a tax-adjusted basis (to the extent there was a tax benefit recorded by Cornerstone as a result of the incurrence of such expense) based on Cornerstone’s marginal tax rate; provided that “total shareholders’ equity,” “intangible assets” and “accumulated other comprehensive income or loss” shall each be calculated in accordance with GAAP and consistent with Cornerstone’s consolidated balance sheet at December 31, 2023 as included in the Cornerstone Financial Statements; provided further to the extent any Merger Related Expenses are unknown or cannot be calculated prior to the delivery of the Closing Financial Statements, Cornerstone and Plumas shall confer in good faith and agree upon reasonable estimates thereof for purposes of determining the total Merger Related Expenses.
“Affiliate” means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by or is under common control with such Person. For purposes of this definition, “control” of a Person shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
“Agreement” means this Agreement and Plan of Merger and Reorganization, as amended or modified from time to time in accordance with Section 9.02.
“Agreement of Merger” has the meaning set forth in Section 2.02(a).
“Bank Merger” has the meaning set forth in the recitals.
“Bank Merger Agreement” means the Bank Merger Agreement by and between Plumas Bank and Cornerstone Bank, the form of which is attached hereto as Exhibit C, as amended or modified from time to time in accordance with its provisions.
“Bank Secrecy Act” means the Bank Secrecy Act of 1970, as amended.
“Bankruptcy and Equity Exception” has the meaning set forth in Section 5.03(e).
“Benefit Plans” has the meaning set forth in Section 5.03(m)(i).
“BHCA” means the Bank Holding Company Act of 1956, as amended.
“Book-Entry Shares” means shares of Cornerstone Common Stock held in book-entry form immediately prior to the Effective Time.
“Burdensome Condition” has the meaning set forth in Section 7.01(b).
“Business Day” means Monday through Friday of each week, except a legal holiday recognized as such by the U. S. Government or any day on which banking institutions in the State of California are authorized or obligated to close.
“CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act, as amended.
“Cash Consideration” means $9.75 per share, subject to potential reduction as provided in Section 3.08, without interest.
“Cause,” for the purposes of Section 6.11(b), has the meaning set forth such Section.
“Certificate” means any certificate which immediately prior to the Effective Time represented shares of Cornerstone Common Stock.
“CFC” means the California Financial Code, as amended.
“CGCL” has the meaning set forth in the recitals.
“Change in Recommendation” has the meaning set forth in Section 6.02(a).
“Closing Date” has the meaning set forth in Section 2.02(a).
“Closing” has the meaning set forth in Section 2.02(b).
“Closing Financial Statements” has the meaning set forth in Section 6.19.
“Closing Tangible Equity Target” means $42,586,066.
“Code” has the meaning set forth in the preamble to this Agreement.
“Community Reinvestment Act” means the Community Reinvestment Act of 1977, as amended.
“Confidentiality Agreement” has the meaning set forth in Section 6.06(f).
“Continuing Employees” has the meaning set forth in Section 6.11(a).
“Control Transaction” has the meaning set forth in Section 8.02(b).
“Cornerstone” has the meaning set forth in the preamble to this Agreement.
“Cornerstone Articles” means the Articles of Incorporation of Cornerstone.
“Cornerstone Bank” has the meaning set forth in the recitals.
“Cornerstone Bank Board” means the Board of Directors of Cornerstone Bank.
“Cornerstone Board” means the Board of Directors of Cornerstone.
“Cornerstone Bylaws” means the Bylaws of Cornerstone, as amended.
“Cornerstone Common Stock” means the common stock, without par value, of Cornerstone.
“Cornerstone Equity Plans” means the Cornerstone Community Bancorp 2017 Omnibus Plan and the 2006 Cornerstone Community Bancorp Stock Option Plan.
“Cornerstone Financial Statements” has the meaning set forth in Section 5.03(g)(i).
“Cornerstone Group” means any or all of Cornerstone and its Subsidiaries or any predecessor of or any successor to any or all of Cornerstone and its Subsidiaries (or to another such predecessor or successor). References herein to the Cornerstone Group shall be deemed to refer to both the Cornerstone Group as a whole and to each individual member thereof, as well as to groups comprising some, but not all, of Cornerstone and its Subsidiaries.
“Cornerstone IT Systems” has the meaning set forth in Section 5.03(t)(iii).
“Cornerstone Loan Property” has the meaning set forth in Section 5.03(o).
“Cornerstone Meeting” has the meaning set forth in Section 6.02(a).
“Cornerstone NQDP” has the meaning set forth in Section 5.03(m)(vii).
“Cornerstone Options” means the options to acquire Cornerstone Common Stock.
“Cornerstone Shareholder Approval” means the approval of this Agreement by the holders of a majority of the outstanding shares of Cornerstone Common Stock pursuant to Section 1201 of the CGCL.
“Cornerstone 401(k) Plan” has the meaning set forth in Section 6.11(c).
“Criticized Loans” has the meaning set forth in Section 5.03(r)(v).
“Derivatives Contract” means any swap transaction, option, warrant, forward purchase or sale transaction, futures transaction, cap transaction, floor transaction or collar transaction relating to one or more currencies, commodities, bonds, equity securities, loans, interest rates, credit-related events or conditions or any indexes, or any other similar transaction or combination of any of these transactions, including collateralized mortgage obligations or other similar instruments or any debt or equity instruments evidencing or embedding any such types of transactions, and any related credit support, collateral or other similar arrangements related to such transactions; provided that, for the avoidance of doubt, the term “Derivatives Contract” shall not include any Cornerstone Options.
“DFPI” means the California Department of Financial Protection and Innovation.
“Disclosure Schedule” has the meaning set forth in Section 5.01.
“Dissenting Shares” means any share of Cornerstone Common Stock that is owned by a shareholder who has perfected and not withdrawn a demand for dissenters’ rights pursuant to Chapter 13 of the CGCL with respect to such share.
“DOL” has the meaning set forth in Section 5.03(m)(i).
“Effective Time” has the meaning set forth in Section 2.02(a).
“Employees” has the meaning set forth in Section 5.03(m)(i).
“End Date” has the meaning set forth in Section 8.01(c).
“Environmental Laws” has the meaning set forth in Section 5.03(o).
“Equal Credit Opportunity Act” means the Equal Credit Opportunity Act, as amended.
“Equity Award Cashout Price” has the meaning set forth in Section 3.07(a).
“Equity Investment” means (a) an Equity Security; (b) an ownership interest in any company or other entity or a membership interest that includes a voting right in any company or other entity; and (c) any investment or transaction which in substance falls into any of these categories even though it may be structured as some other form of investment or transaction.
“Equity Security” means any stock, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, or voting-trust certificate; any security convertible into such a security; any security carrying any warrant or right to subscribe to or purchase any such security; and any certificate of interest or participation in, temporary or interim certificate for, or receipt for any of the foregoing.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations and formal guidance issued thereunder.
“ERISA Affiliate” means any entity considered to be a single employer with Cornerstone under Section 4001(b)(1) of ERISA or Section 414 of the Code.
“Environmental Consultant” has the meaning set forth in Section 6.22(a).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
“Exchange Agent” has the meaning set forth in Section 3.02(a).
“Exchange Ratio” means 0.6608 shares of Plumas Common Stock.
“Excluded Shares” has the meaning set forth in Section 3.01(c).
“Fair Housing Act” means the Fair Housing Act, as amended.
“FDIC” means the Federal Deposit Insurance Corporation.
“FHLB” means the Federal Home Loan Bank of San Francisco.
“FRB” means the Board of Governors of the Federal Reserve System and includes, where applicable, the Federal Reserve Bank of San Francisco.
“GAAP” means accounting principles generally accepted in the United States of America.
“Governmental Entity” means any federal, state or local court, administrative agency or commission or other governmental authority or instrumentality or self-regulatory organization.
“Hazardous Substance” has the meaning set forth in Section 5.03(o).
“Indemnified Parties” and “Indemnifying Party” have the meanings set forth in Section 6.10(a).
“Insurance Policies” has the meaning set forth in Section 5.03(x).
“Intellectual Property” means: (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereon, and all patents, patent applications and patent disclosures, together with all reissues, continuations, continuations-in-part, divisions, extensions and re-examinations thereof; (b) all trademarks whether registered or unregistered, service marks, domain names, corporate names and all combinations thereof, and associated therewith; (c) all copyrights whether registered or unregistered, and all applications, registrations and renewals in connection therewith; (d) all datasets, databases and related documentation; and (e) all other intellectual property and proprietary rights.
“IRS” has the meaning set forth in Section 5.03(m)(i).
“Knowledge” means facts and other information which, as of the date hereof, is actually known after due inquiry by, unless otherwise specified, (i) in the case of Cornerstone and any Cornerstone Subsidiary, its chairman, chief executive officer, president, chief financial officer and chief operating officer (and any officer superior to any of the foregoing), and (ii) in the case of Plumas and any Plumas Subsidiary, its chief executive officer, chief financial officer, chief banking officer, chief information officer and chief credit or lending officer (and any officer superior to any of the foregoing).
“Law” means any applicable federal, state, local or foreign statute, law, code, regulation, ordinance, rule, judgment, injunction, order, decree or policy, agency requirement, license, permit, or guideline of any Governmental Entity.
“Liens” means any charge, mortgage, pledge, security interest, restriction, claim, lien or encumbrance other than Permitted Liens.
“Loans” has the meaning set forth in Section 4.01(u).
“Material Adverse Effect” means, with respect to Plumas, Cornerstone or their respective subsidiaries, any effect, circumstance, occurrence or change that (i) is material and adverse to the condition (financial or otherwise), results of operations, assets or business of Plumas and its Subsidiaries taken as a whole or Cornerstone and its Subsidiaries taken as a whole, as the case may be, or (ii) would or is reasonably likely to materially impair the ability of any of Plumas and its Subsidiaries or Cornerstone and its Subsidiaries, as the case may be, to perform their respective obligations under this Agreement or otherwise materially impede the consummation of the Transaction; provided, however, that Material Adverse Effect with respect to subclause (i) shall not be deemed to include the impact of (a) changes after the date hereof in Law of general applicability to banks and their holding companies or interpretations thereof by Governmental Entities, (b) changes after the date hereof in GAAP or regulatory accounting requirements applicable to banks and their holding companies generally, (c) change resulting from any outbreak or worsening of geopolitical conditions in the United States or acts of war, sabotage or terrorism (including any escalation or general worsening of any such acts of war, sabotage or terrorism) in the United States or resulting from hurricanes, earthquakes, tornados, floods or other natural disasters, man-made disasters or any outbreak of any epidemic, pandemic or other public health event or emergencies (including any law, directive or guideline issued by a Governmental Entity in response thereto), (d) changes resulting from conditions affecting the banking and financial services industry or changes in global, national or regional economic, political or market conditions (including changes in prevailing interest rates or exchange rates) affecting banks and their holding companies generally, (e) changes in relationships with customers or employees of Plumas and its Subsidiaries or Cornerstone and its Subsidiaries that were primarily the result of the announcement or public disclosure of this Agreement and the transactions contemplated hereby, (f) any modifications or changes to valuation policies and practices in connection with the Transaction or restructuring charges taken in connection with the Transaction, in each case in accordance with GAAP, and (g) with respect to either Party to this Agreement, the effects of any action or omission taken with the prior written consent of the other Party or as otherwise required by this Agreement; provided that the effect of such changes described in clauses (a), (b), (c) and (d) shall not be excluded when determining whether a Material Adverse Effect has occurred to the extent of a materially disproportionate impact, if any, on Plumas and its Subsidiaries taken as a whole on the one hand, or Cornerstone and its Subsidiaries taken as a whole on the other hand, as measured relative to similarly situated companies in the banking industry.
“Material Contracts” has the meaning set forth in Section 5.03(k)(i).
“Maximum Insurance Amount” has the meaning set forth in Section 6.10(c).
“Merger” has the meaning set forth in the recitals.
“Merger Consideration” has the meaning set forth in Section 3.01(b).
“Merger Related Expenses” means Cornerstone’s and its Subsidiaries’ costs, fees and expenses related to the Merger, the Bank Merger, this Agreement and the transactions contemplated hereby, whether paid or accrued by Cornerstone before, at or after the delivery of the binding Closing Financial Statements or the Closing Date, including but not limited to (i) the amount of any penalty or liquidated damages associated with the termination of Cornerstone’s contracts with any provider of electronic banking and data processing services prior to or following the Closing Date, (ii) the fees and expenses associated with the termination of any Material Contracts of Cornerstone that will be or are required to be terminated on or before the Closing pursuant to their terms in connection with the Transaction, that are listed in Section 1.01(a) of Cornerstone’s Disclosure Schedule or that Plumas and Cornerstone otherwise mutually agree to terminate on or before the Closing; (iii) the change-in-control, severance payments, bonus, incentive compensation, retention, or any other benefits or payments which vest or are payable by reason of either alone or in connection with any other event and the consummation of the Transaction (plus any employer portion of employment Taxes required to be paid with respect thereto); (iv) the amount of the accrual through the Closing Date in accordance with GAAP of any future benefit payments due by Cornerstone or its Subsidiaries under any salary continuation, deferred compensation or other similar agreements of Cornerstone or its Subsidiaries; (v) the amount paid to obtain the insurance coverage required pursuant to Section 6.10(c); (vi) the costs of printing and mailing the Proxy Statement/Prospectus to the shareholders of Cornerstone and holding the Cornerstone Meeting; and (vii) the fees and expenses of Cornerstone’s and its Subsidiaries’ attorneys, accountants, investment bankers and other advisors for their services rendered solely in connection with the Transaction. An estimate of Merger Related Expenses shall be set forth in Section 1.01(a) of Cornerstone’s Disclosure Schedule, which shall be updated within five (5) Business Days prior to the Closing Date. To the extent any Merger Related Expenses are unknown or cannot be calculated prior to such date, Cornerstone and Plumas shall confer in good faith and agree upon reasonable estimates thereof for purposes of determining the total Merger Related Expenses.
“Nasdaq” means the Nasdaq Stock Market.
“National Labor Relations Act” means the National Labor Relations Act, as amended.
“Option Exchange Ratio” means the ratio of (a) the sum of (i) the Exchange Ratio multiplied by the closing sales price of a share of Plumas Common Stock on the NASDAQ Stock Market on the last trading day immediately preceding the Closing Date, plus (ii) the Cash Consideration, divided by (b) the closing sales price of a share of Plumas Common Stock on the NASDAQ Stock Market on the last trading day immediately preceding the Closing Date.
“Option Consideration” has the meaning set forth in Section 3.07(a).
“OREO” means other real estate owned.
“Parties” and “Party” have the meaning set forth in the preamble to this Agreement.
“Payroll Processor” has the meaning set forth in Section 3.07(b).
“Phase I ESA” has the meaning set forth in Section 6.22(a).
“Phase II ESA” has the meaning set forth in Section 6.22(b).
“Phase I Notice” has the meaning set forth in Section 6.22(b).
“Permitted Lien” means (i) statutory Liens securing payments not yet delinquent (or being contested in good faith and for which adequate reserves have been established), (ii) Liens for real property Taxes not yet delinquent, or (iii) easements, rights of way, restrictive covenants, imperfections or irregularities of title, and other similar encumbrances or Liens that do not materially affect the value or prohibit the current use of the property or asset subject thereto.
“Person” means any individual, bank, corporation (including not-for-profit), joint-stock company, general or limited partnership, limited liability company, joint venture, estate, business trust, trust, association, organization, Governmental Entity or other entity of any kind or nature.
“Personal Information” means any information that identifies or could reasonably be used to identify an individual, and any other personal information that is subject to any applicable Law or Cornerstone’s or its Subsidiaries’ Privacy and Security Policies.
“Plumas Bank” has the meaning set forth in the recitals.
“Plumas Bank Board” means the Board of Directors of Plumas Bank.
“Plumas” has the meaning set forth in the preamble to this Agreement.
“Plumas Articles” means the Articles of Incorporation of Plumas, as amended.
“Plumas Average Closing Price” means the average closing price per share of Plumas Common Stock, as reported on Nasdaq, for the twenty (20) trading days ending on and including the second (2nd) trading day prior to the Closing Date.
“Plumas Benefit Plans” means the material benefit and compensation plans, contracts, policies or arrangements maintained, contributed to, obligated to be contributed to, or sponsored by Plumas and Plumas Bank for the benefit of employees of Plumas and its Subsidiaries including, but not limited to, “employee benefit plans” within the meaning of Section 3(3) of ERISA, any pension, retirement, profit sharing, medical, life, accidental death and dismemberment, disability, dental, vision, compensation, severance, termination pay, salary continuation, unemployment, workers’ compensation, vacation, sick pay, paid-time off, retention, employment, consulting, change in control, fringe benefit, deferred compensation, stock option, stock purchase, stock appreciation rights or other stock-based incentive, cafeteria or flexible benefit, adoption or educational assistance, and bonus or other cash-based incentive, or other similar plans, agreements, programs, policies or other arrangements.
“Plumas Board” means the Board of Directors of Plumas.
“Plumas Bylaws” means the Bylaws of Plumas, as amended.
“Plumas Common Stock” means the common stock, without par value, of Plumas.
“Plumas SEC Reports” has the meaning set forth in Section 5.04(h)(i).
“Plumas Stock Plan” means the Plumas Bancorp 2022 Equity Incentive Plan.
“Plumas Substitute Option” has the meaning set forth in Section 3.07.
“Previously Disclosed” by a Party shall mean information set forth in a section of its Disclosure Schedule (subject to Section 5.01).
“Privacy and Security Policies” has the meaning set forth in Section 5.03(t)(iv).
“Proxy Statement/Prospectus” has the meaning set forth in Section 6.03(a).
“Qualified Plan” has the meaning set forth in Section 5.03(m)(ii).
“Registration Statement” has the meaning set forth in Section 6.03(a).
“Representatives” has the meaning set forth in Section 6.07(a).
“Retiree Welfare Plan” means any Benefit Plan providing for retiree health and life benefits, other than group health plan continuation coverage as may be required under Section 4980B of the Code or Part 6 of Subtitle B of Title I of ERISA, or under any analogous continuation of coverage provisions of the Laws of any state or locality.
“Rights” means, with respect to any Person, warrants, options, rights, convertible securities, restricted stock units and other arrangements or commitments which obligate the Person to issue or dispose of any of its capital stock or other ownership interests.
“SEC” means the U.S. Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.
“Security Breach” has the meaning set forth in Section 5.03(t)(iv).
“Shareholder Agreements” has the meaning set forth in the recitals to this Agreement.
“Specified Loan Recoveries” means recoveries with respect to that loan identified in Section 1.01(b) of Cornerstone’s Disclosure Schedule that are realized on or before the fifth (5th) Business Day preceding the Closing Date, if any.
“Stock Consideration” has the meaning set forth in Section 3.01(b).
“Subsidiary” has the meaning ascribed to that term in Rule l-02 of Regulation S-X of the SEC.
“Superior Proposal” means an unsolicited bona fide Acquisition Proposal (provided that for purposes of the definition of “Superior Proposal” the references to “10%” in the definition of “Acquisition Proposal” shall instead refer to “50%”) that the Cornerstone Board has determined in its good faith judgment is reasonably likely to be consummated in accordance with its terms, taking into account all legal, financial and regulatory aspects of the proposal and the Person making the proposal, and if consummated, would result in a transaction more favorable to the holders of Cornerstone Common Stock from a financial point of view than the transaction contemplated by this Agreement (after taking into account any revisions to the terms of the transaction contemplated by Section 6.07 of this Agreement and the time likely to be required to consummate such Acquisition Proposal).
“Surviving Corporation” has the meaning set forth in the recitals.
“Tax” and “Taxes” mean all federal, state, local or foreign income, gross income, gains, gross receipts, sales, use, ad valorem, goods and services, capital, production, transfer, franchise, windfall profits, license, withholding, payroll, employment, disability, employer health, excise, estimated, severance, stamp, occupation, property (real or personal), real property gains, escheat, abandoned or unclaimed property, registration, alternative minimum, add-on minimum, value added, natural resources, social security, environmental, custom duties, unemployment or other taxes of any kind whatsoever, together with any interest, additions or penalties thereto and any interest in respect of such interest and penalties.
“Tax Returns” means any return (including any amended return), declaration or other report (including elections, declarations, claims for refunds, schedules, estimates and information returns) with respect to any Taxes (including estimated taxes).
“Termination Fee” has the meaning set forth in Section 8.02(b).
“Transaction” means the Merger, the Bank Merger and any other transactions contemplated by this Agreement.
“Treasury Regulations” means the final and temporary regulations promulgated under the Code by the United States Department of the Treasury.
“Volcker Rule” means 12 U.S.C. § 1851 and the regulations promulgated by the FRB, the FDIC and the SEC in connection therewith.
ARTICLE II
THE MERGER
2.01 The Merger.
(a) The Merger. Subject to the terms and conditions of this Agreement, at the Effective Time, Cornerstone shall merge with and into Plumas in accordance with the applicable provisions of the CGCL, and the separate corporate existence of Cornerstone shall cease. Plumas shall be the Surviving Corporation and shall survive and continue to exist as a corporation incorporated under the CGCL.
(b) Name. The name of the Surviving Corporation shall be “Plumas Bancorp”.
(c) Articles and Bylaws. The articles of incorporation and bylaws of the Surviving Corporation immediately after the Merger shall be the Plumas Articles and the Plumas Bylaws as in effect immediately prior to the Merger.
(d) Directors and Executive Officers. The directors of the Surviving Corporation immediately after the Merger shall be the directors of Plumas immediately prior to the Merger, with the addition of one director as contemplated by Section 6.12, each of whom shall serve until the first annual meeting of shareholders of Plumas following the Effective Time and until their successors are duly elected. The executive officers of the Surviving Corporation immediately after the Merger shall be the executive officers of Plumas immediately prior to the Merger, each of whom shall serve until such time as their successors shall be duly appointed or elected and qualified.
(e) Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in accordance with the CGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of Cornerstone shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of Cornerstone shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation.
(f) Additional Actions. If, at any time after the Effective Time, the Surviving Corporation shall consider that any further assignments or assurances in law or any other acts are necessary or desirable to (i) vest, perfect, record or otherwise confirm the Surviving Corporation’s right, title or interest in, to or under any of the rights, properties or assets of Cornerstone acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger, or (ii) otherwise carry out the purposes of this Agreement, Cornerstone, and its proper officers and directors, acting in such corporate capacity and not individually, shall be deemed to have granted to the Surviving Corporation an irrevocable power of attorney to execute and deliver all such proper deeds, assignments and assurances in law and to do all acts necessary or proper to vest, perfect or confirm title to and possession of such rights, properties or assets in the Surviving Corporation and otherwise to carry out the purposes of this Agreement, and the proper officers and directors of the Surviving Corporation are fully authorized in the name of the Surviving Corporation or otherwise to take any and all such action.
2.02 Closing Date and Effective Time; Closing.
(a) Subject to the satisfaction or waiver of the conditions set forth in Article VII (other than those conditions that by their nature are to be satisfied at the consummation of the Merger, but subject to the fulfillment or waiver of those conditions), the Parties shall cause an Agreement of Merger relating to the Merger, the form of which is attached hereto as Exhibit B (the “Agreement of Merger”), to be filed with the Secretary of State of the State of California pursuant to the CGCL on the first Friday that is not less than five (5) nor more than thirty-five (35) Business Days after such satisfaction or (ii) such other date following such satisfaction or waiver to which the Parties may mutually agree in writing (the “Closing Date”). The Merger provided for herein shall become effective upon the filing of the Agreement of Merger with the Secretary of State of the State of California. The “Effective Time” of the Merger shall be the time of such filing or as set forth in such filing.
(b) A closing (the “Closing”) shall take place remotely by mutual exchange of documents and signatures (or their electronic counterparts) immediately prior to the Effective Time or at such other time on the Closing Date. At the Closing, there shall be delivered to Plumas and Cornerstone the certificates and other documents required to be delivered under Article VII hereof.
2.03 Bank Merger. As soon as practicable after the Merger, Cornerstone Bank shall be merged with and into Plumas Bank. Plumas Bank shall be the surviving entity in the Bank Merger. Following the execution of this Agreement, on such date as Plumas shall specify in writing, Plumas and Cornerstone shall cause Plumas Bank and Cornerstone Bank, respectively, to execute and deliver the Bank Merger Agreement and any other documents and certificates that are necessary to consummate the Bank Merger as soon as practicable after the Effective Time.
ARTICLE III
CONSIDERATION AND EXCHANGE PROCEDURES
3.01 Conversion of Shares. At the Effective Time, by virtue of the Merger and without any action on the part of a holder of shares of Cornerstone Common Stock:
(a) Plumas Common Stock. Each share of Plumas Common Stock that is issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding and shall be unchanged by the Merger.
(b) Cornerstone Common Stock. Subject to the provisions of this Agreement, each share of Cornerstone Common Stock issued and outstanding immediately prior to the Effective Time (other than Excluded Shares and Dissenting Shares) shall be converted into, and shall be canceled in exchange for, the right to receive (i) a number of shares of Plumas Common Stock equal to the Exchange Ratio (the “Stock Consideration”) and (ii) an amount of cash equal to the Cash Consideration, without interest thereon (collectively, the “Merger Consideration”).
(c) Cancellation of Excluded Shares. Any shares of Cornerstone Common Stock owned by Cornerstone as treasury stock or owned, directly or indirectly, by Cornerstone, Plumas or any of Plumas’s subsidiaries (other than those held in a fiduciary capacity or as a result of debts previously contracted) (“Excluded Shares”) shall automatically be cancelled and retired and shall cease to exist at the Effective Time of the Merger and no consideration shall be issued in exchange therefor. Subject to Section 3.01(d) and any Dissenting Shares shall automatically be cancelled and retired and shall cease to exist at the Effective Time of the Merger and no consideration shall be issued in exchange therefor.
(d) Dissenting Shares.
(i) No later than ten (10) calendar days following the date that the Cornerstone Shareholder Approval is received, Cornerstone or the Surviving Corporation shall provide each record holder of Cornerstone Common Stock entitled to vote on the Merger with a notice including the information required by in Section 1301(a) of the CGCL.
(ii) Notwithstanding any provision of this Agreement to the contrary, to the extent dissenters’ rights under Section 1301(a) are applicable to the Merger, no Dissenting Shares shall be converted into or represent a right to receive the Merger Consideration for such shares set forth in this Agreement, if any, but the holder of such Dissenting Shares shall only be entitled to such dissenters’ rights to the extent granted by Chapter 13 of the CGCL. If a holder of shares of Cornerstone Common Stock who demands that Cornerstone purchase such shares under Chapter 13 of the CGCL shall thereafter effectively withdraw or lose (through failure to perfect or otherwise) such holders’ dissenters’ rights with respect to such shares of Cornerstone Common Stock then, as of the occurrence of such withdrawal or loss, each such share of Cornerstone Common Stock shall be deemed as of the Effective Time to have been converted into and represent only the right to receive, in accordance with Section 3.01, the Merger Consideration for such shares set forth in this Article III.
(iii) Cornerstone shall comply in all respects with the provisions of Chapter 13 of the CGCL with respect to the Dissenting Shares. Cornerstone shall give Plumas (A) prompt notice of any demands for purchase of any such shares of Cornerstone Common Stock pursuant to Chapter 13 of the CGCL, attempted withdrawals of such demands and any other instruments served pursuant to Chapter 13 of the CGCL and received by Cornerstone in connection therewith and (B) the opportunity to direct all negotiations and proceedings with respect to purchase of any shares of Cornerstone Common Stock under Chapter 13 of the CGCL; provided that Plumas shall act in a commercially reasonable manner in directing any such negotiations and proceedings. Cornerstone shall not, except with the prior written consent of Plumas or as required by law, voluntarily make any payment with respect to any demands for purchase of Cornerstone Common Stock or offer to settle or settle any such demands.
3.02 Exchange Procedures.
(a) Mailing of Transmittal Material. Provided that Cornerstone has delivered, or caused to be delivered, to an independent exchange agent selected by Plumas (the “Exchange Agent”) all information which is reasonably necessary for the Exchange Agent to perform its obligations as specified herein, the Exchange Agent shall, promptly following the Closing Date (but in no event more than five (5) Business Days after the Closing Date), mail and otherwise make available to each holder of record of Cornerstone Common Stock (other than holders of Excluded Shares and Dissenting Shares), a notice and a form of letter of transmittal, in a form reasonably acceptable to, and approved in writing by, Cornerstone (which shall specify that delivery shall be effected, and risk of loss and title to such Certificate(s) theretofore representing shares of Cornerstone Common Stock shall pass, only upon proper delivery of such Certificate(s) to the Exchange Agent or transfer of Book-Entry Shares to the Exchange Agent), advising such holder of the effectiveness of the Merger and the procedure for surrendering to the Exchange Agent such Certificate(s) or Book-Entry Shares in exchange for the Merger Consideration and cash in lieu of fractional share amounts to which such holder may be entitled pursuant to Section 3.01(b) and Section 3.04 hereof. A letter of transmittal will be properly completed only if accompanied by Certificate or Certificates or instructions to transfer Book-Entry Shares representing all shares of Cornerstone Common Stock covered thereby, subject to the provisions of Section 3.02(d).
(b) Plumas Deliveries. At the Effective Time, for the benefit of the holders of Certificates and/or Book-Entry Shares, Plumas shall deliver to the Exchange Agent (i) certificates, or at Plumas’s option, evidence of shares in book entry form, representing the number of shares of Plumas Common Stock issuable to the holders of Cornerstone Common Stock (other than Excluded Shares and Dissenting Shares) as the Stock Consideration, (ii) cash in the amount equal to the Cash Consideration multiplied by the number of shares of Cornerstone Common Stock (other than Excluded Shares and Dissenting Shares) issued and outstanding immediately prior to the Effective Time; (iii) any cash due in lieu of fractional shares pursuant to Section 3.04, to be given to the holders of Cornerstone Common Stock in exchange for their Certificates and Book-Entry Shares as provided for in this Article III. The Exchange Agent shall not be entitled to vote or exercise any rights of ownership with respect to the shares of Plumas Common Stock held by it from time to time hereunder, except that it shall receive and hold all dividends or other distributions paid or distributed with respect to such shares for the account of the Persons entitled thereto.
(c) Exchange Agent Deliveries.
(i) Each holder of an outstanding Certificate or Certificates or Book-Entry Shares who has surrendered such Certificate or Certificates to the Exchange Agent or who has instructed the transfer of Book-Entry Shares will, upon acceptance thereof by the Exchange Agent, be entitled to evidence of issuance in book entry form, or upon written request of such holder, a certificate or certificates representing, the number of whole shares of Plumas Common Stock the Cash Consideration into which the aggregate number of shares of Cornerstone Common Stock previously represented by such Certificate or Certificates or Book-Entry Shares surrendered shall have been converted pursuant to this Agreement and any other distribution theretofore paid with respect to Plumas Common Stock issuable in the Merger, in each case, without interest. The Exchange Agent shall accept such Certificates or Book-Entry Shares upon compliance with such reasonable terms and conditions as the Exchange Agent may impose consistent with the notice and form of letter of transmittal to effect an orderly exchange thereof in accordance with normal exchange practices.
(ii) Each outstanding Certificate or Book-Entry Share which prior to the Effective Time represented Cornerstone Common Stock and which is not surrendered to the Exchange Agent in accordance with the procedures provided for herein shall, except as otherwise herein provided, until duly surrendered to the Exchange Agent, be deemed to evidence ownership of the number of shares of Plumas Common Stock and the Cash Consideration into which such Cornerstone Common Stock shall have been converted. After the Effective Time, there shall be no further transfer on the records of Cornerstone of Certificates or Book-Entry Shares representing shares of Cornerstone Common Stock and, if such Certificates or Book-Entry Shares are presented to Cornerstone for transfer, they shall be cancelled and exchanged for the applicable Merger Consideration and any payment in lieu of fractional shares as hereinabove provided. No dividends which have been declared will be remitted to any Person entitled to receive shares of Plumas Common Stock under Section 3.01 until such Person surrenders the Certificate or Certificates or Book-Entry Shares representing Cornerstone Common Stock, at which time such dividends shall be remitted to such Person, without interest.
