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REGISTRATION NO. 33-63157
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO.1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FIRST CHARTER CORPORATION
(Exact name of registrant as specified in its charter)
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NORTH CAROLINA 6022 56-1355866
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
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22 UNION STREET, NORTH
CONCORD, NORTH CAROLINA 28025
(704) 786-3300
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
LAWRENCE M. KIMBROUGH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
FIRST CHARTER CORPORATION
22 UNION STREET, NORTH
CONCORD, NORTH CAROLINA 28025
(704) 786-3300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPY TO:
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J. RICHARD HAZLETT ANTHONY GAETA, JR.
ANNE F. TEAM WARD AND SMITH, P.A.
SMITH HELMS MULLISS & MOORE, L.L.P. TWO HANNOVER SQUARE
227 NORTH TRYON STREET SUITE 2400
CHARLOTTE, NORTH CAROLINA 28202 RALEIGH, NORTH CAROLINA 27602
(704) 343-2000 (919) 836-1800
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. ( )
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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FIRST CHARTER CORPORATION
CROSS REFERENCE SHEET
PURSUANT TO REGULATION S-K, ITEM 501(B)
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FORM S-4 ITEM JOINT PROXY STATEMENT-PROSPECTUS HEADING
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Information About the Transaction
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus.................. Facing Page of Registration Statement; Cross Reference Sheet;
Outside Front Cover Page of Joint Proxy Statement-Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus...................................... TABLE OF CONTENTS; AVAILABLE INFORMATION; INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information........................... SUMMARY
4. Terms of the Transaction........................ SUMMARY; THE MERGER; COMPARISON OF FIRST CHARTER COMMON STOCK
AND UNION COMMON STOCK
5. Pro Forma Financial Information................. SUMMARY; PRO FORMA CONDENSED FINANCIAL INFORMATION
6. Material Contacts with the Company Being
Acquired........................................ THE MERGER -- Background of and Reasons for the Merger
7. Additional Information Required for Reoffering
by Persons and Parties Deemed to be
Underwriters.................................... *
8. Interests of Named Experts and Counsel.......... LEGAL OPINIONS; EXPERTS
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities..................................... *
Information About the Registrant
10. Information with Respect to S-3 Registrants..... *
11. Incorporation of Certain Information by
Reference....................................... *
12. Information with Respect to S-2 or S-3
Registrants..................................... INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE; SUMMARY;
RECENT DEVELOPMENTS; INFORMATION ABOUT FIRST CHARTER
13. Incorporation of Certain Information............ INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
14. Information with Respect to Registrants other
than S-2 or S-3 Registrants..................... *
Information About the Company Being Acquired
15. Information with Respect to S-3 Companies....... *
16. Information with Respect to S-2 or S-3
Companies....................................... INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE; SUMMARY;
RECENT DEVELOPMENTS; INFORMATION ABOUT UNION
17. Information with Respect to Companies other than
S-2 or S-3 Companies............................ *
Voting and Management Information
18. Information if Proxies, Consents or Authori-
zations are to be Solicited..................... INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE; SUMMARY; THE
SPECIAL MEETINGS; THE MERGER -- Dissenters' Rights of
Shareholders; THE MERGER -- Interests of Certain Persons in
the Merger; INFORMATION ABOUT FIRST CHARTER -- Management and
Additional Information; INFORMATION ABOUT UNION -- Management
and Additional Information; SHAREHOLDER PROPOSALS
19. Information if Proxies, Consents or Authori-
zations are not to be Solicited or in an
Exchange Offer.................................. *
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* Item is omitted because answer is negative or item is inapplicable.
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PRELIMINARY COPY SUBJECT TO COMPLETION, DATED NOVEMBER 8, 1995
JOINT PROXY STATEMENT
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FIRST CHARTER CORPORATION BANK OF UNION
SPECIAL MEETING OF SHAREHOLDERS SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 14, 1995 TO BE HELD ON DECEMBER 14, 1995
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PROSPECTUS
FIRST CHARTER CORPORATION
COMMON STOCK
This Prospectus of First Charter Corporation ("First Charter") relates to
up to 1,644,672 shares of common stock, $5 par value per share (the "First
Charter Common Stock"), of First Charter offered hereby to the shareholders of
Bank of Union ("Union") upon consummation of a proposed merger (the "Merger") of
an interim bank to be organized by First Charter (the "Interim Bank") into Union
pursuant to an Agreement and Plan of Merger between First Charter and Union,
dated as of September 13, 1995 (the "Agreement"). Upon completion of the Merger,
each share of Union common stock, $1.25 par value per share ("Union Common
Stock"), will be converted into 0.75 shares of First Charter Common Stock (the
"Exchange Ratio"). Any options to purchase Union Common Stock remaining
unexercised upon consummation of the Merger will become options to purchase a
number of shares of First Charter Common Stock computed according to the
Exchange Ratio. Each holder of Union Common Stock who would otherwise be
entitled to receive a fractional share of First Charter Common Stock (after
taking into account all of a shareholder's certificates) will receive, in lieu
thereof, the equivalent cash value of such fractional share, without interest.
Consummation of the Merger is subject to several conditions, including, among
others, the approval of the shareholders of each of First Charter and Union and
the approval of appropriate regulatory authorities. See "THE MERGER."
This Prospectus also serves as the Joint Proxy Statement of First Charter
and of Union in connection with the solicitation of proxies to be used at their
respective Special Meetings of Shareholders, each to be held on December 14,
1995. This Joint Proxy Statement-Prospectus is first being mailed to
shareholders of First Charter and shareholders of Union on or about November ,
1995.
First Charter Common Stock is reported on The NASDAQ Stock Market as a
NASDAQ National Market security under the trading symbol "FCTR." The average of
the high and low sales prices of First Charter Common Stock as reported by The
NASDAQ Stock Market on November 10, 1995 was $ per share and on September
13, 1995, the last trading day preceding public announcement of the proposed
Merger, was $20.50 per share. Union Common Stock is traded in the over-
the-counter market and is listed in the National Daily Quotation Service "Pink
Sheets." The average of the bid and asked prices of Union Common Stock on
November 10, 1995 was $ per share and on September 13, 1995 was $8.75 per
share. See "PRICE RANGE OF COMMON STOCK AND DIVIDENDS."
ANY SHAREHOLDER OF UNION WHO DESIRES TO DISSENT FROM THE MERGER HAS THE
RIGHT TO DISSENT UNDER APPLICABLE PROVISIONS OF NORTH CAROLINA LAW AND, UPON
COMPLIANCE WITH APPLICABLE STATUTORY PROCEDURES, TO RECEIVE PAYMENT OF THE VALUE
OF HIS OR HER SHARES OF UNION COMMON STOCK. A UNION SHAREHOLDER WHO WISHES TO
DISSENT FROM THE MERGER MUST NOT VOTE ANY SHARES IN FAVOR OF THE AGREEMENT. SEE
"THE MERGER -- DISSENTERS' RIGHTS OF SHAREHOLDERS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR THE FEDERAL
DEPOSIT INSURANCE CORPORATION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION, ANY STATE SECURITIES COMMISSION OR THE FEDERAL
DEPOSIT INSURANCE CORPORATION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS JOINT PROXY STATEMENT-PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SHARES OF FIRST CHARTER COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS
OR BANK DEPOSITS, ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANKING OR
NON-BANKING AFFILIATE OF FIRST CHARTER AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
The date of this Joint Proxy Statement-Prospectus is November , 1995.
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
OTHER THAN THOSE CONTAINED OR INCORPORATED IN THIS JOINT PROXY
STATEMENT-PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY FIRST CHARTER OR UNION.
THIS JOINT PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO EXCHANGE
OR SELL, OR A SOLICITATION OF AN OFFER TO EXCHANGE OR PURCHASE, THE FIRST
CHARTER COMMON STOCK OFFERED BY THIS JOINT PROXY STATEMENT-PROSPECTUS, NOR DOES
IT CONSTITUTE THE SOLICITATION OF A PROXY, IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR TO OR FROM ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS JOINT
PROXY STATEMENT-PROSPECTUS NOR ANY DISTRIBUTION OF FIRST CHARTER COMMON STOCK
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF FIRST CHARTER OR UNION SINCE THE DATE
HEREOF OR THAT INFORMATION IN THIS JOINT PROXY STATEMENT-PROSPECTUS OR IN THE
DOCUMENTS INCORPORATED HEREIN BY REFERENCE IS CORRECT AS OF ANYTIME SUBSEQUENT
TO THE DATE HEREOF OR THE DATES THEREOF. THE INFORMATION CONTAINED IN THIS JOINT
PROXY STATEMENT-PROSPECTUS SPEAKS AS OF THE DATE HEREOF UNLESS OTHERWISE
SPECIFICALLY INDICATED. INFORMATION CONTAINED IN THIS JOINT PROXY
STATEMENT-PROSPECTUS REGARDING FIRST CHARTER, AND PRO FORMA INFORMATION, HAS
BEEN FURNISHED BY FIRST CHARTER, AND INFORMATION HEREIN REGARDING UNION HAS BEEN
FURNISHED BY UNION.
TABLE OF CONTENTS
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PAGE
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AVAILABLE INFORMATION................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....... 3
SUMMARY............................................... 4
RECENT DEVELOPMENTS................................... 14
THE SPECIAL MEETINGS.................................. 16
General............................................. 16
Date, Place and Time................................ 16
Proxies............................................. 16
Solicitation of Proxies............................. 17
Record Date and Voting Rights....................... 17
Recommendation of the Boards of Directors........... 18
THE MERGER............................................ 18
Description of the Merger........................... 18
Effective Time of the Merger........................ 19
Exchange of Certificates............................ 19
Background of and Reasons for the Merger............ 19
Opinions of Financial Advisors...................... 22
Effect on Employee Stock Options.................... 28
Conditions to the Merger............................ 28
Conduct of Business Prior to the Merger............. 29
Modification, Waiver and Termination................ 30
Certain Federal Income Tax Consequences............. 30
Management and Operations After the Merger.......... 31
Interests of Certain Persons in the Merger.......... 31
Stock Option Agreement Between First Charter and
Union............................................ 32
Dissenters' Rights of Shareholders.................. 34
Accounting Treatment................................ 35
Bank Regulatory Matters............................. 35
Restrictions on Resales by Affiliates............... 36
Dividend Reinvestment Plan.......................... 37
PRICE RANGE OF COMMON STOCK AND DIVIDENDS............. 37
Market Prices....................................... 37
Dividends........................................... 38
PRO FORMA CONDENSED FINANCIAL INFORMATION............. 39
INFORMATION ABOUT FIRST CHARTER....................... 43
General............................................. 43
Management and Additional Information............... 43
Supervision and Regulation.......................... 43
INFORMATION ABOUT UNION............................... 45
General............................................. 45
Voting Securities and Beneficial Ownership
Thereof.......................................... 46
Management and Additional Information............... 46
Supervision and Regulation.......................... 46
COMPARISON OF FIRST CHARTER COMMON STOCK AND UNION
COMMON STOCK........................................ 47
First Charter Common Stock.......................... 47
Union Common Stock.................................. 48
Comparison of Voting and Other Rights............... 49
LEGAL OPINIONS........................................ 51
EXPERTS............................................... 51
SHAREHOLDER PROPOSALS................................. 51
INDEPENDENT PUBLIC ACCOUNTANTS........................ 51
OTHER MATTERS......................................... 52
APPENDIX A -- Agreement and Plan of Merger............ A-1
APPENDIX B -- Opinion of Wheat, First Securities,
Inc................................................. B-1
APPENDIX C -- Opinion of Baxter Fentriss and
Company............................................. C-1
APPENDIX D -- Provisions of North Carolina Law
Relating to Dissenters' Appraisal Rights............ D-1
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AVAILABLE INFORMATION
First Charter has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 under the Securities Act of
1933, as amended (the "Securities Act"), relating to the shares of First Charter
Common Stock to be issued in connection with the Merger (the "Registration
Statement"). For further information pertaining to the shares of First Charter
Common Stock to which this Joint Proxy Statement-Prospectus relates, reference
is made to such Registration Statement, including the exhibits and schedules
filed as a part thereof. As permitted by the rules and regulations of the
Commission, certain information included in the Registration Statement is
omitted from this Joint Proxy Statement-Prospectus. In addition, First Charter
is subject to certain of the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files certain reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference room of the Commission, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and copies of such materials
can be obtained by mail from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. In
addition, copies of such materials are available for inspection and reproduction
at the public reference facilities of the Commission at its New York Regional
Office, 7 World Trade Center, Suite 1300, New York, New York 10048; and at its
Chicago Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511.
Union is also subject to certain of the informational requirements of the
Exchange Act and, in accordance therewith, files certain reports, proxy
statements and other information with the Federal Deposit Insurance Corporation
(the "FDIC"). Such reports, proxy statements and other information can be
inspected and copied at the Registration and Disclosure Section of the FDIC at
1776 F Street, N.W., Room F-630, Washington, D.C. 20006, at prescribed rates, or
by calling (202) 898-8920.
Copies of the following documents are delivered herewith: (i) First
Charter's 1994 Annual Report to Shareholders; (ii) First Charter's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995; (iii) Union's 1994
Annual Report to Shareholders; and (iv) Union's Quarterly Report on Form F-4 for
the quarter ended June 30, 1995.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, or portions of documents, as applicable,
previously filed by First Charter with the Commission are hereby incorporated by
reference in this Joint Proxy Statement-Prospectus: (a) its Annual Report on
Form 10-K for the year ended December 31, 1994, as amended by its Form 10-K/A
Amendment No. 1 to Annual Report on Form 10-K for the year ended December 31,
1994; (b) its Quarterly Reports on Form 10-Q for the quarters ended March 31,
1995 and June 30, 1995; (c) its Current Reports on Form 8-K filed September 22,
1995 and November , 1995; (d) the description of First Charter Common Stock
contained in its registration statement filed pursuant to Section 12 of the
Exchange Act and any amendment or report filed for the purpose of updating such
description, including its Current Report on Form 8-K filed November , 1995;
and (e) the following portions of First Charter's 1994 Annual Report to
Shareholders: inside front cover under "Stock Information and Dividends" and
"Quarterly Common Stock Price Ranges and Dividends"; page 1 under "Selected
Consolidated Financial Data"; page 30 under Note (16) of the "Notes to
Consolidated Financial Statements"; and pages 31 through 39 under "Management's
Discussion and Analysis of Results of Operations and Financial Condition."
The following documents, or portions of documents, as applicable,
previously filed by Union with the FDIC are included as exhibits to the
Registration Statement and are hereby incorporated by reference in this Joint
Proxy Statement-Prospectus: (a) its Annual Report on Form F-2 for the year ended
December 31, 1994, as amended by Amendment No. 1 to Annual Report on Form F-2
for the year ended December 31, 1994, and Amendment No. 2 to Annual Report on
Form F-2 for the year ended December 31, 1994; (b) its Quarterly Report on Form
F-4 for the quarter ended March 31, 1995 and its Quarterly Report on Form F-4
for the quarter ended June 30, 1995, as amended by its Amendment No. 1 to Form
F-4 for the quarter ended June 30, 1995; (c) its Current Reports on Form F-3
filed May 3, 1995 and September 21, 1995; and (d) the following portions of
Union's 1994 Annual Report to Shareholders: page 1 under "Selected Financial
Data"; and pages 3 through 5 under "Management's Discussion and Analysis of
Results of Operations and Financial Condition."
THIS JOINT PROXY STATEMENT-PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THE DOCUMENTS
RELATING TO FIRST CHARTER (OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH EXHIBITS
ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS) ARE AVAILABLE
WITHOUT CHARGE UPON REQUEST FROM ROBERT O. BRATTON, EXECUTIVE VICE PRESIDENT,
FIRST CHARTER CORPORATION, POST OFFICE BOX 228, CONCORD, NORTH CAROLINA
28026-0228, TELEPHONE (704) 786-3300. THE DOCUMENTS RELATING TO UNION (OTHER
THAN EXHIBITS TO SUCH DOCUMENTS WHICH EXHIBITS ARE NOT SPECIFICALLY INCORPORATED
BY REFERENCE IN SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE UPON REQUEST FROM
DAVID C. MCGUIRT, EXECUTIVE VICE PRESIDENT AND SECRETARY, BANK OF UNION, POST
OFFICE BOX 1459, MONROE, NORTH CAROLINA 28111-1459, TELEPHONE (704) 289-9555. TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY DECEMBER
7, 1995. PERSONS REQUESTING COPIES OF EXHIBITS TO SUCH DOCUMENTS THAT ARE NOT
SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS WILL BE CHARGED THE
COSTS OF REPRODUCTION AND MAILING.
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SUMMARY
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN INFORMATION SET FORTH ELSEWHERE
IN THIS JOINT PROXY STATEMENT-PROSPECTUS AND IS NOT INTENDED TO BE COMPLETE. IT
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO MORE DETAILED INFORMATION CONTAINED
ELSEWHERE IN THIS JOINT PROXY STATEMENT-PROSPECTUS, THE ACCOMPANYING APPENDICES
AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE.
THE COMPANIES
FIRST CHARTER. First Charter, a bank holding company registered under the
Bank Holding Company Act of 1956, as amended (the "BHCA"), was organized under
the laws of the State of North Carolina in 1983 and has as its principal asset
the stock of its subsidiary, First Charter National Bank, a national banking
association ("FCNB"). FCNB provides banking and banking-related services through
a network of twelve branches located in Cabarrus, Rowan and Mecklenburg
Counties, North Carolina. At June 30, 1995, First Charter had total assets of
approximately $338 million and total deposits of approximately $280 million. The
principal executive offices of First Charter are located at 22 Union Street,
North, Concord, North Carolina 28025, and its telephone number is (704)
786-3300. All references herein to First Charter refer to First Charter
Corporation and its subsidiary, FCNB, unless the context otherwise requires.
Interim Bank is or upon formation will be a North Carolina banking corporation
and a direct subsidiary of First Charter.
For additional information regarding First Charter and the combined company
that would result from the Merger, see "THE MERGER" and "INFORMATION ABOUT FIRST
CHARTER."
UNION. Union is a state-chartered commercial bank organized under the laws
of North Carolina in 1985. Union provides general banking services through a
network of five branch offices located in Union and Mecklenburg Counties, North
Carolina. Through its subsidiary, BOU Financial, Inc. ("BOU Financial"), Union
also offers discount brokerage services, insurance and annuity sales and
financial planning services. At June 30, 1995, Union had total assets of
approximately $134 million and total deposits of approximately $117 million. The
principal executive offices of Union are located at 201 North Charlotte Avenue,
Monroe, North Carolina 28112, and its telephone number is (704) 289-9555.
For additional information regarding Union, see "THE MERGER" and
"INFORMATION ABOUT UNION."
THE MERGER
The Agreement provides for the merger of Interim Bank with and into Union,
with Union to be the surviving entity. Except as hereinafter described, upon
consummation of the Merger, each outstanding share of Union Common Stock (other
than shares as to which dissenters' rights of appraisal have been perfected)
will be converted into 0.75 shares of First Charter Common Stock. Any shares of
Union Common Stock owned by First Charter or FCNB (other than shares held in a
fiduciary capacity or as a result of debts previously contracted) immediately
prior to the Effective Time (as hereinafter defined) will be cancelled. Each
outstanding share of First Charter's Common Stock will remain outstanding.
Holders of Union Common Stock will receive cash (without interest) in lieu of
any fractional shares of First Charter Common Stock that would otherwise be
issuable. As of the record date for the Special Meeting of Union's shareholders,
there were 2,192,270 shares of Union Common Stock outstanding. Of this amount,
First Charter owned 69,361 shares directly for its own account. In addition,
there were outstanding options to purchase an aggregate of 626 shares of Union
Common Stock.
If the Merger is consummated, a total of up to 1,592,181 shares of First
Charter Common Stock would be issued in the Merger to Union shareholders and
option holders (assuming that no options are exercised prior to the Effective
Time and assuming the cancellation of the 69,361 shares owned directly by First
Charter for its own account), representing approximately 26% of the shares of
First Charter Common Stock to be outstanding immediately after the Effective
Time.
The Merger is subject to the satisfaction of certain conditions, including
among others, the approvals of the respective shareholders of First Charter and
Union, the effectiveness under the Securities Act of a Registration Statement
for shares of First Charter Common Stock to be issued in the Merger, and
approval of certain regulatory agencies.
For additional information relating to the Merger, see "THE MERGER."
THE SPECIAL MEETINGS
FIRST CHARTER. The Special Meeting of First Charter's shareholders (the
"First Charter Special Meeting") to consider and vote on the Agreement and the
transactions contemplated thereby, including the issuance of First Charter
Common Stock upon consummation of the Merger, will be held on Thursday, December
14, 1995 at 10:00 a.m., local time, at the Cabarrus Country Club, located on
Weddington Road, in Concord, North Carolina. Only holders of record of First
Charter Common
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Stock at the close of business on November 7, 1995 will be entitled to vote at
the First Charter Special Meeting. At such date, there were outstanding and
entitled to vote 4,640,213 shares of First Charter Common Stock. Each share of
First Charter Common Stock is entitled to one vote.
UNION. The Special Meeting of Union's shareholders (the "Union Special
Meeting," and together with the First Charter Special Meeting, the "Special
Meetings") to consider and vote on the Agreement and the transactions
contemplated thereby will be held on Thursday, December 14, 1995 at 10:00 a.m.,
local time, at Rolling Hills Country Club, located on Roosevelt Boulevard, in
Monroe, North Carolina. Only holders of record of Union Common Stock at the
close of business on November 8, 1995 will be entitled to vote at the Union
Special Meeting. At such date, there were outstanding and entitled to vote
2,192,270 shares of Union Common Stock. Each share of Union Common Stock is
entitled to one vote.
For additional information relating to the Special Meetings, see "THE
SPECIAL MEETINGS."
VOTES REQUIRED
Approval of the Agreement and the transactions contemplated thereby,
including the issuance of First Charter Common Stock, by the shareholders of
First Charter requires the affirmative vote of a majority of the votes cast by
holders of First Charter Common Stock. Approval of the Agreement and the
transactions contemplated thereby by the shareholders of Union requires the
affirmative vote of the holders of two-thirds of the outstanding shares of Union
Common Stock.
As of the record date for the First Charter Special Meeting, First
Charter's directors and executive officers and their affiliates held
approximately 11.9% of the outstanding First Charter Common Stock entitled to
vote at the First Charter Special Meeting. As of the record date for the Union
Special Meeting, Union's directors and executive officers and their affiliates
held approximately 16.3% of the outstanding Union Common Stock entitled to vote
at the Union Special Meeting. Each of the directors of Union has agreed to vote
in favor of the Agreement. See "THE MERGER -- Interests of Certain Persons in
the Merger."
For additional information relating to voting rights and the Special
Meetings, see "THE SPECIAL MEETINGS -- Record Date and Voting Rights."
PROXIES
The copies of this Joint Proxy Statement-Prospectus that are being mailed
to shareholders of First Charter are accompanied by a form of proxy solicited by
the Board of Directors of First Charter for use at the First Charter Special
Meeting. A shareholder of First Charter may revoke any proxy given pursuant to
this solicitation by delivering to the Secretary of First Charter, prior to or
at the First Charter Special Meeting, a written notice revoking the proxy or a
duly executed proxy relating to the same shares bearing a later date, or by
voting in person at the First Charter Special Meeting. See "THE SPECIAL
MEETINGS -- Proxies."
The copies of this Joint Proxy Statement-Prospectus that are being mailed
to the shareholders of Union are accompanied by a form of proxy solicited by the
Board of Directors of Union for use at the Union Special Meeting. A shareholder
of Union may revoke any proxy given pursuant to this solicitation by delivering
to the Secretary of Union, prior to or at the Union Special Meeting, a written
notice revoking the proxy or a duly executed proxy relating to the same shares
bearing a later date, or by voting in person at the Union Special Meeting. See
"THE SPECIAL MEETINGS -- Proxies."
RECOMMENDATION OF BOARDS OF DIRECTORS
The Board of Directors of First Charter and Board of Directors of Union
each has unanimously approved the Agreement and the transactions contemplated
thereby. Each Board of Directors believes that the Merger is fair to and in the
best interests of its respective shareholders and recommends a vote "FOR" the
matters to be voted upon by such shareholders in connection with the Merger. For
a discussion of the factors considered by the respective Boards of Directors in
reaching their conclusions, see "THE MERGER -- Background of and Reasons for the
Merger." Certain directors of Union may have interests in the Merger which arise
from proposed membership on the Board of Directors of First Charter, receipt of
options to purchase First Charter Common Stock and receipt of certain other
benefits as continuing employees of Union. See "THE MERGER -- Management and
Operations After the Merger" and " -- Interests of Certain Persons in the
Merger."
OPINIONS OF FINANCIAL ADVISORS
First Charter's financial advisor, Wheat, First Securities, Inc. ("Wheat
First"), has rendered its written opinion to the Board of Directors of First
Charter that the Exchange Ratio is fair to the shareholders of First Charter
from a financial point
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of view. A copy of such opinion, updated to the date hereof, is set forth as
Appendix B to this Joint Proxy Statement-Prospectus and should be read in its
entirety with respect to the assumptions made, other matters considered and
limitations on the reviews undertaken.
Union's financial advisor, Baxter Fentriss and Company ("Baxter Fentriss"),
has rendered its written opinion to the Board of Directors of Union that the
Exchange Ratio is fair to the shareholders of Union from a financial point of
view. A copy of such opinion, updated to the date hereof, is set forth as
Appendix C to this Joint Proxy Statement-Prospectus and should be read in its
entirety with respect to the assumptions made, other matters considered and
limitations on the review undertaken.
See "THE MERGER -- Opinions of Financial Advisors."
EFFECTIVE TIME OF THE MERGER
The Merger will become effective at the date and time specified in Articles
of Merger (the "Effective Time") to be filed with the North Carolina Secretary
of State following approval by the North Carolina Banking Commission (the
"Banking Commission"). Unless otherwise agreed by First Charter and Union, the
Effective Time will occur on or promptly after the first business day following
the last to occur of (i) the expiration of all required waiting periods
following the date of the order of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") approving the Merger pursuant to the BHCA,
the date of the order of the FDIC approving the Merger pursuant to the Bank
Merger Act, or the date of the order of the Banking Commission approving the
Merger, as applicable; (ii) the effective date of the last order, approval or
exemption of any other Federal or state regulatory agency approving or exempting
the Merger if such action is required; (iii) the day of expiration of all
required waiting periods after the filing of all notices to all Federal or state
regulatory agencies for consummation of the Merger; and (iv) the date on which
the Union shareholders and the First Charter shareholders approve the Agreement.
If approved by the First Charter and Union shareholders and applicable
regulatory authorities, the parties currently expect that the Effective Time
will occur by December 31, 1995 or as soon as practicable thereafter, although
there can be no assurance as to whether or when the Merger will occur. See "THE
MERGER -- Effective Time of the Merger" and " -- Conditions to the Merger."