(d) Lost or Destroyed Certificates; Issuances of Plumas Common Stock in New Names. The Exchange Agent and Plumas, as the case may be, shall not be obligated to deliver a certificate or certificates representing shares of Plumas Common Stock to which a holder of Cornerstone Common Stock would otherwise be entitled as a result of the Merger until such holder surrenders the Certificate or Certificates representing the shares of Cornerstone Common Stock for exchange as provided in this Section 3.02, or, in default thereof, an appropriate affidavit of loss and indemnity agreement and/or a bond in an amount as may be reasonably required in each case by Plumas. If any certificates evidencing shares of Plumas Common Stock are to be issued in a name other than that in which the Certificate evidencing Cornerstone Common Stock surrendered in exchange therefore is registered, it shall be a condition of the issuance thereof that the Certificate so surrendered shall be properly endorsed or accompanied by an executed form of assignment separate from the Certificate and otherwise in proper form for transfer and that the Person requesting such exchange pay to the Exchange Agent any transfer or other Tax required by reason of the issuance of a certificate for shares of Plumas Common Stock in any name other than that of the registered holder of the Certificate surrendered or otherwise establish to the satisfaction of the Exchange Agent that such Tax has been paid or is not payable.
(e) Unclaimed Merger Consideration. Any portion of the cash or shares of Plumas Common Stock delivered to the Exchange Agent by Plumas pursuant to Section 3.02(b) that remains unclaimed by the shareholders of Cornerstone for six (6) months after the Effective Time (as well as any proceeds from any investment thereof) shall be delivered by the Exchange Agent to Plumas. Any shareholders of Cornerstone who have not theretofore complied with Section 3.02(c) shall thereafter look only to Plumas for the consideration deliverable in respect of each share of Cornerstone Common Stock such shareholder holds as determined pursuant to this Agreement without any interest thereon. If outstanding Certificates or Book-Entry Shares are not surrendered or the payment for them is not claimed prior to the date on which such shares of Plumas Common Stock and Cash Consideration therefor would otherwise escheat to any governmental unit or agency, the unclaimed items shall, to the extent permitted by abandoned property and any other applicable law, become the property of Plumas (and to the extent not in its possession shall be delivered to it), free and clear of all claims or interest of any Person previously entitled to such property. Neither the Exchange Agent nor either Party shall be liable to any holder of stock represented by any Certificate or Book-Entry Share for any consideration paid to a public official pursuant to applicable abandoned property, escheat or similar laws. Plumas and the Exchange Agent shall be entitled to rely upon the stock transfer books of Cornerstone to establish the identity of those Persons entitled to receive the consideration specified in this Agreement, which books shall be conclusive (absent manifest error) with respect thereto. In the event of a dispute with respect to ownership of stock represented by any Certificate or Book-Entry Share, Plumas and the Exchange Agent shall be entitled to deposit any consideration represented thereby in escrow with an independent third party and thereafter be relieved with respect to any claims thereto.
3.03 Rights as Shareholders. At the Effective Time, holders of Cornerstone Common Stock shall cease to be, and shall have no rights as, shareholders of Cornerstone other than to receive the consideration provided for under this Article III.
3.04 No Fractional Shares. Notwithstanding any other provision of this Agreement, neither certificates nor scrip for fractional shares of Plumas Common Stock shall be issued in the Merger. Each holder of Cornerstone Common Stock who otherwise would have been entitled to a fraction of a share of Plumas Common Stock (after taking into account all Certificates or Book-Entry Shares delivered by such holder) shall receive in lieu thereof cash (without interest) in an amount determined by multiplying the fractional share interest to which such holder would otherwise be entitled by the Plumas Average Closing Price, rounded to the nearest whole cent. No such holder shall be entitled to dividends, voting rights or any other rights in respect of any fractional share.
3.05 Anti-Dilution Provisions. If, between the date hereof and the Effective Time, the shares of Plumas Common Stock shall be changed into a different number or class of shares by reason of any reclassification, recapitalization, split-up, combination, exchange of shares or readjustment, or similar transaction, or a stock dividend thereon shall be declared with a record date within said period, the Exchange Ratio and the Merger Consideration shall be adjusted accordingly.
3.06 Withholding Rights. Plumas (through the Exchange Agent, if applicable) shall be entitled to deduct and withhold from any amounts otherwise payable pursuant to this Agreement to any holder of shares of Cornerstone Common Stock such amounts as Plumas is required under the Code or any state, local or foreign Tax law or regulation thereunder to deduct and withhold with respect to the making of such payment. Any amounts so withheld shall be timely remitted to the applicable Governmental Entity and shall be treated for all purposes of this Agreement as having been paid to the holder of Cornerstone Common Stock in respect of which such deduction and withholding was made by Plumas.
3.07 Cornerstone Equity Awards.
(a) Treatment of Cornerstone Options. At the Effective Time, each Cornerstone Option that is then outstanding and held by a Continuing Employee or the member of the Cornerstone Board appointed to the Plumas Board pursuant to Section 6.12 shall automatically, by virtue of the Merger and without any action on the part of the holder thereof, be adjusted and assumed by Plumas such that it shall represent an option to purchase shares of Plumas Common Stock (each, an “Plumas Substitute Option”) under the Plumas Stock Plan, and the number of shares of Plumas Common Stock subject to such Plumas Substitute Option shall be equal to the number of shares of Cornerstone Common Stock subject to such Cornerstone Option immediately prior to the Effective Time multiplied by the Option Exchange Ratio (rounded down to the nearest whole share), and the exercise price of each Plumas Substitute Option shall be equal to the exercise price of the Cornerstone Option immediately prior to the Effective Time divided by the Option Exchange Ratio (rounded up to the nearest penny); provided in each case that prior to the Merger, the Continuing Employee or the member of the Cornerstone Board agrees in writing that such Plumas Substitute Option shall be governed by Plumas’s then-current equity incentive plan and standard form of option agreement; provided, however, that the exercise price and the number of shares of Plumas Common Stock issuable upon exercise of such Plumas Substitute Option, and the terms and conditions of each such Plumas Substitute Option, shall be determined in a manner consistent with the requirements for a substitution of stock rights in accordance with Sections 424 or 409A of the Code, as applicable, so as not to be considered a modification of any Cornerstone Option, to retain, where applicable and possible, the tax and accounting treatment of each such Cornerstone Option (including any Cornerstone Options that are intended to qualify as incentive stock options within the meaning of Section 422 of the Code) and not to be treated as a change in the form of payment or as nonqualified deferred compensation under Section 409A of the Code. At the Effective Time, each Cornerstone Option under the Cornerstone Equity Plan outstanding immediately prior to the Effective Time that is not so assumed by Plumas, whether vested or unvested, shall be cancelled and shall only entitle the holder of such Cornerstone Option to receive an amount in cash (less any applicable Taxes and deductions required to be withheld with respect to such payment), rounded down to the nearest whole cent, equal to the product of (i) the total number of shares of Cornerstone Common Stock subject to such Cornerstone Option and (ii) the excess, if any, of (A) the Equity Award Cashout Price over (B) the exercise price per share of Cornerstone Common Stock under such Cornerstone Option (such amount, the “Option Consideration”). For the avoidance of doubt, any Cornerstone Option which has an exercise price per share of Cornerstone Common Stock that is greater than or equal to the Equity Award Cashout Price shall be cancelled at the Effective Time for no consideration or payment. For purposes of this Agreement, the “Equity Award Cashout Price” shall mean an amount equal to the sum of (x) product of (A) the Plumas Average Closing Price multiplied by (B) the Exchange Ratio, plus (y) the Cash Consideration.
(b) To the extent reasonably practicable, Plumas shall fund the Option Consideration to be paid with respect to Cornerstone Options by funding the necessary amounts to the payroll processor of Cornerstone or any of its Affiliates (the “Payroll Processor”) for payment by the Payroll Processor of the Option Consideration to the applicable holders of such Cornerstone Options, less applicable withholdings and deductions, which payments in all events shall be made on the regular payroll date of Cornerstone that occurs no later than fifteen (15) days following the Closing Date.
(c) At least fifteen (15) days prior to the Closing Date and prior to any such payment to which a holder of a Cornerstone Option may be entitled under this Section 3.07, Cornerstone shall obtain a written acknowledgement, waiver and release of claims (in form and substance reasonably satisfactory to Cornerstone and Plumas) from each holder of a Cornerstone Option (i) confirming the number of Cornerstone Options held (and shares of Cornerstone Common Stock subject to such Cornerstone Options), (ii) confirming that the treatment of such Cornerstone Options pursuant to this Agreement and the amounts to be paid pursuant to this Agreement have been correctly calculated and (iii) acknowledging that in consideration for the cancellation of such Cornerstone Option, the holder agrees to accept the Option Consideration. Company shall provide a copy of each such acknowledgement and waiver to Plumas at least five (5) Business Days prior to the Closing Date.
(d) Prior to the Effective Time, the Cornerstone Board shall adopt any necessary resolutions and take any actions necessary (i) to effectuate the provisions of Section 3.07(a) and 3.07(b) and (ii) to terminate all of Cornerstone’s equity incentive plans and ensure that no Person has any rights under such plans, including for the avoidance of doubt the Cornerstone Equity Plans. Cornerstone will use its reasonable best efforts to ensure that, from and following the Effective Time and subject to payment in full in respect of obligations under the Cornerstone Equity Plans and the Cornerstone Options that are cancelled pursuant to this Agreement, (x) no participant in any of the Cornerstone Equity Plans will have any right thereto to acquire after the Effective Time any equity securities of Cornerstone or any of its Subsidiaries and (y) Plumas will not be required to deliver shares of Cornerstone Common Stock, Plumas Common Stock or other capital stock to any Person after the Effective Time pursuant to or in settlement of any equity awards of Cornerstone.
3.08 Potential Adjustments to Cash Consideration. The Cash Consideration, for all purposes, is subject to potential reduction as follows, without duplication:
(a) In the event that the Adjusted Tangible Common Equity as reflected in the binding Closing Financial Statements is less than the Closing Tangible Equity Target, then the Cash Consideration shall be reduced by an amount equal to the quotient of (i) the amount by which the Adjusted Tangible Common Equity as reflected in the binding Closing Financial Statements is less than the Closing Tangible Equity Target divided by (ii) the number of shares of Cornerstone Common Stock outstanding immediately prior to the Effective Time; and
(b) In the event the Adjusted Merger Related Expenses are greater than $7.0 million, then the Cash Consideration shall be reduced by an amount equal to the quotient of (i) the amount by which the Adjusted Merger Related Expenses are greater than $7.0 million divided by (ii) the number of shares of Cornerstone Common Stock outstanding immediately prior to the Effective Time.
ARTICLE IV
ACTIONS PENDING ACQUISITION
4.01 Forbearances of Cornerstone. From the date hereof until the Effective Time, except as expressly contemplated or permitted by this Agreement, as required by applicable Law, or with the prior written consent of Plumas, Cornerstone will not, and will cause each of its Subsidiaries not to:
(a) Ordinary Course. Conduct its business other than in the ordinary and usual course consistent with past practice or fail to use all commercially reasonable efforts consistent with past practice and its policies as in effect on the date of this Agreement, to preserve its business organization, keep available the present services of its officers and employees (except in the case of terminations of officers and employees for cause) and preserve for itself and Plumas the goodwill of the customers of Cornerstone and its Subsidiaries and others with whom business relations exist.
(b) Capital Stock. Other than pursuant to Rights set forth on Section 4.01(b) of Cornerstone’s Disclosure Schedule and outstanding on the date hereof, (i) issue, sell or otherwise permit to become outstanding, or authorize the creation of, any additional shares of Cornerstone capital stock or any Rights or (ii) permit any additional shares of Cornerstone capital stock to become subject to grants of employee or director stock options or other Rights.
(c) Dividends; Reclassifications; Etc.
(i) Make, declare, pay or set aside for payment any dividend on or in respect of, or declare or make any distribution on any shares of Cornerstone capital stock.
(ii) Directly or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire, any shares of Cornerstone capital stock.
(d) Compensation; Employment Agreements; Etc. (i) Enter into or amend or renew any employment, consulting, severance, change in control, retention, bonus, salary continuation or similar agreements or arrangements with any director, officer employee or consultant of Cornerstone or its Subsidiaries or grant or pay any salary or wage increase, grant any incentive compensation, bonus, equity award, severance or termination pay (other than as required pursuant to an existing severance arrangement or policy in effect on the date of this Agreement and disclosed in Section 4.01(d) of Cornerstone’s Disclosure Schedule), or increase or materially decrease any employee compensation benefit (including incentive or bonus payments), except for changes that are required by applicable Law or payments made in accordance with existing Benefit Plans and set forth in Section 4.01(d) of Cornerstone’s Disclosure Schedule, (ii) pay any other bonuses or incentives other than pursuant to an incentive plan, agreement, plan or policy of Cornerstone or Cornerstone Bank in effect as of the date hereof and set forth in Section 4.01(d) of Cornerstone’s Disclosure Schedule and in a manner consistent with past practice, or (iii) provide loans to any service provider, except as required by the terms of any Benefit Plan or, in the case of Cornerstone Bank, pursuant to its lending policies in effect as of the date of this Agreement.
(e) Hiring. Hire or terminate any person as an employee or other service provider of Cornerstone or any of its Subsidiaries or promote or demote any employee or other service provider, except (i) to satisfy contractual obligations existing as of the date hereof and set forth on Section 4.01(e) of Cornerstone’s Disclosure Schedule and (ii) persons hired to fill any vacancies either existing as of the date hereof and set forth in Section 4.01(e) of Cornerstone’s Disclosure Schedule or arising after the date hereof (due to the departure of an employee), whose employment is terminable at the will of Cornerstone or its Subsidiaries and who are not subject to or eligible for any severance or similar benefits or payments that would become payable as a result of the Transaction or consummation thereof and at an annual base salary or wage rate and with a target cash bonus opportunity not greater than that of the employee who previously held such position, or (2) enter into any agreement with a labor union, guild or association representing any employee.
(f) Benefit Plans. Enter into, establish, adopt, amend or terminate, or make any contributions to (except to satisfy contractual obligations existing as of the date hereof and set forth in Section 4.01(f) of Cornerstone’s Disclosure Schedule), any Benefit Plans, including any pension, retirement, stock option, stock purchase, savings, profit sharing, deferred compensation, consulting, bonus, group insurance or other employee benefit, incentive or welfare contract, loan, plan or arrangement, or any trust agreement (or similar arrangement) related thereto, in respect of any current or former director, officer or employee of Cornerstone or its Subsidiaries, other than as contemplated by Section 3.07, take any action to accelerate the vesting or exercisability of Cornerstone Options, other compensation or benefits payable thereunder.
(g) Dispositions. Sell, lease, license, transfer, mortgage, encumber or otherwise dispose of or discontinue any of its assets, deposits, business or properties, except for sales, transfers, leases, licenses, mortgages, encumbrances, dispositions or discontinuances which are in the ordinary course of business and consistent with past practices and are not material to Cornerstone and its Subsidiaries taken as a whole.
(h) Acquisitions. Acquire (other than by way of foreclosures or acquisitions of control in a bona fide fiduciary capacity or in satisfaction of debts previously contracted in good faith, in each case in the ordinary and usual course of business consistent with past practice), including without limitation, by merger or consolidation or by investment in a partnership or joint venture, all or any portion of the assets, business, securities, deposits or properties of any other Person.
(i) Mergers. Merge or consolidate Cornerstone or any of its Subsidiaries with any other Person or restructure, reorganize or completely or partially liquidate or otherwise enter into any agreements or arrangements imposing material changes or restrictions on its assets, operations or businesses
(j) Capital Expenditures. Make any capital expenditures, other than capital expenditures in the ordinary course of business consistent with past practice in amounts not exceeding $50,000 individually or $100,000 in the aggregate.
(k) Governing Documents. Amend the Cornerstone Articles, the Cornerstone Bylaws or the articles of incorporation or bylaws (or equivalent documents) of any Subsidiary of Cornerstone.
(l) Accounting Methods. (i) Implement or adopt any change in Cornerstone’s book or tax accounting principles, practices or methods, other than as may be required by GAAP, and as concurred in by Cornerstone’s independent public accountants, or as required by Section 6.08 of this Agreement or (ii) except as may be required by GAAP, and in the ordinary course of business consistent with past practice, revalue in any material respect any of its assets (including any contract, agreement or understanding that would be a Material Contract as a result of entering into, modifying or amending such contract, agreement or understanding), other than in the ordinary course of business consistent with past practice.
(m) Contracts. Except as otherwise permitted under Section 4.01 hereof, enter into, cancel, fail to renew or terminate any Material Contract or amend or modify in any material respect any of its existing Material Contracts.
(n) Claims. Enter into any settlement or similar agreement with respect to any action, suit, proceeding, order or investigation to which Cornerstone or any of its Subsidiaries is or becomes a party after the date of this Agreement, which settlement, agreement or action involves payment by Cornerstone or any of its Subsidiaries of an amount which exceeds $50,000 and/or would impose any material restriction on the business of Cornerstone or any of its Subsidiaries or create precedent for claims that are reasonably likely to be material to Cornerstone and its Subsidiaries taken as a whole.
(o) New Business. Enter into any new material line of business; introduce any material new products or services; change its material lending, investment, underwriting, loan, deposit or fee pricing, servicing, risk and asset liability management and other material banking and operating policies, except as required by applicable Law or policies imposed by any Governmental Entity, or the manner in which its investment securities or loan portfolio is classified or reported; or invest in any mortgage-backed or mortgage-related security that would be risk-weighted over 100% according to BASEL III regulatory capital guidelines.
(p) Branches and Offices. File any application or enter into any contract with respect to the opening, relocation or closing of, or open, relocate or close, any branch, office, service center or other facility.
(q) Marketing. Introduce any material marketing campaigns or any material new sales compensation or incentive programs or arrangements, or incur any costs under its marketing and development budget in excess of those set forth in its operating budget for the current year (except those the material terms of which have been fully disclosed in writing to Plumas prior to the date hereof).
(r) Derivatives Contracts. Purchase or enter into any Derivatives Contract.
(s) Indebtedness. Incur or modify any indebtedness for borrowed money (other than deposits, federal funds purchased, cash management accounts, Federal Home Loan Bank and FRB borrowings that mature within ninety (90) days and that have no put or call features and securities sold under agreements to repurchase that mature within ninety (90) days, in each case, in the ordinary course of business consistent with past practice); or assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other Person, other than with respect to the collection of checks and other negotiable instruments in the ordinary course of business consistent with past practice.
(t) Investments. (i) Make any investment either by contributions to capital, property transfers or purchases of any property or assets of any Person or any Equity Investment, (ii) other than purchases of direct obligations of the United States of America or obligations of United States government agencies which are entitled to the full faith and credit of the United States of America, in any case with a remaining maturity at the time of purchase of six months or less, purchase or acquire securities of any type or (iii) dispose of any debt security or Equity Investment; provided, however, that in the case of investment securities, Cornerstone may purchase investment securities if, within three (3) Business Days after Cornerstone requests in writing (which request shall describe in detail the type of investment securities to be purchased, the estimated price thereof and Cornerstone’s investment strategy thereto) that Plumas consent to making of any such purchase, Plumas has approved such request in writing or has not responded in writing to such request.
(u) Loans. (i) Make, extend, renew or otherwise modify any loan, loan commitment, letter of credit, note, borrowing arrangement or other extension of credit in which Cornerstone or any of its Subsidiaries is creditor (collectively, “Loans”) which would, when aggregated with all outstanding Loans or any renewals or extensions thereof made to such Person and any Affiliate or immediate family member of such Person, exceed of $500,000; (ii) take any action that would result in any discretionary release of collateral or guarantees or otherwise restructure the respective amounts set forth in clause (i) above; (iii) enter into any Loan securitization or create any special purpose funding entity, other than a Loan participation entered into in the ordinary course of business consistent with past practice where Cornerstone’s or any Subsidiary’s exposure does not exceed $500,000; (iv) make any Loan to any Person with a Criticized Loan; (v) make any Loan that is subject to Regulation O of the FRB; or (vi) purchase or sell any (y) Criticized Loan or (z) any Loan in excess of $500,000; provided however, Cornerstone and its Subsidiaries make, renew or modify a Loans or Loan participations that exceeds the foregoing dollar limitations if, within three (3) Business Days after Cornerstone notifies Plumas’s chief credit officer of its intent to do so (which request shall include a copy of the loan write up containing the information customarily submitted as part of the loan write up) Plumas confirms in writing that it does not object to such proposed Loan or Loan participation or Plumas has not responded to such request. Cornerstone shall not forgive any loans to any of the directors, officers or employees of Cornerstone or its Subsidiaries.
(v) Investments in Real Estate. Make any investment or commitment to invest in real estate or in any real estate development project (other than by way of foreclosure or acquisitions in a bona fide fiduciary capacity or in satisfaction of a debt previously contracted in good faith, in each case in the ordinary course of business consistent with past practice).
(w) Tax Elections. Except as set forth on Section 4.01(w) of Cornerstone’s Disclosure Schedule, make or change any Tax election, settle or compromise any Tax liability of Cornerstone or any of its Subsidiaries, agree to an extension or waiver of the statute of limitations with respect to the assessment or determination of an amount of Taxes of Cornerstone or any of its Subsidiaries (or the assets and liabilities of Cornerstone or any of its Subsidiaries), enter into any closing agreement with respect to any amount of Taxes or surrender any right to claim a Tax refund, adopt or change any method of accounting with respect to Taxes, or file any amended Tax Return.
(x) Lending Practices. Other than in the ordinary course of business consistent with past practice, make any material changes in its policies and practices with respect to (i) underwriting, pricing, originating, acquiring, selling, servicing, or buying or selling rights to service loans or (ii) Cornerstone’s hedging practices and policies, in each case except as required by Law or requested by a Governmental Entity.
(y) Deposits. Cause or permit Cornerstone Bank to (A) change Cornerstone Bank’s rate sheets attached as Section 4.01(y) of the Cornerstone Disclosure Schedule (including any change to any of the interest rates and the maturity dates set forth in Cornerstone Bank’s rate sheets) other than in the ordinary course of business consistent with past practice and Cornerstone’s or Cornerstone Bank’s applicable policies, as the case may be, with respect thereto, (B) amend, modify, terminate or deviate from the exception practice in place for such rate sheets attached as Section 4.01(y) of the Cornerstone Disclosure Schedule, (C) make any material changes in its policies and practices with respect to deposits and earnings credits, (D) make any increases to deposit pricing, (E) accept any brokered deposits or collateralized deposits with a maturity greater than 12 months or (F) accept more than $10 million in additional brokered deposits from the date of this Agreement.
(z) Antitakeover Statutes. Take any action (i) that would cause this Agreement or the Transaction to be subject to the provisions of any state antitakeover law or state law that purports to limit or restrict business combinations or the ability to acquire or vote shares or (ii) to exempt or make not subject to the provisions of any state antitakeover law or state law that purports to limit or restrict business combinations or the ability to acquire or vote shares, any Person (other than Plumas or its Subsidiaries) or any action taken thereby, which Person or action would have otherwise been subject to the restrictive provisions thereof and not exempt therefrom.
(aa) Transactions with Insiders. Make or propose to make any Loan to or enter into any transaction with Cornerstone, any of its Subsidiaries, or any of their respective directors or officers or principals shareholders or any Affiliate thereof.
(bb) Adverse Actions. Take any action that would or is reasonably likely to result in (i) the Merger not qualifying as a reorganization within the meaning of Section 368(a) of the Code, (ii) any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time at or prior to the Effective Time, (iii) any of the conditions to the Merger set forth in Article VII not being satisfied, (iv) a material violation of any provision of this Agreement, except as may be required by applicable law or regulation, (v) a material delay in the ability of Plumas or Cornerstone to perform any of their obligations under this Agreement on a timely basis, or (vi) a material delay in the ability of Plumas to obtain any necessary approvals of any Governmental Entity required for the transactions contemplated hereby.
(cc) Consent and Absence of Changes. Unreasonably withhold, delay or condition Cornerstone’s prior written consent or approval as may be reasonably requested by Plumas, or fail to promptly notify Plumas of any change, occurrence or event not in the ordinary course of the business of Cornerstone or any of its Subsidiaries and of any change, occurrence or event which, individually or in the aggregate with any other changes, occurrences and events, would reasonably be expected to cause any of the conditions to Closing in Article VII of this Agreement not to be satisfied.
(dd) Commitments. Enter into any contract with respect to, or otherwise agree or commit to do, any of the foregoing.
4.02 Forbearances of Plumas. From the date hereof until the Effective Time, except as expressly contemplated or permitted by this Agreement, as required by applicable Law, or with the prior written consent of Cornerstone, Plumas will not, and will cause each of its Subsidiaries not take any action that would or is reasonably likely to result in (i) the Merger not qualifying as a reorganization within the meaning of Section 368(a) of the Code, (ii) any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time at or prior to the Effective Time, (iii) any of the conditions to the Merger set forth in Article VII not being satisfied, (iv) a material violation of any provision of this Agreement, except as may be required by applicable Law or (v) a material delay in the ability of Plumas or Cornerstone to perform any of their obligations under this Agreement on a timely basis, or (vi) a material delay in the ability of Plumas to obtain any necessary approvals of any Governmental Entity required for the transactions contemplated hereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 Disclosure Schedules. On or prior to the date hereof, Cornerstone has delivered to Plumas a schedule (its “Disclosure Schedule”) setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more representations or warranties contained in Section 5.03 or 5.04 or to one or more of its covenants contained in Article IV or Article VI; provided, however, that (i) any information set forth in any one section of the Disclosure Schedule shall be deemed to apply to each other applicable section or subsection of the Disclosure Schedule if its relevance to the information called for in such section or subsection is reasonably apparent on its face and (ii) the mere inclusion of an item in the Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission by a Party that such item represents a material exception or fact, event or circumstance or that, absent such inclusion in the Disclosure Schedule, such item is or would be reasonably likely to result in a Material Adverse Effect.
5.02 Standard. Solely for the purposes of determining whether the conditions set forth in Sections 7.02(a) or 7.03(a), as the case may be, have been satisfied (and without otherwise qualifying any representation or warranty made on the date hereof), no representation or warranty of Cornerstone on the one hand or Plumas on the other hand contained in Sections 5.03 or 5.04, respectively (other than (a) the representations of Cornerstone contained in Section 5.03(b), which shall be true in all respects, except to a de minimis extent (relative to Section 5.03(b) taken as a whole), (b) the representations of Cornerstone contained in Sections 5.03(d), 5.03(e), 5.03(g)(v) and 5.03(i), and the representations of Plumas contained in Section 5.04(g)(ii), which shall be true and correct in all respects, and (c) the representations of Cornerstone contained in Section 5.03(m)(v), which shall be true in all material respects) shall be deemed untrue or incorrect for purposes of Sections 7.02(a) or 7.03(a), and neither Party shall be deemed to have breached a representation or warranty for purposes of such Sections, as a consequence of the existence of any fact, event or circumstance unless such fact, circumstance or event, individually or taken together with all other facts, events or circumstances inconsistent with any representation or warranty contained in Sections 5.03 or 5.04, has had or is reasonably likely to have a Material Adverse Effect on the Party making such representation or warranty.
5.03 Representations and Warranties of Cornerstone. Except as set forth in Cornerstone’s Disclosure Schedule, Cornerstone hereby represents and warrants to Plumas:
(a) Organization, Standing and Authority. Cornerstone is a corporation duly organized, validly existing and in good standing under the Laws of the State of California. Cornerstone is duly licensed or qualified to do business and is in good standing in each jurisdiction where its ownership or leasing of property or assets or the conduct of its business requires it to be so licensed or qualified, except where the failure to be so licensed or qualified would not have nor reasonably be expected to have a Material Adverse Effect on Cornerstone. Cornerstone has in effect all federal, state, local and foreign governmental authorizations necessary for it to own or lease its properties and assets and to carry on its business as now conducted. The copies of the Cornerstone Articles and Cornerstone Bylaws set forth in Section 5.03(a) of Cornerstone’s Disclosure Schedule are true, complete and correct copies of such documents as in effect on the date of this Agreement. The minute books of Cornerstone and each of its Subsidiaries previously made available to Plumas contain true, complete and correct records in all material respects of all meetings and other material corporate actions held or taken of their respective shareholders and Boards of Directors (including committees of their respective Boards of Directors) through the date hereof. Cornerstone is duly registered as a bank holding company under the BHCA.
(b) Cornerstone Capital Stock. The authorized capital stock of Cornerstone consists solely of 30,000,000 shares of Cornerstone Common Stock, of which 1,491,692 shares are issued and outstanding as of the date hereof and 10,000,000 shares of preferred stock of Cornerstone, none of which are outstanding or designated as any series. As of the date of this Agreement, no shares of Cornerstone Common Stock are held in treasury by Cornerstone or otherwise directly or indirectly owned by Cornerstone. The outstanding shares of Cornerstone Common Stock have been duly authorized and validly issued and are fully paid and non-assessable, and none of the outstanding shares of Cornerstone Common Stock have been issued in violation of the preemptive rights of any Person. As of the close of business on the date of this Agreement, there are 130,899 shares of Cornerstone Common Stock issuable upon the exercise of outstanding Cornerstone Options. Section 5.03(b) of Cornerstone’s Disclosure Schedule sets forth, as of the date hereof, for each Cornerstone Option, the name of the grantee, the date of the grant and, if applicable, the status of the option grant as qualified or non-qualified under Section 422 of the Code, the number of shares of Cornerstone Common Stock underlying each Cornerstone Option, the number of shares of Cornerstone Common Stock subject to the Cornerstone Options that are currently exercisable and the exercise or strike price per share. Each Cornerstone Option (i) currently has an exercise price that is the same as when first issued and such exercise price is at least equal to the fair market value of the underlying shares of Cornerstone Common Stock as of the grant date and (ii) has been issued in compliance with applicable Laws. Except for the Cornerstone Options listed in Section 5.03(b) of Cornerstone’s Disclosure Schedule, there are no shares of Cornerstone Common Stock reserved for issuance, Cornerstone does not have any Rights issued or outstanding with respect to Cornerstone Common Stock and Cornerstone does not have any commitment to authorize, issue or sell any Cornerstone Common Stock or Rights, whether under any of the Cornerstone Equity Plans or otherwise. No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which shareholders of Cornerstone may vote are outstanding.
(c) Subsidiaries.
(i) (A) Section 5.03(c)(i)(A) of Cornerstone’s Disclosure Schedule sets forth a list of all of Cornerstone’s Subsidiaries together with the employer identification number, corporate address, the number of shares and class of capital stock issued and outstanding and the jurisdiction of organization of each such Subsidiary, (B) Cornerstone owns, directly or indirectly, all the issued and outstanding Equity Securities of each of its Subsidiaries, (C) no Equity Securities of any of its Subsidiaries are or may become required to be issued (other than to Cornerstone) by reason of any Right or otherwise, (D) there are no contracts, commitments, understandings or arrangements by which any of its Subsidiaries is or may be bound to sell or otherwise transfer any of its Equity Securities (other than to Cornerstone or any of its wholly owned Subsidiaries), (E) there are no contracts, commitments, understandings, or arrangements relating to Cornerstone’s rights to vote or to dispose of such securities and (F) all the Equity Securities of Cornerstone’s Subsidiaries held by Cornerstone or its Subsidiaries are fully paid and nonassessable and are owned by Cornerstone or its Subsidiaries free and clear of any Liens. No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which shareholders of any of the Cornerstone Subsidiaries may vote are outstanding.
(ii) Except as set forth in Section 5.03(c)(ii) of Cornerstone’s Disclosure Schedule and except for securities and other interests held in a fiduciary capacity and beneficially owned by third parties or taken in consideration of debts previously contracted, ownership interests in Cornerstone’s Subsidiaries and stock in the FHLB, Cornerstone does not own beneficially, directly or indirectly, any Equity Securities or similar interests of any Person or any interest in a partnership or joint venture of any kind.
(iii) Each of Cornerstone’s Subsidiaries has been duly organized, is validly existing and is in good standing, in each case under the laws of the jurisdiction of its organization, and is duly licensed or qualified to do business and in good standing in the jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so licensed or qualified, except where the failure to be so licensed or qualified would not have nor reasonably be expected to have a Material Adverse Effect on Cornerstone. Cornerstone Bank is a bank duly organized and validly existing under the Laws of the State of California and is duly authorized by the DFPI to conduct business as a commercial bank. Each of Cornerstone’s Subsidiaries has in effect all federal, state, local and foreign governmental authorizations necessary for it to own or lease its properties and assets and to carry on its business as now conducted.