CONDITIONS TO THE MERGER
The respective obligations of First Charter and Union to consummate the
Merger are subject to certain conditions, including (i) the receipt of all
regulatory approvals and expiration of all waiting periods; (ii) the approval by
the respective shareholders of First Charter and Union of the Agreement and the
transactions contemplated thereby by the vote required under applicable law at
the Special Meetings; (iii) the receipt by First Charter of an opinion of KPMG
Peat Marwick LLP, independent accountants for First Charter, that the Merger
qualifies for pooling-of-interests accounting treatment; (iv) the receipt of an
opinion of counsel to First Charter to the effect that the Merger will
constitute a reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"), and that no gain or loss will be
recognized by the shareholders of Union to the extent that they receive solely
First Charter Common Stock in exchange for their shares of Union Common Stock in
the Merger; and (v) the satisfaction of certain other conditions customary in
transactions of this nature. See "THE MERGER -- Conditions to the Merger."
MODIFICATION, WAIVER AND TERMINATION
The Agreement provides that First Charter may at any time change the method
of its acquisition of Union if and to the extent that it deems such a change
desirable. In no case, however, may any such change (i) alter the amount or kind
of consideration to be received by Union shareholders under the Agreement; (ii)
adversely affect the tax treatment to Union shareholders as the result of the
receipt of such consideration; (iii) take the form of an asset purchase
agreement; (iv) effect an acquisition in which Union shall not continue to
operate as a separate banking corporation immediately following the Effective
Time; or (v) alter or change certain employment arrangements to be provided
certain officers of Union upon consummation of the Merger. See "THE
MERGER -- Description of the Merger," " -- Modification, Waiver and Termination"
and " -- Interests of Certain Persons in the Merger."
The Agreement also provides that each party may waive any of the conditions
precedent to its obligations to consummate the Merger, to the extent legally
permitted. The Agreement further provides that it may be terminated and the
Merger abandoned at any time prior to the Effective Time (i) by mutual consent
of the Boards of Directors of First Charter and Union; (ii) by the respective
Board of Directors of First Charter or Union if the Effective Time has not
occurred by June 30, 1996; (iii) by the Board of Directors of First Charter if
the Federal Reserve Board, the FDIC or the Banking Commission has
6
<PAGE>
approved the Merger subject to conditions that in the judgment of First Charter
would restrict its operations or business activities after the Effective Time;
(iv) by the respective Board of Directors of First Charter or Union pursuant to
notice in the event of a breach or failure by the other party of any
representation, warranty, covenant or agreement contained therein that is
material in the context of the transactions contemplated by the Agreement and
which has not been, or cannot be, cured within 30 days after written notice of
such breach is given; (v) by the Board of Directors of Union if the average
price of First Charter Common Stock for the twenty trading days ending the date
that is four business days prior to the Effective Time is less than $14.00 per
share; or (vi) by the Board of Directors of First Charter if First Charter
determines that either (A) the shareholders' equity of Union is less than as
reported in Union's consolidated balance sheet as of June 30, 1995 or (B) the
loan portfolio of Union presents a risk of noncollectibility unacceptable to
First Charter. See "THE MERGER -- Modification, Waiver and Termination. "
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Following the Merger, it is expected that the Board of Directors of First
Charter will comprise 18 persons, consisting of all the current members of the
Board of Directors of First Charter, plus H. Clark Goodwin, currently President,
Chief Executive Officer and Director of Union, Frank H. Hawfield, Jr., currently
Chairman of the Board of Union, and James B. Fincher and Dr. Jerry E. McGee,
each currently a Director of Union. In addition, it is expected that Mr. Goodwin
shall also become a member of the Executive Committee of the Board of Directors
of First Charter following the Effective Time. Also following the Merger, it is
expected that the Board of Directors of Union will comprise 17 persons,
consisting of all the current members of the Board of Directors of Union, plus
Lawrence M. Kimbrough, currently President, Chief Executive Officer and Director
of First Charter, and J. Roy Davis, Jr., currently Chairman of the Board of
First Charter.
Following the Merger and for an unspecified time in the future, First
Charter intends to operate Union as a separate state banking subsidiary under
the name "Bank of Union."
See "THE MERGER -- Management and Operations After the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Union's Board of Directors and management may have
interests in the Merger in addition to their interests, if any, as shareholders
of Union generally. These arise from, among other things, proposed membership
for certain Union directors on the Board of Directors of First Charter, receipt
by certain executive officers of Union (upon consummation of the Merger) of
options to purchase First Charter Common Stock, the continuation of employment
agreements of certain officers of Union following the Merger, the receipt of
certain additional employee benefits by certain officers of Union following the
Merger and provisions of the Agreement providing for the continuation of Union's
existing directors' and officers' liability insurance following the Merger. See
"THE MERGER -- Management and Operations After the Merger" and " -- Interests of
Certain Persons in the Merger."
STOCK OPTION AGREEMENT BETWEEN FIRST CHARTER AND UNION
Following the execution of the Agreement, First Charter and Union entered
into a Stock Option Agreement dated September 30, 1995 (the "Stock Option
Agreement") whereby Union granted First Charter an irrevocable option (the
"Option") to purchase up to 436,261 shares (the "Option Shares"), subject to
certain adjustments, of Union Common Stock, at an exercise price of $9.00 per
share. The Option Shares, if issued, would represent approximately 19.9% of the
Union Common Stock issued and outstanding, without giving effect to the issuance
of any Option Shares pursuant to an exercise of the Option. The number of Option
Shares subject to the Option will be increased to the extent that Union issues
additional shares of Union Common Stock (otherwise than pursuant to an exercise
of the Option), such that the number of Option Shares continues to equal 19.9%
of the Union Common Stock then issued and outstanding, without giving effect to
the issuance of Option Shares pursuant to an exercise of the Option. The Option
is exercisable only upon the occurrence of certain events generally related to a
change in control of or a material business combination by Union, none of which
events has occurred as of the date hereof. The Option also allows the holder
thereof to require that Union repurchase (at a price determined as specified in
the Stock Option Agreement) the Option, or the Option Shares acquired pursuant
to the exercise of the Option, if certain conditions are met. Union granted its
Option as a condition of and in consideration for First Charter's entering into
the Agreement. See "THE MERGER -- Stock Option Agreement Between First Charter
and Union."
7
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a reorganization under Section
368(a)(1) of the Code. Smith Helms Mulliss & Moore, L.L.P., counsel to First
Charter, has delivered an opinion to the effect that the Merger will constitute
a reorganization within the meaning of Section 368 of the Code and that no gain
or loss will be recognized by the Union shareholders as a result of the Merger
to the extent that they receive solely shares of First Charter Common Stock in
exchange for their shares of Union Common Stock. For a more complete description
of the federal income tax consequences, see "THE MERGER -- Certain Federal
Income Tax Consequences."
DISSENTERS' RIGHTS
Under the provisions of North Carolina law, holders of Union Common Stock
will be entitled to dissenters' rights of appraisal with respect to payment for
their shares of Union Common Stock provided that the Merger is consummated and
such shareholders comply with the required statutory procedures. Failure to take
any necessary step in connection with the exercise of such rights may result in
termination or waiver of dissenters' rights. A Union shareholder who wishes to
dissent from the Merger must not vote any shares of Union Common Stock in favor
of the approval of the Agreement and the transactions contemplated thereby.
Under North Carolina law, holders of First Charter Common Stock will not be
entitled to dissenters' rights of appraisal with respect to their shares of
First Charter Common Stock. A copy of applicable provisions of North Carolina
law is attached hereto as Appendix D. For a more complete description of
dissenters' rights of appraisal, see "THE MERGER -- Dissenters' Rights of
Shareholders."
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for as a pooling of
interests under generally accepted accounting principles. It is a condition to
consummation of the Merger that First Charter receive an opinion from KPMG Peat
Marwick LLP, independent accountants of First Charter, that the Merger will be
accounted for as a pooling of interests. See "THE MERGER -- Accounting
Treatment."
BANK REGULATORY MATTERS
The Merger is subject to the approval of the Federal Reserve Board and the
FDIC. In addition, the Merger is subject to the approval of the Banking
Commission. The Merger may not be consummated until expiration of applicable
waiting periods. First Charter and Union have filed all required applications
for regulatory review and approval or notice with the Federal Reserve Board, the
FDIC and the Banking Commission. There can be no assurance that such approvals
will be obtained or as to the date of any such approvals. See "THE MERGER
-- Conditions to the Merger" and " -- Bank Regulatory Matters."
RESALES BY AFFILIATES
Affiliates of Union have entered into agreements that they will not
transfer any shares of First Charter Common Stock received by them as a result
of the Merger, except in compliance with the applicable provisions of the
Securities Act. See "THE MERGER -- Restrictions on Resales by Affiliates."
COMPARISON OF FIRST CHARTER COMMON STOCK AND UNION COMMON STOCK
First Charter is a corporation organized under the laws of North Carolina,
and, accordingly, the rights of shareholders and other corporate matters
relating to First Charter Common Stock are controlled by the North Carolina
Business Corporation Act (the "NCBCA"). Union is a banking corporation organized
under the laws of North Carolina, with the rights of its shareholders and other
corporate matters relating to Union Common Stock controlled by the NCBCA and the
North Carolina banking statutes. Shareholders of Union, whose rights are
governed by Union's Articles of Incorporation and Bylaws and the relevant
provisions of North Carolina law, will become shareholders of First Charter upon
consummation of the Merger. As shareholders of First Charter, their rights will
be governed by First Charter's Restated Articles of Incorporation, its Bylaws
and the provisions of the NCBCA. See "COMPARISON OF FIRST CHARTER COMMON STOCK
AND UNION COMMON STOCK."
8
<PAGE>
SHARE INFORMATION AND MARKET PRICES
The First Charter Common Stock is reported on The NASDAQ Stock Market as a
NASDAQ National Market security under the symbol "FCTR." The Union Common Stock
is traded in the over-the-counter market and is listed in the National Daily
Quotation Service "Pink Sheets."
The following table sets forth the average of the high and low sales prices
reported on The NASDAQ Stock Market for shares of First Charter Common Stock on
September 13, 1995, the last trading day preceding public announcement of the
proposed Merger, and on November 10, 1995. It also sets forth the average of the
bid and asked prices for shares of Union Common Stock on September 13, 1995 and
on November 10, 1995. The "Union Equivalent" represents the consideration per
share of Union Common Stock to be received by a holder of Union Common Stock in
the Merger, computed by multiplying the average of the high and low sales prices
of First Charter Common Stock on such date by the Exchange Ratio.
<TABLE>
<CAPTION>
UNION
FIRST CHARTER UNION EQUIVALENT
<S> <C> <C> <C>
September 13, 1995................................................. $ 20.50 $8.75 $ 15.375
November 10, 1995..................................................
</TABLE>
For additional information regarding the market prices of the First Charter
Common Stock and Union Common Stock during the previous two years, see "PRICE
RANGE OF COMMON STOCK AND DIVIDENDS -- Market Prices."
9
<PAGE>
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth selected comparative unaudited per share
data for (i) First Charter on a historical basis and on a pro forma basis
assuming the Merger had been effective for the periods presented and (ii) Union
on a historical and pro forma equivalent basis. The unaudited pro forma
information has been prepared giving effect to the Merger as a pooling of
interests. For a description of the effect of pooling-of-interests accounting on
the Merger and the historical financial statements of First Charter, see "THE
MERGER -- Accounting Treatment. " The Union pro forma equivalent amounts are
presented with respect to each set of pro forma information.
The comparative per share data presented are based on and derived from, and
should be read in conjunction with, the historical consolidated financial
statements and the related notes thereto of each of First Charter and Union
incorporated by reference herein and on the PRO FORMA CONDENSED FINANCIAL
INFORMATION included elsewhere herein. Results of each of First Charter and
Union for the six months ended June 30, 1995 are not necessarily indicative of
results expected for the entire year, nor are pro forma amounts necessarily
indicative of results of operations or combined financial position that would
have resulted had the Merger been consummated at the beginning of the period
indicated. All adjustments necessary for a fair statement of results of interim
periods have been included.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1995 1994 1993 1992
<S> <C> <C> <C> <C>
FIRST CHARTER:
Income per common share (primary)
Historical (1)................................................................... $0.64 $1.12 $0.95 $0.70
Pro forma combined............................................................... 0.60 1.04 0.87 0.65
Cash dividends declared per common share
Historical (1)................................................................... 0.26 0.41 0.31 0.25
Pro forma combined (2)........................................................... 0.26 0.41 0.31 0.25
Shareholders' equity per common share (period end)
Historical (1)................................................................... 8.59 8.09 7.60 6.83
Pro forma combined............................................................... 8.10 7.60 7.07 6.34
UNION:
Income per common share (primary)
Historical (3)................................................................... 0.35 0.60 0.47 0.38
Pro forma equivalent (4)......................................................... 0.45 0.78 0.65 0.49
Cash dividends declared per common share
Historical (3)................................................................... -- -- -- 0.09
Pro forma equivalent (4)......................................................... 0.20 0.31 0.23 0.19
Shareholders' equity per common share (period end)
Historical (3)................................................................... 5.06 4.61 4.12 3.66
Pro forma equivalent (4)......................................................... 6.08 5.70 5.30 4.76
</TABLE>
(1) First Charter per share data has been adjusted to reflect a stock split
effected in the form of a 33 1/3% stock dividend declared in the fourth
quarter of 1994 and a 20% stock dividend effected in the fourth quarter of
1992.
(2) Pro forma combined dividends per share represent historical dividends per
share paid by First Charter, because Union has not regularly paid cash
dividends.
(3) Union per share data has been adjusted to reflect 5% stock dividends
declared in the fourth quarter of each of 1994 and 1993.
(4) Union pro forma equivalent amounts are calculated by multiplying the pro
forma combined amounts by the Exchange Ratio.
SELECTED FINANCIAL DATA
The following tables set forth certain summary selected financial data for
each of First Charter and Union on a historical basis and certain summary
unaudited pro forma selected financial data giving effect to the Merger as a
pooling of interests. For a description of the effect of pooling-of-interests
accounting on the Merger and the historical financial statements of First
Charter, see "THE MERGER -- Accounting Treatment."
10
<PAGE>
The summary selected financial data are based on and derived from, and
should be read in conjunction with, the historical consolidated financial
statements and the related notes thereto of each of First Charter and Union
incorporated by reference herein and on the PRO FORMA CONDENSED INFORMATION
included elsewhere herein. Results of each of First Charter and Union for the
six months ended June 30, 1995 are not necessarily indicative of results
expected for the entire year, nor are pro forma amounts necessarily indicative
of results of operations or combined financial position that would have resulted
had the Merger been consummated at the beginning of the period indicated. All
adjustments necessary for a fair statement of results of interim periods have
been included.
SELECTED HISTORICAL FINANCIAL DATA OF FIRST CHARTER CORPORATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1995 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
INCOME STATEMENT DATA:
Interest income............................. $ 12,746 $ 10,134 $ 21,858 $ 19,192 $ 18,706 $ 20,660 $ 22,427
Interest expense............................ 4,849 3,375 7,360 6,631 7,465 10,379 12,003
Net interest income......................... 7,897 6,759 14,498 12,561 11,241 10,281 10,424
Provision for loan losses................... 225 200 575 285 397 1,470 883
Net interest income after provision for loan
losses.................................... 7,672 6,559 13,923 12,276 10,844 8,811 9,541
Noninterest income.......................... 1,670 1,822 3,480 3,425 3,157 3,052 2,586
Noninterest expense......................... 5,058 5,039 10,051 10,142 9,789 9,359 8,713
Income before income taxes.................. 4,284 3,342 7,352 5,559 4,212 2,504 3,414
Income taxes................................ 1,281 867 2,092 1,390 919 406 854
Net income before cumulative effect of
change in accounting principle............ 3,003 2,475 5,260 4,169 3,293 2,098 2,560
Cumulative effect of change in accounting
principle................................. -- -- -- 300 -- -- --
Net income.................................. $ 3,003 $ 2,475 $ 5,260 $ 4,469 $ 3,293 $ 2,098 $ 2,560
PER SHARE DATA: (1)
Net income before cumulative effect of
accounting change (primary and fully
diluted).................................. $ 0.64 $ 0.53 $ 1.12 $ 0.89 $ 0.70 $ 0.45 $ 0.55
Net income (primary and fully diluted)...... 0.64 0.53 1.12 0.95 0.70 0.45 0.55
Cash dividends declared..................... 0.26 0.18 0.41 0.31 0.25 0.23 0.23
Period-end book value....................... 8.59 7.83 8.09 7.60 6.83 6.36 6.15
BALANCE SHEET DATA (AT PERIOD END):
Total assets................................ $337,597 $298,575 $324,049 $285,190 $277,446 $241,637 $245,875
Loans, net.................................. 216,391 182,959 200,918 173,103 160,102 153,841 155,431
Deposits.................................... 279,567 249,965 266,353 243,364 229,995 204,354 206,169
Total shareholders' equity.................. 39,802 36,344 37,463 35,353 32,061 29,800 28,787
PERFORMANCE RATIOS:
Net income to average shareholders'
equity.................................... 15.38%(2) 13.76%(2) 14.37% 13.32% 10.66% 7.13% 9.09%
Net income to average
total assets.............................. 1.87(2) 1.69(2) 1.74 1.63 1.30 0.86 1.06
CAPITAL RATIOS:
Tier 1 risk-based capital................... 17.33% 18.62% 16.42% 17.54% 16.06% 15.55% 15.00%
Total risk-based capital.................... 16.13 17.40 17.67 18.79 16.93 16.37 15.98
Leverage.................................... 11.61 12.06 11.41 12.14 11.56 12.33 11.71
ASSET QUALITY RATIOS:
Allowance for loan losses as a percentage of
gross loans, excluding loans held for
sale...................................... 1.32% 1.37% 1.38% 1.48% 1.69% 1.53% 1.42%
Net loans charged off to average loans...... 0.13(2) 0.30(2) 0.19 0.26 0.02 0.84 0.30
Nonperforming assets as a percentage of
total assets.............................. 1.20 1.64 1.56 1.53 2.95 3.19 2.39
</TABLE>
(1) All per share data has been adjusted to reflect a stock split effected in
the form of a 33 1/3% stock dividend declared in the fourth quarter of 1994
and a 20% stock dividend declared in the fourth quarter of 1992.
(2) Annualized.
11
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF BANK OF UNION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1995 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
INCOME STATEMENT DATA:
Interest income............................. $ 5,015 $ 3,676 $ 8,103 $ 6,812 $ 7,080 $ 7,319 $ 7,081
Interest expense............................ 2,209 1,394 3,188 2,726 3,333 4,140 4,498
Net interest income......................... 2,806 2,282 4,915 4,086 3,747 3,179 2,583
Provision for loan losses................... 255 132 264 550 545 209 316
Net interest income after provision for loan
losses.................................... 2,551 2,150 4,651 3,536 3,202 2,970 2,267
Noninterest income.......................... 1,660 1,020 2,174 1,665 1,335 840 927
Noninterest expense......................... 3,112 2,285 4,954 3,748 3,422 2,822 2,594
Income before income taxes.................. 1,099 885 1,871 1,453 1,115 988 600
Income taxes................................ 323 265 561 438 293 251 112
Net income before cumulative effect of
change in accounting principle............ 776 620 1,310 1,015 822 737 488
Cumulative effect of change in accounting
principle................................. -- -- -- -- -- -- --
Net income.................................. $ 776 $ 620 $ 1,310 $ 1,015 $ 822 $ 737 $ 488
PER SHARE DATA: (1)
Net income before cumulative effect of
accounting change (primary and fully
diluted).................................. $ 0.35 $ 0.28 $ 0.60 $ 0.47 $ 0.38 $ 0.35 $ 0.24
Net income (primary and fully diluted)...... 0.35 0.28 0.60 0.47 0.38 0.35 0.24
Cash dividends declared..................... -- -- -- -- 0.09 -- --
Period-end book value....................... 5.06 4.34 4.61 4.12 3.66 3.38 3.07
BALANCE SHEET DATA (AT PERIOD END):
Total assets................................ $133,587 $109,034 $123,413 $106,570 $ 93,616 $ 92,857 $ 77,441
Loans, net.................................. 84,807 75,393 82,613 72,191 67,593 59,237 51,700
Deposits.................................... 116,858 95,345 106,468 92,906 84,610 83,697 70,179
Total shareholders' equity.................. 11,093 9,476 10,075 9,010 7,986 7,317 6,361
PERFORMANCE RATIOS:
Net income to average shareholders'
equity.................................... 14.68%(2) 13.36%(2) 13.73% 11.98% 10.66% 10.85% 8.06%
Net income to average
total assets.............................. 1.23(2) 1.15(2) 1.16 1.04 0.88 0.91 0.66
CAPITAL RATIOS:
Tier 1 risk-based capital................... 12.30% 11.80% 11.80% 11.27% 10.90% 10.89% 11.04%
Total risk-based capital.................... 13.50 13.05 13.05 12.52 12.15 12.11 12.14
Leverage.................................... 8.30 8.64 8.22 8.24 8.23 7.54 8.21
ASSET QUALITY RATIOS:
Allowance for loan losses as a percentage of
gross loans, excluding loans held for
sale...................................... 1.81% 1.62% 1.58% 1.80% 1.76% 1.31% 1.22%
Net loans charged off to average loans...... 0.05(2) 0.54(2) 0.32 0.66 0.19 0.10 0.39
Nonperforming assets as a percentage of
total assets.............................. 0.27 0.97 0.69 0.47 0.29 0.24 0.31
</TABLE>
(1) All per share data has been adjusted to reflect 5% stock dividends declared
in the fourth quarter of each of 1994, 1993, 1991 and 1990.
(2) Annualized.
12
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1995 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
INCOME STATEMENT DATA:
Interest income.......................... $ 17,761 $ 13,810 $ 29,961 $ 26,004 $ 25,786 $ 27,979 $ 29,508
Interest expense......................... 7,058 4,769 10,548 9,358 10,799 14,519 16,501
Net interest income...................... 10,703 9,041 19,413 16,646 14,987 13,460 13,007
Provision for loan losses................ 480 332 839 835 942 1,679 1,199
Net interest income after provision for
loan losses............................ 10,223 8,709 18,574 15,811 14,045 11,781 11,808
Noninterest income....................... 3,330 2,841 5,654 5,090 4,493 3,892 3,513
Noninterest expense...................... 8,170 7,323 15,005 13,889 13,211 12,181 11,307
Income before income taxes............... 5,383 4,227 9,223 7,012 5,327 3,492 4,014
Income taxes............................. 1,604 1,132 2,653 1,828 1,212 657 966
Net income before cumulative effect of
change in accounting principle......... 3,779 3,095 6,570 5,184 4,115 2,835 3,048
Cumulative effect of change in accounting
principle.............................. -- -- -- 300 -- -- --
Net income............................... $ 3,779 $ 3,095 $ 6,570 $ 5,484 $ 4,115 $ 2,835 $ 3,048
PER SHARE DATA: (1)
Net income before cumulative effect of
accounting change (primary and fully
diluted)............................... $ 0.60 $ 0.49 $ 1.04 $ 0.82 $ 0.65 $ 0.45 $ 0.49
Net income (primary and fully diluted)... 0.60 0.49 1.04 0.87 0.65 0.45 0.49
Cash dividends declared (2).............. 0.26 0.18 0.41 0.31 0.25 0.23 0.23
Period-end book value.................... 8.10 7.29 7.63 7.09 6.34 5.89 5.65
BALANCE SHEET DATA (AT PERIOD END):
Total assets............................. $470,693(3) $407,334(3) $447,272(3) $391,593(3) $371,062 $334,494 $323,316
Loans, net............................... 301,198 258,352 283,531 245,294 227,695 213,078 207,131
Deposits................................. 396,425 345,310 372,821 336,270 314,605 288,051 276,348
Total shareholders' equity............... 50,404(3) 45,545(3) 47,348(3) 44,196(3) 40,047 37,117 35,148
PERFORMANCE RATIOS:
Net income to average shareholders'
equity................................. 15.39%(4) 13.77%(4) 14.30% 13.10% 10.66% 7.83% 8.90%
Net income to average
total assets........................... 1.69(4) 1.55(4) 1.58 1.48 1.19 0.87 0.97
CAPITAL RATIOS:
Tier 1 risk-based capital................ 14.99% 15.76% 15.06% 15.72% 14.71% 14.37% 14.09%
Total risk-based capital................. 16.19 17.00 16.31 16.97 15.68 15.30 15.09
Leverage................................. 10.58 11.08 10.46 11.05 10.72 11.00 10.87
ASSET QUALITY RATIOS:
Allowance for loan losses as a percentage
of gross loans, excluding loans held
for sale............................... 1.46% 1.44% 1.44% 1.57% 1.71% 1.47% 1.38%
Net loans charged off to average loans... 0.11(4) 0.37(4) 0.23 0.38 0.07 0.65 0.39
Nonperforming assets as a percentage of
total assets........................... 0.94 1.46 1.32 1.25 2.28 2.37 1.89
</TABLE>
(1) All per share data has been adjusted to reflect a First Charter stock split
effected in the form of a 33 1/3% stock dividend declared in the fourth
quarter of 1994 and a 20% stock dividend declared in the fourth quarter of
1992.
(2) Pro forma combined dividends represent historical dividends per share
declared by First Charter, because Union has not regularly paid cash
dividends.
(3) Reflects the retirement and cancellation of shares of Union Common Stock
owned by First Charter directly for its own account.
(4) Annualized.
13
<PAGE>
RECENT DEVELOPMENTS
FIRST CHARTER
First Charter's income for the three month period ended September 30, 1995
was $1,536,310, or $0.33 per share, versus $1,426,044, or $0.30 per share, for
the comparable period in 1994, representing a 7.7% increase. Net income for the
nine month period ended September 30, 1995 was $4,539,432, or $0.97 share,
versus $3,901,472, or $0.83 per share, for the comparable period in 1994,
representing a 16.4% increase. The increases are primarily attributable to
increases in net interest income. On an annualized basis, First Charter's year
to date results represent a return on average assets of 1.85% versus 1.75% and a
return on average equity of 15.28% versus 14.34%, for the periods ended
September 30, 1995 and September 30, 1994, respectively.
For the three and nine month periods ended September 30, 1995, net interest
income before provision for loan losses increased $298,903 and $1,436,660,
respectively, over the comparable periods in 1994. The increases are
attributable to an increase in the level of interest earning assets, as well as
an improvement in the net interest margin. The average interest-bearing
liabilities increased, and the average rate paid on interest-bearing liabilities
increased.
Total assets at September 30, 1995 were $343,458,704, compared to
$324,048,652 at December 31, 1994. Asset growth is primarily attributable to
increases in loan balances. Loan demand was strong during the first nine months
of 1995. As a result, gross loans increased 12.1% to $228,648,198 from
$203,935,504 at December 31, 1994. Total deposits increased 6.1% to $282,730,526
from $266,352,534 at December 31, 1994.
Investment securities totaled $53,340,528 at September 30, 1995,
representing a decrease of approximately $7.7 million from December 31, 1994.
Securities available for sale totaled $36,791,538 at September 30, 1995,
representing an increase of approximately $6.0 million from December 31, 1994.
The following table sets forth certain selected consolidated financial
information for First Charter on a historical basis. This financial information
is based on First Charter's interim unaudited financial results, and the results
of operations are not necessarily indicative of operations that may be expected
in the future. In the opinion of management of First Charter, all adjustments
necessary for a fair presentation of results of interim periods of First Charter
(none of which were other than normal accruals) have been included.
FIRST CHARTER CORPORATION
SUMMARY OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPT. 30, ENDED SEPT. 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
INCOME STATEMENT DATA:
Interest income............................................................. $6,832 $5,707 $19,579 $15,841
Interest expense............................................................ 2,731 1,905 7,580 5,279
Net interest income......................................................... 4,101 3,802 11,999 10,562
Provision for loan losses................................................... 325 150 550 350
Net interest income after provision for loan losses......................... 3,776 3,652 11,449 10,212
Noninterest income.......................................................... 845 860 2,515 2,681
Noninterest expense......................................................... 2,405 2,439 7,463 7,478
Income before income taxes.................................................. 2,216 2,073 6,501 5,415
Income taxes................................................................ 680 647 1,961 1,514
Net income.................................................................. $1,536 $1,426 $ 4,540 $ 3,901
PER SHARE DATA: (1)
Net income (primary and fully diluted)...................................... $ 0.33 $ 0.30 $ 0.97 $ 0.83
Cash dividends declared..................................................... 0.13 0.10 0.39 0.28
Period-end book value....................................................... 8.80 7.99 8.80 7.99
</TABLE>
(1) All per share data has been retroactively adjusted to reflect a stock split
effected in the form of a 33 1/3% stock dividend declared in the fourth
quarter of 1994.
14
<PAGE>
UNION
Bank of Union's income for the three month period ended September 30, 1995
was $535,404, or $.24 per share, versus $334,212, or $.15 per share, for the
comparable period in 1994, representing a 60.20% increase. Net income for the
nine month period ended September 30, 1995 was $1,311,608, or $.60 per share,
versus $953,744, or $.44 per share, for the comparable period in 1994,
representing a 37.52% increase. The increases are primarily attributable to
increases in net interest income and net credit card income. On an annualized
basis, Union's year to date results represent a return on average assets of
1.34% versus 1.15% and a return on average equity of 16.18% versus 13.55%, for
the periods ended September 30, 1995 and September 30, 1994, respectively.
For the three and nine month periods ended September 30, 1995, net interest
income before provision for loan losses increased $197,383 and $721,499,
respectively, over the comparable periods in 1994. The increases are
attributable to an increase in the level of interest earning assets, as well as
an improvement in the net interest margin. The average interest-bearing
liabilities increased, and the average rate paid on interest-bearing liabilities
increased.
Total assets at September 30, 1995 were $141,571,654, compared to
$123,413,131 at December 31, 1994. Asset growth is attributable to increases in
the loan portfolio, the securities portfolio, and other interest-bearing
overnight and bank time deposits. As a result, gross loans increased 7.00% to
$89,804,158 from $83,927,205 at December 31, 1994. Total deposits increased
15.46% to $122,925,148 from $106,467,846 at December 31, 1994.
Investment securities totaled $28,601,629, representing an increase of
approximately $7.5 million from December 31, 1994. Securities available for sale
totaled $5,843,680 at September 30, 1995, representing a decrease of
approximately $.9 million from December 31, 1994.
The following table sets forth certain selected consolidated financial
information for Union on a historical basis. This financial information has been
based on Union's interim unaudited financial statements, and the results of
operations are not necessarily indicative of operations that may be expected in
the future. In the opinion of management of Union, all adjustments necessary for
a fair presentation of results of interim periods of Union (none of which were
other than normal accruals) have been included.
BANK OF UNION
SUMMARY OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPT. 30, ENDED SEPT. 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
INCOME STATEMENT DATA:
Interest income.................................................................. $2,761 $2,133 $7,776 $5,808
Interest expense................................................................. 1,277 846 3,486 2,240
Net interest income.............................................................. 1,484 1,287 4,290 3,568
Provision for loan losses........................................................ 85 77 340 209
Net interest income after provision for loan losses.............................. 1,399 1,210 3,950 3,359
Noninterest income............................................................... 1,096 500 2,756 1,520
Noninterest expense.............................................................. 1,725 1,233 4,837 3,518
Income before income taxes....................................................... 770 477 1,869 1,361
Income taxes..................................................................... 235 143 557 407
Net income....................................................................... $ 535 $ 334 $1,312 $ 954
PER SHARE DATA: (1)
Net income (primary and fully diluted)........................................... $ 0.24 $ 0.15 $ 0.60 $ 0.44
Cash dividends declared.......................................................... -- -- -- --
Period-end book value............................................................ 5.31 4.12 5.31 4.12
</TABLE>
(1) All per share data has been retroactively adjusted to reflect a 5% stock
dividend declared in the fourth quarter of 1994.
15
<PAGE>
THE SPECIAL MEETINGS
GENERAL
This Joint Proxy Statement-Prospectus is being furnished to holders of
First Charter Common Stock in connection with the solicitation of proxies by the
Board of Directors of First Charter for use at the First Charter Special Meeting
to consider and vote upon the approval of the Agreement and the transactions
contemplated thereby, including the issuance of First Charter Common Stock upon
consummation of the Merger, and to transact such other business as may properly
come before the First Charter Special Meeting or any adjournments or
postponements thereof. In addition, this Joint Proxy Statement-Prospectus is
being furnished to holders of Union Common Stock in connection with the
solicitation of proxies by the Board of Directors of Union for use at the Union
Special Meeting to consider and vote upon the approval of the Agreement and the
transactions contemplated thereby, and to transact such other business as may
properly come before the Union Special Meeting or any adjournments or
postponements thereof. Each copy of this Joint Proxy Statement-Prospectus mailed
to holders of First Charter Common Stock is accompanied by a form of proxy for
use at the First Charter Special Meeting, and each copy of this Joint Proxy
Statement-Prospectus mailed to holders of Union Common Stock is accompanied by a
form of proxy for use at the Union Special Meeting. This Joint Proxy
Statement-Prospectus is also being furnished by First Charter to Union
shareholders as a prospectus in connection with the issuance by First Charter of
the shares of First Charter Common Stock upon consummation of the Merger.
This Joint Proxy Statement-Prospectus is first being mailed to the holders
of First Charter Common Stock and the holders of Union Common Stock on or about
November , 1995.
DATE, PLACE AND TIME
FIRST CHARTER. The First Charter Special Meeting will be held at the
Cabarrus Country Club, located on Weddington Road in Concord, North Carolina on
Thursday, December 14, 1995 at 10:00 a.m. local time.
UNION. The Union Special Meeting will be held at the Rolling Hills Country
Club, located on Roosevelt Boulevard in Monroe, North Carolina on Thursday,
December 14, 1995 at 10:00 a.m. local time.
PROXIES
FIRST CHARTER. A shareholder of First Charter may use the accompanying
proxy if such shareholder is unable to attend the First Charter Special Meeting
in person or wishes to have his or her shares voted by proxy even if such
shareholder does attend the meeting. A shareholder of First Charter may revoke
any proxy given pursuant to this solicitation by delivering to the Secretary of
First Charter, prior to or at the First Charter Special Meeting, a written
notice revoking the proxy or a duly executed proxy relating to the same shares
bearing a later date, or by voting in person at the First Charter Special
Meeting. All written notices of revocation and other communications with respect
to the revocation of First Charter proxies should be addressed to First Charter
Corporation, Post Office Box 228, Concord, North Carolina 28026-0228, Attention:
Secretary. For such notice of revocation or later proxy to be valid, however, it
must actually be received by First Charter prior to the vote of the First
Charter shareholders. All shares represented by valid proxies received pursuant
to this solicitation, and not revoked before they are exercised, will be voted
in the manner specified therein. If no specification is made, the proxies will
be voted in favor of approval of the Agreement and the transactions contemplated
thereby, including the issuance of the First Charter Common Stock upon
consummation of the Merger. The Board of Directors of First Charter is unaware
of any other matters that may be presented for action at the First Charter
Special Meeting. If other matters do properly come before the First Charter
Special Meeting, however, it is intended that shares represented by proxies in
the accompanying form will be voted or not voted by the persons named in the
proxies in their discretion.
UNION. A shareholder of Union may use the accompanying proxy if such
shareholder is unable to attend the Union Special Meeting in person or wishes to
have his or her shares voted by proxy even if such shareholder does attend the
meeting. A shareholder of Union may revoke any proxy given pursuant to this
solicitation by delivering to the Secretary of Union, prior to or at the Union
Special Meeting, a written notice revoking the proxy or a duly executed proxy
relating to the same shares bearing a later date, or by voting in person at the
Union Special Meeting. All written notices of revocation and other
communications with respect to the revocation of Union proxies should be
addressed to Bank of Union, 201 North Charlotte Avenue, Monroe, North Carolina
28112, Attention: Secretary. For such notice of revocation or later proxy to be
valid, however, it must actually be received by Union prior to the vote of the
shareholders. All shares represented by valid proxies received pursuant to this
solicitation, and not revoked before they are exercised, will be voted in the
manner specified therein. If no specification is made, the proxies will be voted
in favor of approval of the Agreement and the transactions contemplated thereby.
The Board of Directors of Union is unaware of any other matters that may be
presented for action at
16
<PAGE>
the Union Special Meeting. If other matters do properly come before the Union
Special Meeting, however, it is intended that shares represented by proxies in
the accompanying form will be voted or not voted by the persons named in the
proxies in their discretion.
SOLICITATION OF PROXIES
Solicitation of proxies may be made in person, by mail, telephone or
facsimile, by directors, officers and employees of First Charter and Union, who
will not be specially compensated for such solicitation. Nominees, fiduciaries
and other custodians will be requested to forward solicitation materials to
beneficial owners and secure their voting instructions, if necessary, and will
be reimbursed for the expenses incurred in sending proxy materials to beneficial
owners. First Charter and Union will each bear its own expenses in connection
with the solicitation of proxies for its Special Meeting, except that each will
pay one-half of the costs incurred in printing this Joint Proxy
Statement-Prospectus, the forms of proxy and other proxy materials.
RECORD DATE AND VOTING RIGHTS
FIRST CHARTER. The Board of Directors of First Charter has fixed November
7, 1995 as the record date for the determination of shareholders of First
Charter entitled to receive notice of and to vote at the First Charter Special
Meeting. At the close of business on such record date, there were outstanding
4,640,213 shares of First Charter Common Stock held of record by approximately
1,035 holders of record. Each share of First Charter Common Stock outstanding on
such record date is entitled to one vote as to (i) the approval of the Agreement
and the transactions contemplated thereby, including the issuance of First
Charter Common Stock upon consummation of the Merger, and (ii) any other
proposal that may properly come before the First Charter Special Meeting.
Pursuant to the requirements of the National Association of Securities Dealers,
Inc., approval of the Agreement and the issuance of First Charter Common Stock
in connection therewith by the First Charter shareholders will require the
affirmative vote of a majority of the votes cast by the holders of the First
Charter Common Stock. In accordance with the NCBCA, abstentions from voting with
respect to the Agreement and the transactions contemplated thereby will count as
shares present for purposes of establishing a quorum at the First Charter
Special Meeting. Such abstentions, however, will not have the effect of a
negative vote.
As of the record date for the First Charter Special Meeting, the directors
and executive officers of First Charter and their affiliates beneficially owned
an aggregate of 553,960 shares, or 11.9%, of the First Charter Common Stock.
Directors and executive officers of First Charter have indicated their intention
to vote their shares of First Charter Common Stock in favor of the Agreement and
the transactions contemplated thereby, including the issuance of First Charter
Common Stock upon consummation of the Merger.
As of the record date for the First Charter Special Meeting, the trust
department of FCNB had sole or shared voting power with respect to 700,126
shares of First Charter Common Stock for various accounts. Of these, 76,165
shares of First Charter Common Stock were held under arrangements that provide
for exercise of voting power by co-fiduciaries, settlors, beneficiaries or
others; as a matter of policy, FCNB votes such shares only in accordance with
the instructions of such other persons.
BECAUSE APPROVAL OF THE AGREEMENT AND THE ISSUANCE OF FIRST CHARTER COMMON
STOCK IN CONNECTION THEREWITH REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE
VOTES CAST WITH RESPECT THERETO, THE BOARD OF DIRECTORS OF FIRST CHARTER URGES
ITS SHAREHOLDERS TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.
UNION. The Board of Directors of Union has fixed November 8, 1995 as the
record date for the determination of shareholders of Union entitled to receive
notice of and to vote at the Union Special Meeting. At the close of business on
such record date, there were outstanding 2,192,270 shares of Union Common Stock
held of record by approximately 1,272 holders of record. Each share of Union
Common Stock outstanding on such record date is entitled to one vote as to (i)
the approval of the Agreement and the transactions contemplated thereby and (ii)
any other proposal that may properly come before the Union Special Meeting.
Under the provisions of the banking laws of North Carolina, approval of the
Agreement and the transactions contemplated thereby by the Union shareholders
will require the affirmative vote of the holders of two-thirds of the
outstanding shares of Union Common Stock. In accordance with applicable law,
abstentions from voting with respect to the Agreement and the transactions
contemplated thereby will count as shares present for purposes of establishing a
quorum at the Union Special Meeting. Furthermore, because approval of such
matter requires the affirmative vote of the holders of
17
<PAGE>
two-thirds of the Union Common Stock outstanding, such abstentions will also
have the effect of a negative vote with respect to the Agreement and the
transactions contemplated thereby.
As of the record date for the Union Special Meeting, the directors and
executive officers of Union and their affiliates beneficially owned an aggregate
of 357,702 shares, or 16.3%, of Union Common Stock. Directors of Union have
indicated their intention to vote their shares of Union Common Stock in favor of
the Agreement and the transactions contemplated thereby. See "THE
MERGER -- Interests of Certain Persons in the Merger."
As of the record date for the Union Special Meeting, First Charter owned
directly, for its own account, 69,361 shares, or 3.2%, of the Union Common
Stock. In addition, as of such date directors and executive officers of First
Charter beneficially owned 242 shares, or .01%, of the Union Common Stock. It is
expected that these shares will be voted in favor of the proposal to approve the
Agreement and the transactions contemplated thereby.
BECAUSE APPROVAL OF THE AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF THE
HOLDERS OF TWO-THIRDS OF THE OUTSTANDING SHARES OF UNION COMMON STOCK, THE BOARD
OF DIRECTORS OF UNION URGES ITS SHAREHOLDERS TO COMPLETE, DATE AND SIGN THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID
ENVELOPE.
RECOMMENDATION OF THE BOARDS OF DIRECTORS
The Board of Directors of First Charter and the Board of Directors of Union
each has unanimously approved the Agreement and the transactions contemplated
thereby. Each Board of Directors believes that the Merger is fair to and in the
best interests of its respective shareholders and recommends a vote "FOR" the
matters to be voted upon by such shareholders in connection with the Merger. See
"THE MERGER -- Background of and Reasons for the Merger."
THE MERGER
THE FOLLOWING SUMMARY OF CERTAIN TERMS AND PROVISIONS OF THE AGREEMENT IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE AGREEMENT, WHICH IS INCORPORATED
HEREIN BY REFERENCE AND, WITH THE EXCEPTION OF THE SCHEDULES THERETO, IS
INCLUDED AS APPENDIX A TO THIS JOINT PROXY STATEMENT-PROSPECTUS. ALL
SHAREHOLDERS ARE ENCOURAGED TO READ THE AGREEMENT, AS WELL AS THE OTHER
APPENDICES, IN THEIR ENTIRETY.
DESCRIPTION OF THE MERGER
First Charter has formed, or will form, Interim Bank as its subsidiary for
the purpose of effecting the acquisition of Union. At the Effective Time,
Interim Bank will be merged with and into Union, and Union will be the surviving
entity and will operate as a separate banking subsidiary of First Charter. The
Articles of Incorporation and Bylaws of Union in effect at the Effective Time
will continue to govern Union until amended or repealed in accordance with
applicable law. The organization of Interim Bank by First Charter and the Merger
are subject to the approvals of the Federal Reserve Board, the FDIC and the
Banking Commission. See "THE MERGER -- Bank Regulatory Matters." There will be
no change in the Restated Articles of Incorporation or the Bylaws of First
Charter as a result of the Merger.
At the Effective Time, except as hereinafter described, each share of Union
Common Stock outstanding immediately prior to the Effective Time (other than
shares as to which dissenters' rights have been perfected) will be converted
automatically into the right to receive 0.75 shares of First Charter Common
Stock. Shares of Union Common Stock held by First Charter or FCNB (other than
shares held in a fiduciary capacity or as a result of debts previously
contracted) immediately prior to the Merger will be cancelled. The shares of
First Charter Common Stock outstanding immediately prior to the Merger will
continue to be outstanding after the Effective Time.
No fractional shares of First Charter Common Stock will be issued in the
Merger. Instead, each holder of shares of Union Common Stock who would otherwise
have been entitled to receive a fraction of a share of First Charter Common
Stock (after taking into account all certificates delivered by such holder) will
receive, in lieu thereof, cash (without interest) in an amount equal to such
fraction of a share of First Charter Common Stock multiplied by the Fair Market
Value (as defined below) of one share of First Charter Common Stock at the
Effective Time. The Fair Market Value of one share of First Charter Common Stock
at the Effective Time is defined by the Agreement as the closing price per share
as reported by The NASDAQ Stock Market on the last business day prior to the
Effective Time. No such holder will be entitled to dividends, voting rights or
any other rights as a shareholder in respect of any fractional shares. See "THE
MERGER -- Exchange of Certificates."
18
<PAGE>
EFFECTIVE TIME OF THE MERGER
The Merger will become effective at the date and time specified in Articles
of Merger to be filed with the North Carolina Secretary of State following
approval by the Banking Commission. Unless otherwise agreed by First Charter and
Union, the Effective Time will occur on or promptly after the first business day
following the last to occur of (i) the expiration of all required waiting
periods following the date of the order of the Federal Reserve Board approving
the Merger pursuant to the BHCA, the date of the order of the FDIC approving the
Merger pursuant to the Bank Merger Act, or the date of the order of the Banking
Commission approving the Merger, as applicable; (ii) the effective date of the
last order, approval or exemption of any other Federal or state regulatory
agency approving or exempting the Merger if such action is required; (iii) the
day of expiration of all required waiting periods after the filing of all
notices to all Federal or state regulatory agencies for consummation of the
Merger; and (iv) the date on which the Union shareholders and the First Charter
shareholders approve the Agreement. If approved by the First Charter and Union
shareholders and applicable regulatory authorities, the parties currently expect
that the Effective Time will occur by December 31, 1995 or as soon as possible
thereafter, although there can be no assurance as to whether or when the Merger
will occur. See "THE MERGER -- Conditions to the Merger."
EXCHANGE OF CERTIFICATES
Before or as soon as practicable after the Effective Time, First Charter
National Bank, in its capacity as Exchange Agent (the "Exchange Agent"), will
mail to each holder of Union Common Stock of record as of the Effective Time a
letter of transmittal and related forms (the "Letter of Transmittal") for use in
forwarding stock certificates previously representing Union Common Stock for
surrender and exchange for certificates representing First Charter Common Stock.
UNION SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE
THE LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT.
Upon surrender to the Exchange Agent of one or more certificates for shares
of Union Common Stock, together with a properly completed Letter of Transmittal,
there will be issued and mailed to the holder thereof a certificate or
certificates representing the aggregate number of whole shares of First Charter
Common Stock to which such holder is entitled, together with all declared but
unpaid dividends in respect of such shares following the Effective Time and,
where applicable, a check for the amount (without interest) representing any
fractional shares. A certificate for shares of First Charter Common Stock, or
any check representing cash in lieu of fractional shares or declared but unpaid
dividends, may be issued in a name other than the name in which the surrendered
certificate is registered only if (i) the certificate surrendered is properly
endorsed, accompanied by a guaranteed signature if required by the Letter of
Transmittal and otherwise in proper form for transfer, and (ii) the person
requesting the issuance of such certificate either (A) pays to the Exchange
Agent any transfer or other taxes required by reason of the issuance of a
certificate for such shares in a name other than the registered holder of the
certificate surrendered or (B) establishes to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable. The Exchange Agent will
issue stock certificates evidencing First Charter Common Stock in exchange for
lost, stolen, mutilated or destroyed certificates of Union Common Stock only
upon receipt of a lost stock affidavit and a bond indemnifying First Charter
against any claim arising out of the allegedly lost, stolen, mutilated or
destroyed certificate. In no event will the Exchange Agent, First Charter or
Union be liable to any persons for any First Charter Common Stock or dividends
thereon or cash delivered in good faith to a public official pursuant to any
applicable abandoned property, escheat or similar law.
On and after the Effective Time and until surrender of certificates of
Union Common Stock to the Exchange Agent, each certificate that represented
outstanding Union Common Stock immediately prior to the Effective Time (other
than certificates held by First Charter or FCNB representing shares of Union
Common Stock not held in a fiduciary capacity or as a result of debts previously
contracted) will be deemed to evidence ownership of the number of whole shares
of First Charter Common Stock into which such shares have been converted, and
the holders thereof shall be entitled to vote at any meeting of First Charter
shareholders. No shareholder will, however, receive dividends or other
distributions, if any, on such First Charter Common Stock following the
Effective Time until the certificates representing Union Common Stock are
surrendered. Upon surrender of Union Common Stock certificates, Union
shareholders will be paid any dividends or other distributions on First Charter
Common Stock that are payable to holders as of any record date on or following
the Effective Time. No interest will be payable with respect to withheld
dividends or other distributions.
BACKGROUND OF AND REASONS FOR THE MERGER
FIRST CHARTER. The strategy of the Board of Directors of First Charter has
been to increase long-term value for shareholders while at the same time
remaining an independent financial institution. In this regard, the Board of
Directors of First Charter has maintained a philosophy of controlled growth and
has opened DE NOVO branches in its market area. It has also
19
<PAGE>
continually evaluated potential mergers with or acquisitions of stable financial
institutions located in markets compatible with that of First Charter. In
identifying any such financial institutions, First Charter has focused on
institutions that, like it, have encouraged earnings growth for the purpose of
building long-term shareholder value and have maintained similar philosophies
regarding cost controls and development of new services as a means of generating
additional fee income. As part of this on-going process, First Charter
identified Union as a potential merger partner.
The increase in the merger and acquisition activity of banks and other
financial institutions during 1993 and 1994 provided an environment in which to
pursue merger negotiations, and the increase in the market price of First
Charter Common Stock during such time provided First Charter with the
opportunity to pursue discussions with Union regarding a possible combination.
The senior management of First Charter had preliminary, informal contact with
the senior management of Union regarding such a combination in the first quarter
of 1995. Following that contact, First Charter began its own internal
discussions and analyses with its financial advisor, Wheat First, regarding a
possible acquisition of Union. In the second quarter of 1995, the Board of
Directors of First Charter authorized senior management to communicate a
tentative expression of interest to Union. After informal discussions between
the senior managements of First Charter and Union regarding overall operational
philosophies, as well as potential prices and structures for a transaction,
senior management of First Charter appeared before the ad hoc committee
established by the Chairman of the Board of Directors of Union in May 1995
presenting First Charter's indication of interest in a combination. The parties
continued informal discussions until mid July on an exploratory, and generally
infrequent, basis, with both sides recognizing that Union had not made a
commitment to a merger or sale and that a number of issues attendant to a
possible transaction were unresolved. In early August 1995, discussions
intensified, and in late August the Board of Directors of First Charter and the
Board of Directors of Union agreed on the Exchange Ratio and the proposed
structure of the Merger. In general, in formulating the Exchange Ratio, the
Board of Directors of First Charter, with the advice of Wheat First, considered
primarily such typical factors as earnings, cost savings and impact on the book
value of First Charter. The structure of the transaction, with Union to remain
as separate state banking subsidiary immediately following the Merger, generally
was agreed upon after consideration of the positive impact and goodwill to be
maintained in Union's market by it remaining as a local community banking
organization.
Thereafter First Charter and Union proceeded to conduct due diligence with
respect to each other. At the same time, the entities negotiated an agreement of
merger providing for the Exchange Ratio and the proposed structure. In general,
these negotiations proceeded in a usual and customary manner and resulted in an
agreement consisting primarily of standard terms, tailored where applicable to
the specific parties. In addition, as part of such negotiations and as a
condition to First Charter's entering into the Agreement, Union agreed to grant
to First Charter the Option, and the parties negotiated the Stock Option
Agreement containing provisions that are usual and customary in bank mergers.
After satisfactory completion of due diligence, the Board of Directors of each
of First Charter and Union met separately on September 13, 1995 to consider the
Agreement, the Stock Option Agreement and the Merger. At the First Charter
meeting, Wheat First presented the Board of Directors with its oral opinion that
the Exchange Ratio was fair, from a financial point of view, to the shareholders
of First Charter, and the Board of Directors unanimously approved the Agreement,
the Stock Option Agreement and the Merger.
The Board of Directors considered several factors in arriving at its
decision to approve the Agreement. It did not assign any relative or specific
weights to the factors considered. The Board of Directors of First Charter
believes that the area of Union County and southern Mecklenburg County is a
prime growth area, and it anticipates that the population growth for Union
County will be comparable with that in First Charter's primary market. FCNB
currently does not have any branches in Union's market. The Board of Directors
of First Charter believes that the location of Union's branches should provide
First Charter with the opportunity to benefit from continued growth in this
market. The Board of Directors of First Charter considered that Union currently
is the second largest financial institution in Union County in terms of deposit
market share and concluded that an acquisition of Union provides First Charter
with a preferable means of entering the market as opposed to DE NOVO expansion.
The Board of Directors of First Charter also considered that the combined
resources of First Charter and Union should (i) provide opportunities to achieve
economies of scale, primarily with respect to the elimination of duplicative
back-office staff functions as well as enhanced ability to achieve better human
and technological resources, which economies of scale should improve the
efficiency and profitability of the combined entity; (ii) improve the ability of
Union to compete with the many financial institutions doing business in Union's
market area and the surrounding counties; (iii) provide a source for increases
in revenues for the combined entity through the addition of trust and other
services such as corporate cash management, lockbox services and higher lending
limits not currently offered by or available to Union; and (iv) generally result
in an institution better able to respond to the needs of its customers in the
community.
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The Board of Directors of First Charter also believes that the banking
philosophies of First Charter and Union are similar and will mix well together.
In addition, the Board of Directors considered the book value of Union and the
financial information related to comparable financial institutions and
acquisitions provided by Wheat First. Based upon these considerations, among
others, the Board of Directors of First Charter concluded that the combination
of the market areas, products and services made the Merger attractive for both
First Charter and Union.
UNION. Union was organized and commenced operations in October 1985,
following a successful community stock offering that raised sufficient equity
capital under North Carolina law to permit Union to obtain a charter and license
to commence operations. Union began its operations as a one-office bank. Over
the past ten years, Union has expanded to five full service banking offices and
an additional office housing its home mortgage division and subsidiary
corporation operations. During its initial years of operation, Union
concentrated on developing its financial services products both from a loan and
a deposit standpoint. During most of this period, it was one of only two locally
owned and operated financial institutions in Union County. In January 1994, a
major Charlotte-based financial institution entered Union County through the
acquisition of the other locally-owned institution.