(iv) The deposit accounts of Cornerstone Bank are insured by the FDIC in the manner and to the maximum extent provided by applicable Law, and Cornerstone Bank has paid all deposit insurance premiums and assessments required by applicable Laws and regulations.
(d) Corporate Power and Authority. Cornerstone and each of its Subsidiaries have all requisite power and authority (corporate and other) to carry on their respective businesses as they are now being conducted and to own all their respective properties and assets; and Cornerstone has all requisite corporate power and authority and, other than receiving the Cornerstone Shareholder Approval, has taken all corporate action necessary in order to execute, deliver and perform each of its obligations under this Agreement and to consummate the Merger, the Bank Merger and the transactions contemplated by this Agreement.
(e) Corporate Action; Enforceability. As of the date hereof, the Cornerstone Board has, by resolutions duly adopted at a meeting duly called and held, (i) determined that this Agreement, the Merger and the other transactions contemplated hereby are fair to and in the best interests of Cornerstone and its shareholders, (ii) adopted, approved and declared advisable this Agreement, the Merger and the other transactions contemplated hereby and (iii) resolved that such matters be submitted for consideration by its shareholders at a special meeting of such shareholders and that such matters be recommended for approval at such special meeting. Cornerstone has duly authorized, executed and delivered this Agreement, and this Agreement (assuming due authorization, execution and delivery by Plumas) is a valid and legally binding obligation of Cornerstone, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar Laws of general applicability relating to or affecting creditors’ rights or to general equity principles (the “Bankruptcy and Equity Exception”). The Bank Merger Agreement has been adopted and approved by the Cornerstone Bank Board and Cornerstone, as Cornerstone Bank’s sole shareholder. The Cornerstone Board has received an opinion (which, if initially rendered verbally, has been or will be confirmed by a written opinion, dated the same date) of its financial advisor, Performance Trust Capital Partners, LLC, to the effect that, as of the date of such opinion, and based upon and subject to the factors, assumptions, and limitations set forth therein, the Merger Consideration to be paid to the holders of Cornerstone Common Stock is fair, from a financial point of view, to such holders. Such opinion has not been amended or rescinded as of the date of this Agreement.
(f) Regulatory Approvals; No Defaults.
(i) No consents or approvals of, or waivers by, or notices to, or filings or registrations with, any Governmental Entity or with any third party are required to be made or obtained by Cornerstone or any of its Subsidiaries in connection with the execution, delivery or performance by Cornerstone of this Agreement and by Cornerstone Bank of the Bank Merger Agreement, or to consummate the Transaction, except for (A) filings of applications or notices with, and approvals or waivers by, the FRB and the DFPI, as required, (B) filings with the SEC, Nasdaq and state securities authorities, as applicable, (C) the filing of (1) the Agreement of Merger with the Secretary of State of the State of California pursuant to the CGCL and (2) the Bank Merger Agreement with the Secretary of State of the State of California and the DFPI pursuant to the CGCL and CFC, and (D) the Cornerstone Shareholder Approval. As of the date hereof, Cornerstone is not aware of any reason why the approvals set forth above and referred to in Section 7.01(b) will not be received in a timely manner and without the imposition of a Burdensome Condition.
(ii) Subject to receipt, or the making, of the consents, approvals, waivers and filings referred to in the preceding paragraph and the expiration of related waiting periods, the execution, delivery and performance of this Agreement by Cornerstone and the Bank Merger Agreement by Cornerstone Bank and the consummation of the Transaction do not and will not (A) constitute a breach or violation of, or a default under, or give rise to any Lien, any acceleration of remedies or any right of termination under, any Law, agreement, indenture or instrument of Cornerstone or any of its Subsidiaries or to which Cornerstone or any of its Subsidiaries or any of their respective assets or properties is subject or bound, (B) constitute a breach or violation of, or a default under, the Cornerstone Articles, the Cornerstone Bylaws or the or the articles of incorporation, bylaws or similar organizational documents of any of Cornerstone’s Subsidiaries or (C) require any consent or approval under any such Law, agreement, indenture or instrument.
(g) Financial Statements; Undisclosed Liabilities; No Material Adverse Effect.
(i) Cornerstone has previously provided to Plumas complete and correct copies of (A) its consolidated audited financial statements (including any related notes and schedules thereto and the signed, unqualified opinion of Richardson & Company LLP, its independent auditor) for the years ended December 31, 2021, 2022 and 2023, and (B) its unaudited consolidated balance sheet, and unaudited consolidated statements of income, comprehensive income (loss) and changes in shareholders’ equity as of and for the twelve (12) month period ended December 31, 2024; it will provide Plumas when available consolidated balance sheets, and consolidated statements of income, comprehensive income (loss), changes in shareholders’ equity and cash flows (which for quarterly periods shall be unaudited and without any related notes and schedules) for each of the quarterly and annual periods ended thereafter (all of the foregoing audited and unaudited financial statements referred to collectively as the “Cornerstone Financial Statements”), provided that Cornerstone shall deliver to Plumas its consolidated audited financial statements (including any related notes and schedules thereto and the signed, unqualified opinion of Richardson & Company LLP, its independent auditor) for the year ended December 31, 2024 not later than March 17, 2025. Since January 1, 2020, no independent registered public accounting firm of the Cornerstone has resigned (or informed Cornerstone that it intends to resign) or been dismissed as independent registered public accountants of Cornerstone as a result of or in connection with any disagreements with Cornerstone on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.
(ii) The Cornerstone Financial Statements (including, where applicable, any notes thereto) were or will be prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated (except (A) as may be indicated in the notes thereto, (B) in the case of interim consolidated financial statements, where information and footnotes contained in such financial statements are not required to be in compliance with GAAP or (C) with respect to the Cornerstone Financial Statements for any quarterly period ending after the date hereof, subject to normal year-end audit adjustments and the absence of notes to such Cornerstone Financial Statements), were or will be prepared from and in accordance with, the books and records of Cornerstone and its Subsidiaries, and in each case such consolidated financial statements fairly presented, in all material respects, the consolidated financial position, results of operations and cash flows of Cornerstone and the consolidated Subsidiaries of Cornerstone as of the respective dates thereof and for the respective periods covered thereby (subject, in the case of unaudited statements, to normal year-end adjustments).
(iii) The books and records of Cornerstone and its Subsidiaries (and any predecessor entities) have been, and are being, properly and accurately maintained, there are no inaccuracies or discrepancies of any kind contained or reflected therein and they fairly present the financial position and results of operations of Cornerstone and its Subsidiaries.
(iv) Except as set forth on the unaudited consolidated balance sheet of Cornerstone dated as of December 31, 2024, neither Cornerstone nor any of its Subsidiaries has any material liability (whether absolute, contingent or accrued or otherwise and whether due or to become due) that would be required to be reflected on a balance sheet or in notes thereto prepared in accordance with GAAP, other than liabilities (A) incurred after December 31, 2024 in the ordinary course of business consistent with past practice or (B) incurred pursuant to or provided for in this Agreement.
(v) Since December 31, 2023, no event has occurred or circumstance arisen that, individually or taken together with all other facts, circumstances and events (described in any paragraph of this Section 5.03(g) or otherwise), is reasonably likely to have a Material Adverse Effect with respect to Cornerstone.
(vi) Since December 31, 2023, (A) Cornerstone and its Subsidiaries have conducted their respective businesses in the ordinary and usual course consistent with past practice, (B) except as set forth in Section 5.03(g)(vi) of Cornerstone’s Disclosure Schedule, neither Cornerstone nor any of its Subsidiaries has taken nor permitted or entered into any contract with respect to, or otherwise agreed or committed to do or take, any action that, if taken after the date hereof, would constitute a breach of any of the covenants in Section 4.01 and (C) no event has occurred or circumstance arisen that, individually or taken together with all other facts, circumstances and events (described in any paragraph of this Section 5.03(g) or otherwise), has had or is reasonably likely to have a Material Adverse Effect with respect to Cornerstone.
(vii) Except as set forth in Section 5.03(g)(vii) of Cornerstone’s Disclosure Schedule, no agreement pursuant to which any Loans or other assets have been or shall be sold by Cornerstone or its Subsidiaries entitled the buyer of such Loans or other assets, to cause Cornerstone or its Subsidiaries to repurchase such Loan or other asset or the buyer to pursue any other form of recourse against Cornerstone or its Subsidiaries. Section 5.03(g)(vii) of Cornerstone’s Disclosure Schedule sets forth all cash, stock or other dividend or any other distribution with respect to the capital stock of Cornerstone or its Subsidiaries that has been declared, set aside or paid since December 31, 2023, as well as all shares of capital stock of Cornerstone or any of its Subsidiaries that have been purchased, redeemed or otherwise acquired, directly or indirectly, by Cornerstone or any of its Subsidiaries since December 31, 2023.
(viii) Cornerstone has established and maintains (i) disclosure controls and procedures to ensure that material information relating to Cornerstone and its Subsidiaries is made known timely to the management of Cornerstone by others within those entities, and (ii) internal control over financial reporting designed to provide reasonable assurance (A) regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP; (B) that receipts and expenditures of Cornerstone and its Subsidiaries are being made only in accordance with the authorization of Cornerstone’s management and directors; and (C) regarding prevention or timely detection of the unauthorized acquisition, use or disposition of the assets of Cornerstone or any of its Subsidiaries that would reasonably be likely to have a material effect on the Cornerstone Financial Statements. Cornerstone has disclosed, based on its most recent evaluation prior to the date hereof and to Cornerstone’s Knowledge, to Cornerstone’s auditors, the audit committee of the Cornerstone Board and Plumas (A) any significant deficiencies in the design or operation of internal controls which could adversely affect in any material respect Cornerstone’s ability to record, process, summarize and report financial data any material weaknesses in internal controls and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in Cornerstone’s internal controls. Since January 1, 2020, Cornerstone has not made any material modification to its disclosure controls and procedures or internal control over financial reporting.
(ix) Since December 31, 2023, there has not been (A) any material damage, destruction or other casualty loss with respect to any material asset or property owned, leased or otherwise used by Cornerstone or any Subsidiary of Cornerstone, whether or not covered by insurance, (B) any declaration, setting aside or payment of any dividend or other distribution in cash, stock or property in respect of the capital stock of Cornerstone other than as set forth in the Cornerstone Financial Statements for the periods prior to the date hereof, (C) any change by Cornerstone in accounting principles, practices or methods or (D) any increase in the compensation payable or that could become payable by Cornerstone or any of its Subsidiaries to officers or key employees or any amendment of any of the Benefit Plans other than increases or amendments in the ordinary and usual course consistent with past practice.
(x) Since December 31, 2021, (A) except as set forth in Section 5.03(g)(x) of Cornerstone’s Disclosure Schedule, neither Cornerstone nor any of its Subsidiaries nor, to the Knowledge of Cornerstone, any director, officer, employee, auditor, accountant or representative of Cornerstone or any of its Subsidiaries, has received or otherwise had or obtained Knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of Cornerstone or any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that Cornerstone or any of its Subsidiaries, has engaged in questionable accounting or auditing practices, and (B) no attorney representing Cornerstone or any of its Subsidiaries, whether or not employed by Cornerstone or any of its Subsidiaries, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by Cornerstone or any of its Subsidiaries or their respective officers, directors, employees or agents to the Cornerstone Board or any committee thereof or, to the Knowledge of Cornerstone, to any director or officer of Cornerstone or any of its Subsidiaries.
(h) Legal Proceedings. Section 5.03(h) of the Cornerstone Disclosure Schedule lists all litigation, arbitration, claims or other proceedings before any court or Governmental Entity that is pending against Cornerstone or any of its Subsidiaries or any of their respective executive officers or directors acting in their capacity as such. Except as set forth in Section 5.03(h) of Cornerstone’s Disclosure Schedule, no litigation, arbitration, claim or other proceeding before any court or Governmental Entity is pending against Cornerstone or any of its Subsidiaries or any of their respective executive officers or directors acting in their capacity as such. To Cornerstone’s Knowledge, no such litigation, arbitration, claim or other proceeding has been threatened and there are no facts which could reasonably give rise to such litigation, arbitration, claim or other proceeding in any such case that, individually or in the aggregate, has or could be reasonably expected to have a Material Adverse Effect with respect to Cornerstone. Neither Cornerstone nor any of its Subsidiaries nor any of their respective properties nor any of their respective executive officers or directors acting in their capacity as such is a party to or subject to any order, judgment, decree or regulatory restriction that, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect with respect to Cornerstone.
(i) Regulatory Matters.
(i) Since December 31, 2021, Cornerstone and its Subsidiaries have duly filed with the appropriate regulatory authorities in substantially correct form the monthly, quarterly and annual reports required to be filed under applicable Laws, and such reports were in all material respects complete and accurate and in compliance in all material respects with the requirements of applicable Laws, and Cornerstone has previously delivered or made available to Plumas accurate and complete copies of all such reports. In connection with the most recent examination of Cornerstone and its Subsidiaries by the appropriate regulatory authorities, neither Cornerstone nor any of its Subsidiaries was required to correct or change any action, procedure or proceeding which Cornerstone believes in good faith has not been now corrected or changed, other than corrections or changes which, if not made, either individually or in the aggregate, would not have a Material Adverse Effect on Cornerstone.
(ii) Except as set forth in Section 5.03(i)(ii) of Cornerstone’s Disclosure Schedule, neither Cornerstone nor any of its Subsidiaries nor any of their respective properties is a party to or is subject to any order, decree, directive, agreement, memorandum of understanding or similar arrangement with, or a commitment letter or similar submission to, or extraordinary supervisory letter from, nor has Cornerstone or any of its Subsidiaries adopted any policies, procedures or board resolutions at the request or suggestion of, any Governmental Entity. Cornerstone and its Subsidiaries have paid all assessments made or imposed by any Governmental Entity.
(iii) Neither Cornerstone nor any of its Subsidiaries has been advised by, nor does Cornerstone have any Knowledge of facts which could give rise to an advisory notice by, any Governmental Entity that such Governmental Entity is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such order, decree, directive, agreement, memorandum of understanding, board resolution, commitment letter, supervisory letter or similar submission or any request for the adoption of any policy, procedure or board resolution.
(iv) (A) Except as set forth in Section 5.03(i)(iv)(A) of Cornerstone’s Disclosure Schedule, no Governmental Entity has initiated since December 31, 2020 or has pending any proceeding, enforcement action or, to the Knowledge of Cornerstone, investigation or inquiry into the business, operations, policies, practices or disclosures of Cornerstone or any of its Subsidiaries (other than normal examinations conducted by a Governmental Entity in the ordinary course of the business of Cornerstone and its Subsidiaries), or, to the Knowledge of Cornerstone, threatened any of the foregoing, and (B) there is no material unresolved violation, criticism, comment or exception by any Governmental Entity with respect to any report or statement relating to any examinations or inspections of Cornerstone or any of its Subsidiaries.
(v) The most recent regulatory rating given to Cornerstone Bank as to compliance with the Community Reinvestment Act is “satisfactory” or better. To the Knowledge of Cornerstone, since the last regulatory examination of Cornerstone Bank with respect to Community Reinvestment Act compliance, Cornerstone Bank has not received any complaints as to the Community Reinvestment Act nor does Cornerstone have Knowledge of any conditions or circumstances that would result in Cornerstone Bank receiving a Community Reinvestment Act rating of less than “satisfactory” or material criticism from regulators with respect to discriminatory lending practices.
(vi) Cornerstone is “well-capitalized” (as that term is defined at 12 CFR § 225.2(r)). Cornerstone is eligible for and complies with all capital requirements under the FRB’s Small Bank Holding Company and Savings and Loan Holding Company Policy Statement (Appendix C to 12 CFR Part 225). Cornerstone Bank is “well-capitalized” as (as that term is defined at 12 CFR § 208.43 or the relevant regulation of its primary federal bank regulator).
(j) Compliance With Laws.
(i) Each of Cornerstone and its Subsidiaries is, and at all times since December 31, 2021, has been, in compliance in all material respects with all Laws applicable thereto or to their employees conducting such businesses, including, without limitation, the BHCA, Sections 23A and 23B of the Federal Reserve Act and FRB and FDIC regulations pursuant thereto, Laws regarding loans to insiders, the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act, the Bank Secrecy Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Volcker Rule, the USA PATRIOT Act, the Electronic Fund Transfer Act and Regulation E of the FRB, the Interagency Policy Statement on Retail Sales of Nondeposit Investment Products, the SAFE Mortgage Licensing Act of 2008, the Real Estate Settlement Procedures Act and Regulation X, any regulations promulgated by the Consumer Financial Protection Bureau, all other applicable fair lending Laws and other Laws relating to discriminatory business practices and the servicing or mortgage loans and all posted and internal policies of Cornerstone and its Subsidiaries related to customer data, data protection or privacy (including laws relating to the privacy and security of data or information that constitutes Personal Information, the CARES Act, the Small Business Act and the U.S. Treasury’s Home Affordable Modification Program. Without limiting the generality of the foregoing, Cornerstone has not been advised in writing of any governmental or regulatory concerns regarding its compliance with the Anti-Bribery and Anti-Corruption Laws, anti-money laundering Laws, including the Bank Secrecy Act, any order issued with respect to anti-money laundering by the Office of Foreign Assets Control of the U.S. Department of the Treasury and any other state or federal anti-money-laundering Laws, including those provisions of federal regulations requiring (i) the filing of reports, such as Currency Transaction Reports and Suspicious Activity Reports, (ii) the maintenance of records and (iii) the exercise of diligence in identifying customers.
(ii) Cornerstone has adopted such procedures, policies and internal controls as are necessary or appropriate to comply with the Bank Secrecy Act, the USA PATRIOT Act of 2001, and any other applicable anti-money laundering Laws (including any economic or trade sanction or guidance) and, to Cornerstone’s Knowledge, is in compliance with such Laws in all material respects. Cornerstone and its Subsidiaries have all permits, licenses, franchises, authorizations, orders and approvals of, and has made all filings, applications and registrations with, all Governmental Entities (and has paid all fees and assessments due and payable in connection therewith) that are required in order to permit them to own or lease their properties and to conduct their businesses as presently conducted; all such permits, licenses, franchises, certificates of authority, orders and approvals are in full force and effect and, to Cornerstone’s Knowledge, no suspension or cancellation of any of them is threatened.
(iii) No investigation or review by any Governmental Entity with respect to Cornerstone or any of its Subsidiaries is pending or, to the Knowledge of Cornerstone, threatened, nor has Cornerstone or any Subsidiary of Cornerstone received any written notification or communication from any Governmental Entity (A) asserting that Cornerstone or any such Subsidiary is not in compliance with any of the Laws which such Governmental Entity enforces or (B) threatening to revoke any license, franchise, permit or governmental authorization (nor, to Cornerstone’s Knowledge, do any grounds for any of the foregoing exist).
(k) Material Contracts; Defaults.
(i) Except for documents set forth in Section 5.03(k)(i) of Cornerstone’s Disclosure Schedule, neither Cornerstone nor any of its Subsidiaries is a party to, bound by or subject to any agreement, contract, arrangement, commitment or understanding (whether written or oral) (A) with respect to the employment of any of its directors, officers, employees, or with regards to the provision of services similar to those provided by an employee, independent contractors or consultants and involving the payment or value of more than $100,000 per annum, (B) which would entitle any present or former director, officer, employee, independent contractor, consultant or agent of Cornerstone or any of its Subsidiaries to indemnification from Cornerstone or any of its Subsidiaries, (C) which provides for the payment by Cornerstone or any of its Subsidiaries of severance benefits or other compensation upon a merger, consolidation, acquisition, asset purchase, stock purchase or other business combination transaction involving Cornerstone or any of its Subsidiaries (whether alone, or in connection with any other event), including but not limited to, the Transaction, (D) which would be a material contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC), (E) which is an agreement (including data processing, software programming, consulting and licensing contracts) not terminable on sixty (60) days or less notice and involving the payment or value of more than $100,000 per annum, (F) that may not be cancelled by Plumas, Cornerstone or any of their respective Subsidiaries without payment of a penalty or termination fee equal to or greater than $25,000 (assuming it is terminated on the Closing Date), (G) which is with or to a labor union or guild (including any collective bargaining agreement), (H) which relates to the incurrence of indebtedness or guaranty of any liability (other than deposit liabilities, advances and loans from the FHLB, and sales of securities subject to repurchase, in each case, in the ordinary course of business), (I) which grants any Person a right of first refusal, right of first offer or similar right with respect to any material properties, rights, assets or businesses of Cornerstone or any of its Subsidiaries, (J) which involves the purchase or sale of assets with a purchase price of $75,000 or more in any single case or $200,000 in all such cases, other than purchases and sales of investment securities or government guaranteed loans in the ordinary course of business consistent with past practice, (K) which is a consulting agreement, license or service contract (including data processing, software programming and licensing contracts and outsourcing contracts) which involves the payment of $100,000 or more in annual fees, (L) which relates to the settlement or other resolution of any legal proceeding in an amount in excess of $75,000 or that has any continuing obligations, liabilities or restrictions, (M) providing for indemnification by Cornerstone or any of its Subsidiaries of any Person, except for a non-material agreement or contract entered into in the ordinary course of business; (N) which relates to a partnership or joint venture or similar arrangement, (O) which is a lease for any real or material personal property owned or presently used by Cornerstone or any of its Subsidiaries, (P) which restricts the conduct of any business by Cornerstone or any of its Subsidiaries or limits the freedom of Cornerstone or any of its Subsidiaries to engage in any line of business in any geographic area (or would so restrict the Surviving Corporation or any of its Affiliates after consummation of the Transaction) or which requires exclusive referrals of business or requires Cornerstone or any of its Subsidiaries to offer specified products or services to its customers or depositors on a priority or exclusive basis, (Q) relating to the acquisition or disposition of any business or operations (whether by merger, sale of stock, sale of assets or otherwise) entered into since December 31, 2021 (other than solely with respect to the acquisition or sale of OREO in the ordinary course of business), (R) to which any officer, director of Cornerstone or Cornerstone Bank, or any holder of five percent (5.0%) or more of the outstanding Cornerstone Common Stock, or any of their immediate family members or Affiliates, is a party, or (S) which is with respect to, or otherwise commits Cornerstone or any of its Subsidiaries to do, any of the foregoing (collectively, “Material Contracts”). Except as set forth in Section 5.03(k)(i) of Cornerstone’s Disclosure Schedule, no consents, approvals, notices or waivers are required to be obtained or delivered pursuant to the terms and conditions of any Material Contract as a result of Cornerstone’s and Cornerstone Bank’s (as applicable) execution, delivery or performance of this Agreement and the Bank Merger Agreement and the consummation of the Transaction. True, correct and complete copies of all such Material Contracts have been made available to Plumas as of the date hereof.
(ii) Each of the Material Contracts is in full force and effect (other than due to the ordinary expiration thereof) and is a valid and binding obligation of Cornerstone or its Subsidiaries and, to Cornerstone’s Knowledge, is a valid and binding obligation of the other parties thereto, enforceable against Cornerstone or its Subsidiaries, and to Cornerstone’s Knowledge, the other parties thereto, in accordance with its terms (in each case, except as enforceability may be limited by the Bankruptcy and Equity Exception). Cornerstone and its Subsidiaries (as applicable) have performed, in all material respects, all obligations required to be performed by them under each Material Contract. Neither Cornerstone or its Subsidiaries nor, to Cornerstone’s Knowledge, any other parties thereto, is in material default under any contract, agreement, commitment, arrangement, lease, insurance policy or other instrument to which they are a party, by which their respective assets, business, or operations may be bound or affected, or under which their respective assets, business, or operations receives benefits, and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a default. Except as set forth in Section 5.03(k)(ii) of Cornerstone’s Disclosure Schedule, no power of attorney or similar authorization given directly or indirectly by Cornerstone or any of its Subsidiaries is currently outstanding. With respect to the Material Contracts, to Cornerstone’s Knowledge, no event has occurred, and no circumstance or condition exists that (with or without notice or lapse of time, or both) will, or would reasonably be expected to, (A) give any Person the right to declare a default or exercise any remedy under any Material Contract, (B) give any Person the right to accelerate the maturity or performance of any Material Contract, or (C) give any Person the right to cancel, terminate or modify any Material Contract.
(l) No Brokers. No action has been taken by Cornerstone or any of its Subsidiaries that would give rise to any valid claim against any Party hereto (or any of their Subsidiaries) for a brokerage commission, finder’s fee or other like payment with respect to the Transaction, other than fees to be paid to Performance Trust Capital Partners, LLC, which are set forth in Section 5.03(l) of Cornerstone’s Disclosure Schedule. Copies of all agreements by and between with Performance Trust Capital Partners, LLC and Cornerstone or any of its Affiliates have been previously provided or made available to Plumas.
(m) Employee Benefit Plans.
(i) All benefit and compensation plans, contracts, policies or arrangements maintained, contributed to, obligated to be contributed to, or sponsored by Cornerstone and its Subsidiaries in which any of the current or former employees of Cornerstone and its Subsidiaries (the “Employees”) or other service provider of Cornerstone, or which Cornerstone and its Subsidiaries may have liability and its Subsidiaries participate, or with respect to which Cornerstone and its Subsidiaries have any direct or indirect present or future liability (actual or contingent) including, but not limited to, “employee benefit plans” within the meaning of Section 3(3) of ERISA (whether or not subject to ERISA), any pension, retirement, profit sharing, medical, life, accidental death and dismemberment, disability, dental, vision, compensation, severance, termination pay, salary continuation, unemployment, workers’ compensation, vacation, personal time off, sick pay, paid-time off, retention, employment, consulting, change in control, fringe benefit, deferred compensation, stock option, stock purchase, stock appreciation rights or other stock-based incentive, cafeteria or flexible benefit, adoption or educational assistance, and bonus or other cash-based incentive, or other similar plans, agreements, programs, policies or other arrangements (whether written or oral and whether or not qualified or funded) or any such plan for which Cornerstone may have any liability including, without limitation, as a result of being deemed a single employer with any ERISA Affiliate (collectively, the “Benefit Plans”), are set forth in Section 5.03(m)(i) of Cornerstone’s Disclosure Schedule. True and complete copies of the following documents have been provided or made available to Plumas: (A) the governing Benefit Plan document and all written agreements underlying a funding medium for, or relating to the administration of, any Benefit Plan including, but not limited to, any trust instruments, group annuity contracts, investment management, recordkeeping, administrative services, other third party services agreements and insurance contracts, certificate of coverage and other similar agreements entered into in connection with any Benefit Plans and all amendments thereto; (B) a written summary of the material terms of any Benefit Plan that is not set forth in a written document; (C) the three most recent annual reports (Form 5500), together with all schedules, as required, filed with the Internal Revenue Service (“IRS”) or Department of Labor (the “DOL”), as applicable, and any financial statements and opinions required by Section 103(e)(3) of ERISA with respect to each Benefit Plan; (D) for each Benefit Plan which is a “top-hat” plan, a copy of the top-hat statement filed with the DOL; (E) the most recent determination or opinion or advisory letter issued by the IRS for each Benefit Plan that is intended to be “qualified” under Section 401(a) of the Code; (F) the most recent summary plan description and any summary of material modifications, as required, for each Benefit Plan; (G) the three most recent actuarial reports, if any, relating to each Benefit Plan; (H) the most recent summary annual report for each Benefit Plan required to provide summary annual reports by Section 104 of ERISA; (I) the minimum coverage, top-heavy and discrimination testing results for each applicable Benefit Plan for the three most recently completed plan years; and (J) copies of all non-routine correspondence received from or delivered to the IRS, the DOL or any other Governmental Entity since December 31, 2021.
(ii) Each Benefit Plan has been established and administered to date in all material respects in accordance with the applicable provisions of ERISA, the Code and applicable Law and has been operated in accordance with the terms and provisions of all documents, contracts or agreements pursuant to which such Benefit Plan is maintained. Cornerstone and any ERISA Affiliate has complied with the Patient Protection and Affordable Care Act, as amended by the Health Care and Reconciliation Act of 2010, and the requirements of Section 4980B of the Code, Part 6 of Subtitle B of Title I of ERISA and the regulations thereunder. All required reports and notices with respect to each Benefit Plan have been timely and accurately filed with the IRS and DOL or any other Governmental Entity as appropriate, and provided to participants in the Benefit Plan. No asset of either Cornerstone or any of its ERISA Affiliates is subject to a Lien imposed under ERISA or the Code. Each Benefit Plan which is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA and which is intended to be qualified under Section 401(a) of the Code (a “Qualified Plan”), has either received a favorable determination letter from the IRS, or is the subject of an advisory or opinion letter issued on a pre-approved plan document upon which such Qualified Plan is based, each trust under such Qualified Plan is tax exempt, and Cornerstone has no Knowledge of any circumstances reasonably likely to result in revocation of any such favorable determination letter, the inability of Cornerstone to rely on any such advisory or opinion letter or the loss of the qualification of such Pension Plan under Section 401(a) of the Code or loss of tax exemption status of any such trust. Neither Cornerstone nor any of its Subsidiaries has received any correspondence or written or verbal notice from the IRS, DOL, any other Governmental Entity, any participant in or beneficiary of, a Benefit Plan, or any agent representing any of the foregoing that brings into question the qualification or compliance of any such Benefit Plan. There is no pending or, to Cornerstone’s Knowledge, threatened proceeding, audit, investigation, lawsuit or claim (other than a routine claim for benefits) relating to the Benefit Plans. Neither Cornerstone nor any of its Subsidiaries is subject to or could reasonably be likely to be subject to a material Tax, fine, penalty or material liability of any kind under either the Code or ERISA with respect to any Benefit Plan. There are no matters pending before the IRS, DOL or other Governmental Entity with respect to any Benefit Plan. Since January 1, 2021, no Benefit Plan or related trust has been the subject of an audit, investigation or examination by a Governmental Entity. Neither Cornerstone nor any other “disqualified person” (within the meaning of Section 4975 of the Code) nor any “party in interest” (within the meaning of Section 3(14) of ERISA) has engaged in any nonexempt “prohibited transaction” (within the meaning of Section 4975 of the Code or Section 406 of ERISA) with respect to any Benefit Plan.
(iii) Neither Cornerstone nor any ERISA Affiliate maintains or contributes to any Qualified Plan subject to Title IV of ERISA, Section 302 of ERISA or Section 412 of the Code, a multiple employer plan (as defined in Section 413(c) of the Code) or multiemployer plan (as defined in 4001(a)(3) of ERISA), a “voluntary employee’s beneficiary association” within the meaning of Section 501(c)(9) of the Code, a “multiple employer welfare arrangement” within the meaning of Section 3(40) of ERISA or a Retiree Welfare Plan, other than those disclosed and identified as such in Section 5.03(m)(iii) of Cornerstone’s Disclosure Schedule. Except as set forth in Section 5.03(m)(iii) of Cornerstone’s Disclosure Schedule, no Benefit Plan holds as an asset an annuity contract, guaranteed investment contract or other investment contract issued by an insurance company.
(iv) All contributions required to be made under the terms of any Benefit Plan (including any amounts withheld from employees’ paychecks with respect to a Benefit Plan) and premiums required to be paid have been timely made in accordance with the terms of the applicable Benefit Plan and applicable Law. All contributions for any period ending on or before the Closing Date that are not yet due have been made or have been reflected appropriately in the Cornerstone Financial Statements. Benefits under each Benefit Plan that is an “employee welfare benefit plan” (within the meaning of Section 3(1) of ERISA), with the exception of any flexible spending arrangements subject to Sections 125 and 105 of the Code and health savings accounts (within the meaning of Section 223 of the Code), are provided exclusively through insurance contracts or policies issued by an insurance company, health maintenance organization, or similar organization unrelated to Cornerstone or any ERISA Affiliate, the premiums for which are paid directly by Cornerstone or an ERISA Affiliate thereof, from its general assets or partly from its general assets and partly from contributions by its employees. No insurance policy or contract relating to a Benefit Plan requires or permits a retroactive increase to premiums or payments due thereunder.