Over the past 18 months, Union began studying its strategic alternatives in
an effort to maximize shareholder value and remain competitive. The increasing
consolidation in the financial services industry increased the competitive
pressures that Union faced. In September 1994 Union adopted, for the first time,
an expansion plan (the "Plan") for the years 1995 through 1998. The Plan
identified three possible methods of expansion for Union: (i)
merger/acquisition; (ii) purchase of existing branches; and (iii) DE NOVO
branching. The Plan indicated that Union should not be constrained as to future
growth only to Union County and considered markets contiguous to Union's
existing market. The Plan also considered markets that were not contiguous but
which nevertheless might make economic sense in the long run. The Plan placed
emphasis on Union remaining as an independent financial institution, whether
through ownership or at least through management and name identification. The
Plan also considered areas in the neighboring State of South Carolina, in light
of the contemplated passage of interstate banking.
After development of the Plan, Union retained the services of Baxter
Fentriss to assist in its analysis of a potential affiliation with an existing
bank holding company in South Carolina. The Reigle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (the "Interstate Banking and Branching Act")
enacted by Congress in September 1994 raised new questions about the future
nature and structure of the financial services industry and the options open to
local institutions offering limited lines of financial services and products.
Union, with the advice of Baxter Fentriss and other professionals, assessed the
economic and legal feasibility of affiliation with a South Carolina institution.
Ultimately, Union concluded that an affiliation with a South Carolina
institution would not enhance its shareholder value or produce enhanced products
and services any more so than a similar affiliation with a North Carolina based,
community oriented financial institution.
Union also considered affiliating with a DE NOVO bank in a South Carolina
town located adjacent to the Union County border. It discovered, however, that
following the formation of a DE NOVO South Carolina-chartered bank, Union would
be precluded from considering any strategic alternative that involved a sale or
merger of Union and its DE NOVO South Carolina affiliate for a minimum of five
years. This resulted in Union discarding the idea of affiliating across its
southern border into South Carolina. Union further studied affiliation with
thrift institutions in its market. The sale of the only other locally owned
financial institution, a state savings bank, in Union County, however, led Union
to determine that expansion through acquisition of a thrift was also not
feasible. Union concluded that it was not of a significant enough size, nor did
it command a sufficient capital base, for it to consider acquiring any other
financial institution in or near its market or within the reach of its market.
Having had some success with DE NOVO branching, Union considered, and continues
to consider, DE NOVO branching in and around its market area, but concluded that
DE NOVO branching is both capital consuming and time consuming. Ultimately,
Union concluded that adoption of the single strategy of DE NOVO branching would
not permit it, either in the short or intermediate term, to return maximum value
to its shareholders. Having analyzed and considered all of the options
identified in the Plan, Union thus, in light of the discussions that followed as
discussed below, and in light of the changes occurring within the financial
institutions industry, considered the idea of affiliating with another financial
institution.
As the result of the heightened consolidation in the financial services
industry in the first half of 1995, other financial institutions desirous of
considering an affiliation with Union contacted management of Union. Two other
financial institutions of a size comparable to First Charter made informal
inquiry of the management of Union. These informal inquiries were not pursued
beyond informal discussions due to the level of interest indicated by First
Charter. No formal offers were extended to Union by any third party, but it
became evident that should Union desire to affiliate there would be sufficient
interest in the acquisition of Union. In an effort to assist management in its
evaluation process of any informal discussions, the Chairman of the Board of
Directors appointed an ad hoc committee of directors for the purpose of advising
management
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on an informal basis. This special committee was to assist management in
evaluating the merits, or lack thereof, of any proposed affiliation and was
directed to report any recommendation to the Executive Committee of the Board of
Directors, which, in turn, was to report any recommendation to the Board of
Directors.
As a result of the discussions and meetings between senior management of
Union and First Charter, and with the consultation of Union's ad hoc committee,
certain parameters were established by Union should Union consider an
affiliation with First Charter. Specifically, Union desired to remain a
state-chartered institution with its current charter, identity and signage.
Management of Union was concerned that a change of name would result in customer
resistance and could lead to loss of customers. Ultimately, Union's primary
goals were to effect a tax free stock exchange with an institution having
greater stock trading liquidity, a dividend history and experienced management
who expressed a similar philosophy of customer service, while achieving maximum
value for its shareholders. These parameters were communicated to First Charter,
and at a meeting of the Board of Directors on August 30, 1995, the Board was
advised of the parameters and considered the merits of the affiliation. In
addition, at this meeting the Board of Directors learned of the two other
financial institutions who had expressed interest in an affiliation with Union.
The Board was advised that these two other informal proposals were not seriously
considered due to one or more of the following: (i) the interested party was
significantly out of Union's market; (ii) the interested party was then engaged
in a stock offering making timing of a proposal difficult; (iii) neither of the
other institutions offered trust services; (iv) the rapid acquisition pace of
one of the other financial institutions caused concern for the ability of this
interested party to smoothly effect another acquisition in the near term; and
(v) the perceived management philosophies and style of the interested party
created concern for potential conflict with Union's management philosophy and
style. At that time, the Board engaged legal counsel and Baxter Fentriss to
advise the Board and unanimously determined that it was in the best interest of
Union and its shareholders for management to pursue further, in-depth
discussions with First Charter. These discussions were to include a due
diligence review of the books and records of First Charter in order to determine
if a transaction as outlined and suggested by First Charter was feasible.
Thereafter, extensive discussions were held between Union's professional
advisors and senior management with professional advisors and senior management
of First Charter. At Union's Board of Directors meeting held September 13, 1995,
the Board of Directors was presented with the Agreement and the Stock Option
Agreement for consideration. At that meeting, the Board received a detailed
analysis from Baxter Fentriss as well as its opinion that the terms of the
proposed transaction, from a financial point of view, were fair to the
shareholders of Union. That analysis, together with other considerations
assessed by the Board of Directors as discussed below, resulted in the Board's
unanimous decision to enter into the Agreement and the Stock Option Agreement.
The Board of Directors considered the following factors, without assigning
any relative or specific weights to such factors, in assessing the First Charter
proposal: (i) the Exchange Ratio; (ii) the commitment made by First Charter
that, for an unspecified period of time, Union would retain its separate
existence and name; (iii) the agreement of First Charter to add four members of
Union's Board of Directors to the Boards of Directors of First Charter and its
subsidiary bank and to name a representative of Union to the Executive Committee
of First Charter; (iv) the ability for Union to expand its mortgage lending,
financial planning services and merchant credit card program through the offices
of First Charter and the expansion through Union's offices of additional
products and services, especially trust services, presently available from First
Charter; (v) the contiguous-county expansion that an affiliation with First
Charter would provide; and (vi) the perceived compatibility of corporate
cultures between Union and First Charter.
The foregoing six factors, coupled with the Baxter Fentriss opinion on the
terms of the proposed transaction, caused Union's Board to unanimously approve
the Agreement and recommend its approval to Union's shareholders. The Exchange
Ratio converting Union's shares to those of First Charter was considered to be
fair and a maximization of shareholder value. Meeting Union's requirement of
remaining a separate financial institution with local identity and electing four
Union directors to the Board of First Charter, thereby allowing director input
from Union's market area, assured Union that the continued quality of customer
service would continue to be stressed and that Union's shareholders would have a
voice at the Board level of First Charter. These factors, coupled with product
expansion, contiguous county expansion and the belief that the combination of
Union and First Charter would result in a smooth operational and organizational
transition, influenced Union's Board's decision to adopt the Agreement.
OPINIONS OF FINANCIAL ADVISORS
FIRST CHARTER. First Charter retained Wheat First to act as its financial
advisor in connection with the Merger and to render a written opinion to the
First Charter Board of Directors as to the fairness, from a financial point of
view, of the Exchange Ratio to the holders of First Charter Common Stock. Wheat
First is a nationally recognized investment banking
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firm regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. The First
Charter Board of Directors selected Wheat First to serve as its financial
advisor in connection with the Merger on the basis of such firm's expertise. In
connection with Wheat First's representation, the First Charter Board of
Directors did not impose any limitations upon Wheat First's scope of
investigation or procedures to be followed.
Representatives of Wheat First attended the meeting of the First Charter
Board of Directors on September 13, 1995, at which the Merger was considered and
approved. At the meeting, Wheat First issued its oral opinion that, as of such
date, the Exchange Ratio was fair, from a financial point of view, to the
holders of First Charter Common Stock. A written opinion dated as of November
has been delivered to the First Charter Board of Directors to the effect that,
as of such date, the Exchange Ratio is fair, from a financial point of view, to
the holders of First Charter Common Stock.
THE FULL TEXT OF WHEAT FIRST'S OPINION DATED AS OF NOVEMBER , WHICH SETS
FORTH CERTAIN ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW
UNDERTAKEN, IS ATTACHED AS APPENDIX B TO THIS JOINT PROXY STATEMENT-PROSPECTUS,
IS INCORPORATED HEREIN BY REFERENCE AND SHOULD BE READ IN ITS ENTIRETY IN
CONNECTION WITH THIS JOINT PROXY STATEMENT-PROSPECTUS. THE SUMMARY OF THE
OPINION OF WHEAT FIRST SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE OPINION. WHEAT FIRST'S OPINION IS DIRECTED ONLY TO THE
FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE EXCHANGE RATIO TO THE HOLDERS
OF FIRST CHARTER COMMON STOCK AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
SHAREHOLDER OF FIRST CHARTER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE WITH RESPECT
TO THE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
Wheat First's opinion was one of many factors taken into consideration by
the First Charter Board of Directors in determining to approve the Agreement.
The opinion of Wheat First does not address the relative merits of the Merger as
compared to any alternative business strategies that might exist for First
Charter, nor does it address the effect of any other business combination in
which First Charter might engage.
In rendering its written opinion, Wheat First reviewed certain publicly
available business and financial information relating to First Charter and Union
and certain other information provided to it, including, among other things, the
following: (i) Union's Annual Reports to Shareholders, Annual Reports on Form
F-2 and related financial information for the three fiscal years ended December
31, 1994; (ii) Union's Quarterly Reports on Form F-4 and related financial
information for the quarters ended March 31 and June 30, 1995; (iii) First
Charter's Annual Reports to Shareholders, Annual Reports on Form 10-K and
related financial information for the three fiscal years ended December 31,
1994; (iv) First Charter's Quarterly Reports on Form 10-Q and related financial
information for the quarters ended March 31 and June 30, 1995; (v) certain
publicly available information with respect to historical market prices and
trading activity for First Charter Common Stock and Union Common Stock and for
certain publicly traded financial institutions which Wheat First deemed
relevant; (vi) certain publicly available information with respect to banking
companies and the financial terms of certain other mergers and acquisitions
which Wheat First deemed relevant; (vii) the Agreement; (viii) the Registration
Statement on Form S-4 of First Charter, including this Joint Proxy
Statement-Prospectus; (ix) other financial information concerning the businesses
and operations of First Charter and Union, including certain audited financial
information and certain internal financial analyses and forecasts for First
Charter and Union prepared by their respective senior managements; and (x) such
financial studies, analyses, inquiries and other matters as Wheat First deemed
necessary. In addition, Wheat First met with members of senior management of
each of First Charter and Union to discuss the businesses and prospects of each
company.
In connection with its review, Wheat First relied upon and assumed the
accuracy and completeness of all of the foregoing information provided to it or
publicly available, including the representations and warranties of First
Charter and Union included in the Agreement, and Wheat First has not assumed any
responsibility for independent verification of such information. Wheat First
relied upon the respective managements of First Charter and Union as to the
reasonableness and achievability of their financial and operational forecasts
and projections, and the assumptions and bases therefor, provided to it, and
assumed that such forecasts and projections reflect the best currently available
estimates and judgments of such management and that such forecasts and
projections will be realized in the amounts and in the time periods currently
estimated by such management. Wheat First also assumed, without independent
verification, that the aggregate allowances for loan losses and other
contingencies for First Charter and Union are adequate to cover such losses.
Wheat First did not review any individual credit files of First Charter or
Union, nor did it make an independent evaluation or appraisal of the assets or
liabilities of First Charter or Union.
Additionally, Wheat First considered certain financial and stock market
data of First Charter and Union and compared that data with similar data for
certain publicly-held financial institutions and considered the financial terms
of certain other
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comparable transactions that recently have been announced or effected, as
further discussed below. Wheat First also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria as it deemed relevant.
In connection with rendering its opinion dated as of the date of this Joint
Proxy Statement-Prospectus, Wheat First performed a variety of financial
analyses. The preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to partial analysis or summary
description. Moreover, the evaluation of the fairness, from a financial point of
view, of the Exchange Ratio to holders of First Charter Common Stock was to some
extent a subjective one based on the experience and judgment of Wheat First and
not merely the result of mathematical analysis of financial data. Accordingly,
notwithstanding the separate factors summarized below, Wheat First believes that
its analyses must be considered as a whole and that selecting portions of its
analyses and of the factors considered by it, without considering all analyses
and factors, could create an incomplete view of the evaluation process
underlying its opinion. The ranges of valuations resulting from any particular
analysis described below should not be taken to be Wheat First's view of the
actual value of First Charter or Union.
In performing its analyses, Wheat First made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of First Charter or Union. The
analyses performed by Wheat First are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by such analyses. Additionally, analyses relating to the values of
businesses do not purport to be appraisals or to reflect the prices at which
businesses actually may be sold. In rendering its opinion, Wheat First assumed
that, in the course of obtaining the necessary regulatory approvals for the
Merger, no conditions will be imposed that will have a material adverse effect
on the contemplated benefits of the Merger, on a pro forma basis, to First
Charter.
The following is a summary of the analyses performed by Wheat First in
connection with its opinion delivered to the First Charter Board of Directors on
September 13, 1995:
(a) COMPARISON OF SELECTED COMPANIES. Wheat First compared the
financial performance and market trading information of First Charter to
that of a group of regional bank holding companies (the "Group"). This
Group included: Carolina First Corporation; Centura Banks, Inc.; CCB
Financial Corporation; First Bancorp; FNB Corporation; Bank of Granite
Corporation; LSB Bancshares, Inc.; Peoples Bank; Triangle Bancorp, Inc.;
and United Carolina Bancshares Corporation.
Based on financial data as of and for the twelve month period ended
June 30, 1995, First Charter had (i) equity to assets of 11.79% compared to
an average of 9.65% for the Group; (ii) nonperforming loans to total loans
of 1.06% compared to an average of 0.64% for the Group; (iii) reserves for
loan losses to total loans of 1.33% compared to an average of 1.61% for the
Group; (iv) returns on average assets before extraordinary items of 1.83%
compared to an average of 1.09% for the Group; and (v) returns on average
equity before extraordinary items of 15.18% compared to an average of
11.04% for the Group.
Based on the market values as of September 11, 1995, and financial
data as of June 30, 1995, First Charter had (i) a stock price to book value
multiple of 232.8% compared to an average of 161.6% for the Group; (ii) a
stock price to "First Call" (as hereinafter defined) 1996 estimated
earnings per share before extraordinary items multiple of 14.1x compared to
an average of 11.1x for the Group; and (iii) an indicated dividend yield of
2.60% compared to an average of 2.43% for the Group. "First Call" is a data
service that monitors and publishes a compilation of earnings estimates
produced by selected research analysts regarding companies of interest to
institutional investors.
(b) COMPARABLE ACQUISITIONS ANALYSIS. Wheat First performed an
analysis of premiums paid in fourteen selected pending or recently
completed acquisitions valued between $15 million and $100 million of banks
or bank holding companies headquartered in Georgia, North Carolina, South
Carolina, Tennessee or Virginia, announced between January 1, 1994 and
September 12, 1995 (the "Selected Transactions"). Multiples of book value,
tangible book value, trailing twelve months earnings and annualized latest
quarter earnings, as well as deposit premiums paid in the Selected
Transactions, were compared to the multiples and premiums implied by the
consideration based on the Exchange Ratio offered to Union in the Merger.
The Selected Transactions included the following pending transactions:
Regions Financial Corporation/Metro Financial Corporation; First Union
Corporation/Brentwood National Bank; First American Corporation/First City
Bancorp, Inc.; BancorpSouth, Inc./Wes-Tenn Bancorp, Inc.; and United
Bankshares, Inc./First Commercial Bank. The Selected Transactions also
included the following completed transactions: SouthTrust
Corporation/Southern Bank Group; First Tennessee National
Corporation/Community Bancshares, Inc.; Triangle
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Bancorp, Inc./Atlantic Community Bancorp, Inc.; Triangle Bancorp,
Inc./Standard Bank and Trust Company; NationsBank Corporation/RHNB
Corporation; Mercantile Bankshares, Inc./Fredericksburg National Bancorp,
Inc.; Regions Financial Corporation/First Community Bancshares, Inc.;
Allied Bancshares, Inc./Citizens Bank & Trust; and F&M National
Corporation/Hallmark Bank & Trust.
Based on the market value of First Charter Common Stock on September
13, 1995, and financial data as of June 30, 1995, the analysis yielded
ratios of the implied consideration based on the Exchange Ratio offered by
First Charter to Union (i) to book value of 303.9% compared to an average
of 212.8% for the Selected Transactions; (ii) to tangible book value of
308.2%, compared to an average of 223.0% for the Selected Transactions;
(iii) to trailing twelve months earnings of 22.9x compared to an average of
21.9x for the Selected Transactions; and (iv) to latest quarter earnings
annualized of 20.2x compared to an average of 18.9x for the Selected
Transactions. Additionally, Wheat First examined the implied consideration
less tangible equity as a function of total deposits, yielding ratios of
19.5% compared to an average of 11.8% for the Selected Transactions.
The following comparisons are based on financial data as of and for
the twelve months ended June 30, 1995, for Union and the twelve month
reporting period prior to the announcement of each transaction for each
acquiree in the Selected Transactions: Union had (i) equity to assets of
8.30% compared to an average of 8.50% for the Selected Transaction
acquirees; (ii) nonperforming loans to assets of 0.29% compared to an
average of 0.63% for the Selected Transaction acquirees; (iii) returns on
average assets before extraordinary items of 1.21% compared to an average
of 0.97% for the Selected Transaction acquirees; (iv) returns on average
equity before extraordinary items of 14.26% compared to an average of
11.84% for the Selected Transaction acquirees; and (v) net interest margin
of 4.78% compared to an average of 4.69% for the Selected Transaction
acquirees.
(c) DISCOUNTED DIVIDENDS ANALYSIS. Using discounted dividend analysis,
Wheat First estimated the present value of the future stream of dividends
that Union could produce over the next five years, under various
circumstances, assuming the company performed in accordance with the
earnings forecasts of management and an assumed level of expense savings
were achieved. Wheat First then estimated the terminal values for Union
Common Stock at the end of the period by applying multiples ranging from
13x to 18x earnings projected in year five. The dividend streams and
terminal values were then discounted to present values using different
discount rates (ranging from 9% to 13%) chosen to reflect different
assumptions regarding the required rates of return to holders or
prospective buyers of Union Common Stock. This discounted dividend analysis
indicated reference ranges of between $12.88 and $20.32 per share for Union
Common Stock. These values compare to the implied consideration based on
the Exchange Ratio offered by First Charter to Union in the Merger of
$15.38 based on the market value of First Charter Common Stock on September
13, 1995.
In connection with its opinion as of November , 1995, Wheat First
confirmed the appropriateness of its reliance on the analyses used to render its
September 13, 1995, opinion by performing procedures to update certain of such
analyses and by reviewing the assumptions on which such analyses were based and
the factors considered in connection therewith.
No company or transaction used as a comparison in the above analysis is
identical to First Charter, Union or the Merger. Accordingly, an analysis of the
results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors that could affect the public trading value of
the companies used for comparison in the above analysis.
The opinion set forth in Appendix B is dated the date of this Joint Proxy
Statement-Prospectus and is based solely upon the information available to Wheat
First and the economic, market and other circumstances as they existed as of
such date. Events occurring after that date could materially affect the
assumptions and conclusions contained in the opinion of Wheat First. Wheat First
has not undertaken to reaffirm or revise its opinion or otherwise comment on any
events occurring after the date hereof.
First Charter has paid Wheat First $50,000 in fees as compensation for
Wheat First's rendering of its fairness opinion and for its financial advisory
services and has agreed to pay Wheat First an additional $250,000 in fees upon
consummation of the Merger. First Charter also has agreed to reimburse Wheat
First for its out-of-pocket expenses incurred in connection with the activities
contemplated by its engagement, regardless of whether the Merger is consummated.
The payment of all or a significant portion of fees related to financial
advisory services provided in connection with arm's-length mergers and other
business combinations upon consummation of such transactions, as is the case
with respect to the Merger, may be viewed as providing such financial advisors a
financial interest in the successful completion of such transactions. Such
compensation arrangements, however, are standard and customary for transactions
of the size and type of the Merger. First Charter has
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further agreed to indemnify Wheat First against certain liabilities, including
certain liabilities under federal securities laws. The payment of the above fees
is not contingent upon Wheat First rendering a favorable opinion with respect to
the Merger.
First Charter has retained Wheat First to provide on-going financial
advisory services during the past two years, for which Wheat First has received
$35,000 per year plus expenses. In addition, in the ordinary course of its
securities business, Wheat First actively trades First Charter Common Stock for
its own account and for the accounts of its customers and may, therefore, from
time to time hold a long or short position in such securities.
UNION. Union retained Baxter Fentriss to act as its financial advisor in
connection with the Merger and to render a written opinion to the Union Board of
Directors as to the fairness, from a financial point of view, of the Exchange
Ratio to the holders of Union Common Stock. Baxter Fentriss did not assist Union
in identifying prospective acquirors. Baxter Fentriss, as part of its investment
banking business, is continually engaged in the valuation of financial
institutions and their securities in connection with mergers and acquisitions
and valuations for estate, corporate and other purposes. Baxter Fentriss is a
nationally recognized advisor to firms in the financial services industry on
mergers and acquisitions. The Union Board of Directors selected Baxter Fentriss
to serve as its financial advisor in connection with the Merger because Baxter
Fentriss is an investment banking firm focusing on banking transactions, and
because of the firm's extensive experience and expertise in transactions similar
to the Merger. In connection with Baxter Fentriss' representation, the Union
Board of Directors did not impose any limitations upon Baxter Fentriss' scope of
investigation or procedures to be followed.
On September 13, 1995, Baxter Fentriss delivered to Union its opinion that
as of such date, and on the basis of matters referred to in its written report
and opinion, the Exchange Ratio was fair, from a financial point of view, to the
holders of Union Common Stock. In rendering its opinion, Baxter Fentriss
consulted with the management of Union and First Charter, reviewed the Agreement
and certain publicly-available information on the parties and reviewed certain
additional materials made available by the managements of the respective
companies. In addition, Baxter Fentriss discussed with the management of Union
and First Charter their respective businesses and outlooks. A written opinion
dated as of November , 1995 has been delivered to the Union Board of Directors
to the effect that, as of such date, the Exchange Ratio is fair, from a
financial point of view, to the holders of Union Common Stock.
THE FULL TEXT OF BAXTER FENTRISS' OPINION DATED AS OF NOVEMBER , 1995,
WHICH SETS FORTH CERTAIN ASSUMPTIONS MADE, MATTERS CONSIDERED AND QUALIFICATIONS
AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS APPENDIX C TO THIS
JOINT PROXY STATEMENT-PROSPECTUS, IS INCORPORATED HEREIN BY REFERENCE AND SHOULD
BE READ IN ITS ENTIRETY IN CONNECTION WITH THIS JOINT PROXY
STATEMENT-PROSPECTUS. THE SUMMARY OF THE OPINION OF BAXTER FENTRISS SET FORTH
HEREIN AS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE OPINION. BAXTER
FENTRISS' OPINION IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF
VIEW, OF THE EXCHANGE RATIO TO THE HOLDERS OF UNION COMMON STOCK AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER OF UNION AS TO HOW SUCH
SHAREHOLDER SHOULD VOTE WITH RESPECT TO THE AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY.
Baxter Fentriss' opinion was one of many factors taken into consideration
by the Union Board of Directors in determining to approve the Agreement, and the
receipt of Baxter Fentriss' opinion is a condition precedent to Union
consummating the Merger. The opinion of Baxter Fentriss does not address the
relative merits of the Merger as compared to any alternative business strategies
that might exist for Union, nor does it address the effect of any other business
combination in which Union might engage.
In rendering its written opinion, Baxter Fentriss reviewed (i) the
Agreement; (ii) drafts of this Joint Proxy Statement-Prospectus; (iii) the
respective Annual Reports to Shareholders, including the audited financial
statements, of Union and First Charter for the year ended December 31, 1994, and
the respective Quarterly Reports of Union and First Charter for the six months
ended June 30, 1995; (iv) pro forma combined unaudited condensed balance sheets
as of December 31, 1994 and June 30, 1995, pro forma combined statements of
income for the year ended December 31, 1994, and the six months ended June 30,
1995; and (v) certain additional financial and operating information with
respect to the respective business, operations and prospects of First Charter
and Union as it deemed appropriate. Baxter Fentriss also (a) held discussions
with members of the respective senior managements of First Charter and Union
regarding the historical and current business operation, financial condition and
future prospects of their respective companies; (b) reviewed the historical
market prices and trading activity for the common stock of each of Union and
First Charter; (c) compared the results of operations of Union and First Charter
with those of certain banking companies that it deemed to be relevant; (d)
analyzed the pro forma financial impact of the Merger on First Charter; (e)
analyzed the pro forma financial impact of the Merger on Union; and (f)
conducted such other studies, analyses, inquiries and examinations as Baxter
Fentriss deemed appropriate.
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In rendering its opinion to Union's Board of Directors, Baxter Fentriss
performed a variety of financial analyses. In conducting its analyses and
arriving at its opinion as expressed therein, Baxter Fentriss considered such
financial and other factors as it deemed appropriate under the circumstances
including, among others, the following: (i) the historical and current financial
condition and results of operations of First Charter and Union including
interest income, interest expense, interest sensitivity, noninterest income,
noninterest expense, earnings, book value, returns on assets and equity,
capitalization, the amount and type of nonperforming assets, the impact of
holding certain non-earning real estate assets, the reserve for loan losses and
possible tax consequences resulting from the transaction; (ii) the business
prospects of First Charter and Union; (iii) the economies of First Charter's and
Union's respective market areas; (iv) the respective historical and current
markets for First Charter Common Stock and Union Common Stock; and (v) the
nature and terms of certain other merger transactions that Baxter Fentriss
believed to be relevant. Baxter Fentriss also considered its assessment of
general economic, market, financial and regulatory conditions and trends, as
well as its knowledge of the financial institutions industry, its experience in
connection with similar transactions, its knowledge of securities valuation
generally, and its knowledge of merger transactions in North Carolina and South
Carolina (the "Carolinas").
The following is a summary of selected analyses performed by Baxter
Fentriss in connection with its opinion:
(a) STOCK PRICE HISTORY. Baxter Fentriss studied the respective
histories of the trading prices and volume for Union Common Stock and First
Charter Common Stock and compared that to publicly traded banks in the
Carolinas and to the price offered by First Charter. The 17 North Carolina
publicly-traded banks, as listed in SNL Monthly Market Report with prices
as of August 31, 1995, sell at median price to book and price to earnings
multiples of 1.51 times and 12.9 times, respectively. Median trading volume
of shares of North Carolina banks as a percent of outstanding shares is
1.5%. This median trading data incorporates First Charter information, with
price to book and price to earnings multiples of 2.39 times and 16.7 times,
respectively. Trading volume in shares of First Charter Common Stock as a
percent of outstanding shares as of July 31, 1995 was 0.4%. Union shares,
which have limited trading volume in the over-the-counter market, traded at
$8.50 per share on June 30, 1995, which equates to price to book and price
to earnings multiples of 1.68 times and 12.0 times, respectively. As of
June 30, 1995, Union's fully diluted book value was $5.06.
(b) COMPARATIVE ANALYSIS. Baxter Fentriss compared the price to
earnings multiple, price to book multiple, and price to assets multiple of
the Exchange Ratio with other comparable merger transactions in the
Carolinas after considering Union's nonperforming assets and other
variables. The comparative multiples included both bank and thrift sales
during the last three years. The average price to book multiple was 1.74
times versus 3.04 times for the Merger, the average price to earnings
multiple was 18.98 times versus 21.70 times for the Merger, and the average
price to assets ratio was 16.28% versus 25.20% for the Merger. Of the 37
transactions listed over the last three years, the Union transaction ranked
first in price to book multiple, fourth in price to assets multiple and
sixth in price to earnings multiple.
(c) PRO FORMA IMPACT. Baxter Fentriss considered the pro forma impact
of the transaction and concluded the transaction should have a positive
long-term impact on First Charter.
(d) DISCOUNTED CASH FLOW ANALYSIS. Baxter Fentriss performed a
discounted cash flow analysis to determine hypothetical present values for
a share of Union Common Stock as a five-year and ten-year investment. Under
this analysis, Baxter Fentriss considered various scenarios for the
performance of Union's stock using (i) a range from 5% to 14% in the growth
of Union's earnings and dividends and (ii) a range from 8x to 20x times
earnings as the terminal value for Union's stock. A range of discount rates
from 11% to 15% were applied to these alternative growth and terminal value
scenarios. These ranges of discount rates, growth alternatives and terminal
values were chosen based upon what Baxter Fentriss, in its judgment,
considered to be appropriate taking into account, among other things,
Union's past and current performance, the general level of inflation, and
rates of return for fixed income and equity securities in the marketplace
generally and for companies with similar risk profiles. In almost all of
the scenarios considered, the present value of a share of Union Common
Stock was calculated at less than the $15.38 in market value of the
consideration to be received by Union shareholders calculated as of
September 13, 1995. Thus, Baxter Fentriss' discounted cash flow analysis
indicated that Union shareholders would be in a better financial position
by receiving the First Charter Common Stock offered in the Merger rather
than by continuing to hold shares of Union Common Stock.
Using publicly available information on First Charter and applying the
capital guidelines of banking regulators, Baxter Fentriss' analysis indicated
that the Merger would not seriously dilute the capital and earnings capacity of
First Charter and would, therefore, likely not be opposed by the banking
regulatory agencies from a capital perspective. Furthermore, Baxter Fentriss
considered the likely market overlap and the guidelines of the Federal Reserve
Board with regard to market concentration and did not believe there to be an
issue with regard to possible antitrust concerns.
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Baxter Fentriss has relied, without any independent verification, upon the
accuracy and completeness of all financial and other information reviewed.
Baxter Fentriss has assumed that all estimates, including those as to possible
economies of scale, were reasonably prepared by management and reflect their
best current judgments. Baxter Fentriss did not make an independent appraisal of
the assets or liabilities of either Union or First Charter, and has not been
furnished such an appraisal.
Union has paid Baxter Fentriss $20,000 as compensation for Baxter Fentriss'
rendering of its fairness opinion. Union has also agreed to reimburse Baxter
Fentriss for its reasonable out-of-pocket expenses incurred in connection with
rendering its services. In addition, Union has agreed to pay Baxter Fentriss
$3,000 for each update of its fairness opinion, and Union has agreed to
indemnify Baxter Fentriss against certain liabilities, including certain
liabilities under federal securities laws. Baxter Fentriss is not affiliated
with either First Charter or Union. For its prior advisory services, Union has
paid Baxter Fentriss an aggregate of $3,500.
EFFECT ON EMPLOYEE STOCK OPTIONS
Options to purchase an aggregate of 626 shares of Union Common Stock were
outstanding as of the record date for the Union Special Meeting. To the extent
that shares of Union Common Stock are issued pursuant to the exercise of such
options in accordance with their terms prior to the Effective Time, they will be
converted into shares of First Charter Common Stock in the same manner as other
shares of Union Common Stock. At the Effective Time, each option to purchase
shares of Union Common Stock that has not expired and remains outstanding at the
Effective Time shall be converted into and become rights with respect to First
Charter Common Stock, and First Charter shall assume each such option in
accordance with the terms of the stock option plan under which it was issued and
the stock option agreement by which it is evidenced. From and after the
Effective Time, (i) each option to purchase Union Common Stock assumed by First
Charter may be exercised solely for shares of First Charter Common Stock; (ii)
the number of shares of First Charter Common Stock subject to each such option
will be equal to the number of shares of Union Common Stock subject to such
option immediately prior to the Effective Time multiplied by the Exchange Ratio
(with cash to be paid in lieu of any resulting fraction of a share of First
Charter Common Stock at the time of exercise); and (iii) the per share exercise
price under each such option will be adjusted by dividing the per share exercise
price by the Exchange Ratio and rounding down to the nearest cent.
CONDITIONS TO THE MERGER
The Merger will occur only if the Agreement and the transactions
contemplated thereby are approved by the requisite votes of the shareholders of
First Charter and the shareholders of Union. Consummation of the Merger is
further subject to the satisfaction of certain other conditions, unless waived,
to the extent legally permitted. Such conditions include (i) the receipt of all
required governmental approvals, provided that such approvals shall not have
imposed any condition that in the judgment of First Charter would restrict it or
its subsidiaries or any of its affiliates in their respective spheres of
operations and business activities after the Effective Time; (ii) the continuing
effectiveness under the Securities Act of the Registration Statement for the
First Charter Common Stock issuable to holders of Union Common Stock upon
consummation of the Merger; (iii) the absence of any active litigation which
seeks any order, decree or injunction of a court or agency of competent
jurisdiction to enjoin or prohibit the consummation of the Merger; (iv) the
receipt of an opinion of counsel to First Charter to the effect that the Merger
will constitute a reorganization within the meaning of Section 368 of the Code,
and that no gain or loss will be recognized by the shareholders of Union to the
extent they receive solely First Charter Common Stock in exchange for their
shares of Union Common Stock in the Merger; (v) the absence of a material
adverse change in the various representations and warranties made by either
party in the Agreement, unless waived by the other party; (vi) the receipt by
First Charter of an opinion of KPMG Peat Marwick LLP, independent accountants
for First Charter, that the Merger qualifies for pooling-of-interests accounting
treatment; (vii) the performance by each party of its various obligations under
the Agreement, unless waived by the other party; (viii) the receipt by First
Charter of an opinion of counsel to Union, in form satisfactory to First
Charter, as to certain matters regarding the Merger; and (ix) the receipt by
Union of an opinion of counsel to First Charter, in form satisfactory to Union,
as to certain matters regarding the Merger. See "THE MERGER -- Modification,
Waiver and Termination," " -- Certain Federal Income Tax Consequences,"
" -- Accounting Treatment" and " -- Bank Regulatory Matters."
In addition, unless waived, each party's obligation to effect the Merger is
subject to the receipt of certain closing certificates and documents from the
other party. No assurances can be provided as to when or if all of the
conditions precedent to the Merger can or will be satisfied or waived by the
party permitted to do so.
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CONDUCT OF BUSINESS PRIOR TO THE MERGER
In the Agreement, Union has agreed, except as otherwise contemplated by the
Agreement, to conduct its business only in the usual, regular and ordinary
course consistent with past practice and to use its best efforts to preserve its
business organization, employees and advantageous business relationships and
retain the services of its officers and key employees. In addition, Union has
agreed that it will not, without the prior written consent of First Charter:
(a) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money (other than short-term
indebtedness incurred to refinance short-term indebtedness, it being understood
and agreed that incurrence of indebtedness in the ordinary course of business
shall include, without limitation, the creation of deposit liabilities,
purchases of federal funds, sales of certificates of deposit and entering into
repurchase agreements), assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any other individual,
corporation or other entity, or make any loan or advance other than in the
ordinary course of business consistent with past practice;
(b) adjust, split, combine or reclassify any capital stock or otherwise
make any change with respect to its authorized capital stock; make, declare or
pay any dividend or make any other distribution on, or directly or indirectly
redeem, purchase or otherwise acquire, any shares of its capital stock or any
securities or obligations convertible into or exchangeable for any shares of its
capital stock, or grant any stock appreciation rights or grant any individual,
corporation or other entity any right to acquire any shares of its capital
stock; or issue any additional shares of capital stock, or any securities or
obligations convertible into or exchangeable for any shares of its capital
stock, except pursuant to the exercise of Union options outstanding as of
September 13, 1995 and pursuant to the Stock Option Agreement;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of its
properties or assets to any individual, corporation or other entity, or cancel,
release or assign any indebtedness to any such person or any claims held by any
such person;
(d) make any material investment either by purchase of stock or securities,
contributions to capital, property transfers, or purchase of any property or
assets of any other individual, corporation or other entity;
(e) enter into or terminate any contract or agreement involving annual
payments in excess of $1,000 and which cannot be terminated without penalty upon
30 days notice, or make any change in, or extension of, any of its leases or
contracts involving annual payments in excess of $1,000 and which cannot be
terminated without penalty upon 30 days notice;
(f) increase or modify in any manner the compensation or fringe benefits of
any of its employees or pay any pension or retirement allowance not required by
any existing plan or agreement to any such employees, or become a party to,
amend or commit itself to any pension, retirement, profit-sharing or welfare
benefit plan or agreement or employment agreement with or for the benefit of any
employee or accelerate the vesting of any stock options or other stock-based
compensation, provided that the foregoing shall not prevent the continued
accrual and payment in the ordinary course of benefits under Union's existing
cash incentive bonus plan for key employees and that Union may put in effect
regularly scheduled salary increases which are either (A) approved in advance by
First Charter or (B) consistent with the budgets for Union which have been
approved by First Charter;
(g) take any action, or refrain from taking any action, that would prevent
or impede the Merger from qualifying as a reorganization within the meaning of
Section 368 of the Code or from qualifying for pooling-of-interests accounting
treatment;
(h) settle any claim, action or proceeding involving the payment of money
damages in excess of an amount which, together with all other claims, actions or
proceedings previously settled, exceeds $20,000;
(i) amend its Articles of Incorporation or its Bylaws;
(j) fail to maintain its regulatory agreements, material licenses and
permits or to file in a timely fashion all Federal, state, local and foreign tax
returns;
(k) make any capital expenditures of more than $10,000 individually or
$25,000 in the aggregate;
(l) fail to maintain its benefit plans or timely make all contributions or
accruals required thereunder in accordance with generally accepted accounting
principles applied on a consistent basis;
(m) agree to, or make any commitment to, take any of the foregoing actions;
or
(n) (A) initiate, encourage or solicit, directly or indirectly, or permit
its officers, directors and employees and any investment banker, attorney,
accountant or other agent retained by it to initiate, encourage or solicit,
directly or indirectly, the
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making of any proposal or offer (an "Acquisition Proposal") to acquire all or
any significant part of the business and properties or capital stock of Union or
its subsidiary, whether by merger, consolidation or other business combination,
purchase of securities or assets, tender offer or exchange offer or otherwise,
or initiate, directly or indirectly, any contact with any person in an effort to
or with a view towards soliciting any Acquisition Proposal or (B) participate in
any discussions or negotiations regarding, or furnish to any other person any
information with respect to, an Acquisition Proposal or (C) enter into any
agreements to effect an Acquisition Proposal.
MODIFICATION, WAIVER AND TERMINATION
The Agreement provides that First Charter may at any time change the method
of its acquisition of Union if and to the extent that it deems such a change
desirable. In no case, however, may any such change (i) alter or change the
amount or kind of consideration to be received by Union shareholders under the
Agreement; (ii) adversely affect the tax treatment to Union shareholders of the
receipt of such consideration; (iii) take the form of an asset purchase
agreement; (iv) effect an acquisition in which Union shall not continue to
operate as a separate banking corporation immediately following the Effective
Time; or (v) alter or change certain employment arrangements to be provided to
certain officers of Union. See "THE MERGER -- General," " -- Certain Federal
Income Tax Consequences" and " -- Interests of Certain Persons in the Merger."
The Agreement also provides that it may be amended by a subsequent writing
signed by each party. However, the provision relating to the manner or basis in
which shares of Union Common Stock will be exchanged in the Merger may not be
amended after the First Charter Special Meeting and the Union Special Meeting
without any requisite approval of the holders of the issued and outstanding
shares of First Charter Common Stock or Union Common Stock entitled to vote
thereon, as the case may be.
The Agreement further provides that each party may waive any of the
conditions precedent to its obligations to consummate the Merger, to the extent
legally permitted. Neither of the parties intends, however, to waive any
conditions of the Merger if such waiver would, in the judgment of the waiving
party, have a material adverse effect on its shareholders.
The Agreement further provides that it may be terminated and the Merger
abandoned at any time prior to the Effective Time (i) by mutual written consent
of the Boards of Directors of each of First Charter and Union; (ii) by the
respective Board of Directors of First Charter or Union if the Effective Time
has not occurred by June 30, 1996; (iii) by the Board of Directors of First
Charter if the Federal Reserve Board, the FDIC or the Banking Commission has
approved the Merger subject to conditions that in the judgment of First Charter
would restrict its operations or business activities after the Effective Time;
(iv) by the respective Board of Directors of either First Charter or Union
pursuant to notice in the event of a breach or failure by the other party that
is material in the context of the transactions contemplated by the Agreement of
any representation, warranty, covenant or agreement contained therein which has
not been, or cannot be, cured within 30 days after written notice of such breach
is given; (v) by the Board of Directors of Union if the average of the daily
closing price of First Charter Common Stock as reported on the NASDAQ National
Market for the twenty consecutive trading days ending the date that is four
business days prior to the Effective Time shall be less than $14.00 (unless the
change in such average price is directly attributable to an increase, decrease
or change in the number of outstanding shares of First Charter Common Stock due
to a recapitalization, reclassification, stock dividend, stock split or reverse
stock split); or (vi) by the Board of Directors of First Charter if it
determines that either (A) the shareholders' equity of Union is less than
reported in the consolidated balance sheet of Union as June 30, 1995 or (B) that
the loan portfolio of Union presents a risk of noncollectibility unacceptable to
First Charter.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Smith Helms Mulliss & Moore, L.L.P., counsel to First Charter, has
delivered to First Charter and Union its opinion that, under Federal law as
currently in effect, (i) the proposed Merger will constitute a reorganization
within the meaning of Section 368(a)(1) of the Code; (ii) no gain or loss will
be recognized by the shareholders of Union on the exchange of their shares of
Union Common Stock for shares of First Charter Common Stock pursuant to the
terms of the Merger to the extent of such exchange; (iii) the Federal income tax
basis of the First Charter Common Stock for which shares of Union Common Stock
are exchanged pursuant to the Merger will be the same as the basis of such
shares of Union Common Stock exchanged therefor (less any proportionate part of
such basis allocable to any fractional interest in any share of First Charter
Common Stock); (iv) the holding period of First Charter Common Stock for which
shares of Union Common Stock are exchanged will include the period that such
shares of Union Common Stock were held by the holder, provided such shares were
capital assets of the holder; (v) the receipt of cash in lieu of fractional
shares will be treated as if the fractional shares were distributed as part of
the exchange and then redeemed by First Charter, and gain or loss will be
recognized in an amount equal to
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the difference between the cash received and the basis of the Union Common Stock
surrendered, which gain or loss will be capital gain or loss if the Union Common
Stock was a capital asset in the hands of the shareholder; and (vi) cash
received by shareholders of Union upon the exercise of dissenters' appraisal
rights will be treated as having been received in payment for such Union Common
Stock surrendered, and gain or loss will be recognized in an amount equal to the
difference between the cash received and the basis of the Union Common Stock
surrendered, which gain or loss shall be capital gain or loss if the Union
Common Stock was a capital asset in the hands of a shareholder.
THE FOREGOING IS A SUMMARY OF THE ANTICIPATED FEDERAL INCOME TAX
CONSEQUENCES OF THE PROPOSED MERGER UNDER THE CODE AND IS FOR GENERAL
INFORMATION ONLY. IT DOES NOT INCLUDE CONSEQUENCES OF STATE, LOCAL OR OTHER TAX
LAWS OR SPECIAL CONSEQUENCES TO PARTICULAR SHAREHOLDERS HAVING SPECIAL
SITUATIONS. SHAREHOLDERS OF UNION SHOULD CONSULT THEIR OWN TAX ADVISORS
REGARDING SPECIFIC TAX CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE
APPLICATION AND EFFECT OF FEDERAL, STATE AND LOCAL TAX LAWS AND TAX CONSEQUENCES
OF SUBSEQUENT SALES OF FIRST CHARTER COMMON STOCK.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Following the Merger, it is expected that the Board of Directors of First
Charter will comprise 18 persons, consisting of all the current members of the
Board of Directors of First Charter, plus H. Clark Goodwin, currently President,
Chief Executive Officer and Director of Union, Frank H. Hawfield, Jr., currently
Chairman of Union, and James B. Fincher and Dr. Jerry E. McGee, each currently a
Director of Union. In addition, it is expected that Mr. Goodwin shall also
become a member of the Executive Committee of the Board of Directors of First
Charter following the Effective Time. Additional information regarding the
existing management of First Charter, as well as the management of First Charter
following the Merger, is contained in the various documents incorporated herein
by reference. See "INFORMATION ABOUT FIRST CHARTER -- Management and Additional
Information" and "INFORMATION ABOUT UNION -- Management and Additional
Information."
Also following the Merger, it is expected that the Board of Directors of
Union will comprise 17 persons, consisting of all the current members of the
Board of Directors of Union plus Lawrence M. Kimbrough, currently President,
Chief Executive Officer and Director of First Charter, and J. Roy Davis, Jr.,
currently Chairman of First Charter.
Following the Merger and for an unspecified period of time in the future,
First Charter intends to operate Union as a separate state banking subsidiary
under the name "Bank of Union."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As of November 10, 1995, the directors and executive officers of Union and
their affiliates beneficially owned an aggregate of shares of Union
Common Stock, and based on the Exchange Ratio such persons are expected to
beneficially own shares of First Charter Common Stock following the
Effective Time. Based on the respective closing stock prices of the First
Charter Common Stock and the Union Common Stock as of such date, the value
realizable upon the conversion of such Union Common Stock into First Charter
Common Stock in the Merger is approximately $ . The number of shares
of Union Common Stock reported as beneficially owned by such persons does not
include 626 shares subject to outstanding options held by James T. Mathews, Jr.,
Senior Vice President of Union. For information relating to the treatment in the
Merger of options to purchase Union Common Stock, see "THE MERGER -- Effect on
Employee Stock Options." As discussed therein, all options to purchase Union
Common Stock outstanding at the Effective Time will be converted into rights
with respect to First Charter Common Stock and otherwise will remain subject to
the terms, including vesting schedules, of such options. Accordingly, the value
realizable upon exercise or conversion of such securities by the holders thereof
will depend upon the price of First Charter Common Stock at the time of such
exercise or conversion. Mr. Matthews' options are not currently exercisable. As
a result of the Merger, however, such options will vest immediately prior to the
Effective Time.
Each of the directors of Union has executed the Agreement and, by his
execution thereof, has agreed to vote all shares of Union Common Stock
beneficially owned by him in favor of the Agreement and the transactions
contemplated thereby.
Pursuant to the Agreement, First Charter has agreed to use its reasonable
efforts to maintain Union's existing directors' and officers' liability
insurance, with respect to claims arising from facts or events that occurred
prior to the Effective Time, for a period of three years after the Effective
Time. At its option, however, First Charter may substitute policies providing at
least comparable coverage containing terms and conditions substantially no less
favorable than those in effect on such date or, with the consent of Union, any
other policy. Furthermore, in connection with such continuation of insurance
coverage First Charter is not obligated to make annual premium payments which
exceed $20,000. In lieu of maintaining such insurance
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coverage, First Charter may agree to indemnify such covered persons against
liabilities arising out of acts or omissions occurring at or prior to the
Effective Time.
Four of the directors of Union, Messrs. H. Clark Goodwin, Frank H.
Hawfield, Jr., James B. Fincher and Jerry E. McGee, will become directors of
First Charter following consummation of the Merger. See "THE
MERGER -- Management and Operations After the Merger." In addition, five of the
executive officers of Union, consisting of Messrs. Goodwin (President and Chief
Executive Officer), McGuirt (Executive Vice President), Mathews (Senior Vice
President), William E. Davis (Senior Vice President) and Don E. Lewis (Senior
Vice President), currently have employment agreements with Union. Because Union
will remain as a separate subsidiary of First Charter following the Merger, such
employment agreements will remain in effect. Except as described above, it is
not anticipated that such persons or any other directors or executive officers
of Union will be employed by First Charter or FCNB immediately following the
Merger.
In addition, First Charter has agreed to provide certain additional
benefits to each of Messrs. Goodwin, McGuirt and Mathews. In particular, First
Charter has agreed to grant, pursuant to its Comprehensive Stock Option Plan, to
each of Messrs. Goodwin, McGuirt and Mathews an option to purchase 15,000, 8,000
and 5,000 shares, respectively, of First Charter Common Stock. The options each
will become exercisable in equal increments over five years, beginning six
months from the date of grant. The term of all such options will be ten years,
subject to normal provisions of the Comprehensive Stock Option Plan regarding
retirement, disability and other matters. Pursuant to the provisions of the
Comprehensive Stock Option Plan, the exercise price per share of the options
will be the fair market value per share of the First Charter Common Stock on the
date of grant, which is expected to be immediately following the Effective Time.
Accordingly, the value realizable upon exercise of such options by the holders
thereof will depend upon the price of First Charter Common Stock at the time of
exercise.
First Charter has also agreed that Messrs. Goodwin and McGuirt will be
eligible to participate in the First Charter Executive Incentive Compensation
Plan (the "Incentive Compensation Plan") on the same terms and conditions as
other participants. For purposes of the amount of the bonus pool established for
each of Messrs. Goodwin and McGuirt, Mr. Goodwin will participate at 30% of
current annual base salary and Mr. McGuirt will participate at 20% of current
annual base salary. The individual goals of Messrs. Goodwin and McGuirt under
the Incentive Compensation Plan for purposes of payment of the non-discretionary
portion of the incentive will be based on the annual performance plan for Union
as agreed to by Union and the Board of Directors of First Charter.
First Charter has also agreed to continue to fund the current life
insurance-based, supplementary retirement benefit for each of Messrs. Goodwin
and McGuirt through their respective normal retirement dates at the current
annual premium levels of $7,800 and $5,556, respectively. First Charter has also
agreed that Union will provide automobiles to each of Messrs. Goodwin and
McGuirt through the term of their employment contracts. The existing policies of
Union regarding such automobiles shall be applicable. Union will continue to
reimburse Messrs. Goodwin and McGuirt for dues for Rolling Hills Country Club
(and, in the case of Mr. Goodwin, The Charlotte City Club and The Tower Club)
through their respective normal retirement dates. Messrs. Goodwin and McGuirt
will be entitled to 20 days of paid vacation each calendar year and will be
entitled to attend conventions and meetings of various state and national
associations in line with the established practices of Union. First Charter will
make appropriate current or deferred compensation adjustments for Messrs.
Goodwin and/or McGuirt if it is determined that their respective entitlements
under the First Charter Retirement Saving Plan are less than the Union
Retirement Plan as the result of the "age-weighted" formula used under that
plan. First Charter also has agreed to attempt to secure continuing dependent
coverage under First Charter's group medical plan for Mr. Goodwin's spouse
following his retirement, at Mr. Goodwin's expense.
STOCK OPTION AGREEMENT BETWEEN FIRST CHARTER AND UNION
THE FOLLOWING DESCRIPTION OF THE OPTION AND THE STOCK OPTION AGREEMENT DOES
NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
STOCK OPTION AGREEMENT, WHICH IS ATTACHED AS AN EXHIBIT TO FIRST CHARTER'S
CURRENT REPORT ON FORM 8-K FILED SEPTEMBER 22, 1995 AND IS INCORPORATED HEREIN
BY REFERENCE.
Following execution of the Agreement, First Charter and Union entered into
the Stock Option Agreement whereby Union granted to First Charter the Option to
purchase up to 436,261 shares of Union Common Stock, subject to certain
adjustments, at an exercise price of $9.00 per share. Union granted First
Charter the Option as a condition of and in consideration of First Charter's
entering into the Agreement. The Option Shares, if issued, would represent
approximately 19.9% of the Union Common Stock issued and outstanding, without
giving effect to the issuance of any shares pursuant to an exercise of the
Option. The number of Option Shares subject to the Option will be increased to
the extent that Union issues additional shares of Union Common Stock (otherwise
than pursuant to an exercise of the Option), such that the number of Option
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Shares continues to equal 19.9% of the Union Common Stock then issued and
outstanding, without giving effect to the issuance of Option Shares pursuant to
an exercise of the Option.
First Charter may exercise the Option, in whole or in part, subject to
regulatory approval, at any time within 30 days (subject to extension as
provided in the Stock Option Agreement) after both an "Initial Triggering Event"
and a "Subsequent Triggering Event" that occurs prior to termination of the
Option. An "Initial Triggering Event" is defined as the occurrence of any of the
following events:
(i) Union or any subsidiary of Union, without having received First
Charter's prior written consent, shall have entered into an agreement to
engage in an Acquisition Transaction (hereinafter defined) with any person
or group other than First Charter or any of its subsidiaries, or Union's
Board of Directors shall have recommended that its shareholders approve or
accept any Acquisition Transaction other than as contemplated by the
Agreement or the Option Agreement. For purposes of the Option Agreement,
"Acquisition Transaction" shall mean (x) a merger or consolidation, or any
similar transaction, involving Union or any significant subsidiary of
Union, (y) a purchase, lease or other acquisition of all or substantially
all of the assets of Union or any significant subsidiary of Union or (z) a
purchase or other acquisition (including by way of merger, consolidation,
share exchange or otherwise) of securities representing 15% or more of the
voting power of Union or any significant subsidiary of Union;
(ii) any person or group other than First Charter, any subsidiary of
First Charter or any subsidiary of Union acting in a fiduciary capacity
shall have acquired beneficial ownership or the right to acquire beneficial
ownership of 15% or more of the outstanding shares of Union Common Stock;
(iii) the shareholders of Union shall not have approved the
transactions contemplated by the Agreement at the Union Special Meeting or
any adjournment thereof, or such meeting shall not have been held or shall
have been cancelled prior to termination of the Agreement, in either case
after Union's Board of Directors shall have withdrawn or modified (or
publicly announced its intention to withdraw or modify or interest in
withdrawing or modifying) its recommendation that the shareholders of Union
approve the transactions contemplated by the Agreement, or Union or any of
its subsidiaries, without having received First Charter's prior written
consent, shall have authorized, recommended, or proposed (or publicly
announced its intention to authorize, recommend or propose or its interest
in authorizing, recommending or proposing) an agreement to engage in an
Acquisition Transaction, with any person other than First Charter or any of
its subsidiaries;
(iv) any person or group other than First Charter or any subsidiary of
First Charter shall have made a bona fide proposal to Union or its
shareholders to engage in an Acquisition Transaction;
(v) Union shall have willfully breached any covenant or obligation
contained in the Agreement in anticipation of engaging in an Acquisition
Transaction, and such breach would entitle First Charter to terminate the
Agreement; or
(vi) any person or group other than First Charter or any subsidiary of
First Charter, other than in connection with a transaction to which First
Charter has given its prior written consent, shall have filed an
application or notice with the Federal Reserve Board, the FDIC or other
Federal or state bank regulatory authority, which application or notice has
been accepted for processing, for approval to engage in an Acquisition
Transaction.