(v) Except as set forth in Section 5.03(m)(v) of Cornerstone’s Disclosure Schedule, none of the execution of this Agreement, the Cornerstone Shareholder Approval or the consummation of the Transaction, either alone or in connection with any other event, (A) entitle any Employees or any current or former director or independent contractor of Cornerstone or any of its Subsidiaries to severance pay or any increase in severance pay upon any termination of employment or service after the date hereof, (B) accelerate the time of payment or vesting or trigger any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable under, or trigger any other material obligation pursuant to, any of the Benefit Plans, (C) result in any breach or violation of, or a default under, any of the Benefit Plans or (D) result in the payment of any “excess parachute payments” within the meaning of Section 280G of the Code. Cornerstone will make available to Plumas upon request Cornerstone’s calculations under Section 280G of the Code and all related underlying back-up information and agreements taken into account in the performance of such calculations or deemed necessary by Plumas, in its discretion, including, without limitation, pertinent Form W-2 information for any “disqualified individuals” determined in accordance with Q&A-15 of Treasury Regulation § 280G-1. Neither Cornerstone nor any of its Subsidiaries has any liability or is a party with respect to any gross-up provision or agreement in connection with Section 280G of the Code or excise Taxes under Section 4999 of the Code.
(vi) Neither Cornerstone nor any of its Subsidiaries has now, nor has had, the obligation to maintain, establish, sponsor, participate in or contribute to any Benefit Plan or other similar arrangement that is subject to any law or applicable custom or rule of any jurisdiction outside of the United States.
(vii) Each Benefit Plan which is a “nonqualified deferred compensation plan” (within the meaning of Section 409A of the Code) (hereinafter referred to as a “Cornerstone NQDP”) has been maintained, as to both form and operation, in compliance with Section 409A of the Code. No event in connection with a Cornerstone NQDP has occurred which would subject a participant to inclusion of income under Section 409A(a)(1) of the Code and neither Cornerstone nor any ERISA Affiliate has any liability or is a party with respect to any gross-up provision or agreement in connection with any income inclusion, interest or additional Tax payable in accordance with Section 409A of the Code.
(viii) Except as set forth in Section 6.11, neither Cornerstone nor any Subsidiary has (A) announced its intention, made any amendment or any binding commitment, or given written or oral notice providing that it will increase benefits under any Benefit Plan, (B) created or adopted any arrangement that would be considered a Benefit Plan once established, (C) agreed not to exercise any right or power to amend, suspend or terminate any Benefit Plan, or (D) since December 31, 2023, not adopted, amended or terminated any Benefit Plan.
(n) Labor Matters.
(i) Section 5.03(n)(i) of Cornerstone’s Disclosure Schedule sets forth (A) the name, title, date of hire or retention and total compensation of each employee, independent contractor or consultant of Cornerstone and each of its Subsidiaries, (B) all bonuses and other incentive compensation received by such employees, independent contractors and consultants in 2023 and 2024 and any accrual for such bonuses and incentive compensation, (C) all persons who will be (as of the Effective Time) “specified employees” of Cornerstone within the meaning of Code Section 409A and (D) all contracts, agreements, commitments or arrangements by Cornerstone and each of its Subsidiaries regarding compensation with any of its respective officers, employees, independent contractors and consultants, including those to increase the compensation or to modify the conditions or terms of employment.
(ii) To Cornerstone’s Knowledge, no officer or director of Cornerstone or any of its Subsidiaries or any employee, independent contractor or consultant of Cornerstone or any of its Subsidiaries is a party to, or is otherwise bound by, any agreement or arrangement, including any confidentiality, non-competition, or proprietary rights agreement, that could adversely affect the ability of Cornerstone or any of its Subsidiaries to conduct its business as currently conducted.
(iii) Neither Cornerstone nor any of its Subsidiaries has (A) classified any individual as an “independent contractor” or similar status who, under applicable Law or the provisions of any Benefit Plan, should have been classified as an employee or (B) incurred any liability for improperly excluding any Person from participating in any Benefit Plan who provides or provided services to Cornerstone or any of its Subsidiaries, in any capacity.
(iv) None of the officers, employees or consultants of Cornerstone or any of its Subsidiaries has informed Cornerstone or such Subsidiary of his or her intent, nor does Cornerstone have any Knowledge of any of the officers, employees or consultants of Cornerstone or any of its Subsidiaries having an intention, to terminate employment with Cornerstone or any of its Subsidiaries during the next twelve (12) months.
(v) Neither Cornerstone nor any of its Subsidiaries is a party to or is bound by any collective bargaining agreement, contract or other agreement, arrangement or understanding with a labor union or labor organization, nor is Cornerstone or any of its Subsidiaries the subject of a proceeding asserting that it has committed an unfair labor practice (within the meaning of the National Labor Relations Act) or seeking to compel Cornerstone or any of its Subsidiaries to bargain with any labor organization as to wages or conditions of employment, nor is there any strike or other labor dispute involving it pending or, to Cornerstone’s Knowledge, threatened, nor does Cornerstone have any Knowledge of any activity involving its employees seeking to certify a collective bargaining unit or engaging in other organizational activity, either currently or during the past three (3) years. Each of Cornerstone and its Subsidiaries has paid in full all wages, salaries, commissions, bonuses, benefits and other compensation currently due to its employees or otherwise arising on a current basis under any Cornerstone policy, practice, agreement, plan, or program, or any applicable statute or other law. Except as set forth in Section 5.03(n)(v) of Cornerstone’s Disclosure Schedule, the employment of each officer and employee of Cornerstone and each of its Subsidiaries is terminable at the will of Cornerstone or such Subsidiary.
(vi) Except as set forth in Section 5.03(n)(vi) of Cornerstone’s Disclosure Schedule, (A) there is no pending or, to Cornerstone’s Knowledge, threatened legal proceeding involving Cornerstone or any of its Subsidiaries, on the one hand, and any present or former employee(s) of Cornerstone or any of its Subsidiaries, on the other hand, and (B) no other Person, to Cornerstone’s Knowledge, has threatened any claim or any legal proceeding against Cornerstone or any of its Subsidiaries (or, to Cornerstone’s Knowledge, against any officer, director or employee of Cornerstone or any of its Subsidiaries) relating to employees or former employees of Cornerstone or any of its Subsidiaries, including any such claim or legal proceeding arising out of any statute, ordinance or regulation relating to wages, collective bargaining, discrimination in employment or employment practices or occupational safety and health standards (including, without limitation, the Fair Labor Standards Act, Title VII of the Civil Rights Act of 1964, as amended, the Occupational Safety and Health Act, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act or the Family and Medical Leave Act). Neither Cornerstone nor any of its Subsidiaries has committed any unfair labor practice.
(vii) Cornerstone and each of its Subsidiaries is, and at all times since December 31, 2020 has been, in compliance with all applicable Laws relating to labor, employment, termination of employment or similar matters, including, but not limited to, such Laws relating to discrimination, disability, labor relations, hours of work, payment of wages and overtime wages, pay equity, immigration, workers compensation, working conditions, employee scheduling, occupational safety and health, family and medical leave and employee terminations, and has not engaged in any unfair labor practices or similar prohibited practices.
(o) Environmental Matters. Except as set forth in Section 5.03(o) of Cornerstone’s Disclosure Schedule, (i) there are no legal, administrative, arbitral or other proceedings, claims, actions, or, to Cornerstone’s Knowledge, environmental investigations or remediation activities by a Governmental Entity or third party, seeking to impose, or that reasonably could be expected to result in the imposition, on Cornerstone or any of its Subsidiaries of any liability or obligation arising under any Environmental Laws pending or, to Cornerstone’s Knowledge, threatened against Cornerstone or any of its Subsidiaries, which liability or obligation could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Cornerstone, and there is no reasonable basis for any such proceeding, claim, action, environmental remediation or investigation that could impose any liability or obligation that could have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Cornerstone; (ii) Cornerstone and each of its Subsidiaries is in compliance in all material respects with applicable Environmental Laws; (iii) no real property (including buildings or other structures) currently or, to Cornerstone’s Knowledge, formerly owned or operated by Cornerstone or any of its Subsidiaries, or any property in which Cornerstone or any of its Subsidiaries holds a security interest or a fiduciary or management role (“Cornerstone Loan Property”), has been contaminated with, or has had any release of, any Hazardous Substance in violation of Environmental Law or that requires investigation or remediation under an Environmental Law, that has resulted, or would reasonably be expected to result in, individually or in the aggregate, a Material Adverse Effect on Cornerstone; (iv) neither Cornerstone nor any of its Subsidiaries are the “owner or operator” of, nor have “participated in the management” regarding Hazardous Substances at, any Cornerstone Loan Property which has been contaminated with, or has had any release of, any Hazardous Substance in violation of any Environmental Law or that requires investigation or remediation under any Environmental Law, that has resulted, or would reasonably be expected to result in, individually or in the aggregate, a Material Adverse Effect on Cornerstone; (v) neither Cornerstone nor any of its Subsidiaries nor, to Cornerstone’s Knowledge, any Person whose liability Cornerstone or any of its Subsidiaries has assumed whether contractually or by operation of law, has received any notice, demand letter, claim or request for information alleging any material violation of, or material liability under, any Environmental Law, and neither Cornerstone nor any of its Subsidiaries is subject to any order, decree, injunction or other agreement with any Governmental Entity relating to any Environmental Law, or agreement with any third party resolving claims under any Environmental Law, which has not been fully satisfied or discharged; (vi) there are no circumstances or conditions (including the presence of asbestos, underground storage tanks, lead products, polychlorinated biphenyls, prior manufacturing operations, dry-cleaning, or automotive services) involving any currently or, to Cornerstone’s Knowledge, formerly owned or operated property, any Cornerstone Loan Property, or to Cornerstone’s Knowledge any Person whose liability Cornerstone or any of its Subsidiaries has assumed, whether contractually or by operation of law, that could reasonably be expected to result in any claims, liability or investigations against Cornerstone, result in any restrictions on the ownership, use, or transfer of any property pursuant to any Environmental Law, or adversely affect the value of any Cornerstone Loan Property, which could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Cornerstone; and (vii) Cornerstone has provided and made available to Plumas copies of all material environmental reports or studies, sampling data, correspondence, filings and other material environmental information in its possession or reasonably available to it relating to Cornerstone, its Subsidiaries and any currently or formerly owned or operated property.
As used in this Agreement, the term “Environmental Laws” means any Laws relating to: (A) the protection or restoration of the environment, health, safety, or natural resources, (B) the handling, use, presence, disposal, release or threatened release of any Hazardous Substance or (C) noise, odor, wetlands, indoor air, pollution, contamination or any injury or threat of injury to persons or property in connection with any Hazardous Substance, including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. § 9601, et seq. and related or similar state and local laws and regulations. The term “Hazardous Substance” means any substance that is: (X) listed, classified or regulated pursuant to any Environmental Law, (Y) any petroleum, petroleum product or by-product, asbestos-containing material, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive materials, radon or urea-formaldehyde insulation or (Z) any other substance which is the subject of regulatory action by any Governmental Entity in connection with any Environmental Law.
(p) Tax Matters.
(i) (A) All Tax Returns that are required to be filed on or before the Closing Date (taking into account any extensions of time within which to file that have not expired) by or with respect to any member of the Cornerstone Group have been or will be timely filed on or before the Closing Date, (B) all such Tax Returns are or will be true, correct and complete in all material respects, (C) all Taxes due and payable by or with respect to any member of the Cornerstone Group (whether or not shown as due on any Tax Return) have been timely paid in full, (D) the unpaid Taxes of each member of the Cornerstone Group did not, as of the date of the most recent financial statements included in the Cornerstone Financial Statements, exceed the reserve for Tax liability set forth on the face of such financial statements and do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the applicable member of the Cornerstone Group in filing its Tax Returns, (E) all deficiencies asserted or assessments made as a result of examinations conducted by any taxing authority have been paid in full, (F) no issues that have been raised by the relevant taxing authority in connection with the examination of any of the Tax Returns referred to in clause (A) are currently pending and (G) no statutes of limitation with respect to any Taxes of any member of the Cornerstone Group have been waived by or on behalf of such member of the Cornerstone Group.
(ii) Cornerstone has made available to Plumas (A) true and correct copies of the U.S. federal, state, local and foreign income Tax Returns filed by or on behalf of each member of the Cornerstone Group for each of the three most recent fiscal years for which such returns have been filed and (B) any audit report issued within the last three years relating to Taxes due from or with respect to any member of the Cornerstone Group or its income, assets or operations. Section 5.03(p)(ii) of Cornerstone’s Disclosure Schedule sets forth any income or franchise Tax Returns filed by or on behalf of any member of the Cornerstone Group that have been examined by any taxing authority since January 1, 2020.
(iii) To the Knowledge of Cornerstone, except as set forth in Section 5.03(p)(iii) of Cornerstone’s Disclosure Schedule, there are no audits or investigations by any taxing authority or proceedings in progress with respect to any member of the Cornerstone Group, nor has any member of the Cornerstone Group received any notice from any taxing authority that it intends to conduct such an audit or investigation.
(iv) No claim has been made in writing during the past five (5) years by a taxing authority in a jurisdiction where any member of the Cornerstone Group does not already file Tax Returns that such member of the Cornerstone Group is or may be subject to taxation by that jurisdiction.
(v) Each member of the Cornerstone Group has withheld and paid over all Taxes required to have been withheld and paid over, and complied with all information reporting and backup withholding requirements, including maintenance of required records thereto, in connection with amounts paid or owing to any employee, creditor, independent contractor, or other third party and has complied in all material respects with all applicable Laws relating to the withholding and payment of Taxes.
(vi) No member of the Cornerstone Group has a permanent establishment in any country other than the United States under any applicable Tax treaty between the United States and such other country and is not subject to income Tax in any country other than the United States.
(vii) There are no Liens or other encumbrances on any of the assets of any member of the Cornerstone Group that arose in connection with any failure (or alleged failure) to pay any Tax.
(viii) No closing agreements, extensions of time within which to file any Tax Return, private letter rulings (or comparable rulings), technical advice memoranda or similar agreements or rulings have been entered into, requested of or issued by any taxing authority with respect to any member of the Cornerstone Group.
(ix) No member of the Cornerstone Group has been, in the past five (5) years, a party to a transaction reported or intended to qualify as a reorganization under Section 368 of the Code. No member of the Cornerstone Group has been a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of shares that was reported or otherwise constituted a distribution of shares under Section 355 of the Code in the two (2) years prior to the date of this Agreement or that could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) that includes the Transaction contemplated by this Agreement.
(x) No member of the Cornerstone Group is or has been, a United States real property holding corporation within the meaning of Section 897(c) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code; the Transaction contemplated by this Agreement is not subject to withholding under Section 1445 of the Code, and no stock transfer Taxes, sales Taxes, use Taxes or real estate transfer or gains Taxes will be imposed on the Transaction contemplated by this Agreement.
(xi) No member of the Cornerstone Group will be required to include any material item of income in, or exclude any material item of deduction from its taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any of the following that occurred or exists on or prior to the Closing Date: (A) a “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of the Code or of the Tax laws of any state or locality), (B) an installment sale or open transaction, (C) a prepaid amount, (D) a change in or improper use of an accounting method of Cornerstone or (E) an election made pursuant to Section 965 of the Code.
(xii) Except as set forth in Section 5.03(p)(xii) of Cornerstone’s Disclosure Schedule, no member of the Cornerstone Group is a party to any Tax sharing, Tax allocation or similar agreement or arrangement (whether or not written) with any Person.
(xiii) No member of the Cornerstone Group has (A) consummated or participated in, and is not currently participating in, any transaction which was or is a “tax shelter” transaction as defined in Section 6662, 6011, 6111 or 6112 of the Code or the Treasury Regulations other related published guidance from the IRS or (B) engaged in any transaction that could give rise to (1) a registration obligation with respect to any Person under Section 6111 of the Code or the Treasury Regulations, (2) a list maintenance obligation with respect to any person under Section 6112 of the Code or the regulations thereunder, or (3) a disclosure obligation as a “reportable transaction” under Section 6011 of the Code or the Treasury Regulations.
(xiv) Except as set forth in Section 5.03(p)(xiv) of Cornerstone’s Disclosure Schedule, no power of attorney granted by any member of the Cornerstone Group relating to Taxes is currently in force.
(xv) No member of the Cornerstone Group has been a member of a consolidated, combined, unitary or affiliated group (other than a group of which Cornerstone is the parent) or has any liability for Taxes of any Person (other than another member of the Cornerstone Group) under Section 1.1502-6 of the Treasury Regulations or any similar provision of state, local, or foreign law, or as a transferee or successor, by contract, or otherwise.
(xvi) No member of the Cornerstone Group has taken any action or failed to take any action, or is aware of any fact or circumstance, in each case, that could reasonably be expected to prevent the Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code.
(xvii) No member of the Cornerstone Group has deferred any payroll Taxes or availed itself of any of the Tax deferral, credits or benefits pursuant to the Coronavirus Aid, Relief, and Economic Security Act or otherwise taken advantage of any change in applicable law in connection with the COVID-19 outbreak that has the result of temporarily reducing (or temporarily delaying the due date of) otherwise applicable Tax payment obligations of any member of the Cornerstone Group to any Governmental Entity which have not yet been paid.
(q) Risk Management Instruments. None of Cornerstone nor or any of its Subsidiaries is a party to, owns or has agreed to enter into or acquire any Derivatives Contract (including various combinations thereof) or any securities that (i) are referred to generically as “structured notes,” “high risk mortgage derivatives,” “capped floating rate notes” or “capped floating rate mortgage derivatives” or (ii) could have changes in value as a result of interest or exchange rate changes that significantly exceed normal changes in value attributable to interest or exchange rate changes.
(r) Loans; Nonperforming and Classified Assets.
(i) Each outstanding Loan (A) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (B) to the extent secured, has been secured by valid Liens which have been perfected and (C) to Cornerstone’s Knowledge, is a legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to the Bankruptcy and Equity Exception. The notes or other credit or security documents with respect to each such outstanding Loan were in compliance with all applicable Laws at the time of origination or purchase by Cornerstone or its Subsidiaries.
(ii) Each outstanding Loan was solicited and originated, and is and has been administered and, where applicable, serviced, and the relevant Loan files are being maintained in accordance with the relevant notes or other credit or security documents and Cornerstone’s written underwriting standards, in each case, in compliance with all applicable requirements of applicable Law and Cornerstone’s policies and procedures. There are no oral modifications or amendments or additional agreements related to the Loans. All such Loans are owned by Cornerstone or its Subsidiaries free and clear of any Liens. No claims of defense as to the enforcement of any Loan have been asserted against Cornerstone or any of its Subsidiaries for which there is a reasonable possibility of a material adverse determination, and Cornerstone has no Knowledge of any acts or omissions which would give rise to any claim or right of rescission, set-off, counterclaim or defense for which there is a reasonable possibility of a material adverse determination. No Loans are presently serviced by third parties, and there is no obligation which could result in any Loan becoming subject to any third party servicing. None of the agreements pursuant to which Cornerstone or any of its Subsidiaries has sold or is servicing (A) Loans or pools of Loans or (B) participations in Loans or pools of Loans contains any obligation to repurchase such Loans or interests therein or to pursue any other form of recourse against Cornerstone or any of its Subsidiaries.
(iii) Except as set forth in Section 5.03(r)(iii) of Cornerstone’s Disclosure Schedule, neither Cornerstone nor any of its Subsidiaries (A) has purchased or sold any Loans or pools of Loans, or participations in Loans or pools of Loans since January 1, 2020, or (B) is a party to a contract that requires Cornerstone or any of its Subsidiaries to sell or purchase any Loans or pools of Loans, or participations in Loans or pools of Loans.
(iv) Section 5.03(r)(iv) of Cornerstone’s Disclosure Schedule lists all claims for repurchases by Cornerstone or any of its Subsidiaries of Loans that were sold to third parties by Cornerstone and its Subsidiaries that are outstanding or threatened (in writing), in each case, as of the date hereof and since December 31, 2021.
(v) Section 5.03(r)(v) of Cornerstone’s Disclosure Schedule sets forth a list of (A) each Loan that as of December 31, 2024 (1) was contractually past due sixty (60) calendar days or more in the payment of principal and/or interest, (2) was on non-accrual status, (3) was classified as “substandard,” “doubtful,” “loss,” “classified,” “criticized,” “credit risk assets,” “concerned loans,” “watch list,” “impaired” or “special mention” (or words of similar import) by Cornerstone, any of its Subsidiaries or any Governmental Entity (collectively, “Criticized Loans”), (4) for which a specific reserve allocation existed in connection therewith, (5) was required to be accounted for as a troubled debt restructuring in accordance with ASC 310-40 and (B) each Loan that, as of January 27, 2025, had a total outstanding balance and/or unfunded commitment of $500,000 or more and that, as of such date, (1) a reasonable doubt exists as to the timely future collectability of principal and/or interest, whether or not interest is still accruing or the Loans are less than ninety (90) calendar days past due, (2) the interest rate terms have been reduced and/or the maturity dates have been extended subsequent to the agreement under which the Loan was originally created due to concerns regarding the borrower’s ability to pay in accordance with such initial terms, or (3) where a specific reserve allocation exists in connection therewith, and (C) each asset of Cornerstone or any of its Subsidiaries that, as December 31, 2024, was classified as “other real estate owned,” “other repossessed assets” or as an asset to satisfy Loans, and the book value thereof as of such date. For each loan identified in accordance with the immediately preceding sentence, Section 5.03(r)(v) of the Cornerstone Disclosure Schedule sets forth the outstanding balance, including accrued and unpaid interest, on each such Loan and the identity of the borrower thereunder as of December 31, 2024.
(vi) No agreement pursuant to which Cornerstone or any of its Subsidiaries has sold or is servicing Loans or pools of Loans or participations in Loans or pools of Loans contains any obligation to repurchase such Loans or interests therein, or entitles the buyer of such Loans or pool of Loans or participation in Loans or pools of Loans or any other Person to pursue any other form of recourse against Cornerstone or any of its Subsidiaries. There has not been any claim made by any such buyer or other Person for repurchase or other similar form of recourse against Cornerstone or any of its Subsidiaries nor, to the Knowledge of Cornerstone, are there any facts or circumstances that could reasonably give rise to any such claim.
(vii) Section 5.03(r)(vii) of Cornerstone’s Disclosure Schedule sets forth a list of all Loans outstanding as of the date of this Agreement by Cornerstone or any of its Subsidiaries to any directors, officers and principal shareholders (as such terms are defined in Regulation O of the FRB (12 C.F.R. Part 215)) of Cornerstone or any of its Subsidiaries. There has been no default, or forgiveness or waiver, in whole or in party, on or of any such loan during the two years immediately preceding the date of this Agreement. There are no executive officer, director or other affiliate Loans on which the borrower is paying a rate other than that reflected in the note or other relevant credit or security agreement or on which the borrower is paying a rate which was not in compliance with Regulation O, and all such Loans are and were originated in compliance with all applicable Laws.
(viii) Neither Cornerstone nor any of its Subsidiaries is (A) now nor has it ever been since December 31, 2020 subject to any fine, suspension, settlement or other contract or other administrative agreement or sanction by any Governmental Entity relating to the origination or servicing of Loans or (B) aware of any actual or threatened claim, proceeding or investigation with respect thereto by any Person.
(ix) Since December 31, 2020, Cornerstone and each of its Subsidiaries has complied with, and all documentation in connection with the origination, processing, underwriting and credit approval of any Loan originated by Cornerstone or any of its Subsidiaries satisfied: (A) all applicable Laws with respect to the origination, insuring, purchase, sale, pooling, servicing, subservicing, loan modification, loss mitigation or filing of claims in connection with such Loans, including, to the extent applicable, all Laws relating to real estate settlement procedures, consumer credit protection, truth in lending Laws, usury limitations, fair housing, transfers of servicing, collection practices, equal credit opportunity and adjustable rate mortgages, in each case applicable as of the time of such origination, processing, underwriting or credit approval; (B) the responsibilities and obligations relating to such Loans set forth in any contract between Cornerstone or any of its Subsidiaries, on the one hand, and any Governmental Entity, loan investor or insurer, on the other hand; (C) the applicable rules, regulations, guidelines, handbooks and other requirements of any Governmental Entity, loan investor or insurer, in each case applicable as of the time of such origination, processing, underwriting or credit approval; and (D) the terms and provisions of any mortgage or other collateral documents and other loan documents with respect to each such Loan; in each case applicable as of the time of such origination, processing, underwriting or credit approval.
(x) Since December 31, 2020, Cornerstone and each of its Subsidiaries have not engaged in, and, to Cornerstone’s Knowledge, no third-party vendors (including outside law firms and other third-party foreclosure services providers used by Cornerstone or by any of its Subsidiaries, as applicable) has engaged in, directly or indirectly, (A) any foreclosures in violation of any applicable Law, including but not limited to the Servicemembers Civil Relief Act, or in breach of any binding agreement with any Governmental Entity or (B) the conduct referred to as “robo-signing” or any other similar conduct of approving or notarizing documents relating to Loans that do not comply with any applicable Law.
(xi) Since December 31, 2020, Cornerstone has not foreclosed upon, managed or taken a deed or title to, any real estate (other than single-family residential properties) without complying with all applicable FDIC environmental due diligence standards (including FDIC Bulletin FIL-14-93, and update FIL-98-2006) or foreclosed upon, managed or taken a deed or title to, any such real estate if the environmental assessment indicates the liabilities under Environmental Laws are likely in excess of the asset’s value.
(s) Properties.
(i) Section 5.03(s)(i) of Cornerstone’s Disclosure Schedule contains a complete and correct list of all real property or premises owned or operated by Cornerstone as of the date hereof. Other than as disclosed in Section 5.03(s)(i) of Cornerstone’s Disclosure Schedule, none of Cornerstone or any of its Subsidiaries owns, and no such entity is in the process of foreclosing (whether by judicial process or by power of sale) or otherwise in the process of acquiring title to, except pursuant to foreclosures which are pending in the ordinary course of business consistent with past practice, any real property or premises on the date hereof in whole or in part.
(ii) Section 5.03(s)(ii) of Cornerstone’s Disclosure Schedule contains a complete and correct list of all real property or premises leased or subleased in whole or in part by Cornerstone or any of its Subsidiaries, and together with a list of applicable leases or subleases and the name of the lessor or sublessor.
(iii) To Cornerstone’s Knowledge, all real and personal property owned by Cornerstone or any of its Subsidiaries or presently used by any of them in their respective business is in a good condition (ordinary wear and tear excepted) and is sufficient to carry on their respective business in the ordinary course of business consistent with their past practices. Cornerstone has good, marketable and indefeasible title, free and clear of all Liens, to all of the material properties and assets, real and personal, reflected on the consolidated balance sheet of Cornerstone as of December 31, 2024, or acquired after such date, other than properties sold by Cornerstone or any of its Subsidiaries in the ordinary course of business, except (A) Liens for current taxes and assessments not yet due or payable for which adequate reserves have been established, (B) pledges to secure deposits incurred in the ordinary course of its banking business consistent with past practice, (C) such imperfections of title, easements and encumbrances, if any, as are not material in character, amount or extent, or (D) as reflected on the consolidated balance sheet of Cornerstone as of December 31, 2024.
(iv) All real and personal property which is material to Cornerstone’s business on a consolidated basis and leased or licensed by Cornerstone or any of its Subsidiaries is held pursuant to leases or licenses which are valid obligations of Cornerstone or any of its Subsidiaries and, to Cornerstone’s Knowledge, are valid and binding obligations of the other parties thereto, enforceable against Cornerstone or such Subsidiary of Cornerstone, and to Cornerstone’s Knowledge, the other parties thereto, in accordance with their terms, subject to the Bankruptcy and Equity Exception.
(v) Except as set forth in Section 5.03(s)(v) of Cornerstone’s Disclosure Schedule, such leases will not terminate or lapse prior to the Effective Time and Cornerstone and each of its Subsidiaries has the right to use and occupy such leased real property for the full term, and in accordance with the conditions of the lease relating thereto. Neither Cornerstone nor any of its Subsidiaries has received any written notice of termination, cancellation, breach or default under any such real property lease and, to the Knowledge of Cornerstone as of the date hereof, no event has occurred, and no circumstances or condition exists, that (with or without notice or lapse of time, or both) will, or would reasonably be expected to, (A) result in a violation or breach of any of the provisions of any real property lease, (B) give any Person the right to declare a default or exercise any remedy under any real property lease, (C) give any Person the right to accelerate the maturity or performance of any real property lease, or (D) give any Person the right to cancel, terminate or modify any real property lease. To Cornerstone’s Knowledge, Cornerstone and its Subsidiaries are in compliance with all applicable health and safety related requirements for the real property owned by any of them, including those requirements under the Americans with Disabilities Act of 1990, as amended. None of the owned or leased premises or properties described in paragraph (i) or (ii) above have been condemned or otherwise taken by any Governmental Entity and no condemnation or taking is threatened or contemplated and none thereof is subject to any claim, contract or law which might adversely affect its use or value for the purposes now made of it.
(vi) Except as set forth in Section 5.03(s)(vi) of Cornerstone’s Disclosure Schedule, (A) neither Cornerstone nor any of its Subsidiaries has granted any options or rights of first refusal to purchase any real property owned by Cornerstone or any of its Subsidiaries (or any portion thereof or interest therein), (B) neither Cornerstone nor any of its Subsidiaries has leased, subleased, licensed or granted occupancy rights in any portion or any real property owned by Cornerstone or any of its Subsidiaries, (C) to Cornerstone’s Knowledge, no other Person has any rights to the use, occupancy or enjoyment of any real property owned by Cornerstone or any of its Subsidiaries pursuant to any lease, sublease, license, occupancy or other agreement.
(vii) Except as set forth in Section 5.03(s)(vii) of Cornerstone’s Disclosure Schedule, the real property owned by Cornerstone or any of its Subsidiaries (A) is occupied under a valid certificate of occupancy or similar permit, (B) the Transaction will not require the issuance of any new or amended certificate of occupancy and, (C) to Cornerstone’s Knowledge, there are no facts that would prevent any such property from being occupied and used by Plumas Bank after the Closing in the same manner as occupied by Cornerstone immediately prior to the Closing.
(viii) To Cornerstone’s Knowledge, (x) all improvements on the real property owned by Cornerstone or any of its Subsidiaries are wholly within the lot limits of such real property and do not encroach on any adjoining premises or easement or similar property right benefiting such real property, and (y) there are no encroachments on any real property owned by Cornerstone or any of its Subsidiaries or any easement of property, right or benefit appurtenant thereto by any improvements located on any adjoining property which detract from the use therefrom.
(t) Intellectual Property; Information Technology; Security.
(i) Each of Cornerstone and its Subsidiaries owns or possesses valid and binding licenses and other rights to use all Intellectual Property used by Cornerstone and its Subsidiaries in the conduct of its business as currently conducted, and neither Cornerstone nor any of its Subsidiaries has received any notice of conflict or allegation of invalidity with respect thereto that asserts the right of others. Section 5.03(t)(i) of Cornerstone’s Disclosure Schedule lists all registered Intellectual Property owned by Cornerstone and its Subsidiaries, and all contracts to which Cornerstone and its Subsidiaries has licensed Intellectual Property from third parties that is material to the operation of Cornerstone and its Subsidiaries (other than commercially available “shrink wrap” or “click wrap” licenses). Each of Cornerstone and its Subsidiaries owns or has a valid right to use or license such Intellectual Property, free and clear of all Liens (except any restrictions set forth in any licensed Intellectual Property), and has performed all the obligations required to be performed by it and is not in default under any contract, agreement, arrangement or commitment relating to any of the foregoing. To Cornerstone’s Knowledge, such Intellectual Property is valid and enforceable, subject to the Bankruptcy and Equity Exception.