"Subsequent Triggering Event" is defined as either (A) the acquisition by
any person or group of beneficial ownership of 25% or more of the then
outstanding Union Common Stock; or (B) the occurrence of the Initial Triggering
Event described in clause (i) above, except that the percentage reference in
subclause (z) thereof shall be 25%.
The Option terminates (i) at the Effective Time of the Merger; (ii) upon
termination of the Agreement in accordance with the provisions thereof if the
termination occurs prior to the occurrence of an Initial Triggering Event or
(iii) twelve months after termination of the Agreement if the termination occurs
following the occurrence of an Initial Triggering Event. Such twelve-month
period may be extended in certain circumstances involving regulatory approvals
or the necessity to avoid liability pursuant to Section 16(b) of the Exchange
Act.
Following the occurrence of a Subsequent Triggering Event and prior to
termination of the Option, subject to regulatory approval, Union is required,
upon request, to repurchase the Option and/or the Option Shares from the holder
at a specified price.
In the event that prior to termination of the Option, Union enters into an
agreement (i) to consolidate with or merge into any entity other than First
Charter or one of its subsidiaries and is not the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any entity other
than First Charter or one of its subsidiaries to merge into Union with
33
<PAGE>
Union as the continuing or surviving corporation, but in connection therewith
the then outstanding shares of Union Common Stock are changed into or exchanged
for securities of any other person or cash or any other property, or the then
outstanding shares of Union Common Stock after such merger represent less than
50% of the outstanding shares and share equivalents of the merged company or
(iii) to sell or otherwise transfer all or substantially all of its assets or
deposits or the assets or deposits of any significant subsidiary to any person
other than First Charter or one of its subsidiaries, then the agreement
governing such transaction must make proper provision so that the Option shall,
upon consummation of such transaction, be converted into or exchanged for an
option (a "Substitute Option"), at the holder's option, either of the continuing
or surviving corporation of a merger or a consolidation or the transferee of all
or substantially all of Union's assets, or of the person controlling such
continuing or surviving corporation or transferee. The number of shares subject
to the Substitute Option and the exercise price per share will be determined in
accordance with a formula set forth in the Stock Option Agreement. To the extent
possible, the Substitute Option will contain other terms and conditions that are
the same as those in the Option. Subject to regulatory approval, the issuer of a
Substitute Option will be required to repurchase such option at the request of
the holder thereof and to repurchase any shares of such issuer's common stock
issued upon exercise of a Substitute Option at the request of the owner thereof,
in each case at a specified price.
To the best of First Charter's and Union's knowledge, no event giving rise
to the exercise of the Option has occurred as of the date of this Joint Proxy
Statement-Prospectus.
DISSENTERS' RIGHTS OF SHAREHOLDERS
FIRST CHARTER. Pursuant to North Carolina law, holders of First Charter
Common Stock who object to the Merger will not be entitled to dissenters'
appraisal rights.
UNION. Article 13 of the NCBCA gives any shareholder of Union who objects
to the Merger and who complies with the provisions of Article 13 the right to
receive a cash payment from Union for the "fair value," immediately before the
Effective Time, of his Union Common Stock, subject only to the surrender by him
of certificates representing his shares. Any such payment may be higher or lower
than the value of the per share consideration paid in the Merger.
To exercise the right to object to the Merger, a shareholder must give to
Union, prior to the vote taken at the Union Special Meeting, a written notice of
such shareholder's intent to demand payment for shares of Union Common Stock. A
shareholder who wishes to object to the Merger must not vote any shares in favor
of the Agreement and the transactions contemplated thereby. If the Agreement and
the transactions contemplated thereby are approved at the Union Special Meeting,
then not later than 10 days after the Effective Time, Union must notify all
objecting shareholders who did not vote in favor of the Agreement and the
transactions contemplated thereby and gave timely notice of intent to demand
payment of the time within which they must make a demand for payment of the fair
value of their shares of Union Common Stock. Not sooner than 30 nor later than
60 days after such notice, each shareholder receiving the notice must make
demand upon Union for payment of the fair value of his shares and must deposit
his shares with Union. As of the Effective Time, or upon receipt of payment
demand, Union shall offer to each objecting shareholder who demands payment the
amount Union estimates to be the fair value of the shareholder's shares, plus
interest accrued from the Effective Time to the date of payment, and Union shall
pay this amount to each objecting shareholder who agrees in writing to accept it
in full satisfaction of his demand. If Union and the shareholder do not agree
upon a value to be paid, the shareholder may notify Union in writing within 30
days after receiving Union's offer of payment of his own estimate of the fair
value of his shares and the amount of interest due. If a demand for payment
remains unsettled after such notification, the shareholder may commence an
appraisal proceeding by filing an action within 60 days after such notification
in the Superior Court of Union County, North Carolina, where Union has its
principal place of business. Upon service upon it of the filing of such an
action, Union must pay to the shareholder the amount offered to the objecting
shareholder. After the Effective Time, no current shareholder of Union will have
any rights as a shareholder of Union including, without limitation, any right to
vote or to receive dividends or liquidating distributions, other than the right
to receive First Charter Common Stock in consideration of the Merger. NEITHER A
VOTE AGAINST THE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY NOR THE
FAILURE TO VOTE WILL CONSTITUTE A PROPER WRITTEN OBJECTION. If proper and timely
written objection to the Merger is given by a shareholder, a failure to vote
against the Agreement and the transactions contemplated thereby will not
constitute a waiver of his right to dissent and demand the fair value of his
shares. A vote by a shareholder to approve the Agreement and the transactions
contemplated thereby terminates his right to object under the statute.
Any objections to the Merger or demands for payment should be mailed to
Bank of Union, 201 North Charlotte Avenue, Monroe, North Carolina 28112,
Attention: Secretary. All proper objections or demands must be received by Union
on or prior to the date on which they are required to be delivered.
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<PAGE>
Except as may be required by law or ordered by a court of proper
jurisdiction, Union will not pay fees of counsel or other expenses incurred by
objecting shareholders.
Shareholders of First Charter do not have dissenters' rights with respect
to the Merger.
REFERENCE IS MADE TO APPENDIX D INCLUDED HEREWITH FOR THE COMPLETE TEXT OF
ARTICLE 13 OF THE NCBCA RELATING TO THE RIGHTS OF DISSENTING SHAREHOLDERS.
STATEMENTS MADE IN THIS JOINT PROXY STATEMENT-PROSPECTUS SUMMARIZING THOSE
SECTIONS ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO APPENDIX D. THE
PROVISIONS OF THE STATUTES ARE TECHNICAL IN NATURE AND COMPLEX. IT IS SUGGESTED
THAT ANY SHAREHOLDER WHO DESIRES TO AVAIL HIMSELF OR HERSELF OF HIS OR HER RIGHT
TO OBJECT TO THE AGREEMENT CONSULT COUNSEL. FAILURE TO COMPLY WITH THE
PROVISIONS OF THE STATUTE MAY DEFEAT A SHAREHOLDER'S RIGHT TO DISSENT.
ACCOUNTING TREATMENT
Consummation of the Merger is conditioned upon the receipt by First Charter
of an opinion from KPMG Peat Marwick LLP, First Charter's independent public
accountants, to the effect that the Merger qualifies for pooling-of-interests
accounting treatment if consummated in accordance with the Agreement. First
Charter and Union have agreed to use their best efforts to cause the Merger to
qualify for pooling-of-interests treatment by First Charter.
Under the pooling-of-interests method of accounting, the historical basis
of the assets and liabilities of First Charter and Union will be combined at the
Effective Time and carried forward at their previously recorded amounts, and the
shareholders' equity accounts of Union and First Charter will be combined on
First Charter's consolidated balance sheet and no goodwill or other intangible
assets will be created. Financial statements of First Charter issued after the
Merger will be restated retroactively to reflect the consolidated operations of
First Charter and Union as if the Merger had taken place prior to the periods
covered by such financial statements.
The unaudited pro forma financial information contained in this Joint Proxy
Statement-Prospectus has been prepared using the pooling-of-interests accounting
method to account for the Merger. See "SUMMARY -- Comparative Unaudited Per
Share Information" and " -- Selected Financial Information" and "PRO FORMA
CONDENSED FINANCIAL INFORMATION."
BANK REGULATORY MATTERS
FEDERAL RESERVE BOARD. The Merger is subject to prior approval by the
Federal Reserve Board under the BHCA. The BHCA requires the Federal Reserve
Board, when approving a transaction such as the Merger, to take into
consideration the financial and managerial resources (including the competence,
experience and integrity of the officers, directors and principal shareholders)
and future prospects of the existing and proposed institutions and the
convenience and needs of the communities to be served. In considering financial
resources and future prospects, the Federal Reserve Board will, among other
things, evaluate the adequacy of the capital levels of the parties to a proposed
transaction.
The BHCA prohibits the Federal Reserve Board from approving a merger if it
would result in a monopoly or be in furtherance of any combination or conspiracy
to monopolize or to attempt to monopolize the business of banking in any part of
the United States, or if its effect in any section of the country would be
substantially to lessen competition or to tend to create a monopoly, or if it
would in any other manner result in a restraint of trade, unless the Federal
Reserve Board finds that the anti-competitive effects of a merger are clearly
outweighed in the public interest by the probable effect of the transaction in
meeting the convenience and needs of the communities to be served. In addition,
under the Community Reinvestment Act of 1977, as amended (the "CRA"), the
Federal Reserve Board must take into account the record of performance of the
existing institutions in meeting the credit needs of the entire community,
including low- and moderate-income neighborhoods, served by such institutions.
Applicable Federal law provides for the publication of notice and public
comment on the application and authorizes the Federal Reserve Board to permit
interested parties to intervene in the proceedings. If an interested party is
permitted to intervene, such intervention could delay the regulatory approvals
required for consummation of the Merger.
The Merger generally may not be consummated until the 30th day following
the date of approval by the Federal Reserve Board (or in certain circumstances
the 15th day), during which time the United States Department of Justice (the
"Department of Justice") may challenge the Merger on antitrust grounds. The
commencement of an antitrust action would stay the effectiveness of the Federal
Reserve Board's approval unless a court specifically ordered otherwise. First
Charter and Union believe that the Merger does not raise substantial antitrust
concerns.
FDIC. The Merger also is subject to prior approval by the FDIC. Under
applicable Federal law, the FDIC also must take into consideration the financial
and managerial resources and future prospects of the existing and proposed
institutions and
35
<PAGE>
the convenience and needs of the communities to be served. The FDIC is
prohibited from approving the Merger if it would result in a monopoly or be in
furtherance of any combination or conspiracy to monopolize or to attempt to
monopolize the business of banking in any part of the United States, or if its
effect in any section of the country may be substantially to lessen competition
or to tend to create a monopoly, or if it would in any other manner result in a
restraint of trade, unless the FDIC finds that the anti-competitive effects of
the Merger are clearly outweighed in the public interest by the probable effect
of the transaction in meeting the convenience and needs of the communities to be
served. Furthermore, the FDIC will not approve the Merger if it determines in
its judgment that the resulting institution will fail to meet existing capital
standards, continue with unsatisfactory management, or that the resulting
institution's earnings prospects, both in terms of quantity and quality, are
weak, doubtful or suspect. In making such determination, the FDIC will focus
particular attention on the adequacy of the provision for loan losses. In
addition, under the CRA, the FDIC must take into account the record of
performance of the existing institutions, as well as the projected performance
of the resulting institution, in meeting the credit needs of the entire
community, including low- and moderate-income neighborhoods, served by such
institutions.
Applicable Federal law provides for the publication of notice and public
comment on the application and authorizes the FDIC to permit interested parties
to intervene in the proceedings. If an interested party is permitted to
intervene, such intervention could delay the regulatory approvals required for
consummation of the Merger.
The Merger generally may not be consummated until the 30th day (or in
certain circumstances the 15th day) following the date of approval by the FDIC,
during which time the Department of Justice may challenge the Merger on
antitrust grounds. The commencement of an antitrust action would stay the
effectiveness of the FDIC's approval unless a court specifically ordered
otherwise.
NORTH CAROLINA BANKING COMMISSION. The organization of Interim Bank and the
Merger are subject to the approval of the Banking Commission.
STATUS OF REGULATORY APPROVALS AND OTHER INFORMATION. First Charter and
Union have filed all applications and notices and have taken (or will take)
other appropriate action with respect to any requisite approvals or other action
of any governmental authority. The Agreement provides that the obligation of
First Charter to consummate the Merger is conditioned upon the receipt of all
requisite regulatory approvals, including the approvals of the Federal Reserve
Board, the FDIC and the Banking Commission. There can be no assurance that any
governmental agency will approve or take any other required action with respect
to the Merger, and, if approvals are received or action is taken, there can be
no assurance as to the date of such approvals or action, that such approvals or
action will not be conditioned upon matters that would cause the parties to
abandon the Merger or that no action will be brought challenging such approvals
or action, including a challenge by the Department of Justice or, if such a
challenge is made, the result thereof.
First Charter and Union are not aware of any governmental approvals or
actions that may be required for consummation of the Merger other than as
described above. Should any other approval or action be required, First Charter
and Union currently contemplate that such approval or action would be sought.
There can be no assurance, however, that any such approval or action, if needed,
could be obtained and would not be conditioned in a manner that would cause the
parties to abandon the Merger.
See "THE MERGER -- Effective Time of the Merger," " -- Conditions to the
Merger" and " -- Modification, Waiver and Termination."
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of First Charter Common Stock to be issued to shareholders of
Union in the Merger have been registered under the Securities Act. Such shares
may be traded freely and without restriction by those shareholders not deemed to
be "affiliates" of Union as that term is defined under the Securities Act. Any
subsequent transfer of such shares, however, by any person who is an affiliate
of Union at the time this Joint Proxy Statement-Prospectus is first distributed
to the shareholders of Union will, under existing law, require either (i) the
further registration under the Securities Act of the shares of First Charter
Common Stock to be transferred, (ii) compliance with Rule 145 promulgated under
the Securities Act (permitting limited sales under certain circumstances) or
(iii) the availability of another exemption from registration. An "affiliate" of
Union, as defined by the rules promulgated pursuant to the Securities Act, is a
person who directly, or indirectly through one or more intermediaries, controls,
is controlled by, or is under common control with Union. The foregoing
restrictions are expected to apply to the directors, executive officers and the
holders of 10% or more of the Union Common Stock (and to certain relatives or
the spouse of any such person and any trusts, estates, corporations or other
entities in which such persons have a 10% or greater beneficial or equity
interest). Stop transfer instructions will be given by First Charter to the
transfer
36
<PAGE>
agent with respect to the First Charter Common Stock to be received by persons
subject to the restrictions described above, and the certificates for such stock
will be appropriately legended. Those individuals identified by Union as
affiliates of Union have entered into agreements that they will not make any
further sales of shares of First Charter Common Stock received upon consummation
of the Merger, except in compliance with the applicable provisions of the
Securities Act.
DIVIDEND REINVESTMENT PLAN
First Charter has a dividend reinvestment plan that provides, for those
shareholders who elect to participate, that dividends on First Charter Common
Stock will be used to purchase on a quarterly basis either original issue shares
or shares in the open market at the market value of First Charter Common Stock.
The plan also permits participants to invest in additional shares of First
Charter Common Stock on a quarterly basis, through optional cash payments not to
exceed $2,500 per quarter, at the then-current market price of such stock at the
time of purchase. Only shareholders of record are entitled to participate in the
dividend reinvestment plan; accordingly, shares held in "street name" generally
may not be included in the dividend reinvestment plan. It is anticipated that
First Charter will continue its dividend reinvestment plan and that shareholders
of Union who receive shares of First Charter Common Stock in the Merger will
have the right to participate therein.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
MARKET PRICES
First Charter Common Stock is reported on The NASDAQ Stock Market as a
NASDAQ National Market security under the trading symbol "FCTR."As of the record
date for the First Charter Special Meeting, First Charter Common Stock was held
of record by approximately 1,035 persons. The following table sets forth the
high and low sales prices of the First Charter Common Stock as reported on The
NASDAQ Stock Market for the periods indicated. The prices for First Charter
Common Stock have been adjusted to reflect a stock split effected in the form of
a 33 1/3% stock dividend declared in the fourth quarter of 1994.
Union Common Stock is traded in the over-the-counter market and is listed
in the National Daily Quotation Service "Pink Sheets." As of the record date for
the Union Special Meeting, Union Common Stock was held of record by
approximately 1,272 persons. The following table sets forth the high and low bid
prices for Union Common Stock for the indicated periods based on information
obtained by Union from financial newspapers. Such prices may reflect interdealer
prices, without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions. The prices for Union Common Stock have been
adjusted to reflect 5% stock dividends declared in the fourth quarter of each of
1993 and 1994.
<TABLE>
<CAPTION>
FIRST CHARTER UNION BID
SALES PRICES PRICES
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
Year Ended December 31, 1993:
First Quarter......................................................................... $ 9.19 $ 6.75 $ 4.31 $3.63
Second Quarter........................................................................ 10.13 8.44 3.86 3.63
Third Quarter......................................................................... 10.31 9.56 4.54 3.86
Fourth Quarter........................................................................ 11.44 9.75 5.00 4.76
Year Ended December 31, 1994:
First Quarter......................................................................... 12.94 11.06 5.71 5.00
Second Quarter........................................................................ 14.63 12.56 5.71 5.71
Third Quarter......................................................................... 15.00 13.88 6.67 5.71
Fourth Quarter........................................................................ 15.50 14.44 7.00 7.00
Year Ending December 31, 1995:
First Quarter......................................................................... 15.25 14.50 7.38 7.00
Second Quarter........................................................................ 19.25 14.50 8.00 7.38
Third Quarter......................................................................... 21.25 18.50 12.50 8.25
Fourth Quarter (through November 10)..................................................
</TABLE>
37
<PAGE>
DIVIDENDS
The following table sets forth dividends declared per share of First
Charter Common Stock for the periods indicated. Such amounts have been adjusted
to reflect a stock split effected in the form of a 33 1/3% stock dividend
declared in the fourth quarter of 1994. Union has not paid any cash dividends
during the periods indicated. The ability of either First Charter or Union to
pay dividends to its shareholders is subject to certain restrictions. See
"INFORMATION ABOUT FIRST CHARTER -- Supervision and Regulation" and "INFORMATION
ABOUT UNION -- Supervision and Regulation."
<TABLE>
<CAPTION>
FIRST CHARTER
DIVIDENDS
<S> <C>
Year Ended December 31, 1993:
First Quarter......................................................................... $ 0.075
Second Quarter........................................................................ 0.075
Third Quarter......................................................................... 0.075
Fourth Quarter........................................................................ 0.083
Year Ended December 31, 1994:
First Quarter......................................................................... 0.090
Second Quarter........................................................................ 0.090
Third Quarter......................................................................... 0.100
Fourth Quarter........................................................................ 0.130
Year Ending December 31, 1995:
First Quarter......................................................................... 0.130
Second Quarter........................................................................ 0.130
Third Quarter......................................................................... 0.130
</TABLE>
38
<PAGE>
PRO FORMA CONDENSED FINANCIAL INFORMATION
(UNAUDITED)
The following unaudited Pro Forma Condensed Financial Information and
explanatory notes are presented to show the impact on the historical financial
position and results of operations of First Charter of the proposed Merger. The
Merger is reflected in the Pro Forma Condensed Financial Information under the
pooling-of-interests method of accounting. See "THE MERGER -- Accounting
Treatment."
The Pro Forma Condensed Balance Sheet is based on the assumption that the
Merger was consummated on June 30, 1995, and the Pro Forma Condensed Statements
of Income are based on the assumption that the Merger was consummated at the
beginning of each period presented.
The unaudited Pro Forma Condensed Financial Information should be read in
conjunction with the historical financial statements and notes thereto of First
Charter and of Union incorporated by reference herein. The pro forma information
is not necessarily indicative of the results of operations or combined financial
position that would have resulted had the Merger been consummated at the
beginning of the periods indicated, nor is it necessarily indicative of the
results of operations of future periods or future combined financial position.
39
<PAGE>
PRO FORMA CONDENSED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
AT JUNE 30, 1995
PRO FORMA
FIRST CHARTER
FIRST PRO FORMA AND UNION
CHARTER UNION ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
ASSETS
Cash and due from banks............................................... $ 17,342 $ 10,663 $ $ 28,005
Federal Funds sold.................................................... 7,147 2,565 9,712
Securities available for sale:
U.S. Government obligations......................................... 11,702 508 12,210
U.S. Government agency obligations.................................. 15,996 3,057 19,053
Mortgage-backed securities.......................................... 2,617 2,469 5,086
State and municipal obligations, nontaxable......................... 306 -- 306
Other............................................................... 4,350 -- (555)(1) 3,795
Total securities available for sale............................ 34,971 6,034 (555) 40,450
Investment securities:
U.S. Government obligations......................................... -- 7,959 7,959
U.S. Government agency obligations.................................. -- 10,298 10,298
Mortgage-backed securities.......................................... 13,403 626 14,029
State and municipal obligations, nontaxable......................... 36,038 7,175 43,213
Total investment securities.................................... 49,441 26,058 75,499
Loans................................................................. 219,601 86,354 305,955
Less: Unearned income............................................... (304) -- (304)
Allowance for loan losses.................................... (2,906) (1,547) (4,453)
Loans, net..................................................... 216,391 84,807 301,198
Premises and equipment, net........................................... 7,865 1,571 9,436
Other assets.......................................................... 4,440 1,889 64(1) 6,393
Total assets................................................... $337,597 $133,587 $ (491) $ 470,693
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits, domestic:
Noninterest-bearing................................................. $ 48,543 $ 19,452 $ $ 67,995
Interest-bearing.................................................... 231,024 97,406 328,430
Total deposits................................................. 279,567 116,858 396,425
Short-term borrowings................................................. 15,942 4,574 20,516
Other liabilities..................................................... 2,286 1,062 3,348
Total liabilities.............................................. 297,795 122,494 420,289
SHAREHOLDERS' EQUITY
First Charter Common Stock -- $5 par value; authorized, 10,000,000
shares; issued and outstanding, 4,633,641 shares.................... 23,168 -- 7,961(2) 31,129
Union Common Stock -- $1.25 par value; authorized, 6,000,000 shares;
issued and outstanding, 2,192,270 shares............................ -- 2,740 (2,740)(1,2) --
Additional paid-in capital............................................ 42 5,062 (5,104)(1,2) --
Unrealized gain (loss) on securities available for sale............... 702 (38) (100)(1) 564
Retained earnings..................................................... 15,890 3,329 (508)(2) 18,711
Total shareholders' equity..................................... 39,802 11,093 (491) 50,404
Total liabilities and shareholders' equity..................... $337,597 $133,587 $ (491) $ 470,693
</TABLE>
See Notes to Pro Forma Condensed Financial Information.
40
<PAGE>
PRO FORMA CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEARS
ENDED JUNE 30, ENDED DECEMBER 31,
1995 1994 1994 1993 1992
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Interest and fees on loans............................................. $14,038 $10,463 $22,940 $19,295 $19,116
Interest on investments and securities................................. 3,693 3,338 7,021 6,709 6,670
Other interest......................................................... 30 9 -- -- --
Total interest income........................................... 17,761 13,810 29,961 26,004 25,786
Interest on deposits................................................... 6,545 4,536 9,882 9,124 10,592
Interest on borrowings................................................. 513 233 666 234 207
Total interest expense.......................................... 7,058 4,769 10,548 9,358 10,799
Net interest income............................................. 10,703 9,041 19,413 16,646 14,987
Provision for loan losses.............................................. 480 332 839 835 942
Net interest income after provision for loan losses............. 10,223 8,709 18,574 15,811 14,045
Noninterest income..................................................... 3,330 2,841 5,654 5,090 4,493
Noninterest expense.................................................... 8,170 7,323 15,005 13,889 13,211
Income before income taxes...................................... 5,383 4,227 9,223 7,012 5,327
Income taxes........................................................... 1,604 1,132 2,653 1,828 1,212
Net income before cumulative effect of a change in accounting
principle.................................................... 3,779 3,095 6,570 5,184 4,115
Cumulative effect of a net change in accounting principle.............. -- -- -- 300 --
Net income...................................................... $ 3,779 $ 3,095 $ 6,570 $ 5,484 $ 4,115
PRIMARY INCOME PER SHARE:
Net income before cumulative effect.................................. $ 0.60 $ 0.49 $ 1.04 $ 0.82 $ 0.65
Net income from cumulative effect.................................... -- -- -- 0.05 --
Net income...................................................... $ 0.60 $ 0.49 $ 1.04 $ 0.87 $ 0.65
Average common equivalent shares..................................... 6,273,206 6,306,853 6,291,911 6,335,094 6,327,506
INCOME PER SHARE ASSUMING FULL DILUTION:
Net income before cumulative effect.................................. $ 0.60 $ 0.49 $ 1.04 $ 0.82 $ 0.65
Net income from cumulative effect.................................... -- -- -- 0.05 --
Net income...................................................... $ 0.60 $ 0.49 $ 1.04 $ 0.87 $ 0.65
Average common equivalent shares..................................... 6,286,804 6,316,870 6,296,207 6,341,734 6,346,940
</TABLE>
See Notes to Pro Forma Condensed Financial Information.
41
<PAGE>
NOTES TO THE UNAUDITED JUNE 30, 1995
PRO FORMA CONDENSED FINANCIAL INFORMATION
The unaudited First Charter and Union Pro Forma Condensed Financial
Information is based upon the following adjustments, reflecting the consummation
of the Merger using the pooling-of-interests method of accounting. Actual
amounts may differ from those reflected in the unaudited Pro Forma Condensed
Financial Information.
NOTE 1
As of June 30, 1995, First Charter owned directly for its own account
69,361 shares of Union Common Stock. Such shares will be cancelled and retired
upon consummation of the Merger.
NOTE 2
First Charter will exchange 0.75 shares of First Charter Common Stock for
each share of Union Common Stock outstanding immediately prior to the Effective
Time (other than shares of Union Common Stock as to which dissenters' rights
have been perfected and other than shares of Union Common Stock owned by First
Charter or FCNB, except for shares held in a fiduciary capacity or as a result
of debts previously contracted). The pro forma issued number of shares of First
Charter Common Stock does not reflect the exercise of options to acquire shares
of Union Common Stock. Options to acquire 626 shares of Union Common Stock were
outstanding at June 30, 1995. Assumed exercise of the Union options does not
have a significant impact on pro forma shareholders' equity or net income per
share.
<TABLE>
<S> <C>
Shares of Union Common Stock (excluding First Charter-owned shares and
excluding 626 shares subject to the exercise of options)............................... 2,122,909
Exchange Ratio........................................................................... 0.75
Shares of First Charter Common Stock issued.............................................. 1,592,181
</TABLE>
NOTE 3
The unaudited Pro Forma Condensed Financial Information does not include
any expenses or restructuring charges related to the Merger. Such after tax
expenses and restructuring charges related to the Merger are currently estimated
to be $825,000. Professional fees associated with the transaction represent the
largest portion of the Merger expenses and the restructuring charge.
42
<PAGE>
INFORMATION ABOUT FIRST CHARTER
GENERAL
First Charter is a bank holding company established as a North Carolina
corporation in 1983 and is registered under the BHCA. Its principal asset is the
stock of FCNB. Through FCNB, First Charter provides banking and banking-related
services throughout Cabarrus, Rowan and Mecklenburg Counties, North Carolina.
The principal executive offices of First Charter are located at 22 Union Street,
North, Concord, North Carolina 28205. Its telephone number is (704) 786-3300.
FCNB has seven full service facilities, two limited service facilities and
nine ATM's (four of which are remote facilities) serving Cabarrus County. In
addition, FCNB has a full service facility with an ATM located in southern Rowan
County. FCNB also has four full service branches (two with ATM's) which serve
northern Mecklenburg County along the I-77 corridor. Although the service
delivery facilities are located in southern Rowan County, Cabarrus County and
northern Mecklenburg County, a large portion of the population that resides in
these market areas commute to Charlotte and other locations within Mecklenburg
County.
Through its service delivery system, FCNB provides the following banking
products: checking accounts; NOW accounts; "Money Market Rate" accounts;
certificates of deposit; individual retirement accounts; overdraft protection;
business, agriculture, real estate, residential mortgage and personal loans;
home equity loans; automobile loans; personal and corporate trust services; safe
deposit boxes; and automated banking.
As of June 30, 1995, First Charter had total assets of approximately $338
million and total deposits of approximately $280 million. See "RECENT
DEVELOPMENTS." As of June 30, 1995, First Charter had approximately 140
full-time equivalent employees.
MANAGEMENT AND ADDITIONAL INFORMATION
Copies of First Charter's 1994 Annual Report to Shareholders and its
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 accompany this
Joint Proxy Statement-Prospectus. Certain information relating to the executive
compensation, various benefit plans (including stock option plans and the
Incentive Compensation Plan), voting securities and the principal holders
thereof, certain relationships and related transactions and other related
matters as to First Charter is incorporated by reference or set forth in First
Charter's Annual Report on Form 10-K for the year ended December 31, 1994,
incorporated herein by reference. Shareholders desiring copies of such documents
may contact First Charter at its address or phone number indicated under
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
SUPERVISION AND REGULATION
GENERAL. As a registered bank holding company, First Charter is subject to
the supervision of, and to regular inspection by, the Federal Reserve Board.
FCNB is organized as a national banking association and as such is subject to
regulation, supervision and examination by the Office of the Comptroller of the
Currency (the "Comptroller"). FCNB is also subject to regulation by the FDIC and
is subject to various other laws and regulations and supervision and examination
by other regulatory agencies, all of which directly or indirectly affect First
Charter's operations, management and ability to make distributions. The
following discussion summarizes certain aspects of those laws and regulations
that affect First Charter.
The activities of First Charter, and those of companies which it controls
or in which it holds more than 5% of the voting stock, are limited to banking or
managing or controlling banks or furnishing services to or performing services
for its subsidiaries, or any other activity which the Federal Reserve Board
determines to be so closely related to banking or managing or controlling banks
as to be a proper incident thereto. In making such determinations, the Federal
Reserve Board is required to consider whether the performance of such activities
by a bank holding company or its subsidiaries can reasonably be expected to
produce benefits to the public such as greater convenience, increased
competition or gains in efficiency that outweigh possible adverse effects, such
as undue concentration of resources, decreased or unfair competition, conflicts
of interest or unsound banking practices. Generally, bank holding companies,
such as First Charter, are required to obtain prior approval of the Federal
Reserve Board to engage in any new activity not previously approved by the
Federal Reserve Board or to acquire more than 5% of any class of voting stock of
any company.
Bank holding companies are also required to obtain the prior approval of
the Federal Reserve Board before acquiring more than 5% of any class of voting
stock of any bank which is not already majority-owned by the bank holding
company. Pursuant to the Interstate Banking and Branching Act, effective
September 29, 1995, a bank holding company is now able to acquire banks in
states other than its home state. Prior to that time, the Federal Reserve Board
could not approve an application by a bank holding company to acquire shares of
a bank located outside of the state in which the operations of the bank
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<PAGE>
holding company were principally conducted on the date it became subject to the
BHCA unless such acquisition was specifically authorized by the laws of the
state in which the bank whose shares are to be acquired was located.
The Interstate Banking and Branching Act also authorizes banks to merge
across state lines, therefore creating interstate branches, beginning June 1,
1997. Under such legislation, each state has the opportunity to "opt out" of
this provision, thereby prohibiting interstate branching in such states, or to
"opt in" at an earlier time, thereby allowing interstate branching within that
state prior to June 1, 1997. The State of North Carolina has "opted in" to such
legislation, effective June 22, 1995. Furthermore, pursuant to such Act, a bank
is now able to open new branches in a state in which it does not already have
banking operations, if the laws of such state permit such DE NOVO branching.
Proposals to change the laws and regulations governing the banking industry
are frequently introduced in Congress, in the state legislatures and before the
various bank regulatory agencies. In 1995, several bills have been introduced in
Congress that would have the effect of broadening the securities underwriting
powers of bank holding companies and possibly permitting bank holding companies
to engage in nonfinancial activities. The likelihood and timing of any such
proposals or bills being enacted and the impact they might have on First Charter
and its subsidiaries cannot be determined at this time.
CAPITAL AND OPERATIONAL REQUIREMENTS. The Federal Reserve Board, the
Comptroller and the FDIC have issued substantially similar risk-based and
leverage capital guidelines applicable to United States banking organizations.
In addition, those regulatory agencies may from time to time require that a
banking organization maintain capital above the minimum levels, whether because
of its financial condition or actual or anticipated growth.
The Federal Reserve Board risk-based guidelines define a two-tier capital
framework. Tier 1 capital consists of common and qualifying preferred
shareholders' equity, less certain intangibles and other adjustments. Tier 2
capital consists of subordinated and other qualifying debt, and the allowance
for loan losses up to 1.25% of risk-weighted assets. The sum of Tier 1 and Tier
2 capital less investments in unconsolidated subsidiaries represents qualifying
total capital, at least 50% of which must consist of Tier 1 capital. Risk-based
capital ratios are calculated by dividing Tier 1 and total capital by
risk-weighted assets. Assets and off-balance sheet exposures are assigned to one
of four categories of risk-weights, based primarily on relative credit risk. The
minimum Tier 1 capital ratio is 4% and the minimum total capital ratio is 8%.
First Charter's Tier 1 and total risk-based capital ratios under these
guidelines at June 30, 1995 were 16.13% and 17.33%, respectively.
The leverage ratio is determined by dividing Tier 1 capital by adjusted
total assets. Although the stated minimum ratio is 3%, most banking
organizations are required to maintain ratios of at least 100 to 200 basis
points above 3%. First Charter's leverage ratio at June 30, 1995 was 11.61%.
Management believes that First Charter meets its leverage ratio requirement.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), among other things, identifies five capital categories for insured
depository institutions (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized) and requires the respective Federal regulatory agencies to
implement systems for "prompt corrective action" for insured depository
institutions that do not meet minimum capital requirements within such
categories. FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions, depending on the category in
which an institution is classified. Failure to meet the capital guidelines could
also subject a banking institution to capital raising requirements. An
"undercapitalized" bank must develop a capital restoration plan and its parent
holding company must guarantee that bank's compliance with the plan. The
liability of the parent holding company under any such guarantee is limited to
the lesser of 5% of the bank's assets at the time it became "undercapitalized"
or the amount needed to comply with the plan. Furthermore, in the event of the
bankruptcy of the parent holding company, such guarantee would take priority
over the parent's general unsecured creditors. In addition, FDICIA requires the
various regulatory agencies to prescribe certain non-capital standards for
safety and soundness relating generally to operations and management, asset
quality and executive compensation and permits regulatory action against a
financial institution that does not meet such standards.
The various regulatory agencies have adopted substantially similar
regulations that define the five capital categories identified by FDICIA, using
the total risk-based capital, Tier 1 risk-based capital and leverage capital
ratios as the relevant capital measures. Such regulations establish various
degrees of corrective action to be taken when an institution is considered
undercapitalized. Under the regulations, a "well capitalized" institution must
have a Tier 1 capital ratio of at least 6%, a total capital ratio of at least
10% and a leverage ratio of at least 5% and not be subject to a capital
directive order. An "adequately capitalized" institution must have a Tier 1
capital ratio of at least 4%, a total capital ratio of at least 8% and a
leverage ratio of at least 4%, or 3% in some cases. Under these guidelines, FCNB
is considered well capitalized.
Banking agencies have recently adopted final regulations which mandate that
regulators take into consideration concentrations of credit risk and risks from
non-traditional activities, as well as an institution's ability to manage those
risks, when
44
<PAGE>
determining the adequacy of an institution's capital. This evaluation will be
made as a part of the institution's regular safety and soundness examination.
Banking agencies also have recently adopted final regulations requiring
regulators to consider interest rate risk (when the interest rate sensitivity of
an institution's assets does not match the sensitivity of its liabilities or its
off-balance-sheet position) in the evaluation of a bank's capital adequacy.
Concurrently, banking agencies have proposed a methodology for evaluating
interest rate risk. After gaining experience with the proposed measurement
process, those banking agencies intend to propose further regulations to
establish an explicit risk-based capital charge for interest rate risk.
DISTRIBUTIONS. First Charter's funds for cash distributions to its
shareholders are derived from a variety of sources, including cash and temporary
investments. The primary source of such funds, however, is dividends received
from FCNB. The amount of dividends that FCNB may declare in a calendar year
without approval of the Comptroller is FCNB's net profits for that year, as
defined by statute, combined with its net retained profits, as defined, for the
preceding two years. In 1995, FCNB can initiate dividend payments without prior
regulatory approval of up to $5,733,000 plus an additional amount equal to its
net profits for 1995 up to the date of any such dividend declaration.
In addition to the foregoing, the ability of First Charter and FCNB to pay
dividends may be affected by the various minimum capital requirements and the
capital and non-capital standards established under FDICIA as described above.
Furthermore, the Comptroller may prohibit the payment of a dividend by a
national bank if it determines that such payment would constitute an unsafe or
unsound practice. The right of First Charter, its shareholders and its creditors
to participate in any distribution of the assets or earnings of its subsidiaries
is further subject to the prior claims of creditors of the respective
subsidiaries.
SOURCE OF STRENGTH. According to Federal Reserve Board policy, bank holding
companies are expected to act as a source of financial strength to each
subsidiary bank and to commit resources to support each such subsidiary. This
support may be required at times when a bank holding company may not be able to
provide such support. In the event of a loss suffered or anticipated by the
FDIC -- either as a result of default of a banking or thrift subsidiary of First
Charter or related to FDIC assistance provided to a subsidiary in danger of
default -- the other banking subsidiaries of First Charter may be assessed for
the FDIC's loss, subject to certain exceptions.
INFORMATION ABOUT UNION
GENERAL
Union is a North Carolina state-chartered commercial bank which was
organized in 1985. Union's principal executive offices are located at 201 North
Charlotte Avenue, Monroe, North Carolina 28112. Its telephone number is (704)
289-9555.
Union engages in a general banking business primarily in Union County,
North Carolina and, to a lesser extent, in Mecklenburg County, North Carolina.
Its operations are primarily retail oriented and aimed at individuals and small
to medium-sized businesses located in its market area. Union provides most
traditional commercial and consumer banking services, including personal and
commercial checking and savings accounts, money market accounts, certificates of
deposit, individual retirement accounts, and related business and individual
banking services. Union's lending activities include making commercial loans to
individuals and small to medium-sized businesses located primarily in its market
area for various business purposes, and various consumer-type loans to
individuals, including installment loans, equity lines of credit, overdraft
checking credit and credit cards. Also, Union makes residential mortgage loans
to its customers which it then sells to other mortgage lenders. Union issues
electronic banking cards which allow its customers to access their deposit
accounts at the automatic teller machines of other banks which are linked to the
HONOR and CIRRUS system. Union also issues VISA debit cards which allow
customers to use a card to electronically access their checking accounts. Union
does not provide trust services except through a correspondent bank.
Union's wholly-owned subsidiary, BOU Financial, offers insurance and
securities services, on an agency basis, to its customers. These services
include discount brokerage services and sales of mutual funds, life, health and
similar insurance and annuity products through agreements with a registered
broker/dealer and agency relationships with certain insurance company product
providers.
Union operates five full-service banking offices in Union and Mecklenburg
Counties, including its Main Office located at 201 North Charlotte Avenue in
Monroe, its Indian Trail Branch office located at 4240 Old Monroe Road in
Matthews, its Skyway Drive Branch office located at 1401 Skyway Drive in Monroe,
its Matthews Branch office located at 217 North Trade Street in Matthews and its
Waxhaw Branch office located at 1100 North Broome Street in Waxhaw, North
Carolina.
45
<PAGE>
As of June 30, 1995, Union had total assets of approximately $134 million
and total deposits of approximately $117 million. As of June 30, 1995, Union had
approximately 68 full-time equivalent employees.
VOTING SECURITIES AND BENEFICIAL OWNERSHIP THEREOF
As of June 30, 1995, no shareholder of Union known to management of Union
beneficially owned more than 5% of the Union Common Stock. As of the same date,
the beneficial ownership of the Union Common Stock by directors individually,
and by directors and executive officers as a group, was as follows:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
BENEFICIAL OF
NAME OF BENEFICIAL OWNER OWNERSHIP (1) CLASS
<S> <C> <C>
John A. Crook, Jr.................................................................................... 7,290 0.33 %
J. Earl Culbreth..................................................................................... 43,232 1.97
Dennison A. Davis.................................................................................... 8,682 0.40
Dr. William C. Deskins............................................................................... 2,428 0.11
James B. Fincher..................................................................................... 51,706 2.36
H. Clark Goodwin..................................................................................... 45,095 2.06
Earl J. Haigler...................................................................................... 4,502 0.21
Frank H. Hawfield, Jr................................................................................ 17,031 0.78
Charles E. (Pete) Hulsey............................................................................. 34,604 1.58
Callie F. King....................................................................................... 4,532 0.21
Joseph L. Little..................................................................................... 35,621 1.62
Fred C. Long......................................................................................... 3,037 0.14
Dr. Jerry E. McGee................................................................................... 4,361 0.20
David C. McGuirt..................................................................................... 21,983 1.00
Lane D. Vickery...................................................................................... 37,868 1.73
All current directors and executive officers as a group (19 persons)................................. 357,702 16.32
</TABLE>
(1) Except as otherwise noted, to the best knowledge of management of Union the
above individuals and group exercise sole voting and investment power with
respect to all shares shown as beneficially owned other than the following
shares as to which such powers are shared: Mr. Crook -- 3,645 shares; Mr.
Culbreth -- 5,651 shares; Mr. Davis -- 6,252 shares; Dr. Deskins -- 1,335
shares; Mr. Fincher -- 9,210 shares; Mr. Hulsey -- 2,187 shares; Mr.
King -- 3,804 shares; Mr. Little -- 11,962 shares; Ms. Vickery -- 16,300
shares; and all current directors and executive officers as a group --
89,273 shares.
MANAGEMENT AND ADDITIONAL INFORMATION
Copies of Union's 1994 Annual Report to Shareholders and its Quarterly
Report on Form F-4 for the quarter ended June 30, 1995 accompany this Joint
Proxy Statement-Prospectus. Certain additional information relating to the
executive compensation, various benefit plans (including stock option plans),
certain relationships and related transactions and other related matters as to
Union is incorporated by reference or set forth in Union's Annual Report on Form
F-2 for the year ended December 31, 1994, incorporated herein by reference.
Shareholders desiring copies of such documents may contact Union at its address
or phone number indicated under "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
SUPERVISION AND REGULATION
Union is a North Carolina state-chartered commercial bank. As such, it is
regulated primarily by the Banking Commission and the FDIC. It is not a member
of the Federal Reserve System.
NORTH CAROLINA REGULATION. As a state-chartered commercial bank, Union is
subject to the applicable provisions of North Carolina law and the regulations
adopted by the Banking Commission. Union must file various reports with, and is
subject to periodic examinations by, the Banking Commission. North Carolina law
and the Banking Commission regulate (in conjunction with applicable federal laws
and regulations), among other things, Union's capital, permissible activities,
reserves, investments, lending authority, branching, mergers and consolidations,
payment of dividends, and transactions with affiliated parties and borrowings.
North Carolina permits state-wide branch banking, and, to the extent permitted
by the laws of another state pursuant to the Interstate Banking and Branching
Act previously described, effective June 22, 1995, a North Carolina
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<PAGE>
bank may merge with a bank located in another state or branch in any other state
that has enacted such legislation in that state. See "INFORMATION ABOUT FIRST
CHARTER -- Supervision and Regulation -- General."
FDIC REGULATION. The FDIC is the primary Federal banking supervisor and
regulator of Union. The FDIC insures deposit accounts in Union (up to applicable
limits) through the Bank Insurance Fund. Union is subject to examination and
regulation by the FDIC. Such examination and regulation is intended primarily
for the protection of depositors. The regulatory structure provides regulatory
officials with extensive discretion in connection with their supervisory and
enforcement activities and examination policies, including policies with respect
to classification of assets and the establishment of adequate loss reserves for
regulatory purposes.
Union is subject to the FDIC's risk-based capital requirements, leverage
ratio capital requirements, and a five-category definition of capital adequacy,
as described above. See "INFORMATION ABOUT FIRST CHARTER -- Supervision and
Regulation -- Capital and Operational Requirements." At June 30, 1995, Union had
Tier 1 and total risk-based capital ratios of 12.30% and 13.50%, respectively,
and a leverage ratio of 8.30%.
Under FDIC regulations, Union is required to pay annual insurance premiums.
COMPARISON OF FIRST CHARTER COMMON STOCK AND UNION COMMON STOCK
FIRST CHARTER COMMON STOCK
GENERAL. First Charter is authorized to issue 10,000,000 shares of First
Charter Common Stock, of which 4,643,993 shares were outstanding as of September
30, 1995. First Charter Common Stock is reported on The NASDAQ Stock Market as a
NASDAQ National Market security under the symbol "FCTR." As of September 30,
1995, 646,582 shares of First Charter Common Stock were reserved for issuance
under various employee benefit plans of First Charter, 138,402 shares were
reserved for issuance under First Charter's Dividend Reinvestment Plan, and up
to 1,644,672 shares were reserved for issuance in connection with the Merger.
After taking into account the shares reserved as described above, the number of
authorized shares of First Charter Common Stock available for other corporate
purposes as of September 30, 1995 was 2,926,351.
VOTING AND OTHER RIGHTS. The holders of First Charter Common Stock are
entitled to one vote per share on each matter voted at a shareholders' meeting.
A majority of the shares entitled to vote, represented at a meeting in person or
by proxy, constitutes a quorum, and, in general, a majority of votes cast with
respect to a matter is sufficient to authorize action upon routine matters.
Directors are elected by a plurality of the votes cast, and each shareholder
entitled to vote in such election is entitled to vote each share of stock for as
many persons as there are directors to be elected. In elections for directors,
such shareholders do not have the right to cumulate their votes, so long as
First Charter has a class of shares registered under Section 12 of the Exchange
Act (unless action is taken to provide otherwise by charter amendment, which
action management does not currently intend to propose). In general, (i)
amendments to First Charter's Restated Articles of Incorporation must be
approved by each voting group entitled to vote separately thereon by a majority
of the votes cast by that voting group, unless the amendment creates dissenters'
rights for a particular voting group, in which case such amendment must be
approved by a majority of the votes entitled to be cast by such voting group;
and (ii) the dissolution of First Charter must be approved by a majority of all
votes entitled to be cast thereon.
The Restated Articles of Incorporation of First Charter provide that a plan
for First Charter to consolidate with, or merge with or into, any other
corporation or convey to any corporation or other person or otherwise dispose of
all or substantially all of its assets or to dispose of by any means all or
substantially all the stock or assets of any major subsidiary will not be
submitted to the shareholders for approval unless such plan is approved by the
affirmative vote of 75% of the directors. The Restated Articles of Incorporation
further provide that the Board of Directors, in its evaluation of such a plan,
shall consider all relevant factors, including the social and economic effects
on employees, customers, communities and others. If submitted to the
shareholders, such plan may be approved only by (A) the affirmative vote of not
less than 75% of the aggregate voting power of the outstanding stock entitled to
vote thereon and (B) the affirmative vote of at least 50% of the voting power of
the outstanding stock of shareholders entitled to vote thereon other than
controlling shareholders, if (x) any shareholder entitled to vote thereon is a
person who, including affiliates of such person, is the beneficial owner of more
than 20% of the voting power of First Charter (a "controlling shareholder"),
provided that shares held, voted or otherwise controlled by a person as a
trustee, plan administrator, officer of First Charter or otherwise pursuant to
an employee benefit plan of First Charter or of an affiliate of First Charter
shall not be deemed to be beneficially owned by a person for the purpose of
determining whether such person is a controlling shareholder, and (y) prior to
the acquisition of 20% of the voting power of First Charter by a
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<PAGE>
shareholder, the Board of Directors has not unanimously approved such
transaction. This provision of the Restated Articles of Incorporation can be
amended only by the vote required to approve such a transaction, if there is a
controlling shareholder.
In the event of liquidation, holders of First Charter Common Stock would be
entitled to receive pro rata any assets legally available for distribution to
shareholders with respect to shares held by them.
First Charter Common Stock does not have any preemptive rights, redemption
privileges, sinking fund privileges or conversion rights. All the outstanding
shares of First Charter Common Stock are, and upon issuance the shares of First
Charter Common Stock to be issued to shareholders of Union will be, validly
issued, fully paid and nonassessable.
First Charter National Bank acts as transfer agent and registrar for First
Charter Common Stock.
DISTRIBUTIONS. The holders of First Charter Common Stock are entitled to
receive such dividends or distributions as the Board of Directors of First
Charter may declare out of funds legally available for such payments. The
payment of distributions by First Charter is subject to the restrictions of
North Carolina law applicable to the declaration of distributions by a business
corporation. A corporation generally may not authorize and make distributions
if, after giving effect thereto, it would be unable to meet its debts as they
become due in the usual course of business, or if the corporation's total assets
would be less than the sum of its total liabilities plus the amount that would
be needed, if it were to be dissolved at the time of distribution, to satisfy
claims of shareholders who have preferential rights superior to the rights of
the holders of its common stock. Share dividends, if any are declared, may be
paid from First Charter's authorized but unissued shares.
The ability of First Charter to pay distributions is affected by the
ability of FCNB to pay dividends. The ability of FCNB, as well as of First
Charter, to pay dividends in the future currently is, and could be further,
influenced by bank regulatory requirements and capital guidelines. See
"INFORMATION ABOUT FIRST CHARTER -- Supervision and Regulation --
Distributions."
UNION COMMON STOCK
GENERAL. Union is authorized to issue 6,000,000 shares of Union Common
Stock, of which 2,192,270 shares were outstanding as of September 30, 1995. The
market prices of the Union Common Stock are listed in the National Daily
Quotation Service "Pink Sheets." As of September 30, 1995, a total of 100,626
additional shares were reserved for issuance in connection with various employee
stock option plans of Union.
VOTING AND OTHER RIGHTS. The holders of Union Common Stock are entitled to
one vote per share on each matter voted on at a meeting. A majority of the
shares entitled to vote, represented at a meeting in person or by proxy,
constitutes a quorum, and, in general, a majority of votes cast are sufficient
to authorize action upon routine matters. Directors are elected by a plurality
of votes cast, and each shareholder entitled to vote in such election is
entitled to vote each share of stock for as many persons as there are directors
to be elected. In an election of directors, such shareholders do not have the
right to cumulate their votes. In general, (i) amendments to Union's Articles of
Incorporation (other than amendments to increase capital stock, which must be
approved by two-thirds of the outstanding stock and which must be approved by
the Banking Commission) must be approved by each voting group entitled to vote
separately thereon by a majority of the votes cast by that voting group, unless
the amendment creates dissenters' rights for a particular voting group, in which
case such amendment must be approved by a majority of the votes entitled to be
cast by such voting group; (ii) a merger with another bank or the transfer of
all of its assets must be approved by two-thirds of the outstanding stock and
must be approved by the Banking Commission; and (iii) the dissolution of Union
must be approved by two-thirds of the outstanding stock and must be approved by
the Banking Commission.
In the event of liquidation, holders of Union Common Stock would be
entitled to receive pro rata any assets legally available for distribution to
shareholders with respect to shares held by them.
Union Common Stock does not have any preemptive rights, redemption rights,
sinking fund privileges or conversion rights. All of the outstanding shares of
Union Common Stock are validly issued and fully paid. However, pursuant to
Chapter 53 of the North Carolina General Statutes, shares of Union Common Stock
may be assessable to the extent necessary to prevent the impairment of capital.
American Stock Transfer and Trust Company acts as transfer agent and
registrar for Union Common Stock.
NORTH CAROLINA SHAREHOLDER PROTECTION ACT. Union is subject to the
provisions of the North Carolina Shareholder Protection Act (the "Shareholder
Protection Act"). The Shareholder Protection Act generally requires that, unless
certain "fair price" and procedural requirements are satisfied, the affirmative
vote of 95% of a corporation's voting shares is required to
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<PAGE>
approve certain business combination transactions with another entity that is
the beneficial owner, directly or indirectly, of more than 20% of the
corporation's voting shares or which is an affiliate of the corporation and
previously has been a 20% beneficial holder of such shares.
CONTROL SHARE ACQUISITION ACT. Union also is subject to provisions of the
North Carolina Control Share Acquisition Act (the "Control Share Act"). The
Control Share Act generally provides that, except as provided below, "Control
Shares" will not have any voting rights. Control Shares are shares acquired by a
person under certain circumstances which, when added to other shares owned,
would give such person effective control over one-fifth, one-third or a majority
of all voting power in the election of the corporation's directors. However,
voting rights will be restored to Control Shares by resolution approved by the
affirmative vote of the holders of a majority of the corporation's voting stock
(other than shares held by the owner of the Control Shares, officers of the
corporation, and directors employed by the corporation). If voting rights are
granted to Control Shares which give the holder a majority of all voting power
in the election of the corporation's directors, then the corporation's other
shareholders may require the corporation to redeem their shares at their fair
value.