(ii) (A) Each of Cornerstone and its Subsidiaries owns or is validly licensed to use (in each case, free and clear of any Liens, except), all Intellectual Property used in or necessary for the conduct of its business as currently conducted; (B) to Cornerstone’s Knowledge, the use of any Intellectual Property by Cornerstone or any of its Subsidiaries and the conduct of their respective businesses as currently conducted does not infringe on or otherwise violate the legal rights of any Person; (C) to Cornerstone’s Knowledge, no Person is challenging, infringing on or otherwise violating any right of Cornerstone or any of its Subsidiaries with respect to any Intellectual Property owned by and/or licensed to Cornerstone or any of its Subsidiaries; and (D) neither Cornerstone nor any of its Subsidiaries has received any written notice or otherwise has Knowledge of any pending legal proceeding against Cornerstone or any of its Subsidiaries with respect to any Intellectual Property used by Cornerstone or any of its Subsidiaries, or any Intellectual Property owned by any Person, and as of the date hereof, Cornerstone and its Subsidiaries are unaware of any facts or events that would give rise to any legal proceeding against Cornerstone or any of its Subsidiaries that is likely to succeed,
(iii) To Cornerstone’s Knowledge, all information technology and computer systems (including software, information technology and telecommunication hardware and other equipment) relating to the transmission, storage, maintenance, organization, presentation, generation, processing or analysis of data and information, whether or not in electronic format, used in or necessary to the conduct of Cornerstone’s and its Subsidiaries respective businesses (collectively, “Cornerstone IT Systems”) have been properly maintained by technically competent personnel, in accordance with standards set by the manufacturers or otherwise in accordance with standards in the industry, to ensure proper operation, monitoring and use. The Cornerstone IT Systems are in good working condition to effectively perform all information technology operations necessary to conduct business as currently conducted. Neither Cornerstone nor any of its Subsidiaries has experienced within the past three (3) years any material disruption to, or material interruption in, its conduct of its business attributable to a defect, bug, breakdown or other failure or deficiency of the Cornerstone IT Systems. Cornerstone and its Subsidiaries have taken commercially reasonable measures to provide for the back-up and recovery of the data and information necessary to the conduct of its business (including such data and information that is stored on magnetic or optical media in the ordinary course) without material disruption to, or material interruption in, the conduct of its business. Neither Cornerstone nor any of its Subsidiaries is in breach of any Material Contract related to any Cornerstone IT Systems.
(iv) Cornerstone and its Subsidiaries maintain written information privacy, cyber security and data security programs and policies (such programs and policies, collectively, the “Privacy and Security Policies”) that (A) comply in all material respects with all requirements of all applicable data protection laws, (B) are consistent with reasonable industry standards and (C) any commitments of Cornerstone or any of its Subsidiaries, each case to protect the privacy, confidentiality and security of all Personal Information against any (i) unauthorized access, loss or misuse of Personal Information, (ii) unauthorized or unlawful operations performed upon Personal Information, or (iii) other act or omission that compromises the privacy, security or confidentiality of Personal Information (clauses (i) through (iii), a “Security Breach”).
(v) To the Knowledge of Cornerstone, neither Cornerstone nor any of its Subsidiaries has experienced any Security Breach that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Cornerstone or require a report to a Governmental Entity. To the Knowledge of Cornerstone, there are no data security or other technological vulnerabilities with respect to its information technology systems or networks that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on Cornerstone.
(vi) Within the prior three- (3) year period preceding the date of this Agreement, Cornerstone and each of its Subsidiaries have (A) complied with all of their respective Privacy and Security Policies and contractual obligations, and all applicable Laws, in each case, regarding Personal Information, including with respect to the collection, use, storage, processing, transmission, transfer, disclosure and protection of Personal Information, and (B) used commercially reasonable measures consistent with reasonable practices in the industry to ensure the confidentiality, privacy and security of Personal Information, and to Cornerstone’s Knowledge, no Person has gained unauthorized access to or misused any Personal Information.
(u) Investment Securities. Section 5.03(u) of Cornerstone’s Disclosure Schedule contains a true, correct and complete list, as of December 31, 2024, of the investment securities of Cornerstone and its Subsidiaries, as well as any purchases or sales of investment securities by Cornerstone or its Subsidiaries between December 31, 2024 to and including the date of this Agreement reflecting with respect to all such securities, whenever purchased or sold, descriptions thereof, CUSIP numbers, designations as securities “available for sale” or securities “held to maturity” (as those terms are used in ASC 320), book values and coupon rates, and any gain or loss with respect to any investment securities sold during such time period after December 31, 2024. No investment securities of Cornerstone or its Subsidiaries are “held for trading.”
(v) Fiduciary Accounts. Neither Cornerstone nor any Cornerstone Subsidiary has offered or engaged in providing any individual or corporate trust services or administers any accounts for which Cornerstone or a Cornerstone Subsidiary acts as a fiduciary, including, but not limited to, any accounts in which it serves as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor. For the avoidance of doubt, Cornerstone Bank does not serve as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor with respect to its Traditional IRA and Roth IRA accounts.
(w) Books and Records. The books and records of Cornerstone and its Subsidiaries have been fully, properly and accurately maintained in material compliance with applicable legal and accounting requirements, and such books and records accurately reflect in all material respects all dealings and transactions in respect of the business, assets, liabilities and affairs of Cornerstone and its Subsidiaries.
(x) Insurance. Section 5.03(x) of Cornerstone’s Disclosure Schedule lists and summarizes all of the insurance policies, binders, or bonds currently maintained by Cornerstone and its Subsidiaries (“Insurance Policies”), which summary includes for each Insurance Policy, the name of the insurance carrier, annual premiums, and the amount of coverage per event and, in the aggregate, a named insured (including any additional insured that may be required), or otherwise the beneficiary of the coverage. Cornerstone and each of its Subsidiaries is insured with reputable insurers against such risks and in such amounts as are customary and prudent in accordance with industry practices. All the Insurance Policies are in full force and effect; neither Cornerstone nor any of its Subsidiaries is in default thereunder; no event has occurred which, with notice or lapse of time, or both, would constitute a default or permit termination, modification or acceleration under such policies; all premiums due and payable with respect to the Insurance Policies have been timely and fully paid; and all claims thereunder have been filed in due and timely fashion. Except as set forth in Section 5.03(x) of Cornerstone’s Disclosure Schedule, there is no claim for coverage by Cornerstone or any of its Subsidiaries pending under any Insurance Policies as to which coverage has been questioned, denied or disputed by the underwriters of such Insurance Policies or in respect of which such underwriters have reserved their rights. Neither Cornerstone nor any of its Subsidiaries have received written notice of any threatened termination of, material premium increase with respect to, or material alteration of coverage under, any Insurance Policies.
(y) Allowance for credit losses. Cornerstone Bank’s allowance for credit losses (“ACL”) is, and shall be as of the Closing Date, in compliance with Cornerstone Bank’s existing methodology for determining the adequacy of its allowance for credit losses as well as the standards established by applicable Governmental Entities and the Financial Accounting Standards Board and is and shall be adequate under all such standards.
(z) Transactions With Affiliates. Cornerstone has not engaged in any transactions with Affiliates within the meaning of Sections 23A and 23B of the Federal Reserve Act. All agreements between Cornerstone or any of its Subsidiaries and any of their respective Affiliates comply in all material respects, to the extent applicable, with Regulation W of the FRB.
(aa) Required Vote; Antitakeover Provisions.
(i) The Cornerstone Shareholder Approval is the only vote of shareholders of Cornerstone necessary by or under Law, the Cornerstone Articles, the Cornerstone Bylaws or otherwise to approve this Agreement and the Merger. The vote of Cornerstone as the sole shareholder of Cornerstone Bank is the only vote of shareholders of Cornerstone Bank necessary by or under Law, the Cornerstone Bank Articles, the Cornerstone Bank Bylaws or otherwise to approve the Bank Merger and the Bank Merger Agreement.
(ii) No “control share acquisition,” “business combination moratorium,” “fair price” or other form of antitakeover statute or regulation under the CGCL or any applicable provisions of the takeover laws of any other state (and any comparable provisions of the Cornerstone Articles and Cornerstone Bylaws), apply or will apply to this Agreement, the Bank Merger Agreement or the Transaction.
(bb) Transactions in Securities.
(i) Since December 31, 2020, all offers and sales of Cornerstone Common Stock by Cornerstone were at all relevant times exempt from, or complied with, the registration requirements of the Securities Act.
(ii) Neither Cornerstone, none of its Subsidiaries, nor, to Cornerstone’s Knowledge, (A) any director or executive officer of Cornerstone or any of its Subsidiaries, (B) any Person related to any such director or officer by blood, marriage or adoption and residing in the same household and (C) any Person who has been knowingly provided material nonpublic information by any one or more of these Persons, has purchased or sold, or caused to be purchased or sold, any shares of Cornerstone Common Stock or other securities issued by Cornerstone (1) during any period when Cornerstone was in possession of material nonpublic information, or (2) in violation of any applicable provision of federal or state securities laws, rules or regulations.
(iii) With respect to all contracts pursuant to which Cornerstone or any of its Subsidiaries has purchased securities subject to an agreement to resell, if any, Cornerstone or such Subsidiary has a valid, perfected first lien or security interest in the government securities or other collateral securing the repurchase agreement, and the value of such collateral is reasonably believed to equal or exceed the amount of debt secured thereby.
(cc) Disclosure. The representations and warranties contained in this Section 5.03, when considered as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Section 5.03 not misleading.
(dd) No Additional Representations. Except for the representations and warranties made by Cornerstone in this Section 5.03 and as Previously Disclosed, neither Cornerstone nor any other Person makes any express or implied representation or warranty with respect to Cornerstone, its Subsidiaries, or their respective businesses, operations, assets, liabilities, conditions (financial or otherwise) or prospects, and Cornerstone hereby expressly disclaims any such other representations and warranties.
5.04 Representations and Warranties of Plumas
. Except as (i) disclosed in Plumas’s Disclosure Schedule, if any, or (ii) disclosed in any report, schedule, form or other document filed with or furnished to the SEC (including the exhibits and other information incorporated therein) by Plumas since December 31, 2021 but prior to the date hereof, Plumas hereby represents and warrants to Cornerstone as follows:
(a) Organization, Standing and Authority. Plumas is duly organized, validly existing and in good standing under the Laws of the State of California and is duly registered as a bank holding company under the BHCA. Plumas is duly licensed or qualified to do business and is in good standing in each jurisdiction where its ownership or leasing of property or assets or the conduct of its business requires it to be so licensed or qualified, except where the failure to be so licensed or qualified would not have nor reasonably be expected to have a Material Adverse Effect on Plumas. Plumas has in effect all federal, state, local and foreign governmental authorizations necessary for it to own or lease its properties and assets and to carry on its business as it is now conducted.
(b) Plumas Capital Stock. As of the date hereof, the authorized capital stock of Plumas consists solely of 22,500,000 shares of Plumas Common Stock, of which 5,903,368 shares were issued and outstanding as of the close of business on January 27, 2025 and 10,000,000 shares of preferred stock, nor par value, of which no shares were issued and outstanding as of the date immediately preceding the date of this Agreement. The outstanding shares of Plumas Common Stock have been duly authorized and validly issued and are fully paid and non-assessable, and none of the shares of Plumas Common Stock have been issued in violation of the preemptive rights of any Person. As of the date hereof, there are no Rights authorized, issued or outstanding with respect to the capital stock of Plumas, except for shares of Plumas Common Stock issuable pursuant to the Plumas Benefit Plans and by virtue of this Agreement.
(c) Issuance of Shares. The shares of Plumas Common Stock to be issued in exchange for shares of Cornerstone Common Stock in the Merger, when issued in accordance with the terms of this Agreement, will be duly authorized, validly issued, fully paid and nonassessable and the issuance thereof is not subject to any preemptive right.
(d) Subsidiaries.
(i) Plumas Bank is duly organized, validly existing and in good standing under the laws of the State of California and is duly qualified to do business and is in good standing in the jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified. Plumas Bank is duly licensed by the DFPI and its deposit accounts are insured by the FDIC in the manner and to the maximum extent provided by applicable law.
(ii) (A) Plumas owns, directly or indirectly, all the issued and outstanding equity securities of Plumas Bank, (B) no equity securities of Plumas Bank are or may become required to be issued (other than to Plumas) by reason of any Right or otherwise, (C) there are no contracts, commitments, understandings or arrangements by which Plumas Bank is or may be bound to sell or otherwise transfer any of its equity securities (other than to Plumas or any of its wholly-owned Subsidiaries) and (D) there are no contracts, commitments, understandings, or arrangements relating to Plumas’s right to vote or to dispose of such securities.
(e) Corporate Power. Plumas and each of its Subsidiaries have all requisite power and authority (corporate and other) to carry on their respective businesses as they are now being conducted and to own all their respective properties and assets. Plumas has all requisite corporate power and authority has taken all corporate action necessary in order to execute, deliver and perform each of its obligations under this Agreement and to consummate the Merger, the Bank Merger and the transactions contemplated hereby.
(f) Corporate Authority. As of the date hereof, the Plumas Board has, by resolutions duly adopted at a meeting duly called and held, (i) determined that this Agreement, the Merger and the other transactions contemplated hereby are fair to and in the best interests of Plumas and its shareholders and (ii) approved this Agreement, the Merger and the other transactions contemplated hereby. Plumas has duly authorized, executed and delivered this Agreement, and this Agreement (assuming due authorization, execution and delivery by Cornerstone) is a valid and legally binding obligation of Plumas, enforceable against it in accordance with its terms, subject to the Bankruptcy and Equity Exception. The Bank Merger Agreement has been adopted and approved by the Plumas Bank Board and by Plumas, as Plumas Bank’s sole shareholder.
(g) Regulatory Approvals; No Defaults.
(i) No consents or approvals of, or waivers by, or notices to, or filings or registrations with, any Governmental Entity or with any third party are required to be made or obtained by Plumas or any of its Subsidiaries in connection with the execution, delivery or performance by Plumas of this Agreement and by Plumas Bank of the Bank Merger Agreement or to consummate the Transaction, except for (A) filings of applications or notices with, and approvals or waivers by, the FRB and the DFPI, as required, (B) filings with the SEC and state securities authorities, as applicable, in connection with the issuance of Plumas Common Stock in the Merger, (C) approval of the listing of such Plumas Common Stock on Nasdaq, and (D) the filing of (1) the Agreement of Merger with the Secretary of State of the State of California pursuant to the CGCL, and (2) the Bank Merger Agreement with the Secretary of State of the State of California and the DFPI pursuant to the CGCL and the CFC. As of the date hereof, Plumas is not aware of any reason why the approvals set forth above and referred to in Section 7.01(b) will not be received in a timely manner and without the imposition of a Burdensome Condition.
(ii) Subject to receipt, or the making, of the consents, approvals, waivers and filings referred to in the preceding paragraph and expiration of the related waiting periods, the execution, delivery and performance of this Agreement by Plumas and the Bank Merger Agreement by Plumas Bank and the consummation of the Transaction do not and will not (A) constitute a material breach or material violation of, or a material default under, or give rise to any Lien, any acceleration of remedies or any right of termination under, any Law or agreement, indenture or instrument of Plumas or of any of its Subsidiaries or to which Plumas or any of its Subsidiaries or any of their respective assets or properties is subject or bound, (B) constitute a breach or violation of, or a default under, the Plumas Articles, the Plumas Bylaws or the articles of incorporation, bylaws or similar governing documents of any of Plumas’s Subsidiaries or (C) require any consent or approval under any such Law, agreement, indenture or instrument.
(h) Financial Reports and SEC Reports; Material Adverse Effect.
(i) Plumas’s Annual Report on Form 10-K for the year ended December 31, 2023 and all other reports, registration statements, definitive proxy statements or information statements filed or to be filed by it subsequent to December 31, 2023 under the Securities Act, or under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act in the form filed or to be filed (collectively, the “Plumas SEC Reports”) with the SEC, as of the date filed or to be filed, (A) complied or will comply in all material respects as to form with the applicable requirements under the Securities Act or the Exchange Act, as the case may be and (B) did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that information as of a later date shall be deemed to modify information as of an earlier date; and each of the consolidated statements of financial condition contained in or incorporated by reference into any such Plumas SEC Reports (including the related notes and schedules thereto) fairly presents, or will fairly present, the consolidated financial position of Plumas and its Subsidiaries as of its date, and each of the consolidated statements of operations and shareholders’ equity and other comprehensive income (loss) and cash flows or equivalent statements in such Plumas SEC Reports (including any related notes and schedules thereto) fairly presents, or will fairly present, the consolidated results of operations, changes in shareholders’ equity and other comprehensive income (loss) and cash flows, as the case may be, of Plumas and its Subsidiaries for the periods to which they relate, in each case in accordance with GAAP consistently applied during the periods involved, except in each case as may be noted therein.
(ii) Since December 31, 2023, no event has occurred or circumstance arisen that, individually or taken together with all other facts, circumstances and events (described in any paragraph of this Section 5.04 or otherwise), is reasonably likely to have a Material Adverse Effect with respect to Plumas.
(i) Legal Proceedings. No litigation, arbitration, claim or other proceeding before any court or governmental agency is pending against Plumas or its Subsidiaries and, to Plumas’s Knowledge, no such litigation, arbitration, claim or other proceeding has been threatened and there are no facts which could reasonably give rise to such litigation, arbitration, claim or other proceeding in any such case that, individually or in the aggregate, has or could be reasonably expected to have a Material Adverse Effect with respect to Plumas. Neither Plumas nor any of its Subsidiaries nor any of their respective properties is a party to or subject to any order, judgment, decree or regulatory restrictions that, individually or in the aggregate, has or could reasonably be expected to have a Material Adverse Effect with respect to Plumas.
(j) No Brokers. No action has been taken by Plumas or its Subsidiaries that would give rise to any valid claim against any Party (or any of their Subsidiaries) for a brokerage commission, finder’s fee or other like payment with respect to the Transaction, other than fees payable by Plumas to Raymond James & Associates, Inc.
(k) Regulatory Matters.
(i) Since December 31, 2021, Plumas and its Subsidiaries have duly filed with the appropriate regulatory authorities in substantially correct form the monthly, quarterly and annual reports required to be filed under applicable Laws, and such reports were in all material respects complete and accurate and in compliance in all material respects with the requirements of applicable Laws, and Plumas has previously delivered or made available to Cornerstone accurate and complete copies of all such reports. In connection with the most recent examination of Plumas and its Subsidiaries by the appropriate regulatory authorities, neither Plumas nor any of its Subsidiaries was required to correct or change any action, procedure or proceeding which Plumas believes in good faith has not been now corrected or changed, other than corrections or changes which, if not made, either individually or in the aggregate, would not have a Material Adverse Effect on Plumas.
(ii) Neither Plumas nor any of its Subsidiaries nor any of their respective properties is, directly or indirectly, a party to or subject to any order, decree, agreement, memorandum of understanding or similar arrangement with, or a commitment letter or similar submission to, or extraordinary supervisory letter from, nor has Plumas or any of its Subsidiaries adopted any policies, procedures or board resolutions at the request or suggestion of, any Governmental Entity. Plumas and its Subsidiaries have paid all assessments made or imposed by any Governmental Entity.
(iii) Neither Plumas nor any of its Subsidiaries has been advised by, nor does Plumas have any Knowledge of facts which could give rise to an advisory notice by, any Governmental Entity that such Governmental Entity is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such order, decree, directive, agreement, memorandum of understanding, board resolution, commitment letter, supervisory letter or similar submission or any request for the adoption of any policy, procedure or board resolution.
(iv) No Governmental Entity has initiated since December 31, 2021 or has pending any proceeding, enforcement action or, to the Knowledge of Plumas, investigation or inquiry into the business, operations, policies, practices or disclosures of Plumas or any of its Subsidiaries (other than normal examinations conducted by a Governmental Entity in the ordinary course of the business of Plumas and its Subsidiaries), or, to the Knowledge of Plumas, threatened any of the foregoing, and (B) there is no material unresolved violation, criticism, comment or exception by any Governmental Entity with respect to any report or statement relating to any examinations or inspections of Plumas or any of its Subsidiaries. material criticism from regulators with respect to discriminatory lending practices.
(v) The most recent regulatory rating given to Plumas Bank as to its compliance with the Community Reinvestment Act is “satisfactory” or better. To the Knowledge of Plumas, since the last regulatory examination of Plumas Bank with respect to Community Reinvestment Act compliance, Plumas Bank has not received any complaints as to the Community Reinvestment Act nor does Plumas have Knowledge of any conditions or circumstances that would result in Plumas Bank receiving a Community Reinvestment Act rating of less than “satisfactory.”
(vi) As of the dated hereof, Plumas is eligible for and complies with all capital requirements under the FRB’s Small Bank Holding Company and Savings and Loan Holding Company Policy Statement (Appendix C to 12 CFR Part 225). Plumas is “well-capitalized” (as that term is defined at 12 CFR §225.2(r)). Plumas Bank is “well-capitalized” as (as that term is defined at 12 CFR § 208.43 or the relevant regulation of its primary federal bank regulator).
(l) Compliance With Laws.
(i) Each of Plumas and its Subsidiaries is and at all times since December 31, 2021 has been in material compliance with all Laws applicable thereto or to the employees conducting such businesses, including, without limitation, the BHCA, Section 23A and 23B of the Federal Reserve Act and FRB regulations pursuant thereto, the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act, the Bank Secrecy Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the USA PATRIOT Act, the Electronic Fund Transfer Act and Regulation E of the FRB, all other applicable fair lending Laws and other Laws relating to discriminatory business practices and Environmental Laws and all posted and internal policies of Plumas and its Subsidiaries related to customer data, privacy and security except for violations that are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Plumas.
(ii) Plumas and its Subsidiaries have all permits, licenses, franchises, authorizations, orders and approvals of, and has made all filings, applications and registrations with, all Governmental Entities (and has paid all fees and assessments due and payable in connection therewith) that are required in order to permit them to own or lease their properties and to conduct their businesses as presently conducted; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect and, to Plumas’s Knowledge, no suspension or cancellation of any of them is threatened, except in each case those the absence of which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect.
(iii) No investigation or review by any Governmental Entity with respect to Plumas or any of its Subsidiaries is pending or, to the Knowledge of Plumas, threatened, nor has Plumas or any Subsidiary of Plumas received any written notification or communication from any Governmental Entity (A) asserting that Plumas or any such Subsidiary is not in compliance with any of the Laws which such Governmental Entity enforces or (B) threatening to revoke any license, franchise, permit or governmental authorization (nor, to Plumas’s Knowledge, do any grounds for any of the foregoing exist).
(m) Tax Matters. Neither Plumas nor any of its Subsidiaries has taken any action or failed to take any action, or is aware of any fact or circumstance, in each case, that could reasonably be expected to prevent the Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code.
(n) Disclosure. The representations and warranties contained in this Section 5.04, when considered as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Section 5.04 not misleading.
(o) No Additional Representations. Except for the representations and warranties made by Plumas in this Section 5.04 and as Previously Disclosed, neither Plumas nor any other Person makes any express or implied representation or warranty with respect to Plumas, its Subsidiaries, or their respective businesses, operations, assets, liabilities, conditions (financial or otherwise) or prospects, and Plumas hereby expressly disclaims any such other representations or warranties.
ARTICLE VI
COVENANTS
6.01 Reasonable Best Efforts. Subject to the terms and conditions of this Agreement, each of Cornerstone and Plumas agrees to use its commercially reasonable best efforts in good faith, and to cause their respective Subsidiaries to use their commercially reasonable best efforts in good faith, to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or desirable, or advisable under applicable Laws, so as to permit consummation of the Transaction as promptly as practicable and otherwise to enable consummation of the Transaction, including the satisfaction of the conditions set forth in Article VII hereof, and shall cooperate fully with the other Party to that end.
6.02 Cornerstone Shareholder Approval.
(a) Cornerstone agrees to take, in accordance with applicable Law and the Cornerstone Articles and the Cornerstone Bylaws, all action necessary to convene as soon as reasonably practicable after the Registration Statement becomes effective, a special meeting of its shareholders (including any adjournment or postponement, the “Cornerstone Meeting”) to consider and to obtain the Cornerstone Shareholder Approval as well as a proposal to grant authority to adjourn the Cornerstone Meeting if there are not enough votes to obtain the Cornerstone Shareholder Approval. Except with the prior written consent of Plumas, no other matters shall be submitted for the approval of Cornerstone shareholders at the Cornerstone Meeting. The Cornerstone Board shall at all times prior to and during the Cornerstone Meeting recommend such approval and shall take all reasonable best efforts to solicit such approval and shall not (x) withdraw, modify or qualify in any manner adverse to Plumas such recommendation or (y) take any other action or make any other public statement in connection with the Cornerstone Meeting inconsistent with such recommendation (collectively, a “Change in Recommendation”), except as and to the extent permitted by Section 6.02(b). Notwithstanding any Change in Recommendation, unless this Agreement is terminated by Cornerstone pursuant to Section 8.01(h), this Agreement shall be submitted to the shareholders of Cornerstone at the Cornerstone Meeting for the purpose of considering and obtaining the Cornerstone Shareholder Approval. In addition to the foregoing, unless this Agreement is terminated by Cornerstone pursuant to Section 8.01(h), Cornerstone shall not submit to the vote of its shareholders any Acquisition Proposal other than the Merger. Cornerstone shall not, without the prior written consent of Plumas, adjourn or postpone the Cornerstone Meeting; provided that Cornerstone may, without the prior written consent of Plumas, adjourn or postpone the Cornerstone Meeting (A) if, as of the time for which the Cornerstone Meeting is originally scheduled (as set forth in the Prospectus/Proxy Statement), there are insufficient shares of Cornerstone Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the Cornerstone Meeting, (B) after consultation with Plumas, if the failure to adjourn or postpone the Cornerstone Meeting would reasonably be expected to be a violation of applicable Law for the distribution of any required supplement or amendment to the Prospectus/Proxy Statement, or (C) after consultation with Plumas, for a single period not to exceed ten (10) Business Days, to solicit additional proxies if necessary to obtain the Cornerstone Shareholder Approval. Plumas may require Cornerstone to adjourn, delay or postpone the Cornerstone Meeting once for a period not to exceed thirty (30) calendar days (but prior to the date that is four (4) Business Days prior to the End Date) to solicit additional proxies necessary to obtain the Cornerstone Shareholder Approval. Once Cornerstone has established a record date for the Cornerstone Meeting, Cornerstone shall not change such record date or establish a different record date for the Cornerstone Meeting without the prior written consent of Plumas, unless required to do so by applicable Law or the Cornerstone Articles or the Cornerstone Bylaws or in connection with a postponement or adjournment of the Cornerstone Meeting permitted by this Section 6.02.
(b) Notwithstanding the foregoing, Cornerstone and the Cornerstone Board shall be permitted to effect a Change in Recommendation if and only to the extent that:
(i) Cornerstone shall have complied in all material respects with Section 6.07;
(ii) the Cornerstone Board, after consulting with its outside counsel and financial advisor, shall have determined in good faith that failure to do so would result in a breach of its fiduciary duties under applicable Law; and
(iii) if the Cornerstone Board intends to effect a Change in Recommendation following receipt of an Acquisition Proposal, (A) the Cornerstone Board shall have concluded in good faith, after giving effect to all of the adjustments which may be offered by Plumas pursuant to clause (C) below, that such Acquisition Proposal constitutes a Superior Proposal, (B) Cornerstone shall notify Plumas, at least five (5) Business Days in advance, of its intention to effect a Change in Recommendation in response to such Superior Proposal and furnish to Plumas all the material terms and conditions of such proposal (including the identity of the party making such Acquisition Proposal), and (C) prior to effecting such a Change in Recommendation, Cornerstone shall, and shall cause its financial and legal advisors to, during the period following Cornerstone’s delivery of the notice referred to in clause (B) above, negotiate with Plumas in good faith for a period of up to five (5) Business Days (to the extent Plumas desires to negotiate) to make such adjustments in the terms and conditions of this Agreement so that such Acquisition Proposal ceases to constitute a Superior Proposal.
Any amendment or modification to the financial or other material terms of the Acquisition Proposal giving rise to Cornerstone’s notice of a Superior Proposal shall constitute a new Acquisition Proposal giving rise to a new obligation to provide notice and a new five (5) Business Day response period for Plumas, consequently extending the periods referenced in Sections 6.02(b)(iii) above.
6.03 Registration Statement.
(a) Plumas shall prepare and file a registration statement on Form S-4 or other applicable form (the “Registration Statement”) with the SEC in connection with the issuance of the shares of Plumas Common Stock to Cornerstone shareholders as the Stock Consideration in the Merger (including the proxy statement for the Cornerstone Meeting and the prospectus of Plumas constituting a part thereof (the “Proxy Statement/Prospectus”) and all related documents). Cornerstone shall prepare and furnish such information, financial statements and disclosures relating to it, its Subsidiaries and their respective directors, officers and shareholders as may be reasonably required in connection with the above referenced documents based on its knowledge of and access to the information required for said documents, and Cornerstone, and its legal, financial and accounting advisors, shall have the right to review in advance and comment on such Registration Statement prior to its filing and on any amendments or supplements thereto and any written communications with the SEC in connection therewith. Cornerstone agrees to cooperate with Plumas and Plumas’s counsel and accountants in requesting and obtaining appropriate opinions, consents and letters from its financial advisor, legal counsel and independent auditor in connection with the Registration Statement and the Proxy Statement/Prospectus. Plumas shall use its commercially reasonable efforts to file, or cause to be filed, the Registration Statement with the SEC within forty-five (45) days of the date of this Agreement or as promptly as reasonably practicable thereafter. Each of Cornerstone and Plumas agrees to use its commercially reasonable efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as reasonably practicable after the filing thereof. Plumas also agrees to use its commercially reasonable efforts to obtain all necessary state securities law or “Blue Sky” permits and approvals required to carry out the transactions contemplated by this Agreement. After the Registration Statement is declared effective under the Securities Act, Cornerstone shall promptly mail at its own expense the Proxy Statement/Prospectus to its shareholders.
(b) Each of Cornerstone and Plumas agrees that none of the information supplied or to be supplied by it for inclusion or incorporation by reference in (i) the Registration Statement shall, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and (ii) the Proxy Statement/Prospectus and any amendment or supplement thereto shall, at the date(s) of mailing to Cornerstone’s shareholders and at the time of the Cornerstone Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. Each of Cornerstone and Plumas further agrees that if it shall become aware prior to the date of effectiveness of the Registration Statement of any information furnished by such party that would cause any of the statements in the Registration Statement or the Proxy Statement/Prospectus to be false or misleading with respect to any material fact, or to omit to state any material fact necessary to make the statements therein not false or misleading, to promptly inform the other parties thereof and to take the necessary steps to correct the Registration Statement or the Proxy Statement/Prospectus.
(c) Plumas agrees to advise Cornerstone promptly in writing after Plumas receives notice thereof, of the time when the Registration Statement has become effective or any supplement or amendment has been filed, of the issuance of any stop order or the suspension of the qualification of Plumas Common Stock for offering or sale in any jurisdiction, of the initiation or, to the extent Plumas is aware thereof, threat of any proceeding for any such purpose, or of any request by the SEC for the amendment or supplement of the Registration Statement or for additional information.
6.04 Regulatory Filings.
(a) Each of Plumas and Cornerstone shall, and shall cause their respective Subsidiaries to, cooperate and use their respective commercially reasonable efforts to prepare all documentation, to effect all filings and to obtain all permits, consents, approvals and authorizations of all Governmental Entities necessary to consummate the Transaction; and Plumas shall use its commercially reasonable efforts to make any initial application filings with Governmental Entities within thirty (30) days of the date of this Agreement or as promptly as reasonably practicable thereafter. Each of Plumas and Cornerstone shall have the right to review in advance, and to the extent practicable, each shall consult with the other, in each case subject to applicable Laws relating to the exchange of information, with respect to all written information submitted to any Governmental Entity in connection with the Transaction. In exercising the foregoing right, each Party agrees to act reasonably and as promptly as practicable. Each Party hereto agrees that it shall consult with the other Party hereto with respect to the obtaining of all permits, consents, approvals, waivers and authorizations of all Governmental Entities necessary or advisable to consummate the Transaction, and each Party shall keep the other Party apprised of the status of material matters relating to completion of the Transaction. Each Party hereto further agrees to provide the other Party with a copy of all correspondence to or from any Governmental Entity in connection with the Transaction, provided that Plumas shall not be required to provide Cornerstone with confidential portions of any filing with a Governmental Entity if such provision would violate applicable Laws relating to the exchange of information.
(b) Each Party agrees, upon request, to furnish the other Party with all information concerning itself, its Subsidiaries, directors, officers and shareholders and such other matters as may be reasonably necessary or advisable in connection with any filing, notice or application made by or on behalf of such other Party or any of their Subsidiaries to any Governmental Entity.
6.05 Press Releases. Cornerstone and Plumas shall consult with each other before issuing any press release or public statement with respect to the Transaction or this Agreement and shall not issue any such press release or make any such public statements without the prior consent of the other Party, which shall not be unreasonably withheld, delayed or conditioned; provided, however, that Plumas or Cornerstone may, without the prior consent of the other Party (but after such consultation, to the extent practicable under the circumstances), issue such press release or make such public statements as may, upon the advice of outside counsel, be required by law or the rules or regulations of the SEC or Nasdaq. Cornerstone and Plumas shall cooperate to develop all public announcement materials and make appropriate management available at presentations related to the Transaction as reasonably requested by the other Party.
6.06 Access; Information.
(a) Cornerstone agrees that upon reasonable notice and subject to applicable Laws relating to the exchange of information, it shall afford Plumas and Plumas’s officers, employees, counsel, accountants and other authorized representatives such access during normal business hours throughout the period prior to the Effective Time to the books, records (including, without limitation, minutes and records of the Cornerstone Board, the Cornerstone Bank Board and their respective committees, Tax Returns and work papers of independent auditors), systems, properties, personnel and advisors of Cornerstone and its Subsidiaries and to such other information relating to Cornerstone and its Subsidiaries as Plumas may reasonably request, provided that Plumas shall coordinate any and all meetings with Cornerstone personnel with one or more designated representatives of Cornerstone, and, during such period, Cornerstone shall furnish promptly to Plumas (i) a copy of each report, schedule, registration statement and other document filed or received during such period pursuant to the requirements of federal or state banking, lending, securities, consumer finance or privacy laws and (ii) all other information concerning the business, properties and personnel of Cornerstone and its Subsidiaries as Plumas may reasonably request
(b) Notwithstanding anything in this Section 6.06 to the contrary, neither Plumas nor Cornerstone shall be required to provide access to or disclose information (i) included in any communications, memoranda or work product prepared by advisors to Cornerstone, or confidential reports, documents or minutes of meetings of the Cornerstone Board, its committees or its management personnel, or similar materials to the extent directly or indirectly substantially related to or prepared in connection with the Transaction and the rights and obligations of Cornerstone under this Agreement, (ii) where such access or disclosure would jeopardize the attorney-client privilege of Cornerstone or any other Person in possession or control of such information (after giving due consideration to the existence of any common interest, joint defense or similar agreement between the Parties) or (iii) where such access or disclosure would contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or agreement entered into prior to the date of this Agreement, provided that in any such event, the Parties will cooperate in good faith to make reasonably appropriate substitute disclosure arrangements.
(c) During the period from the date of this Agreement to the Effective Time, Cornerstone shall, upon the request of Plumas, cause one or more of its designated representatives to confer on a monthly or more frequent basis with representatives of Plumas regarding its consolidated financial condition, operations and business and matters relating to the completion of the Transaction. Subject to applicable law, as soon as reasonably available, but in no event more than fifteen (15) days after the end of each calendar quarter ending after the date of this Agreement, Cornerstone will deliver to Plumas its consolidated balance sheet and consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows, without related notes, for such quarter prepared in accordance with GAAP, and, as soon as reasonably available, but in no event more than thirty (30) days after the end of each fiscal year, Cornerstone will deliver to Plumas its consolidated balance sheet and consolidated statements of income, changes in shareholders’ equity and comprehensive income and cash flows for such year prepared in accordance with GAAP. Subject to applicable Law, within fifteen (15) days after the end of each month, Cornerstone will deliver to Plumas a consolidated balance sheet and consolidated statements of income, without related notes, for such month prepared in accordance with GAAP.
(d) Cornerstone will deliver to Plumas a complete and accurate list as of the end of each calendar month following the date of this Agreement, within fifteen (15) days after the end of each such calendar month, of (a) all periodic internal credit quality reports of Cornerstone and its Subsidiaries prepared during such calendar month (which reports will be prepared in a manner consistent with past practices), (b) all Loans classified as non-accrual, as restructured, as ninety (90) days past due, as still accruing and doubtful of collection or any comparable classification, (c) all OREO, including in-substance foreclosures and real estate in judgment, (d) all new Loans, (e) any current repurchase obligations of Cornerstone or its Subsidiaries with respect to any Loans, Loan participations or state or municipal obligations or revenue bonds, and (f) any standby letters of credit issued by Cornerstone or its Subsidiaries. With respect to any Loans to one borrower that aggregate, with other Loans to the same borrower, more than $500,000, Cornerstone shall deliver to Plumas, or make accessible to Plumas through remote communication, on or before delivery of such monthly credit reports, or as soon as practicable thereafter, copies of the documentation, or a summary of the documentation, that served as the basis for the decision to make such Loan.
(e) From time to time prior to the Effective Time, Cornerstone will promptly supplement or amend the Disclosure Schedule delivered in connection herewith with respect to any material matter hereafter arising which, if existing, occurring or known on the date of this Agreement, would have been required to be set forth or described in such Disclosure Schedule or which is necessary to correct any information in such Disclosure Schedule which has been rendered inaccurate thereby. No supplement or amendment to such Disclosure Schedule shall have any effect for the purpose of determining satisfaction of the conditions set forth in Article VII; provided, however, that the contents of any supplement or amendment shall not otherwise be deemed a breach of a representation or warranty, including for purposes of Section 8.01(b), unless such supplement or amendment contains a fact, circumstance or event that individually, or taken together with all other facts, circumstances and events has resulted in or has had, or is reasonably expected to have or result in a Material Adverse Effect on Cornerstone.
(f) All information furnished by Cornerstone or Plumas to the other pursuant to this Section 6.06 shall be subject to the provisions of the Non-Disclosure Agreement, dated as of September 23, 2024 by and between Plumas and Cornerstone (the “Confidentiality Agreement”).
(g) No investigation by either of the Parties or their respective representatives shall affect the representations, warranties, covenants or agreements of the other Party set forth herein.
6.07 No Solicitation; Acquisition Proposals.
(a) Cornerstone agrees that it shall, and shall direct and use its reasonable best efforts to cause its affiliates, directors, officers, employees, agents and representatives (including, without limitation, any investment banker, financial advisor, attorney, accountant or other representative retained by it) (all of the foregoing, collectively, “Representatives”) to, immediately cease any discussions or negotiations with any other parties that may be ongoing with respect to the possibility or consideration of any Acquisition Proposal, and will use its reasonable best efforts to enforce any confidentiality or similar agreement relating to any Acquisition Proposal, including by requesting the other party to promptly return or destroy any confidential information previously furnished by or on behalf of Cornerstone or any of its Subsidiaries thereunder and by specifically enforcing the terms thereof in a court of competent jurisdiction. From the date of this Agreement through the Effective Time, neither Cornerstone nor any of its Subsidiaries shall, and shall cause their respective directors, officers or employees or any Representative retained by them not to, directly or indirectly through another Person, (i) solicit, initiate or encourage (including by way of furnishing information or assistance), or take any other action designed to facilitate or that is likely to result in, any inquiries or the making of any proposal or offer that constitutes, or is reasonably likely to lead to, any Acquisition Proposal, (ii) provide any confidential information or data to any Person relating to any Acquisition Proposal, (iii) participate in any discussions or negotiations regarding any Acquisition Proposal, (iv) waive, terminate, modify or fail to enforce any provision of any contractual “standstill” or similar obligations of any Person other than Plumas or its Affiliates, (v) approve or recommend, propose to approve or recommend, or execute or enter into, any letter of intent, agreement in principle, merger agreement, asset purchase agreement or share exchange agreement, option agreement or other similar agreement related to any Acquisition Proposal or propose to do any of the foregoing, or (vi) make or authorize any statement, recommendation or solicitation in support of any Acquisition Proposal; provided, however, that prior to the date of the Cornerstone Meeting, if the Cornerstone Board determines in good faith, after consulting with its outside legal and financial advisors, that the failure to do so would breach the Cornerstone Board’s fiduciary duties under applicable Law, Cornerstone may, in response to a bona fide, written Acquisition Proposal not solicited in violation of this Section 6.07(a) that the Cornerstone Board determines in good faith constitutes a Superior Proposal, subject to providing two (2) Business Days prior written notice of its decision to take such action to Plumas and identifying the Person making the proposal and all the material terms and conditions of such proposal and compliance with Section 6.07(b), (1) furnish information with respect to itself to any Person making such a Superior Proposal pursuant to a customary confidentiality agreement (as determined by Cornerstone after consultation with its outside counsel) on terms no more favorable to such Person than the terms contained in the Confidentiality Agreement are to Plumas, and (2) participate in discussions or negotiations regarding such a Superior Proposal.
(b) In addition to the obligations of Cornerstone set forth in Section 6.07(a), Cornerstone shall promptly (within 24 hours) advise Plumas orally and in writing of its receipt of any Acquisition Proposal and keep Plumas reasonably informed, on a current basis, of the continuing status thereof, including the material terms and conditions thereof and any material changes thereto, and shall contemporaneously provide to Plumas all materials provided to or made available to any third party pursuant to this Section 6.07 which were not previously provided to Plumas.
(c) Cornerstone agrees that any violation of the restrictions set forth in this Section 6.07 by any Representative of Cornerstone or its Subsidiaries shall be deemed a breach of this Section 6.07 by Cornerstone.
(d) The Parties agree that irreparable damage would occur in the event any of the restrictions set forth in Section 6.07(a) were violated by Cornerstone, its Subsidiaries or any Representative of Cornerstone or its Subsidiaries. It is accordingly agreed that Plumas shall be entitled to an injunction or injunctions to prevent breaches of Section 6.07 and to enforce specifically the terms and provisions thereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which Plumas is entitled at law or in equity. In the event attorneys’ fees or other costs are incurred to secure performance of any of the obligations herein provided for, or to establish damages for the breach thereof, or to obtain any other appropriate relief, whether by way of prosecution or defense, Plumas shall be entitled to recover reasonable attorneys’ fees and costs incurred therein.
6.08 Certain Policies. Prior to the Closing Date, upon the request of Plumas, Cornerstone shall, and shall cause its Subsidiaries to, consistent with GAAP and applicable banking laws and regulations, use their commercially reasonable efforts to modify or change their Loan, OREO, accrual, reserve, Tax, litigation and real estate valuation policies and practices (including loan classifications and levels of reserves) so as to be applied on a basis that is consistent with that of Plumas; provided, however, that no such modifications or changes need be made prior to the satisfaction of the conditions set forth in Section 7.01(b); and further provided that in any event, no such modification or change made by Cornerstone or any of its Subsidiaries pursuant to this Section 6.08 shall constitute or be deemed to be a breach, violation of or failure to satisfy any representation, warranty, covenant, agreement, condition or other provision of this Agreement or otherwise be considered in determining whether any such breach, violation or failure to satisfy shall have occurred. The recording of any such adjustments shall not be deemed to imply any misstatement of previously furnished financial statements or information and shall not be construed as concurrence of Cornerstone or its management with any such adjustments.
6.09 Nasdaq Listing. Plumas shall, as promptly as practicable, file all documents, take all actions reasonably necessary and otherwise use its commercially reasonable efforts to list, prior to the Closing Date, on Nasdaq the shares of Plumas Common Stock to be issued to the Cornerstone shareholders as the Stock Consideration.
6.10 Indemnification.
(a) From and after the Effective Time through the sixth (6th) anniversary of the Effective Time, Plumas and the Surviving Corporation (each an “Indemnifying Party”) shall indemnify and hold harmless each present and former director, officer and employee of Cornerstone or Cornerstone Bank, as applicable, determined as of the Effective Time (the “Indemnified Parties”) against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, arising in whole or in part out of or pertaining to the fact that he or she was a director, officer, employee, fiduciary or agent of Cornerstone or any Cornerstone Subsidiary or is or was serving at the request of Cornerstone or any Cornerstone Subsidiary as a director, officer, employee, fiduciary or agent of another corporation, partnership, joint venture, trust or other enterprise, including, without limitation, matters related to the negotiation, execution and performance of this Agreement or consummation of the Transaction, to the fullest extent which such Indemnified Parties would be entitled under the Cornerstone Articles and the Cornerstone Bylaws or, as applicable, Cornerstone Bank’s Articles of Incorporation and Cornerstone Bank’s Bylaws or any agreement, arrangement or understanding which has been set forth in Section 6.10 of Cornerstone’s Disclosure Schedule, in each case as in effect on the date hereof. Plumas shall also cause the Surviving Corporation to advance expenses as incurred by such Indemnified Parties to the same extent as such persons are entitled to advancement of expenses as of the date of this Agreement by Cornerstone pursuant to the Cornerstone Articles and the Cornerstone Bylaws or, as applicable, the Cornerstone Bank Articles or the Cornerstone Bank Bylaws or any agreement, arrangement or understanding which has been set forth in Section 6.10 of Cornerstone’s Disclosure Schedule, in each case as in effect on the date hereof.
(b) Any Indemnified Party wishing to claim indemnification under this Section 6.10, upon learning of any such claim, action, suit, proceeding or investigation, shall promptly notify the Indemnifying Party, but the failure to so notify shall not relieve the Indemnifying Party of any liability it may have to such Indemnified Party if such failure does not actually prejudice the Indemnifying Party. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), (i) the Indemnifying Party shall have the right to assume the defense thereof and the Indemnifying Party shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that if the Indemnifying Party elects not to assume such defense or counsel for the Indemnified Parties advises that there are issues which raise conflicts of interest between the Indemnifying Party and the Indemnified Parties that make joint representation inappropriate, the Indemnified Parties may retain counsel which is reasonably satisfactory to the Indemnifying Party, and the Indemnifying Party shall pay, promptly as statements therefor are received, the reasonable fees and expenses of such counsel for the Indemnified Parties (which may not exceed one firm in any jurisdiction unless the Indemnified Parties have conflicts of interest), (ii) the Indemnified Parties will cooperate in the defense of any such matter, (iii) the Indemnifying Party shall not be liable for any settlement effected without its prior written consent, which shall not be unreasonably withheld, delayed or conditioned and (iv) the Indemnifying Party shall have no obligation hereunder in the event that a federal or state banking agency or a court of competent jurisdiction shall determine by final, non-appealable written order that indemnification of an Indemnified Party in the manner contemplated hereby is prohibited by applicable laws and regulations.
(c) Plumas (and the Surviving Corporation) shall maintain Cornerstone’s existing directors’ and officers’ liability insurance policy (or provide a policy providing comparable coverage and amounts on terms no less favorable to the persons currently covered by Cornerstone’s existing policy, including Plumas’s existing policy if it meets the foregoing standard) covering persons who are currently covered by such insurance for a period of six (6) years after the Effective Time; provided, however, that in no event shall Plumas be obligated to expend, in order to maintain or provide insurance coverage pursuant to this Section 6.10(c), an amount in excess of two hundred percent (200%) of the annual premiums paid by Cornerstone as of the date hereof for such insurance (“Maximum Insurance Amount”); provided further, that if the amount of the annual premiums necessary to maintain or procure such insurance coverage exceeds the Maximum Insurance Amount, Plumas shall obtain the most advantageous coverage obtainable for an annual premium equal to the Maximum Insurance Amount.
(d) If Plumas or any of its successors or assigns shall consolidate with or merge into any other entity and shall not be the continuing or surviving entity of such consolidation or merger or shall transfer all or substantially all of its assets to any other entity, then and in each case, proper provision shall be made so that the successors and assigns of Plumas shall assume the obligations set forth in this Section 6.10.
6.11 Benefit Plans.
(a) As soon as administratively practicable after the Effective Time, Plumas shall take all reasonable action so that Employees that are employed by Cornerstone and its Subsidiaries as of the Effective Time and will continue employment with Plumas or any of its Subsidiaries following the Effective Time (the “Continuing Employees”) shall be eligible to participate in each Plumas Benefit Plan of general applicability to the same extent as similarly-situated employees of Plumas and its Subsidiaries (it being understood that inclusion of the employees of Cornerstone and its Subsidiaries in the Plumas Benefit Plans may occur at different times with respect to different plans), provided that coverage or participation shall be continued under the corresponding Benefit Plans of Cornerstone and its Subsidiaries until such employees are permitted to transition from such Benefit Plans and participate or enroll in the Plumas Benefit Plans; and provided further, that nothing contained herein shall require Plumas or any of its Subsidiaries to make any grants to any former employee of Cornerstone and its Subsidiaries under any pension plans, deferred compensation plans, transaction or change in control bonus or incentive arrangements, retiree medical, discretionary equity or incentive compensation plan of Plumas or otherwise make available or establish any new employee benefit plans for or on behalf of the Continuing Employees if Plumas and its Subsidiaries do not offer a particular type of employee benefit plans to their similarly-situated employees. Plumas shall use reasonable best efforts to cause each Plumas Benefit Plan in which Continuing Employees are eligible to participate to recognize, for purposes of determining eligibility to participate in, and the vesting of benefits, but not for purposes of equity grants or accrual of pension benefits or service toward eligibility for any Retiree Welfare Plan, if applicable, under the Plumas Benefit Plans, the service of such employees with Cornerstone and its Subsidiaries if and to the same extent as such service was credited for such purpose by Cornerstone and its Subsidiaries, provided, however, that such service shall not be recognized to the extent that such recognition would result in a duplication of benefits or to the extent not otherwise permissible under the terms of a Plumas Benefit Plan, and provided further, that an employee’s eligibility to participate will be governed by the eligibility criteria of the particular Plumas Benefit Plan. Nothing herein shall limit the ability of Plumas to amend or terminate any of the Plumas Benefit Plans or the Benefit Plans in accordance with their terms at any time.
(b) Those employees of Cornerstone and its Subsidiaries (i) who are not offered employment by Plumas or its Subsidiaries following the Effective Time, who are not a party to an employment agreement or otherwise entitled to an existing severance package, change in control benefit or payments under any salary continuation plan, and who sign and deliver (and do not revoke) a termination and release agreement in a form acceptable to Plumas within forty-five (45) days of the Effective Time or (ii) who are terminated by Plumas without cause prior to the first anniversary of the Effective Time and deliver (and do not revoke) a termination and release agreement in a form acceptable to Plumas within forty-five (45) days of termination, shall be entitled to receive a single lump sum payment of severance in an amount equal to four (4) weeks of such employee’s regularly scheduled base salary or base wages at the time of termination of employment plus one additional week’s salary for every year of completed service before the Closing Date (prorated for any partial year), up to a maximum of twenty-four (24) weeks in the aggregate. If Cornerstone or any of its Subsidiaries has any other severance pay plan or arrangement, then any amounts paid pursuant to that plan or arrangement shall reduce the amount that the employee will receive under this Section 6.11(b) and in no event shall there be any duplication of severance pay. Nothing contained in this Section 6.11(b) hereof shall be construed or interpreted to limit or modify in any way Plumas’s or its Subsidiaries’ at will employment policy or provide any third party beneficiary rights to employees of Cornerstone or any of its Subsidiaries. In no event shall severance pay be taken into account in determining the amount of any other benefit (including but not limited to, an individual’s benefit under any retirement plan or policy). For purposes of this Section 6.11(b), “cause” shall mean the employee’s personal dishonesty, willful misconduct, breach of fiduciary duty involving personal profit, failure to comply with any valid and legal directive of Plumas, Plumas Bank, Cornerstone and/or Cornerstone Bank failure to perform stated duties, violation of any law, rule or regulation (other than traffic violations or similar offenses) or order of any Governmental Entity.
(c) Prior to the Closing, Cornerstone shall have paid into the Cornerstone Community Bancorp 401(k) Profit Sharing Plan (the “Cornerstone 401(k) Plan”) all employer contributions, including any safe harbor employer matching contributions, profit sharing contributions or other non-elective contributions. Prior to the Closing, Cornerstone shall (i) adopt written resolutions (or take such other necessary or appropriate action), in form and substance reasonably acceptable to Plumas, to terminate the Cornerstone 401(k) Plan in compliance with its terms and requirements of applicable Law, effective no later than the Business Day preceding the Closing Date and (ii) provide for full vesting of all employer contributions under the Cornerstone 401(k) Plan to which a vesting schedule applies for all participants who currently maintain an account under the Cornerstone 401(k) Plan, such termination and vesting to be effective no later than the Business Day preceding the Closing Date. Cornerstone shall provide Plumas with evidence of the termination of the Cornerstone 401(k) Plan.
(d) Each of Cornerstone and Plumas acknowledges and agrees that all provisions contained within this Section 6.11 with respect to Employees or any other Person are included for the sole benefit of Cornerstone and nothing contained in this Section 6.11 shall confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Section 6.11. Nothing contained herein (i) shall be construed to establish, amend or modify any benefit plan, program or arrangement or (ii) alter or limit the ability of Plumas to amend, modify or terminate any benefit plan, program or arrangement at any time established, sponsored or maintained by Plumas or any of its Subsidiaries. Each of Cornerstone and Plumas agrees that the terms of this Section 6.11 do not and shall not create any right in any Person to continued employment with Cornerstone, Plumas or any of their respective Subsidiaries or to any compensation or benefit.
6.12 Appointment of Director. Plumas shall take all action necessary to appoint or elect, effective as of the Effective Time, one individual serving as a directors of Cornerstone on the date of this Agreement, who shall be mutually agreeable to Plumas (by the unanimous agreement of the Plumas Board) and Cornerstone and who shall qualify as an “independent” director of Plumas under applicable Nasdaq rules, as a director of each of Plumas and Plumas Bank. Such individual shall serve until the first annual meeting of shareholders of Plumas following the Effective Time or such individual’s earlier death, removal or resignation. Subject to the fiduciary duties of the Plumas Board, Plumas shall include such individual on the list of nominees for director presented by the Plumas Board and for which the Plumas Board shall solicit proxies at the first annual meeting of shareholders of Plumas following the Effective Time.
6.13 Notification of Certain Matters. Each of Cornerstone and Plumas shall give prompt written notice to the other of any fact, event or circumstance known to it that (a) is reasonably likely, individually or taken together with all other facts, events and circumstances known to it, to result in any Material Adverse Effect with respect to it or (b) would cause or constitute a failure of any of the conditions provided for in Article VII.
6.14 Estoppel Letters; Title Insurance. Cornerstone shall use its commercially reasonable efforts to obtain and deliver to Plumas at the Closing with respect to the real estate leased by Cornerstone or a Subsidiary of Cornerstone, an estoppel letter from each of its lessors dated as of the Closing in such a form as may be reasonably acceptable to Plumas. In addition, for each real property owned by Cornerstone or any of its Subsidiaries, if any, improved or vacant, whether for Cornerstone’s or any of its Subsidiaries’ operations or branches, or acquired through foreclosure or deed in lieu thereof, Cornerstone will provide an ALTA Owner’s Policy of Title Insurance, with customary endorsements and without exception for survey, together with a title report or commitment showing any matters of title recorded against the subject property from the date of issuance of the applicable title insurance policy through a date no earlier than fifteen (15) days prior to the Closing. In the event that there is no existing title insurance policy for a particular property, for each such property, Cornerstone will provide a new ALTA Owner’s Policy of Title Insurance, with an insured value no less than the value therefor disclosed in the appraisals provided to Plumas, with customary endorsements and without exception for survey or matters within the Knowledge of Cornerstone as of the policy date.
6.15 Antitakeover Statutes. Cornerstone and the Cornerstone Board shall, if any state antitakeover statute or similar statute becomes applicable to this Agreement and the Transaction, take all action reasonably necessary to ensure that the Transaction may be consummated as promptly as practicable on the terms contemplated hereby and otherwise to minimize the effect of such statute or regulation on this Agreement and the Transaction.
6.16 Consents. Cornerstone shall, and shall cause its Subsidiaries to, use their commercially reasonable efforts to obtain all consents, approvals, waivers, non-objections and to deliver any notices required pursuant to the terms of the Material Contracts as a result of the Transaction.
6.17 Federal Home Loan Bank Borrowings. If requested by Plumas, Cornerstone shall cooperate with Plumas to effect the discharge of Cornerstone’s borrowings from the FHLB prior to the Effective Time.
6.18 Shareholder Litigation and Protests. Cornerstone shall promptly advise Plumas orally and in writing of any shareholder litigation or community-based protests against Cornerstone or its directors relating to this Agreement, the Merger, the Bank Merger or any of the other transactions contemplated hereby and shall keep Plumas fully informed regarding any such shareholder or community-based litigation or protests, including providing all relevant documentation. Cornerstone shall consult with Plumas and give good faith consideration of its comments and advice and give Plumas the opportunity to participate in the defense or settlement of any such litigation, provided that Plumas shall pay its own expenses, subject to applicable law. No settlement in connection with such litigation or protests shall be agreed to without Plumas’s prior written consent.
6.19 Closing Financial Statements
(a) At least seven (7) Business Days prior to the Effective Time of the Merger, Cornerstone shall provide Plumas with (i) Cornerstone’s unaudited consolidated balance sheet and results of operations presenting the financial condition of Cornerstone and its Subsidiaries as of the close of business on the last day of the last month ended prior to the Closing Date and for the period beginning on the first date of the then-current fiscal year through the close of business on the last day of the last month ended prior to the Effective Time of the Merger (the “Closing Financial Statements”) and (ii) a calculation of the Adjusted Tangible Common Equity as of the date of the Closing Financial Statements, along with documents reasonably supporting such calculation; provided, however, that if the Closing Date occurs on or before the fifth Business Day of the month, the Closing Financial Statements and such calculation shall instead be as of and through the end of the second month immediately preceding the Closing Date. The Closing Financial Statements and the calculation of Adjusted Tangible Common Equity shall be prepared in good faith and in accordance with GAAP (excluding notes) and regulatory accounting principles and other applicable legal and accounting requirements, and shall reflect all period-end accruals and other adjustments, subject to the other requirements of this Agreement and shall also reflect accruals for all fees and expenses incurred or expected to be incurred in connection with the transactions contemplated in this Agreement (whether or not doing so is in accordance with GAAP), including all Merger Related Expenses. The Closing Financial Statements and the calculation of the Adjusted Tangible Common Equity shall be accompanied by a certificate of Cornerstone’s Chief Financial Officer to the effect that such financial statements calculation meet the requirements of this Section 6.19(a) and this Agreement.
(b) After delivery of the Closing Financial Statements and Cornerstone’s calculation of the Adjusted Tangible Common Equity, the Parties shall work together in good faith, which in the case of Cornerstone shall include providing Plumas with such documentation and information in its possession or control as Plumas shall reasonably request, to agree at least three (3) Business Days prior to the expected Closing Date on final and binding version of the Closing Financial Statements and a final and binding calculation of Adjusted Tangible Common Equity as of the date of the Closing Financial Statements, and the calculation of the Adjusted Tangible Common Equity, as mutually agreed to by the Parties (such agreement not to be unreasonably withheld, conditioned or delayed), shall become final and binding, subject to Section 6.23(c).
(c) On the Closing Date, Cornerstone’s Chief Financial Officer, shall deliver to Plumas a certificate, dated as of the Closing Date, to the effect that as of the date of the certificate, (x) the Closing Financial Statements finalized pursuant to Section 6.23(b) continues to reflect accurately the financial condition of Cornerstone in all material respects and the requirements of this Agreement and (y) the calculation of the Adjusted Tangible Common Equity finalized pursuant to Section 6.19 continue to reflect continues to be accurate in all material respects and continues to conform to the requirements of this Agreement.
6.20 Customer Notices. On and after the later of the date of receipt of all regulatory approvals required to consummate the Transaction (disregarding any statutory waiting periods) and the date of the Cornerstone Shareholder Approval, Cornerstone and Cornerstone Bank shall permit Plumas and Plumas Bank to provide one or more written notices (which may be joint notices from Cornerstone Bank and Plumas Bank) to customers of Cornerstone and Cornerstone Bank describing the proposed Merger and the Bank Merger, the effect on customers, planned transition procedures and similar information. Cornerstone shall have the right to review and approve the substance any such communications, provided that Cornerstone shall not unreasonably withhold, delay or condition its approval
6.21 Professional Fees and Expenses. Cornerstone shall cause final bills (or estimated final bills through the Effective Time) for all fees and expenses for services rendered by accounting, investment banking, legal, tax and other advisors to Cornerstone to be submitted to Cornerstone at least eight (8) Business Days prior to the Closing Date and shall provide copies of all such bills or estimates to Plumas. Cornerstone shall pay all such final bills or estimated final bills prior to the Effective Time.
6.22 Environmental Matters.
(a) For any real property owned or leased by Cornerstone or any of its Subsidiaries which is identified by Plumas within fifteen (15) days following the date of this Agreement, Plumas may, at its sole cost and expense, obtain, within sixty (60) days after the date of such notice, written reports of a Phase I environmental site assessment in accordance with ASTM International Standard E1527-13 (a “Phase I ESA”) for each such property, prepared by an environmental consultant experienced in performing Phase I ESAs of real property (“Environmental Consultant”) and reasonably acceptable to Cornerstone. Each Phase I ESA shall be delivered in counterparts to Plumas and Cornerstone. The Environmental Consultant will include customary language allowing both Plumas and Cornerstone to rely upon its findings and conclusions. The Environmental Consultant will provide a draft of any Phase I ESA to Plumas and Cornerstone for review and comment prior to the finalization of such report. Notwithstanding the foregoing, except as set forth in this Section 6.22(a), neither Plumas nor the Environmental Consultant will conduct or cause to be conducted any invasive, intrusive or destructive inspections or other sampling or testing on such real property, including, without limitation, of the air, soil, soil gas, vapors, surface water, groundwater, building materials or other environmental media, thereon.
(b) In the event any Phase I ESA (including a Phase I ESA that Cornerstone or any of its Subsidiaries caused to be performed within one (1) year prior to the date of this Agreement) discloses that such property may be impacted or have its use restricted by any Recognized Environmental Condition or Historical Recognized Environmental Condition (as each term is defined by ASTM E1527-13) or by any perfluoroalkyl or polyfluoroalkyl substances for which Plumas or any of its Subsidiaries would be liable and that, in the good faith reasonable belief of Plumas, would result in a material liability to Cornerstone or any of its Subsidiaries following the Effective Time and as such warrants further review or investigation, Plumas shall give notice of the same (a “Phase I Notice”) to Cornerstone no later than five (5) Business Days following Plumas’s receipt of the relevant Phase I ESA. Cornerstone may then, in its sole and absolute discretion and without any obligation whatsoever to do so, within an additional twenty (20) day period, retain the Environmental Consultant to conduct a Phase II environmental site assessment in accordance with ASTM Standard E1903-11 (“Phase II ESA”) of the relevant property; provided, however, that such Phase II ESA shall be completed, and a written report of the Phase II ESA prepared, no later than sixty (60) days after Cornerstone receives from Plumas the Phase I Notice for the relevant property; and provided further, that with respect to any leased property, Cornerstone will use commercially reasonable efforts to obtain the relevant property owner’s consent for such Phase II ESA. Plumas acknowledges and understands that such consent may not be able to be obtained. The scope of the Phase II ESA shall be mutually determined by Plumas and Cornerstone in their reasonable discretion after consultation with the other Party, and all reasonable costs and expenses associated with such Phase II ESA testing and report shall be borne by Plumas. Cornerstone shall provide copies of the draft and final Phase II ESA reports, if any, to Plumas promptly following the receipt of any such report by Cornerstone.
(c) Notwithstanding anything in this Section 6.22(c) to the contrary, Cornerstone shall keep Plumas reasonably apprised of all activities and actions contemplated by this Section 6.22 and Cornerstone and Plumas shall cooperate fully with one another with respect to the matters required by this Section 6.22, and Cornerstone and Plumas shall cooperate fully with one another with respect to the matters required by this Section 6.22.
6.23 Tax Treatment. The Merger contemplated by this Agreement is intended to qualify as a reorganization within the meaning of Section 368(a) of the Code and this Agreement is hereby adopted as a “plan of reorganization” within the meaning of the Treasury Regulations promulgated under Section 368 of the Code. Until the Closing, each Party shall use its commercially reasonable efforts to cause the Merger to so qualify, and will not knowingly take any action, cause any action to be taken, fail to take any action or cause any action not to be taken, which action or failure to act could prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a). Each of Cornerstone and Plumas agrees to prepare and file all U.S. federal income Tax Returns in accordance with this Section 6.23 and shall not take any position inconsistent herewith in the course of any audit, litigation, or other proceeding with respect to U.S. federal income Taxes; provided that nothing contained herein shall prevent Cornerstone or Plumas from settling any proposed deficiency or adjustment by any Governmental Entity based upon or arising out of such treatment, and neither Cornerstone nor Plumas shall be required to litigate before any court any proposed deficiency or adjustment by any Governmental Entity challenging such treatment.
6.24 Assumption of Cornerstone Subordinated Notes. Simultaneous with the consummation of the Merger, Plumas shall assume Cornerstone’s 4.75% Fixed to Floating Subordinated Notes due 2030 and Cornerstone’s 4.75% Fixed to Floating Subordinated Notes due 2035 in accordance with the provisions governing such notes, including Cornerstone’s payment and performance obligations under such notes.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.01 Conditions to Each Party’s Obligation to Effect the Merger. The respective obligation of each of the Parties to consummate the Merger is subject to the fulfillment or, to the extent permitted by applicable law, written waiver by the parties hereto prior to the Closing of each of the following conditions:
(a) Shareholder Approval. Cornerstone shall have obtained the Cornerstone Shareholder Approval.
(b) Regulatory Approvals. All regulatory approvals required to consummate the Merger and the Bank Merger shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired and no such approvals shall contain any conditions, restrictions or requirements (other than conditions or requirements related to remedial actions) which the Plumas Board reasonably determines in good faith, after consultation with Cornerstone, would, individually or in the aggregate, materially reduce the economic benefits of the Transaction to such a degree that Plumas would not have entered into this Agreement had such conditions, restrictions or requirements been known at the date hereof (a “Burdensome Condition”).
(c) No Injunction. No Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order which is in effect and prohibits consummation of the Transaction.
(d) Registration Statement. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated by the SEC and not withdrawn.
(e) Listing. The shares of Plumas Common Stock to be issued to the Cornerstone shareholders as the Stock Consideration shall have been approved for listing on Nasdaq.
7.02 Conditions to Obligation of Cornerstone. The obligation of Cornerstone to consummate the Merger is also subject to the fulfillment or written waiver by Cornerstone prior to the Closing of each of the following conditions:
(a) Representations and Warranties. The representations and warranties of Plumas set forth in this Agreement, subject in all cases to the standard set forth in Section 5.02, shall be true and correct as of the date hereof and as of the Closing Date as though made on and as of the Closing Date (except that representations and warranties that by their terms speak as of the date hereof or some other date shall be true and correct as of such date), and Cornerstone shall have received a certificate, dated as of the Closing Date, signed on behalf of Plumas by the Chief Executive Officer and the Chief Financial Officer of Plumas to such effect.
(b) Performance of Obligations of Plumas. Plumas shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Effective Time, and Cornerstone shall have received a certificate, dated as of the Closing Date, signed on behalf of Plumas by the Chief Executive Officer and the Chief Financial Officer of Plumas to such effect.
(c) Material Adverse Effect. Since the date of this Agreement, no event shall have occurred or circumstance arisen that, individually or taken together with all other facts, circumstances or events, has had or is reasonably likely to have a Material Adverse Effect with respect to Plumas or Plumas Bank.
7.03 Conditions to Obligation of Plumas. The obligation of Plumas to consummate the Merger is also subject to the fulfillment or written waiver by Plumas prior to the Closing of each of the following conditions:
(a) Representations and Warranties. The representations and warranties of Cornerstone set forth in this Agreement, subject in all cases to the standard set forth in Section 5.02, shall be true and correct as of the date hereof and as of the Closing Date as though made on and as of the Closing Date (except that representations and warranties that by their terms speak as of the date hereof or some other date shall be true and correct as of such date), and Plumas shall have received a certificate, dated as of the Closing Date, signed on behalf of Cornerstone by the Chief Executive Officer and the Chief Financial Officer of Cornerstone to such effect.
(b) Performance of Obligations of Cornerstone. Cornerstone shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Effective Time, and Plumas shall have received a certificate, dated the Closing Date, signed on behalf of Cornerstone by the Chief Executive Officer and the Chief Financial Officer of Cornerstone to such effect.
(c) Material Adverse Effect. Since the date of this Agreement, no event shall have occurred or circumstance arisen that, individually or taken together with all other facts, circumstances or events, has had or is reasonably likely to have a Material Adverse Effect with respect to Cornerstone or Cornerstone Bank
(d) Minimum Deposits. The average of Cornerstone Bank’s aggregate outstanding balance of deposits, excluding (i) all time/maturity deposits and (ii) any “brokered deposits,” as such term is defined in the rules and regulations of the FDIC, over the ten (10) consecutive Business Days ending the second Business Day immediately preceding the Closing Date shall be not less than $405,000,000.
(e) Dissenters’ Rights. The holders of no more than five percent (5%) of the aggregate outstanding shares of Cornerstone Common Stock shall have properly notified Cornerstone under Chapter 13 of the CGCL that they intend to exercise their dissenters’ rights.
(f) Tax Opinion. Plumas shall have received the opinion of Sheppard, Mullin, Richter & Hampton LLP, counsel to Plumas, dated as of the Closing Date, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, the Merger will qualify for United States federal income Tax purposes as a reorganization within the meaning of Section 368(a) of the Code. In rendering its opinion such firm may require and rely upon representations contained in letters from each of Cornerstone and Plumas.
(g) FIRPTA Certificate. Cornerstone shall have delivered to Plumas a properly executed statement from Cornerstone that meets the requirements of Treasury Regulation Sections 1.1445-2(c)(3) and 1.897-2(h)(1), together with the appropriate notice to the Internal Revenue Service, each dated as of the Closing Date and in form and substance satisfactory to Plumas.
(h) Agreements and Acknowledgments of Shareholders. Plumas shall have received Shareholder Agreements, executed and delivered by each of the holders of Cornerstone Common Stock that are parties thereto, each of which shall remain in full force and effect. The holders of Cornerstone Common Stock that are parties thereto shall have performed in all material respects all obligations required to be performed by them under the Shareholder Agreements.
(i) Other Actions. Cornerstone shall have furnished Plumas with such certificates of its officers or others and such other documents to evidence fulfillment of the conditions set forth in Sections 7.01 and 7.03 as Plumas may reasonably request.
ARTICLE VIII
TERMINATION
8.01 Termination. This Agreement may be terminated, and the Transaction may be abandoned, at any time prior to the Effective Time:
(a) Mutual Consent. By the mutual written consent of Plumas and Cornerstone.
(b) Breach. Provided that the terminating party is not then in material breach of any representation, warranty, covenant or agreement contained herein, by Plumas or Cornerstone in the event of a breach by the other party of any representation, warranty, covenant or agreement contained herein, which breach (i) cannot be or has not been cured within thirty (30) days after the giving of written notice to the breaching party of such breach (or such shorter period as remaining prior to the End Date) and (ii) would entitle the non-breaching party not to consummate the Transaction contemplated hereby under Section 7.02(a) or (b) or 7.03(a) or (b), as the case may be.
(c) Delay. By Plumas or Cornerstone in the event the Merger is not consummated by November 1, 2025 (the “End Date”) (with an automatic extension by a period of 65 (sixty-five) days if the condition set forth at Section 7.01(b) (Regulatory Approvals) has not been satisfied by the End Date and any related application is pending at such time) except to the extent that the failure of the Merger to be consummated by such date shall be due to (i) the failure of the party seeking to terminate pursuant to this Section 8.01(c) to perform or observe the covenants and agreements of such party set forth in this Agreement or (ii) in the case that Cornerstone is the party seeking to terminate pursuant to this Section 8.01(c), the failure of any of the holders of Cornerstone Common Stock who are party to a Shareholder Agreement (if Cornerstone is the party seeking to terminate) to perform or observe their respective covenants and agreements under the relevant Shareholder Agreement.
(d) No Regulatory Approval. (i) By Plumas or Cornerstone in the event the approval of any Governmental Entity required for consummation of the Merger and the other transactions contemplated by this Agreement shall have been denied by final non-appealable action of such Governmental Entity, (ii) by Plumas or Cornerstone if any Governmental Entity shall have issued a final, non-appealable injunction permanently enjoining or otherwise prohibiting the consummation of the Merger and the other transactions contemplated by this Agreement, or an application therefor shall have been permanently withdrawn at the formal or informal request of a Governmental Entity or (iii) by Plumas in the event the approval of any Governmental Entity required for consummation of the Merger, the Bank Merger or the other transactions contemplated by this Agreement includes, or will not be issued without, a Burdensome Condition.
(e) No Shareholder Approval. By Plumas or Cornerstone if the Cornerstone Shareholder Approval shall not have been obtained by reason of the failure to obtain the required vote at the Cornerstone Meeting or at any adjournment or postponement thereof, provided, however, that a Party may not terminate this Agreement pursuant to this Section 8.01(e) if such Party has breached in any material respect any of its obligations under this Agreement, in each case in a manner that caused the failure to obtain the Cornerstone Shareholder Approval at the Cornerstone Meeting, or at any adjournment or postponement thereof.
(f) Failure to Recommend; Etc. By Plumas if, at any time before the Cornerstone Shareholder Approval is obtained, (i) Cornerstone shall have breached in any material respect the provisions of Section 6.07, (ii) the Cornerstone Board shall have failed to make its recommendation referred to in Section 6.02, withdrawn such recommendation or modified or qualified (or discloses its intention to withdraw or modify or qualify) such recommendation in a manner adverse in any respect to the interests of Plumas, (iii) the Cornerstone Board effects a Change in Recommendation in accordance with Section 6.02(b), (iv) Cornerstone shall have breached in any material respect its obligations under Section 6.02 by failing to call, give notice of, convene and hold the Cornerstone Meeting in accordance with Section 6.02 or (v) at any time after the end of five (5) Business Days following receipt of an Acquisition Proposal, the Cornerstone Board shall have failed to reaffirm its recommendation referred to in Section 6.02 as promptly as practicable (but in any event within five (5) Business Days) after receipt of any written request to do so by Plumas.
(g) Certain Tender or Exchange Offers. By Plumas if a tender offer or exchange offer for 10% or more of the outstanding shares of Cornerstone Common Stock is commenced (other than by Plumas or a Subsidiary thereof), and the Cornerstone Board recommends that the shareholders of Cornerstone tender their shares in such tender or exchange offer or otherwise fails to recommend that such shareholders reject such tender offer or exchange offer within ten (10) Business Days.
(h) Superior Proposal. By Cornerstone, at any such time before the Cornerstone Shareholder Approval is obtained, in order to enter into a definitive agreement providing for a Superior Proposal, provided that Cornerstone is not then in breach of any representation, warranty, covenant or agreement contained herein, including without limitation Sections 6.02 and 6.07, and provided further, that such termination shall not be effective until Cornerstone has paid the Termination Fee required by Section 8.02(b) to Plumas.
8.02 Effect of Termination and Abandonment.
(a) In the event of termination of this Agreement and the abandonment of the Merger pursuant to this Article VIII, neither party to this Agreement shall have any liability or further obligation to the other party hereunder except that (i) this Section 8.02, Section 6.06(f) and Article IX shall survive any termination of this Agreement and (ii) notwithstanding anything to the contrary, neither Plumas nor Cornerstone shall be relieved or released from any liabilities or damages arising out of its fraud or willful breach of any provision of this Agreement.
(b) The Parties agree that Cornerstone shall pay Plumas the sum of $2,528,000 (the “Termination Fee”) as follows:
(i) if this Agreement is terminated by Plumas pursuant to Section 8.01(f) (Failure to Recommend, Etc.) or Section 8.01(g) (Certain Tender or Exchange Offers),Cornerstone shall pay the Termination Fee to Plumas on the second (2nd) Business Day following the termination of this Agreement;
(ii) if this Agreement is terminated by Cornerstone pursuant to Section 8.01(h) (Superior Proposal), Cornerstone shall pay the Termination Fee to Plumas on the date of the termination of this Agreement; or
(iii) if this Agreement is terminated by (A) Plumas pursuant to Section 8.01(b) (Breach), (B) by either Plumas or Cornerstone pursuant to Section 8.01(c) (Delay) and at the time of such termination the Cornerstone Shareholder Approval shall not have been obtained, or (C) by Plumas or Cornerstone pursuant to Section 8.01(e) (No Shareholder Approval), and in the case of any termination pursuant to clause (A), (B) or (C), an Acquisition Proposal shall have been publicly announced and communicated or made known to the executive officers of Cornerstone or the Cornerstone Board (or any Person shall have publicly announced and communicated or made known an intention, whether or not conditional, to make an Acquisition Proposal, or reiterated a previously expressed plan or intention to make an Acquisition Proposal) at any time after the date of this Agreement and prior to the taking of the vote of the shareholders of Cornerstone contemplated by this Agreement at the Cornerstone Meeting, in the case of clause (C), or prior to the date of termination, in the case of clause (A) or (B), then (1) if within twelve (12) months after such termination Cornerstone enters into an agreement with respect to a Control Transaction, then Cornerstone shall pay to Plumas the Termination Fee on the date of execution of such agreement and (2) if a Control Transaction is consummated otherwise than pursuant to an agreement with Cornerstone within twelve (12) months after such termination, then Cornerstone shall pay to Plumas the Termination Fee on the date of such consummation of such Control Transaction.
As used in this Section 8.02(b), a “Control Transaction” means (i) the acquisition by any Person whether by purchase, merger, consolidation, sale, transfer or otherwise, in one transaction or any series of transactions, of a majority of the voting power of the outstanding securities of Cornerstone or Cornerstone Bank or a majority of the assets of Cornerstone or Cornerstone Bank, (ii) any issuance of securities resulting in the ownership by any Person of more than twenty-five percent (25%) of the voting power of Cornerstone or by any Person other than Cornerstone or Cornerstone Bank of more than ten percent (10%) of the voting power of Cornerstone Bank or (iii) any merger, consolidation or other business combination transaction involving Cornerstone or any of its Subsidiaries as a result of which the shareholders of Cornerstone cease to own, in the aggregate, at least fifty percent (50%) of the total voting power of the entity surviving or resulting from such transaction.
Any amount that becomes payable pursuant to this Section 8.02(b) shall be paid by wire transfer of immediately available funds to an account designated by Plumas. Under no circumstances shall Cornerstone be obligated to pay the Termination Fee on more than one occasion, and the Parties hereby acknowledge and agree that in the event the Termination Fee becomes payable and is paid by Cornerstone pursuant to this Section 8.02, the Termination Fee shall be Plumas’s sole and exclusive remedy under this Agreement.
(c) Cornerstone and Plumas agree that the agreement contained in paragraph (b) above is an integral part of the Transactions contemplated by this Agreement, that without such agreement Plumas would not have entered into this Agreement, and that such amount does not constitute a penalty or liquidated damages in the event of a breach of this Agreement by Cornerstone. If Cornerstone fails to pay Plumas the amount due under paragraph (b) above within the time periods specified in such paragraph (b), Cornerstone shall pay the costs and expenses (including reasonable legal fees and expenses) incurred by Plumas in connection with any action, including the filing of any lawsuit, taken to collect payment of such amount, provided Plumas prevails on the merits, together with interest on the amount of any such unpaid amount at the prime lending rate prevailing during such period as published in The Wall Street Journal, calculated on a daily basis from the date such amount was required to be paid until the date of actual payment.
ARTICLE IX
MISCELLANEOUS
9.01 Survival. No representations, warranties, agreements and covenants contained in this Agreement shall survive the Effective Time (other than agreements or covenants contained herein that by their express terms are to be performed after the Effective Time) or the termination of this Agreement if this Agreement is terminated prior to the Effective Time (other than Sections 6.06(d), 8.02 and this Article IX, which shall survive any such termination). Notwithstanding anything in the foregoing to the contrary, no representations, warranties, agreements and covenants contained in this Agreement shall be deemed to be terminated or extinguished so as to deprive a Party or any of its affiliates of any defense at law or in equity which otherwise would be available against the claims of any Person, including without limitation any shareholder or former shareholder.
9.02 Waiver; Amendment. Prior to the Effective Time, any provision of this Agreement may be (i) waived, by the Party benefited by the provision or (ii) amended or modified at any time, by an agreement in writing between the Parties hereto executed in the same manner as this Agreement, provided that after the approval of the principal terms of this Agreement by the Cornerstone shareholders, no amendment shall be made which by law requires further approval by the shareholders of Cornerstone without obtaining such approval. For purposes of clarification, an amendment of any date in Section 8.01(c) shall not require further approval by any shareholders and if such amendment were deemed by law to require further approval by the shareholders of Cornerstone, the approval of the principal terms of this Agreement by such shareholders will be deemed to have granted Cornerstone the authority to amend such dates without such further approval.
9.03 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be deemed to constitute one and the same original agreement.
9.04 Governing Law. This Agreement shall be governed by, and interpreted in accordance with, the laws of the State of California applicable to contracts made and to be performed entirely within such State.
9.05 Expenses. Each Party will bear all expenses incurred by it in connection with this Agreement and the transactions contemplated hereby, including fees and expenses of its own financial consultants, accountants and counsel; provided that nothing contained herein shall limit either Party’s rights to recover any liabilities or damages arising out of the other Party’s fraud or willful breach of any provision of this Agreement.
9.06 Notices. All notices, requests, instructions and other communications to be given hereunder by any Party to the other shall be in writing and shall be deemed given if personally delivered, mailed by registered or certified mail, postage prepaid (return receipt requested) or emailed (with confirmation) to such Party at its address set forth below or such other address as such Party may specify by notice to the other Party; provided, that if given by email, such notice, request, instructions and other communication shall be confirmed within one Business Day by dispatch pursuant to one of the other methods described herein.
If to Cornerstone to:
Cornerstone Community Bancorp
500 Riverside Way
Red Bluff, California 96080
Attention: Matthew B. Moseley, President and Chief Executive Officer
Email: mmoseley@bankcornerstone.com
With a copy to:
Gary Steven Findley & Associates
3808 E. La Palma Avenue
Anaheim, California, 92807
Attention: Gary Findley, Esq.
Email: gsf@findley-reports.com
If to Plumas to:
Plumas Bancorp
5525 Kietzke Land, Suite 100
Reno, Nevada 98511
Attention: Andrew Ryback, President and Chief Executive Officer
email: andy.ryback@plumasbank.com
With copies to:
Sheppard, Mullin, Richter & Hampton LLP
Four Embarcadero Center, 17th Floor
San Francisco, CA 94111
Attention: David J. Gershon
email: dgershon@sheppardmullin.com
9.07 Entire Understanding; Limited Third Party Beneficiaries. This Agreement, the Bank Merger Agreement, the Shareholder Agreements, and the Confidentiality Agreements represent the entire understanding of the Parties and thereto with reference to the Transaction, and this Agreement, the Agreement of Merger, the Bank Merger Agreement, the Shareholder Agreements, and the Confidentiality Agreements supersede any and all other oral or written agreements heretofore made. Except for the Indemnified Parties’ rights with to Section 6.10, which are expressly intended to be for benefit of each Indemnified Party, nothing in this Agreement, expressed or implied, is intended to confer upon any Person, other than the Parties or their respective successors, any rights, remedies, obligations or liabilities under or by reason of this Agreement.
9.08 Severability. Except to the extent that application of this Section 9.08 would have a Material Adverse Effect on Cornerstone or Plumas, any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. In all such cases, the Parties shall use their reasonable best efforts to substitute a valid, legal and enforceable provision which, insofar as practicable, implements the original purposes and intents of this Agreement.
9.09 Interpretation. The parties have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement. When a reference is made in this Agreement to Articles, Sections, Exhibits or Schedules, such reference shall be to an Article or Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The word “or” shall not be exclusive. References to “the date hereof” shall be deemed to mean the day and year first above written. As used in this Agreement, the term “made available” means any document or other information that was (a) provided by one party or its representatives to the other party and its representatives by 5:00 p.m., Pacific time, on the date hereof, (b) included in the virtual data room of a party by 5:00 p.m., Pacific time, on the date hereof, or (c) filed or furnished by a party with the SEC and publicly available on EDGAR at least one (1) day prior to the date hereof, and (ii) the “transactions contemplated hereby” and “transactions contemplated by this Agreement” shall include the Merger and the Bank Merger. The Cornerstone Disclosure Schedule and the Plumas Disclosure Schedule, as well as all other schedules and all exhibits hereto, shall be deemed part of this Agreement and included in any reference to this Agreement. Nothing contained in this Agreement shall require any party or person to take any action in violation of applicable law.
9.10 Assignment. Neither Party may assign either this Agreement or any of its rights, interests or obligations hereunder without the prior written approval of the other Party. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their respective successors and permitted assigns.
9.11 Alternative Structure. Notwithstanding any provision of this Agreement to the contrary, Plumas may at any time modify the structure of the acquisition of Cornerstone and/or Cornerstone Bank set forth herein, provided that (i) the Merger Consideration to be paid to the holders of Cornerstone Common Stock is not thereby changed in kind or reduced in amount as a result of such modification, (ii) such modifications will not adversely affect the tax treatment to Cornerstone’s shareholders as a result of receiving the Merger Consideration and (iii) such modification will not materially jeopardize receipt of any required approvals of Governmental Entities or materially delay consummation of the Transaction contemplated by this Agreement.
9.12 Confidential Supervisory Information.. Notwithstanding any other provision of this Agreement, no disclosure, representation or warranty shall be made (or other action taken) pursuant to this Agreement that would involve the disclosure of confidential supervisory information (including confidential supervisory information as defined in 12 C.F.R. § 261.2(c) and as identified in 12 C.F.R. § 309.5(g)(8)) of a Governmental Entity by either Party to this Agreement to the extent prohibited by applicable Law. To the extent legally permissible, appropriate substitute disclosures or actions shall be made or taken under circumstances in which the limitations of the preceding sentences apply.
9.13 Enforcement of the Agreement. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, the parties shall be entitled to specific performance of the terms hereof, including an injunction or injunctions to prevent breaches or threatened breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof (including the parties’ obligation to consummate the Merger), in addition to any other remedy to which they are entitled at law or in equity. Each of the parties hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any Law to post security or a bond as a prerequisite to obtaining equitable relief.
9.14 Delivery by Facsimile or Electronic Transmission.. This Agreement and any signed agreement or instrument entered into in connection with this Agreement, and any amendments or waivers hereto or thereto, to the extent signed and delivered by means of a facsimile machine or by e-mail delivery of a “.pdf” format data file, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. Neither Party shall raise the use of a facsimile machine or e-mail delivery of a “.pdf” format data file to deliver a signature to this Agreement or any amendment hereto or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine or e-mail delivery of a “.pdf” format data file as a defense to the formation of a contract and each Party forever waives any such defense.
[Signature page follows]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in counterparts by their duly authorized officers, all as of the day and year first above written.
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PLUMAS BANCORP |
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/s/ Andrew Ryback |
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Andrew Ryback |
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Title: |
President and Chief Executive Officer |
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By: |
/s/ Richard Belstock |
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Richard Belstock |
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EVP and Chief Financial Officer |
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CORNERSTONE COMMUNITY BANCORP |
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/s/ Matthew B. Moseley |
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Matthew B. Moseley |
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President and Chief Executive Officer |
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/s/ Michael G. Davis |
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Michael G. Davis |
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Corporate Secretary |
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[Signature Page to Agreement and Plan of Merger and Reorganization]
EXHIBIT A
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (this “Agreement”), dated as of January 28, 2025, among [●], a shareholder (“Shareholder”) of Cornerstone Community Bancorp, a California corporation (“Cornerstone”), Plumas Bancorp, a California corporation (“Plumas”), and, solely for purposes of the last sentence of Section 9, Cornerstone. All terms used herein and not defined herein shall have the meanings assigned thereto in the Merger Agreement (defined below).
WHEREAS, Cornerstone and Plumas are entering into an Agreement and Plan of Merger and Reorganization, dated as of the date hereof (the “Merger Agreement”), pursuant to which Cornerstone will merge with and into Plumas on the terms and conditions set forth therein (the “Merger”) and, in connection therewith, outstanding shares of Cornerstone Common Stock will be converted into shares of Plumas Common Stock in the manner set forth therein; and
WHEREAS, Shareholder owns the shares of Cornerstone Common Stock identified on Schedule I hereto (such shares, together with all shares of Cornerstone Common Stock subsequently acquired by Shareholder during the term of this Agreement, being referred to as the “Shares”); and
WHEREAS, in order to induce Plumas to enter into the Merger Agreement, Shareholder, solely in such Shareholder’s capacity as a shareholder of Cornerstone and not in any other capacity, has agreed to enter into and perform this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. Agreement to Vote Shares. Shareholder agrees while this Agreement is in effect, that at any meeting of the shareholders of Cornerstone, or in connection with any written consent of the shareholders of Cornerstone, Shareholder shall:
(a) appear at each such meeting or otherwise cause the Shares to be counted as present thereat for purposes of calculating a quorum; and
(b) vote (or cause to be voted), in person or by proxy, or deliver a written consent (or cause a consent to be delivered) covering, all the Shares (whether acquired heretofore or hereafter) that are beneficially owned by Shareholder or as to which Shareholder has, directly or indirectly, the right to vote or direct the voting, (x) in favor of adoption and approval of the Merger, the Merger Agreement and the transactions contemplated thereby; (y) against any action or agreement that to the knowledge of Shareholder would reasonably be expected to result in a breach of any covenant, representation or warranty or any other obligation or agreement of Cornerstone contained in the Merger Agreement or of Shareholder contained in this Agreement; and (z) against any Acquisition Proposal or any other action, agreement or transaction that is intended, or to the knowledge of Shareholder would reasonably be expected, to materially impede, interfere or be inconsistent with, delay, postpone, discourage or materially and adversely affect consummation of the Merger or the performance by Shareholder of their obligations under this Agreement.
2. Transfer of Shares.
(a) Prohibition on Transfers of Shares; Other Actions. Shareholder hereby agrees that while this Agreement is in effect, Shareholder shall not, (i) sell, transfer, pledge, encumber, distribute by gift or donation, or otherwise dispose of any of the Shares (or any securities convertible into or exercisable or exchangeable for Shares) or any interest therein, whether by actual disposition, physical settlement or effective economic disposition through hedging transactions, derivative instruments or other means, (ii) enter into any agreement, arrangement or understanding with any Person, or take any other action, that violates or conflicts with or could reasonably be expected to violate or conflict with Shareholder’s representations, warranties, covenants and obligations under this Agreement, or (iii) take any other action that could reasonably be expected to impair or otherwise adversely affect, in any material respect, Shareholder’s power, authority and ability to comply with and perform his, her or its covenants and obligations under this Agreement; provided, however, that once the Shares have been voted at the Cornerstone Meeting as provided for in Section 1(b)(x) hereof, and provided that at least a majority of all of the issued and outstanding shares of Cornerstone Common Stock have been irrevocably voted in favor of the Merger, the Merger Agreement and the transactions contemplated thereby at the Cornerstone Meeting as provided for in Section 1(b)(x) hereof, then the prohibitions provided for in this Section 2 shall no longer apply to Shareholder.
(b) Transfer of Voting Rights. Shareholder hereby agrees that Shareholder shall not deposit any Shares in a voting trust, grant any proxy or enter into any voting agreement or similar agreement or arrangement with respect to any of the Shares.
3. Representations and Warranties of Shareholder. Shareholder represents and warrants to and agrees with Plumas as follows:
(a) Capacity. Shareholder has all requisite capacity and authority to enter into and perform their obligations under this Agreement.
(b) Binding Agreement. This Agreement has been duly executed and delivered by Shareholder and constitutes the valid and legally binding obligation of Shareholder, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.
(c) Non-Contravention. The execution and delivery of this Agreement by Shareholder does not, and the performance by Shareholder of their obligations hereunder and the consummation by Shareholder of the transactions contemplated hereby will not, violate or conflict with, or constitute a default under, any agreement, instrument, contract or other obligation or any order, arbitration award, judgment or decree to which Shareholder is a party or by which Shareholder is bound, or any statute, rule or regulation to which Shareholder is subject or, in the event that Shareholder is a corporation, partnership, trust or other entity, any charter, bylaw or other organizational document of Shareholder.
(d) Ownership. Shareholder’s Shares are, and, except as otherwise provided for in Section 2(a) hereof, through the term of this Agreement will be, owned beneficially and of record solely by Shareholder, except as otherwise disclosed on Schedule I hereto. Shareholder has title to the Shares, free and clear of any lien, pledge, mortgage, security interest or other encumbrance, except as otherwise disclosed on Schedule I hereto. As of the date hereof, the Shares identified on Schedule I hereto constitute all of the shares of Cornerstone Common Stock owned beneficially or of record by Shareholder. Shareholder has and, except as otherwise provided for in Section 2(a) above, will have at all times during the term of this Agreement (i) sole voting power and sole power to issue instructions with respect to the matters set forth in Section 1 hereof, (ii) sole power of disposition and (iii) sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Shares owned by Shareholder on the date of this Agreement and all of the Shares hereafter acquired by Shareholder and owned beneficially or of record by him or her during the term of this Agreement. For purposes of this Agreement, the term “beneficial ownership” shall be interpreted in accordance with Rule 13d-3 under the Exchange Act, provided that a Person shall be deemed to beneficially own any securities which may be acquired by such Person pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise (irrespective of whether the right to acquire such securities is exercisable immediately or only after the passage of time, including the passage of time within 60 days, the satisfaction of any conditions, the occurrence of any event or any combination of the foregoing).
(e) Consents and Approvals. The execution and delivery of this Agreement by Shareholder does not, and the performance by Shareholder of their obligations under this Agreement will not, require Shareholder to obtain any consent, approval, authorization or permit of, or to make any filing with or notification to, any Governmental Entity.
4. Acquisition Proposals; No Solicitation. Shareholder hereby agrees that during the term of this Agreement he or she shall not, and shall not permit any investment banker, financial advisor, attorney, accountant or other representative retained by him or her, directly or indirectly, (a) take any of the actions specified in clauses (i)-(vi) of Section 6.07(a) of the Merger Agreement, (b) agree to release, or release, any Person from any obligation under any existing standstill agreement or arrangement relating to Cornerstone, or (c) participate in, directly or indirectly, a “solicitation” of “proxies” (as such terms are used in the rules of the SEC) or powers of attorney or similar rights to vote, or seek to advise or influence any Person with respect to the voting of, any shares of Cornerstone Common Stock in connection with any vote or other action on any matter of a type described in Section 1(b), other than to recommend that shareholders of Cornerstone vote in favor of the adoption and approval of the Merger Agreement and the Merger and as otherwise expressly permitted by this Agreement. Shareholder agrees immediately to cease and cause to be terminated any activities, discussions or negotiations conducted before the date of this Agreement with any Persons other than Plumas with respect to any possible Acquisition Proposal and will take all necessary steps to inform any investment banker, financial advisor, attorney, accountant or other representative retained by him, her or it of the obligations undertaken by Shareholder pursuant to this Section 4. Nothing contained in this Section 4 shall prevent a Shareholder who is an officer or a member of the Cornerstone Board from discharging their fiduciary duties solely in their capacity as such an officer or director.
5. Notice of Acquisitions; Proposals Regarding Prohibited Transactions. Shareholder hereby agrees to notify Plumas promptly (and in any event within two (2) Business Days) in writing of the number of any additional shares of Cornerstone Common Stock or other securities of Cornerstone of which Shareholder acquires beneficial or record ownership on or after the date hereof. Shareholder will comply with the provisions of Section 6.07(b) of the Merger Agreement as if he, she or it were Cornerstone.
6. Non-Solicitation; Non-Competition; Confidential Information
(a) In connection with the disposition of all of Shareholder’s ownership interest in Cornerstone, Shareholder agrees that for a period of two (2) years following the Closing Date, Shareholder will not directly or indirectly:
(i) solicit (other than general solicitations through newspapers or other media of general circulation, or the engagement of professional search firms, not targeted at such employees) any employees of Cornerstone or its wholly-owned Subsidiaries (“Cornerstone Employees”) as of the Closing Date using Confidential Information; provided, however, that the foregoing shall not apply to any Cornerstone Employee (x) who does not become an employee of Plumas or any of its Subsidiaries on the Closing Date; or (y) whose employment terminated more than six months prior to the time that such Cornerstone Employee is first solicited for employment following the Closing Date;
(ii) knowingly (A) induce, persuade, encourage or influence or attempt to induce, persuade, encourage or influence any Person having a business relationship with Cornerstone or its wholly-owned Subsidiaries prior to the Closing Date, to discontinue, reduce or restrict such relationship on or after the Closing Date or (B) solicit or target the deposits, loans or other products and services from or to Persons who were depositors, borrowers or customers of Cornerstone or its wholly-owned Subsidiaries as of the Closing Date, whether by personal contact, by telephone, by facsimile, by mail or other form of solicitation or communication, or in any other way except for general solicitations that are directed to the general public and not directed specifically to Persons who were depositors, borrowers or customers of Cornerstone or its wholly-owned Subsidiaries as of the Closing Date. Notwithstanding the foregoing and for purposes of clarity, nothing herein shall prohibit Shareholder from exercising Shareholder’s discretion relating to Shareholder’s personal and business banking relationships; or
(iii) own, manage, operate, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with, any business or enterprise engaged in any business that is competitive with or similar to Cornerstone’s Business within any of the California counties of Shasta and Tehama. Notwithstanding the above, Shareholder shall not be deemed to be engaged directly or indirectly in any business in contravention of the immediately preceding sentence, if Shareholder participates in any such business solely (i) as an officer or director of Plumas or Plumas Bank or (ii) as a passive investor in up to 5% of the equity securities or 10% of the debt securities of a company or partnership, provided such securities are publicly traded. For purposes of this Agreement, “Cornerstone’s Business” means and includes (i) the origination, purchasing, selling and servicing of commercial, real estate, residential, construction, agricultural and consumer loans and/or (ii) the solicitation and provision of deposits, as conducted by Cornerstone and its wholly-owned Subsidiaries, in either event as conducted by Cornerstone or its wholly-owned subsidiaries as of the Closing Date.
(b) Without limiting the generality of the foregoing and at all times after the date hereof, other than for the benefit of Plumas, Cornerstone or their respective Subsidiaries, or as otherwise approved by Plumas, Shareholder (i) shall make no use of the Confidential Information, or any other part thereof, (ii) shall not disclose the Confidential Information, or any part thereof, to any other Person, and (iii) shall deliver, on and after the Effective Time of the Merger, upon the request of Plumas, all documents, reports, drawings, designs, plans, proposals and other tangible evidence of Confidential Information, now possessed or hereafter acquired by Shareholder, to Plumas. For purposes of this Agreement, “Confidential Information” means all secrets and other confidential information, trade secrets, ideas, knowledge, know-how, techniques, secret processes, improvements, discoveries, methods, inventions, sales, financial information, customers, lists of customers and prospective customers, plans, concepts, strategies or products, as well as all documents, reports, drawings, designs, plans and proposals otherwise pertaining to same or relating to the business as conducted by Cornerstone or its Subsidiaries of which Shareholder has acquired, or may hereafter acquire, knowledge and possession as a shareholder, director, officer or employee of Cornerstone or its Subsidiaries or as a result of the transactions contemplated by the Merger Agreement, provided however, notwithstanding any other provisions of this Agreement to the contrary, “Confidential Information” shall not include any (i) information which is or has become available from a third party who learned the information independently and is not or was not bound by a duty or agreement of confidentiality with respect to such information; or (ii) information readily ascertainable from public, trade or other nonconfidential sources (other than as a result, directly or indirectly, of a disclosure or other dissemination in contravention of a confidentiality agreement).
(c) Shareholder acknowledges and agrees that the business conducted by Cornerstone and its wholly-owned Subsidiaries is highly competitive and that the covenants made by Shareholder in this Section 6 are made in connection with the disposition of Shareholder’s entire ownership interest in Cornerstone, and are further made as a necessary inducement for Plumas to enter into the Merger Agreement and to consummate the transactions contemplated thereby. It is the desire and intent of the parties to this Agreement that the provisions of this Section 6 shall be enforced to the fullest extent permissible under the laws and public policies of each jurisdiction in which enforcement is sought. It is expressly understood and agreed that although Shareholder and Plumas each consider the restrictions contained in this Section 6 to be reasonable, if a final determination is made by a court of competent jurisdiction or an arbitrator that the time or territory or any other restriction contained in this Section 6 is unenforceable against any party, the provisions of this Section 6 shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. If a court determines that the restriction cannot be so amended, the offending provision will be stricken and all remaining provisions shall remain in full force and effect.
(d) Shareholder acknowledges and agrees that the provisions of this Agreement are necessary to protect Plumas’s legitimate business interests and to protect the value, including goodwill, of Plumas’s acquisition of Cornerstone. Shareholder warrants that these provisions will not unreasonably interfere with their ability to earn a living or to pursue their occupation and Shareholder has the means to support himself or herself and their dependents and the provisions of this Section 6 will not impair such ability in any manner whatsoever.
(e) Shareholder will not disparage Plumas, its Subsidiaries or any of its Affiliates, or the business conducted by Plumas, its Subsidiaries or any of their Affiliates, or any shareholder, member, director, manager, officer, employee or agent of Plumas, its Subsidiaries or any of their Affiliates.
7. Specific Performance and Remedies. Shareholder acknowledges that it will be impossible to measure in money the damage to Plumas if Shareholder fails to comply with the obligations imposed by this Agreement and that, in the event of any such failure, Plumas will not have an adequate remedy at law. Accordingly, Shareholder agrees that injunctive relief or other equitable remedy, in addition to remedies at law or in damages, is the appropriate remedy for any such failure and will not oppose the granting of such relief on the basis that Plumas may have an adequate remedy at law. Shareholder agrees that he or she will not seek, and agrees to waive any requirement for, the securing or posting of a bond in connection with Plumas’s seeking or obtaining such equitable relief.
8. Term of Agreement; Termination.
(a) The term of this Agreement shall commence on the date hereof.
(b) This Agreement shall terminate upon the date, if any, of the termination of the Merger Agreement in accordance with its terms. Upon any such termination, no party shall have any further obligations or liabilities hereunder; provided, however, such termination shall not relieve any party from liability for any willful breach of this Agreement prior to such termination. Notwithstanding the foregoing, in the event this Agreement is terminated prior to the Effective Time of the Merger, the provisions in Sections 6(a) and 6(e) shall survive for a period of two (2) years from the date of termination (substituting the date of termination for the term “Closing Date” in such sections) and the provisions in Sections 3, 6(b) through 6(d), 7, 8 and 10 through 13 shall survive indefinitely.
9. Stop Transfer Order. In furtherance of this Agreement, Shareholder hereby authorizes and instructs Cornerstone to enter a stop transfer order with respect to all of Shareholder’s Shares for the period from the date hereof through the date this Agreement is terminated in accordance with Section 9, except as otherwise provided for in Section 2(a) hereof. Cornerstone agrees that it shall comply with such stop transfer instructions.
10. Entire Agreement. This Agreement supersedes all prior agreements, written or oral, among the parties hereto with respect to the subject matter hereof and contains the entire agreement among the parties with respect to the subject matter hereof. This Agreement may not be amended, supplemented or modified, and no provisions hereof may be modified or waived, except by an instrument in writing signed by each party hereto. No waiver of any provisions hereof by any party shall be deemed a waiver of any other provisions hereof by any such party, nor shall any such waiver be deemed a continuing waiver of any provision hereof by such party.
11. Notices. All notices, requests, claims, demands or other communications hereunder shall be in writing and shall be deemed given when delivered personally, upon receipt of a transmission confirmation if sent by telecopy or like transmission and on the next Business Day when sent by a reputable overnight courier service to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
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Plumas Bancorp |
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5525 Kietzke Lane, Suite 100 |
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Reno, NV 89511 |
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Andrew Ryback, President and |
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Chief Executive Officer |
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andrew.ryback@plumasbank.com |
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With a copy to: |
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Sheppard Mullin Richter & Hampton LLP |
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Four Embarcadero Center, 17th Floor |
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David J. Gershon |
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Cornerstone Community Bancorp |
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500 Riverside Way |
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Red Bluff, California 96080 |
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Matthew B. Moseley, President and Chief Executive Officer |
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Gary Steven Findley & Associates |
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3808 E. La Palma Avenue. |
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Anaheim, California, 92807 |
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Gary Findley, Esq. |
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gsf@findley-reports.com |
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12. Miscellaneous.
(a) Severability. If any provision of this Agreement or the application of such provision to any person or circumstances shall be held invalid or unenforceable by a court of competent jurisdiction, such provision or application shall be unenforceable only to the extent of such invalidity or unenforceability, and the remainder of the provision held invalid or unenforceable and the application of such provision to persons or circumstances, other than the party as to which it is held invalid, and the remainder of this Agreement, shall not be affected.
(b) Capacity. The covenants contained in Sections 1 – 4 herein shall apply to Shareholder solely in their capacity as a shareholder of Cornerstone, and no covenant contained in any such Sections shall apply to Shareholder in their capacity as a director, officer or employee of Cornerstone or, if applicable, of Plumas, or in any other capacity. Nothing contained in this Agreement shall be deemed to apply to, or limit in any manner, the obligations of the Shareholder to comply with their fiduciary duties as a director, officer or employee of Cornerstone.
(c) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.
(d) Headings. All Section headings herein are for convenience of reference only and are not part of this Agreement, and no construction or reference shall be derived therefrom.
(e) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California without giving effect to the principles of conflicts of law.
(f) Successors and Assigns; Third Party Beneficiaries. Neither this Agreement nor any of the rights or obligations of any party under this Agreement shall be assigned, in whole or in part, by any party without the prior written consent of the other parties hereto. Subject to the foregoing, this Agreement shall bind and inure to the benefit of and be enforceable by the parties hereto and their respective successors and permitted assigns. Plumas Bank, as a Subsidiary of Plumas, is an intended third-party beneficiary of this Agreement. Otherwise, nothing in this Agreement, express or implied, is intended to confer on any Person other than the parties hereto or their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement.
(g) Regulatory Compliance. Each of the provisions of this Agreement is subject to compliance with all applicable regulatory requirements and conditions.
13. Attorney’s Fees. The prevailing party or parties in any litigation, arbitration, mediation, bankruptcy, insolvency or other proceeding (“Proceeding”) relating to the enforcement or interpretation of this Agreement may recover from the unsuccessful party or parties all reasonable fees and disbursements of counsel (including expert witness and other consultants’ fees and costs) relating to or arising out of (a) the Proceeding (whether or not the Proceeding proceeds to judgment), and (b) any post-judgment or post-award proceeding including, without limitation, one to enforce or collect any judgment or award resulting from the Proceeding. All such judgments and awards shall contain a specific provision for the recovery of all such subsequently incurred costs, expenses, and fees and disbursements of counsel.
[Signature page follows]
IN WITNESS WHEREOF , the parties hereto have executed and delivered this Agreement as of the date first written above.
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PLUMAS BANCORP |
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By: |
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Andrew Ryback |
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President and Chief Executive Officer |
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CORNERSTONE COMMUNITY BANCORP |
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By: |
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Name: |
Matthew B. Moseley |
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President and Chief Executive Officer |
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SHAREHOLDER |
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SCHEDULE I
SHAREHOLDER AGREEMENT
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Name of Shareholder
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Shares of Cornerstone
Common Stock
Beneficially Owned
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EXHIBIT B
FORM OF
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER, dated as of [●], 2025 (this “Agreement”), is made and entered into by and between, Plumas Bancorp, a California corporation (California Entity No. 2373764) (“Plumas”) and Cornerstone Community Bancorp, a California corporation (California Entity No. 3680844) (“Cornerstone”).
WHEREAS, the Boards of Directors of Plumas and Cornerstone have approved, and deem it advisable and in the best interests of Plumas, Cornerstone and their respective shareholders, that Plumas and Cornerstone consummate the business transaction provided for in this Agreement in which Cornerstone would merge with and into Plumas (the “Merger”) as contemplated in that certain Agreement and Plan of Reorganization and Merger dated as of January 28, 2025 by and between Plumas and Cornerstone (the “Plan of Merger”), providing, among other things, for the execution and filing of this Agreement and the consummation of the Merger.
NOW, THEREFORE, in consideration of the promises and mutual agreements contained in this Agreement, the parties to this Agreement hereby agree that Cornerstone shall be merged with and into Plumas in accordance with the provisions of the laws of the State of California upon the terms and subject to the conditions set forth as follows:
Section 1. The Merger.
(a) Effective Time. The Merger shall become effective on the date and at the time that this Agreement of Merger is filed with the California Secretary of State (the “Effective Time”).
(b) Effect of the Merger. At the Effective Time, Cornerstone shall be merged with and into Plumas and the separate corporate existence of Cornerstone shall cease. Plumas shall be the surviving corporation (the “Surviving Corporation”) in the Merger. The Surviving Corporation shall thereupon succeed, without other transfer, to all rights and properties of, and shall be subject to all the debts and liabilities of, Cornerstone and the separate existence of Surviving Corporation as a California corporation, with all its purposes, objects, rights, powers, privileges and franchises, shall continue unaffected and unimpaired by the Merger.
(c) Name of Surviving Corporation. The name of the Surviving Corporation shall be “Plumas Bancorp.”
(d) Articles of Incorporation and Bylaws. From and after the Effective Time and until thereafter amended as provided by law, the Articles of Incorporation and Bylaws of Plumas as in effect immediately prior to the Effective Time shall be and continue to be the Articles of Incorporation and Bylaws of the Surviving Corporation.
(e) Board of Directors and Officers. The directors and officers of Plumas at the Effective Time will be the directors and officers of the Surviving Corporation until they are removed or their successors are elected and qualified.
(f) Further Actions. Cornerstone shall execute and deliver any documents and instruments and shall take all actions, as requested by the Surviving Corporation, necessary or desirable to evidence or carry out the Merger.
Section 2. Treatment of Shares.
(a) Shares of Cornerstone.
(i) At the Effective Time, by virtue of the Merger, and without any action on the part of the holders of Cornerstone common stock, each share of Cornerstone common stock issued and outstanding immediately prior to the Effective Time (other than shares that are “dissenting shares” within the meaning of Chapter 13 of the California General Corporation Law) shall converted into the right to receive (A) 0.6608 shares of Plumas common stock and (B) a cash payment, without interest, of $[●], together with any cash in lieu of fractional shares.
(ii) Any shares of Cornerstone common stock owned by Cornerstone as treasury stock or owned, directly or indirectly, by Cornerstone, Plumas or any of Plumas’s subsidiaries (other than those held in a fiduciary capacity or as a result of debts previously contracted) shall automatically be cancelled and retired and shall cease to exist at the Effective Time of the Merger and no consideration shall be issued in exchange therefor.
(iii) Shares of Cornerstone common stock that are “dissenting shares” within the meaning of Chapter 13 of the California General Corporation Law will not be converted as described in Section 2(a)(i), but from and after the Effective Time will represent only the right to receive such value as may be determined under Chapter 13 of the California General Corporation Law.
(iv) At the Effective Time, the stock transfer books of Cornerstone will be closed and no transfer of Cornerstone common stock theretofore outstanding will thereafter be made.
(b) Shares of Plumas. All shares of Plumas common stock issued and outstanding immediately prior to the Effective Time shall remain outstanding and unaffected by the Merger.
Section 3. Termination and Amendment.
(a) Termination. This Agreement shall terminate prior to the Effective Time in the event that the Plan of Merger shall be terminated as provided therein.
(b) Amendment. This Agreement may be amended by Plumas and Cornerstone at any time prior to the Effective Time without the approval of the shareholders of Plumas or Cornerstone with respect to any of its terms except any change in its principal terms, the terms relating to the form or amount of consideration to be delivered to Cornerstone shareholders in the Merger or as may otherwise be required by the Plan of Merger or by law. This Agreement may not be amended, except by an instrument in writing signed on behalf of each of the parties hereto.
Section 4. Rules of Construction. Descriptive headings as to the contents of particular sections are for convenience only and do not control or affect the meaning, construction or interpretation of this Agreement. Each use herein of the plural includes the singular and vice versa, in each case as the context requires or as it is otherwise appropriate. The word “or” is used in the inclusive sense. Any and all documents or instruments referred to herein are incorporated herein by reference hereto as though fully set forth herein verbatim. If there is any conflict between the terms of this Agreement and the terms of the Plan of Merger, the terms of the Plan of Merger are to control.
Section 5. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be deemed an original, and all of which shall be deemed but one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement of Merger as of the date first written above.
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PLUMAS BANCORP |
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By: |
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Name: |
Andrew Ryback |
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Title: |
President and Chief Executive Officer |
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By: |
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Name: |
Richard Belstock |
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Title: |
EVP and Chief Financial Officer |
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CORNERSTONE COMMUNITY BANCORP |
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By: |
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Name: |
Matthew B. Moseley |
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Title: |
President and Chief Executive Officer |
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By: |
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Name: |
Michael G. Davis |
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Title: |
Secretary |
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EXHIBIT C
FORM OF
BANK MERGER AGREEMENT
BANK MERGER AGREEMENT, dated as of [●], 2025 (“Bank Merger Agreement”), by and between Cornerstone Community Bancorp (California Entity No. 2847138) (“Cornerstone Bank”) and Plumas Bank (California Entity No. 998536) (“Plumas Bank”).
WHEREAS, Cornerstone Bank is a California-chartered bank and a wholly-owned subsidiary of Cornerstone Community Bancorp, a California corporation (“Cornerstone”), which has its principal place of business in Redding, California; and
WHEREAS, Plumas Bank is a California-chartered bank and a wholly-owned subsidiary of Plumas Bancorp (“Plumas”), which has its principal place of business in Quincy, California; and
WHEREAS, Plumas and Cornerstone have entered into an Agreement and Plan of Merger and Reorganization, dated as of January 28, 2025 (the “Plan of Merger”), pursuant to which Cornerstone will merge with and into Plumas, with Plumas as the surviving corporation (the “Parent Merger”);
WHEREAS, it is the intention of the parties that the Merger (as defined herein) be treated as a “reorganization” under Section 368(a) of the Internal Revenue Code of 1986, as amended, and that this Bank Merger Agreement constitute a “plan of reorganization” within the meaning of Section 1.368-2(g) of the Treasury Regulations; and
WHEREAS, the Boards of Directors of Cornerstone Bank and Plumas Bank have approved and deemed it advisable to consummate the merger provided for herein in which Cornerstone Bank would merge with and into Plumas Bank on the terms and conditions herein provided immediately following the effective time of the Parent Merger.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the parties hereto, intending to be legally bound hereby, agree as follows:
1. The Merger. Subject to the terms and conditions of this Bank Merger Agreement, at the Effective Time, Cornerstone Bank shall merge with and into Plumas Bank (the “Merger”) under the laws of the State of California. Plumas Bank shall be the surviving corporation in the Merger (the “Surviving Bank”) and the separate existence of Cornerstone Bank shall cease.
2. Articles of Incorporation and Bylaws. The Articles of Incorporation and the Bylaws of Plumas Bank in effect immediately prior to the Effective Time (as defined below) shall be the governing documents of the Surviving Bank, until altered, amended or repealed in accordance with their terms and applicable law.
3. Name; Offices. The name of the Surviving Bank shall be “Plumas Bank.” The main office of the Surviving Bank shall be the main office of Plumas Bank immediately prior to the Effective Time. All branch offices of Cornerstone Bank and Plumas Bank which were in lawful operation immediately prior to the Effective Time shall continue to be the branch offices of the Surviving Bank upon consummation of the Merger, subject to the opening or closing of any offices which may be authorized by Cornerstone Bank and Plumas Bank and applicable regulatory authorities after the date hereof.
4. Directors and Executive Officers. The directors and executive officers of the Surviving Bank immediately after the Merger shall be the directors and executive officers of Plumas Bank immediately prior to the Merger.
5. Effectiveness of Merger. The Merger shall become effective on the date and at the time that this Bank Merger Agreement, as certified by the California Secretary of State, is filed with the California Department of Financial Protection and Innovation, or as set forth in such filing (the “Effective Time”).
6. Effects of the Merger. At the Effective Time, the effect of the Merger shall be as provided in the General Corporation Law of the State of California. Without limiting the generality of the foregoing and subject thereto, at the Effective Time:
(a) all rights, franchises and interests of Cornerstone Bank in and to every type of property (real, personal and mixed), tangible and intangible, and choses in action shall be transferred to and vested in the Surviving Bank by virtue of the Merger without any deed or other transfer, and the Surviving Bank, without any order or other action on the part of any court or otherwise, shall hold and enjoy all rights of property, franchises and interests, including appointments, designations and nominations, and all other rights and interests as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver and committee, and in every other fiduciary capacity, in the same manner and to the same extent as such rights, franchises and interest were held or enjoyed by Cornerstone Bank immediately prior to the Effective Time; and
(b) the Surviving Bank shall be liable for all liabilities of Cornerstone Bank, fixed or contingent, including all deposits, accounts, debts, obligations and contracts thereof, matured or unmatured, whether accrued, absolute, contingent or otherwise, and whether or not reflected or reserved against on balance sheets, books of account or records thereof, and all rights of creditors or obligees and all liens on property of Cornerstone Bank shall be preserved unimpaired; after the Effective Time, the Surviving Bank will continue to issue savings accounts on the same basis as immediately prior to the Effective Time.
7. Effect on Shares of Stock.
(a) Cornerstone Bank. As of the Effective Time, each share of Cornerstone Bank common stock issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be cancelled without consideration. Any shares of Cornerstone Bank common stock held in the treasury of Cornerstone Bank prior to the Effective Time shall be retired and cancelled.
(b) Plumas Bank. Each share of Plumas Bank common stock issued and outstanding immediately prior to the Effective Time shall be unchanged and shall remain issued and outstanding.
8. Counterparts. This Bank Merger Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one agreement.
9. Governing Law. This Bank Merger Agreement shall be governed in all respects, including, but not limited to, validity, interpretation, effect and performance, by the laws of the State of California.
10. Amendment. Subject to applicable law, this Bank Merger Agreement may be amended, modified or supplemented only by written agreement of Plumas Bank and Cornerstone Bank at any time prior to the Effective Time.
11. Waiver. Any of the terms or conditions of this Bank Merger Agreement may be waived at any time by whichever of the parties hereto is, or the shareholders of which are, entitled to the benefit thereof by action taken by the Board of Directors of such waiving party.
12. Assignment. This Bank Merger Agreement may not be assigned by any party hereto without the prior written consent of the other party.
13. Termination. This Bank Merger Agreement shall terminate upon the termination of the Plan of Merger prior to the Effective Time in accordance with its terms. The Bank Merger Agreement may also be terminated at any time prior to the Effective Time by an instrument executed by Cornerstone Bank and Plumas Bank.
14. Condition Precedent. The Merger and the obligations of the parties under this Bank Merger Agreement shall be subject to the consummation of the Parent Merger pursuant to the Plan of Merger on or before the Effective Time.
15. Entire Agreement. Except as otherwise set forth in this Bank Merger Agreement and the Plan of Merger, the Plan of Merger and this Bank Merger Agreement (including the documents and the instruments referred to herein) constitute the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. To the extent of a conflict between the terms of the Agreement and the terms of this Bank Merger Agreement, the terms of the Plan of Merger shall control.
[Signature page follows]
IN WITNESS WHEREOF, each of Plumas Bank and Cornerstone Bank has caused this Bank Merger Agreement to be executed on its behalf by its duly authorized officers.
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PLUMAS BANK |
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By: |
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Name: |
Andrew Ryback |
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Title: |
President and Chief Executive Officer |
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By: |
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Name: |
Richard Belstock |
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Title: |
EVP and Chief Financial Officer |
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CORNERSTONE COMMUNITY BANCORP |
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By: |
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Name: |
Matthew B. Moseley |
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Title: |
President and Chief Financial Officer |
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By: |
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Michael G. Davis |
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Secretary |
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Exhibit 99.1
PLUMAS BANCORP TO ACQUIRE CORNERSTONE COMMUNITY BANCORP
RENO, Nevada, January 29, 2025 (GLOBE NEWSWIRE) -- Plumas Bancorp (“Plumas”) (Nasdaq: PLBC) and Cornerstone Community Bancorp (“Cornerstone”) (OTCPK: CRSB) jointly announce the signing of a definitive merger agreement (the “Agreement”) whereby Plumas will acquire Cornerstone in a stock and cash transaction valued at approximately $64.6 million (the “Transaction”) based on the closing price of $47.76 for Plumas shares on January 28, 2025. On a pro forma consolidated basis, the combined company would have approximately $2.3 billion in assets, $2.0 billion in deposits, $1.5 billion in loans, and operate 19 branches throughout Northern California and Western Nevada.
Cornerstone, headquartered in Red Bluff, California, is the parent company of Cornerstone Community Bank, a 19-year-old bank with approximately $658 million in assets as of December 31, 2024.
Cornerstone Community Bank operates through four branches throughout the Northern California counties of Shasta and Tehama.
“We are thrilled to announce our merger agreement with Cornerstone,” said Andrew J. Ryback, President and Chief Executive Officer, Plumas Bancorp. “Our companies share a connection to the people and businesses who have built their livelihoods throughout Northern California. Bringing together the team of local experts at Cornerstone Community Bank with Plumas Bank’s technology and small business expertise offers even greater services for the markets we serve. We look forward to providing long-term value to our combined shareholders, clients, team members, and the communities we serve.”
“We are excited about the opportunity to join forces with Plumas, bringing our banks together to carry on our focus of providing our customers, employees and all of our stakeholders with superior products, services and support,” said Matthew B. Moseley, President and Chief Executive Officer of Cornerstone, who will continue with Plumas following the acquisition. “Gaining access to Plumas’ network of offices and extensive product lines allows us to expand our footprint and offerings beyond the Shasta and Tehama communities we have served for the past 19 years. There are many similarities in our institutions and the small communities we serve. This combination will afford the two organizations the opportunity to utilize our combined years of experience to continue to deliver the outstanding experience our customers have come to expect.”
Under the terms of the Agreement, each issued and outstanding share of common stock of Cornerstone will be converted into the right to receive 0.6608 shares of common stock of Plumas and $9.75 in cash (subject to adjustment under certain circumstances). Based on the closing price of $47.76 for Plumas shares on January 28, 2025, the Transaction would result in an aggregate consideration of $64.6 million (inclusive of the value to Cornerstone stock option holders) and value of $41.31 per Cornerstone share.
Giving effect to the merger, Cornerstone shareholders will hold, in the aggregate, approximately 14% of Plumas’ outstanding common stock based on December 31, 2024 data. One current member of the Cornerstone board of directors will join the Plumas board of directors upon the merger.
Plumas expects the acquisition to be approximately 9% accretive to earnings per share in 2025 and 23% accretive in 2026. Plumas expects dilution to tangible book value per share of approximately 13% at close with a tangible book value earn-back period of less than three years. The boards of directors of Plumas and Cornerstone have approved the proposed merger, which is expected to occur in the second half of 2025 and remains subject to customary closing conditions, including obtaining approval by Cornerstone’s shareholders and bank regulatory authorities.
Plumas was advised in the Transaction by Raymond James & Associates, Inc. as financial advisor and Sheppard, Mullin, Richter & Hampton LLP as legal counsel. Cornerstone was advised by Performance Trust Capital Partners as financial advisor and Gary Steven Findley & Associates as legal counsel.
About Plumas Bancorp
Plumas Bancorp is headquartered in Reno, Nevada. Plumas Bancorp’s principal subsidiary is Plumas Bank, which was founded in 1980. Plumas Bank is a full-service community bank headquartered in Quincy, California. The bank operates fifteen branches: thirteen located in the California counties of Butte, Lassen, Modoc, Nevada, Placer, Plumas, Shasta and Sutter and two branches located in Nevada in the counties of Carson City and Washoe. The bank also operates two loan production offices located in Auburn, California and Klamath Falls, Oregon. Plumas Bank offers a wide range of financial and investment services to consumers and businesses and has received nationwide Preferred Lender status with the United States Small Business Administration. For more information on Plumas Bancorp and Plumas Bank, please visit our website at www.plumasbank.com.
About Cornerstone Community Bancorp
Cornerstone Community Bancorp is a bank holding company headquartered in Red Bluff, California and is the parent company for Cornerstone Community Bank, a California state-chartered bank with four locations across the Northern California counties of Shasta and Tehama. Founded in 2006, Cornerstone Community Bank has a proven track record of contributing to the success of the local economies they serve, contributing to the success of the people who live, work, and play in Shasta and Tehama.
Additional Information About the Proposed Transaction and Where to Find It
This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval.
Investors and security holders are urged to carefully review and consider each of Plumas’s public filings with the SEC, including but not limited to its Annual Reports on Form 10-K, its Proxy Statements, Current Reports on Form 8-K and Quarterly Reports on Form 10-Q. The documents filed by Plumas with the SEC may be obtained free of charge at Plumas’s website at www.plumasbank.com or at the SEC’s website at www.sec.gov. These documents may also be obtained free of charge from Plumas by requesting them in writing to Plumas Bancorp, 5050 Meadowood Mall Circle, Reno, Nevada 89502; Attention: Shareholder Relations, or by telephone at (775) 786-0907.
Plumas intends to file a registration statement on Form S-4 with the SEC which will include a proxy statement /prospectus which will be distributed to the shareholders of Cornerstone in connection with their vote on the Transaction. Before making any voting or investment decision, investors and security holders of Cornerstone are urged to carefully read the entire proxy statement/prospectus, when it becomes available, as well as any amendments or supplements, because it will contain important information about the proposed Transaction. Investors and security holders will be able to obtain the proxy statement/prospectus free of charge from the SEC’s website or from Plumas by writing to the address provided in the preceding paragraph.
The directors, executive officers and certain other members of management and employees at Cornerstone and Plumas may be deemed participants in the solicitation of proxies in favor of the Transaction. Information about the directors and executive officers of Cornerstone will be included in the proxy statement/prospectus regarding the proposed Transaction. Information regarding Plumas’s directors and executive officers is available in Plumas’s definitive proxy statement for its 2024 annual meeting of shareholders filed with the SEC on April 4, 2024, which is available free of charge from Plumas upon request as described above.
Cautionary Note Regarding Forward-Looking Statements
This release contains forward-looking statements regarding Plumas Bancorp (“Plumas”), Cornerstone Community Bancorp (“Cornerstone”) and the combined company and the proposed merger that are forward-looking statements subject to the safe harbor provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include but are not limited to plans, expectations, projections and statements about the benefits of the proposed merger, the timing of completion of the merger, and other statements that are not historical facts. Forward-looking statements involve risks and uncertainties that are difficult to predict. Factors that could cause or contribute to results differing from those in or implied in the forward-looking statements include but are not limited to the occurrence of any event, change or other circumstances that could give rise to the right of Plumas or Cornerstone to terminate the merger agreement; the outcome of any legal proceedings that may be instituted against Plumas or Cornerstone; delays in completing the merger; the failure to obtain necessary regulatory approvals (and the risk that such approvals impose conditions that could adversely affect the combined company or the expected benefits of the merger); the failure of Cornerstone to obtain shareholder approval or Plumas or Cornerstone to satisfy any of the other conditions to the merger on a timely basis or at all; the ability to complete the merger and integration of Plumas and Cornerstone successfully; costs being greater than anticipated; cost savings being less than anticipated; changes in economic conditions; the risk that the merger disrupts the business of the Plumas, Cornerstone or both; difficulties in retaining senior management, employees or customers; and other factors that may affect the future results of Plumas or Cornerstone. Further information regarding Plumas’s risk factors is contained in Plumas’s filings with the Securities and Exchange Commission, including its Form 10-K for the year ended December 31, 2023. Forward-looking statement made in this release speak only as of the date of this release. Neither Plumas nor Cornerstone undertake any obligation to revise or publicly release any revision or update to these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.
Investor Relations Contact:
Jamie Huynh
AVP, Assistant Corporate Secretary and Investor Relations Coordinator
Plumas Bank
Phone: 530.283.7305 ext. 8908
Email: jamie.huynh@plumasbank.com
Exhibit 99.2
Plumas Bancorp (NASDAQ:PLBC)
과거 데이터 주식 차트
부터 12월(12) 2024 으로 1월(1) 2025
Plumas Bancorp (NASDAQ:PLBC)
과거 데이터 주식 차트
부터 1월(1) 2024 으로 1월(1) 2025