DISTRIBUTIONS. The holders of Union Common Stock are entitled to receive
such dividends and distributions as the Board of Directors of Union may declare
out of funds legally available for such payments. The payment of dividends by
Union is subject to restrictions of North Carolina law applicable to the
declaration of distributions by a commercial bank. In general, a North Carolina
bank may declare dividends in an amount that does not exceed its undivided
profits (determined as set forth in Chapter 53 of the North Carolina General
Statutes), as long as the surplus of such bank equals at least 50% of the bank's
paid-in capital stock. Furthermore, a North Carolina commercial bank may pay
stock dividends out of the bank's surplus, as long as the payment of such stock
dividend does not reduce such surplus below 50% of the bank's paid-in capital.
The ability of Union to pay dividends in the future currently is, and could
be further, influenced by bank regulatory requirements and capital guidelines.
COMPARISON OF VOTING AND OTHER RIGHTS
First Charter is a North Carolina corporation subject to the provisions of
the NCBCA. Union is a North Carolina state-chartered commercial bank regulated
primarily by the Banking Commission and the FDIC. Furthermore, Union is a North
Carolina corporation subject to the provisions of the NCBCA. Shareholders of
Union (other than those who perfect dissenters' rights), whose rights are
governed by Union's Articles of Incorporation and Bylaws, by the NCBCA and by
the North Carolina banking statutes, will upon consummation of the Merger,
become shareholders of First Charter. As shareholders of First Charter, their
rights will then be governed by the Restated Articles of Incorporation and the
Bylaws of First Charter and by the NCBCA. Except as set forth below, there are
no material differences between the rights of Union shareholders under Union's
Articles of Incorporation and Bylaws and under the NCBCA, on the one hand, and
the rights of First Charter's shareholders under First Charter's Restated
Articles of Incorporation, its Bylaws and the NCBCA, on the other hand. This
summary does not purport to be a complete discussion of, and is qualified in its
entirety by reference to, the governing law and governing corporate documents of
each corporation.
MEETINGS OF SHAREHOLDERS. A special meeting of First Charter shareholders
may be called for any purpose by the First Charter Board of Directors, by First
Charter's Chief Executive Officer, by First Charter's Secretary acting under
instructions of the Chief Executive Officer or by the holders of at least 10% of
the votes entitled to be cast. A special meeting of Union shareholders may be
called for any purpose by Union's President, its Chairman of the Board, its
Board of Directors or generally by three or more shareholders pursuant to the
request of holders of not less than 15% of all shares entitled to vote at the
meeting.
REQUIRED VOTE FOR AUTHORIZATION OF CERTAIN ACTIONS. In general, any merger,
consolidation or disposition of all or substantially all of the assets of First
Charter or the stock or assets of any of its major subsidiaries may be submitted
to the shareholders of First Charter only if approved by at least 75% of the
directors of First Charter. If submitted to the shareholders, such action
generally must be approved by (i) the holders of at least 75% of aggregate
voting power of First Charter and (ii) the holders of at least 50% of the
aggregate voting power entitled to vote thereon other than controlling
shareholders. In contrast, generally a merger or consolidation of Union with
another bank or the transfer of all of its assets must be approved by two-thirds
of the outstanding stock of Union and by the Banking Commission.
AMENDMENTS TO ARTICLES OF INCORPORATION. Generally, substantive amendments
to either First Charter's or Union's Articles of Incorporation must be approved
by each voting group entitled to vote separately thereon by a majority of the
votes cast by that voting group, unless the amendment creates dissenters' rights
for a particular voting group, in which case such amendment must be approved by
a majority of the votes entitled to be cast by such voting group. An amendment,
however, to
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the provision of First Charter's Restated Articles of Incorporation setting
forth the voting requirements for mergers or consolidations involving First
Charter and for the disposition of all or substantially all of First Charter's
assets or the stock or assets of one of its major subsidiaries, as described
above, must be approved by the vote required to effect such merger,
consolidation or transfer of assets. Furthermore, an amendment to Union's
Articles of Incorporation to increase its capital stock must be approved by the
holders of two-thirds of the outstanding stock of Union and must be approved by
the Banking Commission.
DISTRIBUTIONS. The payment of distributions to holders of First Charter
Common Stock is subject to the provisions of the NCBCA and the ability of FCNB
and any other subsidiary of First Charter to pay dividends to First Charter, as
restricted by various bank regulatory agencies. See "INFORMATION ABOUT FIRST
CHARTER -- Supervision and Regulation -- Distributions." The payment of
distributions to holders of Union Common Stock is subject to the provisions of
Chapter 53 of the North Carolina General Statutes. See "COMPARISON OF FIRST
CHARTER COMMON STOCK AND UNION COMMON STOCK -- Union Common
Stock -- Distributions."
SIZE, CLASSIFICATION AND CONSTITUENCY OF THE BOARD OF DIRECTORS. The size
of the First Charter Board of Directors may be established by the shareholders
or by at least 75% of the directors of First Charter, provided that the
directors of First Charter cannot set the number of directors at less than five
nor more than twenty-five. Only the shareholders have the right to change the
range for the size of the Board, however. The Board of Directors of First
Charter is divided into three classes, and directors are elected to serve
three-year terms. Directors of First Charter need not be residents of the State
of North Carolina or shareholders of First Charter.
The size of the Union Board of Directors is set at 15 directors. The Board
of Directors of Union also is divided into three classes, with directors elected
to serve three-year terms. Each director of Union must own Union Common Stock
representing at least $1,000 book value. Furthermore, at least 75% of the
directors of Union must be residents of Union County, North Carolina.
REMOVAL OF DIRECTORS; FILLING VACANCIES. Generally, directors of First
Charter may be removed by the shareholders with or without cause by the
affirmative vote of a majority of the votes cast, unless its Restated Articles
of Incorporation are amended to provide otherwise. Vacancies occurring on the
First Charter Board of Directors may be filled by the Board of Directors or the
shareholders of First Charter.
Directors of Union may be removed by the shareholders with or without cause
by the affirmative vote of two-thirds of the shares entitled to vote in the
election of directors. Vacancies occurring on the Union Board of Directors may
be filled by a majority of the remaining directors or by the shareholders of
Union, if not filled by the directors.
AMENDMENTS OF BYLAWS. Except as otherwise required in the NCBCA, the
Restated Articles of Incorporation of First Charter or a bylaw adopted by the
shareholders of First Charter, generally the Bylaws of First Charter may be
amended or repealed by a majority of the Board of Directors or by the
shareholders of First Charter, except that a bylaw adopted, amended or repealed
by the shareholders of First Charter may not be modified or repealed by the
Board of Directors if neither the Restated Articles of Incorporation nor a bylaw
adopted by the shareholders authorizes the Board of Directors to so act.
The Bylaws of Union may be amended or repealed by two-thirds of the Board
of Directors or by the shareholders of Union, except that the Board of Directors
may not amend the Bylaws (i) generally to require more than a majority of the
voting shares for a quorum of a meeting of shareholders or to require more than
a majority vote to constitute action of the shareholders; (ii) to provide for
the control of Union other than by its Board of Directors (or Executive
Committee); or (iii) increasing or decreasing the number of directors.
ASSESSABLE COMMON STOCK. All issued and outstanding shares of First Charter
Common Stock are generally nonassessable. In contrast, issued and outstanding
shares of Union Common Stock may be assessable by the Banking Commission to the
extent necessary to prevent impairment of capital.
APPLICABILITY OF CERTAIN LAWS. The provisions of the Shareholder Protection
Act and the Control Share Act are not applicable to First Charter. In contrast,
the provisions of such Acts are applicable to Union. See "COMPARISON OF FIRST
CHARTER COMMON STOCK AND UNION COMMON STOCK -- Union Common Stock -- North
Carolina Control Share Acquisition Act" and " -- North Carolina Shareholder
Protection Act."
MISCELLANEOUS. First Charter National Bank acts as transfer agent and
registrar for First Charter Common Stock. American Stock Transfer and Trust
Company acts as transfer agent for the Union Common Stock. First Charter Common
Stock is
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traded on The NASDAQ Stock Market as a National Market security. The Union
Common Stock is traded in the over-the-counter market and is listed in the
National Daily Quotation Service "Pink Sheets."
LEGAL OPINIONS
The legality of the First Charter Common Stock to be issued in connection
with the Merger and certain other legal matters in connection with the Merger,
including tax consequences of the Merger, will be passed upon by Smith Helms
Mulliss & Moore, L.L.P., Charlotte, North Carolina. In addition, certain other
legal matters in connection with the Merger will be passed upon for Union by
Ward and Smith, P.A., Raleigh, North Carolina. As of the date of this Joint
Proxy Statement-Prospectus, certain members of Smith Helms Mulliss & Moore,
L.L.P., beneficially owned approximately 7,000 shares of First Charter Common
Stock.
EXPERTS
The consolidated financial statements of First Charter as of December 31,
1994 and 1993 and for each of the years in the three-year period ended December
31, 1994 have been incorporated by reference in this Joint Proxy
Statement-Prospectus from First Charter's Annual Report on Form 10-K for the
year ended December 31, 1994, in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, and upon the authority of said
firm as experts in auditing and accounting. The report refers to a change in the
method of accounting for investments and a change in the method of accounting
for income taxes in 1993.
The consolidated financial statements of Union as of and for the year ended
December 31, 1994 incorporated in this Joint Proxy Statement-Prospectus by
reference to the Union's Annual Report on Form F-2 for the year ended December
31, 1994, have been incorporated in reliance on the report of Coopers & Lybrand
L.L.P., independent certified public accountants, given on the authority of said
firm as experts in auditing and accounting. The consolidated financial
statements of Union as of December 31, 1993 and for the years ended December 31,
1993 and December 31, 1992 incorporated in this Joint Proxy Statement-Prospectus
by reference to Union's Annual Report on Form F-2 for the year ended December
31, 1994, have been incorporated in reliance upon the report of KPMG Peat
Marwick LLP, and upon the authority of said firm as experts in auditing and
accounting.
SHAREHOLDER PROPOSALS
FIRST CHARTER. Shareholders of First Charter may submit proposals to be
considered for shareholder action at the 1996 Annual Meeting of Shareholders of
First Charter if they do so in accordance with the applicable regulations of the
Commission. Any such proposals must be submitted to the Secretary of First
Charter no later than November 17, 1995 in order to be considered for inclusion
in First Charter's 1996 proxy materials.
UNION. Union will hold a 1996 Annual Meeting of Shareholders only if the
Merger is not consummated before the time of such meeting. If a meeting is held,
any shareholder proposal intended for inclusion in Union's 1996 proxy materials
must be received by Union no later than December 19, 1995.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of KPMG Peat Marwick LLP, independent accountants for First
Charter, are expected to be present at the First Charter Special Meeting, will
have the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions. Representatives of
Coopers & Lybrand L.L.P., independent accountants for Union, are expected to be
present at the Union Special Meeting, will have the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions.
KPMG Peat Marwick LLP served as the principal accountant to audit Union's
financial statements for fiscal years 1992-1993. Thereafter, Union's Board of
Directors approved the appointment of Coopers & Lybrand L.L.P., Certified Public
Accountants, as Union's independent public accountants for 1994. This change in
accountants was approved by Union's Board of Directors on February 16, 1994
based on interviews by management of Union with four accounting firms (including
KPMG Peat Marwick LLP) and was ratified by Union's shareholders at Union's
Annual Meeting in April 1994, at which point Coopers & Lybrand L.L.P. was
engaged.
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During Union's two most recent fiscal years prior to its change in
accountants, there were no disagreements between Union and KPMG Peat Marwick LLP
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, and, during that period, KPMG Peat
Marwick LLP's reports on Union's financial statements did not contain an adverse
opinion or a disclaimer of opinion, and were not qualified or modified as to
audit scope or accounting principles.
During the two most recent fiscal years prior to Union's change in
accountants, Union did not consult Coopers & Lybrand L.L.P. on any matters.
OTHER MATTERS
As of the date of this Joint Proxy Statement-Prospectus, the respective
Boards of Directors of First Charter and of Union know of no matters that will
be presented for consideration at their respective Special Meetings other than
as described in this Joint Proxy Statement-Prospectus. However, if any other
matters shall properly come before the First Charter Special Meeting or any
adjournments or postponements thereof and be voted upon, or the Union Special
Meeting or any adjournments or postponements thereof and be voted upon, the
enclosed proxies shall be deemed to confer discretionary authority on the
individuals named as proxies therein to vote the shares represented by such
proxies as to any such matters. The persons named as proxies intend to vote or
not to vote in accordance with the recommendation of the respective managements
of First Charter and Union.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
BETWEEN
FIRST CHARTER CORPORATION
AND
BANK OF UNION
September 13, 1995
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TABLE OF CONTENTS
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ARTICLE I
CERTAIN DEFINITIONS
1.01 Certain Definitions........................................................................................... A-5
ARTICLE II
THE MERGER AND RELATED TRANSACTIONS
2.01 Merger........................................................................................................ A-7
2.02 Time and Place of Closing..................................................................................... A-8
2.03 Effective Time................................................................................................ A-8
2.04 Reservation of Right to Revise Transaction; Further Actions................................................... A-8
2.05 Execution of Stock Option Agreement........................................................................... A-9
ARTICLE III
MANNER OF CONVERTING SHARES
3.01 Conversion.................................................................................................... A-9
3.02 Anti-Dilution Provisions...................................................................................... A-9
ARTICLE IV
EXCHANGE OF SHARES
4.01 Exchange Procedures........................................................................................... A-10
4.02 Voting and Dividends.......................................................................................... A-10
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF UNION
5.01 Organization, Standing, and Authority......................................................................... A-11
5.02 Union Capital Stock........................................................................................... A-11
5.03 Subsidiaries.................................................................................................. A-11
5.04 Authorization of Merger and Related Transactions.............................................................. A-12
5.05 Securities Reporting Documents and Financial Statements....................................................... A-12
5.06 Absence of Undisclosed Liabilities............................................................................ A-12
5.07 Tax Matters................................................................................................... A-13
5.08 Allowance for Loan Losses..................................................................................... A-13
5.09 Other Tax and Regulatory Matters.............................................................................. A-13
5.10 Properties.................................................................................................... A-13
5.11 Compliance with Laws.......................................................................................... A-13
5.12 Employee Benefit Plans........................................................................................ A-14
5.13 Commitments and Contracts..................................................................................... A-15
5.14 Material Contract Defaults.................................................................................... A-15
5.15 Legal Proceedings............................................................................................. A-15
5.16 Absence of Certain Changes or Events.......................................................................... A-15
5.17 Regulatory Reports............................................................................................ A-16
5.18 Statements True and Correct................................................................................... A-16
5.19 Insurance..................................................................................................... A-16
5.20 Labor......................................................................................................... A-16
5.21 Material Interests of Certain Persons......................................................................... A-16
5.22 Registration Obligations...................................................................................... A-16
5.23 Brokers and Finders........................................................................................... A-16
5.24 State Takeover Laws........................................................................................... A-17
5.25 Environmental Matters......................................................................................... A-17
5.26 Ownership of Shares........................................................................................... A-17
5.27 Insurance of Deposits......................................................................................... A-17
</TABLE>
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF FIRST CHARTER
6.01 Organization, Standing and Authority.......................................................................... A-17
6.02 First Charter Capital Stock................................................................................... A-17
6.03 Authorization of Merger and Related Transactions.............................................................. A-17
6.04 Financial Statements.......................................................................................... A-18
6.05 First Charter SEC Reports..................................................................................... A-18
6.06 Statements True and Correct................................................................................... A-18
6.07 Capital Stock................................................................................................. A-18
6.08 Tax and Regulatory Matters.................................................................................... A-19
6.09 Litigation.................................................................................................... A-19
6.10 Brokers and Finders........................................................................................... A-19
6.11 Environmental Matters......................................................................................... A-19
ARTICLE VII
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
7.01 Conduct of Business Prior to the Effective Time............................................................... A-19
7.02 Forbearances.................................................................................................. A-19
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.01 Access and Information........................................................................................ A-21
8.02 Registration Statement........................................................................................ A-21
8.03 Shareholder Approvals......................................................................................... A-21
8.04 Press Releases................................................................................................ A-22
8.05 Notice of Defaults............................................................................................ A-22
8.06 Miscellaneous Agreements and Consents; Affiliates Agreements.................................................. A-22
8.07 Conversion of Stock Options................................................................................... A-22
8.08 Certain Change of Control Matters............................................................................. A-23
8.09 Certain Actions............................................................................................... A-23
8.10 Acquisition Proposals......................................................................................... A-23
8.11 Pooling Opinion............................................................................................... A-23
8.12 Fairness Opinions............................................................................................. A-23
8.13 Employment Arrangements....................................................................................... A-23
8.14 Insurance Continuation........................................................................................ A-23
ARTICLE IX
CONDITIONS
9.01 Conditions to Each Party's Obligation to Effect the Merger.................................................... A-23
9.02 Conditions to Obligations of Union to Effect the Merger....................................................... A-24
9.03 Conditions to Obligations of First Charter to Effect the Merger............................................... A-24
ARTICLE X
TERMINATION
10.01 Termination................................................................................................... A-25
10.02 Effect of Termination......................................................................................... A-25
10.03 Non-Survival of Representations, Warranties and Covenants Following the Effective Time........................ A-25
</TABLE>
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ARTICLE XI
GENERAL PROVISIONS
11.01 Expenses...................................................................................................... A-26
11.02 Entire Agreement.............................................................................................. A-26
11.03 Amendments.................................................................................................... A-26
11.04 Waivers....................................................................................................... A-26
11.05 No Assignment................................................................................................. A-26
11.06 Notices....................................................................................................... A-26
11.07 Specific Performance.......................................................................................... A-26
11.08 Arbitration................................................................................................... A-27
11.09 Governing Law................................................................................................. A-27
11.10 Counterparts.................................................................................................. A-27
11.11 Captions...................................................................................................... A-27
11.12 Severability.................................................................................................. A-27
</TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of
September 13, 1995, between FIRST CHARTER CORPORATION ("First Charter"), a North
Carolina corporation and a registered bank holding company under the Bank
Holding Company Act of 1956, as amended (the "BHCA"), and BANK OF UNION, a North
Carolina state-chartered commercial bank ("Union"). Capitalized terms not
otherwise defined herein shall have the meanings ascribed in ARTICLE I.
WITNESSETH:
WHEREAS, pursuant to the terms and subject to the conditions of this
Agreement, First Charter will acquire Union through the merger of a newly
formed, wholly owned banking subsidiary (the "Interim Bank") of First Charter
with and into Union, or by such other means as provided for herein (the
"Merger"); and
WHEREAS, the respective Boards of Directors of First Charter and Union have
resolved that the transactions described herein are in the best interests of the
parties and their respective shareholders and have approved the transactions
described herein; and
WHEREAS, First Charter and Union desire to provide for certain
undertakings, conditions, representations, warranties and covenants in
connection with the transactions contemplated by this Agreement;
WHEREAS, immediately after the execution and delivery of this Agreement, as
a condition and inducement to First Charter's willingness to enter into this
Agreement, Union and First Charter are entering into a Stock Option Agreement
(the "Stock Option Agreement"), in substantially the form of Exhibit 1, pursuant
to which Union is granting to First Charter an option to purchase shares of
Union Common Stock.
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties and agreements contained herein, the parties hereto
agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth below:
"ACQUISITION PROPOSAL" shall have the meaning set forth in SECTION
8.10.
"AFFILIATE" shall mean, with respect to any Person, any Person that,
directly or indirectly, controls or is controlled by or is under common
control with such Person.
"AGREEMENT" shall have the meaning set forth in the introduction to
this Agreement.
"ALLOWANCE" shall have the meaning set forth in SECTION 5.08.
"APPROVALS" shall mean any and all permits, consents, authorizations
and approvals of any governmental or regulatory authority or of any other
third person necessary to give effect to the transactions contemplated by
this Agreement or necessary to consummate the Merger.
"AUTHORIZATIONS" shall have the meaning set forth in SECTION 5.01.
"AVERAGE PRICE" shall have the meaning set forth in SECTION 10.01.
"BHCA" shall have the meaning set forth in the introduction to this
Agreement.
"CLOSING" shall have the meaning set forth in SECTION 2.02.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations thereunder.
"COMMISSION" shall mean the North Carolina State Banking Commission.
"CONDITION" shall have the meaning set forth in SECTION 5.01.
"EFFECTIVE TIME" shall have the meaning set forth in SECTION 2.03.
"EMPLOYEE" shall mean any current or former employee, officer or
director, independent contractor or retiree of Union or its Subsidiaries
and any dependent or spouse thereof.
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"ENVIRONMENTAL LAW" shall have the meaning set forth in SECTION 5.25.
"ERISA" shall have the meaning set forth in SECTION 5.12.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXCHANGE AGENT" shall have the meaning set forth in SECTION 3.01(D).
"EXCHANGE RATIO" shall mean three quarters (0.75) of a share of First
Charter Common Stock for each share of Union Common Stock.
"FAIR MARKET VALUE" shall mean, with respect to the First Charter
Common Stock, the closing price per share as reported by the NASDAQ
National Market or, if not included in the NASDAQ National Market, the
average of the high and low closing bid quotations with respect to such
stock as reported by the NASDAQ Stock Market, or any similar quotation
system then in use.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"FEDERAL RESERVE BOARD" shall mean the Board of Governors of the
Federal Reserve System and any Federal Reserve Bank.
"FIRST CHARTER" shall have the meaning set forth in the introduction
to this Agreement.
"FIRST CHARTER COMMON STOCK" shall mean the common stock, $5 par
value, of First Charter.
"FIRST CHARTER FINANCIAL STATEMENTS" shall have the meaning set forth
in SECTION 6.04.
"FIRST CHARTER SEC DOCUMENTS" shall have the meaning set forth in
SECTION 6.04.
"FIRST CHARTER SHAREHOLDERS' MEETING" shall have the meaning set forth
in SECTION 5.18.
"GAAP" shall mean generally accepted accounting principles in the
United States.
"INTERIM BANK" shall have the meaning set forth in the recitals to
this Agreement.
"JOINT PROXY STATEMENT" shall have the meaning set forth in SECTION
5.18.
"LIENS" shall have the meaning set forth in SECTION 5.03.
"MATERIAL ADVERSE EFFECT" shall have the meaning set forth in SECTION
5.01.
"MERGER" shall have the meaning set forth in the recitals to this
Agreement.
"MERGER CONSIDERATION" shall mean the combination of (i) First Charter
Common Stock and (ii) cash in lieu of fractional shares to be issued by
First Charter in the Merger.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"OCC" shall mean the Office of the Comptroller of the Currency.
"PERSON" or "PERSON" shall mean any individual, corporation,
association, partnership, group (as defined in Section 13(d)(3) of the
Exchange Act), joint venture, trust or unincorporated organization, or a
government or any agency or political subdivision thereof.
"REGISTRATION STATEMENT" shall have the meaning set forth in SECTION
5.18.
"REGULATORY AGREEMENT" shall have the meaning set forth in SECTION
5.11(B).
"REGULATORY AUTHORITIES" shall have the meaning set forth in SECTION
5.11(B).
"REGULATORY REPORTS" shall have the meaning set forth in SECTION 5.17.
"REMEDIES EXCEPTION" shall mean bankruptcy, insolvency,
reorganization, moratorium and similar laws.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SECURITIES LAWS" shall have the meaning set forth in SECTION 5.04(C).
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"SECURITIES REPORTING DOCUMENTS" shall have the meaning set forth in
SECTION 5.05.
"STOCK OPTION AGREEMENT" shall have the meaning set forth in the
recitals to this Agreement.
"SUBSIDIARY" shall mean, in the case of either First Charter or Union,
any corporation, association or other entity in which it owns or controls,
directly or indirectly, 25% or more of the outstanding voting securities or
25% or more of the total equity interest; PROVIDED, HOWEVER, that the term
shall not include any such entity in which such voting securities or equity
interest is owned or controlled in a fiduciary capacity, without sole
voting power, or was acquired in securing or collecting a debt previously
contracted in good faith.
"SURVIVING BANK" shall have the meaning set forth in SECTION 2.01.
"TAX" or "TAXES" shall mean all federal, state, local and foreign
taxes, charges, fees, levies, imposts, duties or other assessments,
including, without limitation, income, gross receipts, excise, employment,
sales, use, transfer, license, payroll, franchise, severance, stamp,
occupation, windfall profits, environmental, federal highway use,
commercial rent, customs duties, capital stock, paid up capital, profits,
withholding, Social Security, single business and unemployment, disability,
real property, personal property, registration, ad valorem, value added,
alternative or add-on minimum, estimated, or other tax or governmental fee
of any kind whatsoever, imposed or required to be withheld by the United
States or any state, local, foreign government or subdivision or agency
thereof, including, without limitation, any interest, penalties or
additions thereto.
"TAXABLE PERIOD" shall mean any period prescribed by any governmental
authority, including, but not limited to, the United States or any state,
local, foreign government or subdivision or agency thereof for which a Tax
Return is required to be filed or Tax is required to be paid.
"TAX RETURN" shall mean any report, return, information return or
other information required to be supplied to a taxing authority in
connection with Taxes, including, without limitation, any return of an
affiliated or combined or unitary group that includes Union or its
Subsidiary.
"UNION" shall have the meaning set forth in the introduction to this
Agreement.
"UNION BENEFIT PLAN" shall have the meaning set forth in SECTION
5.12(A).
"UNION COMMON STOCK" shall mean the common stock, par value $1.25 per
share, of Union.
"UNION DISCLOSURE SCHEDULE" shall mean that document containing the
written detailed information prepared by Union and delivered by Union to
First Charter which appropriately cross-references each Section of the
Agreement to which that Section of the Union Disclosure Schedule applies.
"UNION ERISA PLAN" shall have the meaning set forth in SECTION
5.12(A).
"UNION FINANCIAL STATEMENTS" shall have the meaning set forth in
SECTION 5.05.
"UNION OPTIONS" shall have the meaning set forth in SECTION 8.07(A).
"UNION SHAREHOLDERS' MEETING" shall have the meaning set forth in
SECTION 5.18.
"UNION STOCK PLAN" shall have the meaning set forth in SECTION 5.12.
ARTICLE II
THE MERGER AND RELATED TRANSACTIONS
2.01 MERGER.
(a) First Charter shall cause the Interim Bank to be formed as an interim
or de novo bank under the banking laws of North Carolina and as a wholly-owned
subsidiary of First Charter, which bank shall have its principal place of
business located in Concord, North Carolina or another city in North Carolina
designated by First Charter. The Interim Bank shall have capitalization and
surplus as may be required by applicable law in order to effect the Merger. Upon
organization of the Interim Bank, First Charter shall cause the Board of
Directors of the Interim Bank (i) to approve this Agreement and the transactions
contemplated hereunder and (ii) to authorize and direct an officer of the
Interim Bank to execute and deliver this Agreement.
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(b) Subject to the terms and conditions of this Agreement, at the Effective
Time of the Merger, the Interim Bank shall be merged with and into Union in
accordance with the provisions of the North Carolina General Statutes and with
the effect provided therein. The separate corporate existence of the Interim
Bank shall thereupon cease, and Union shall be the surviving bank in the Merger
(the "Surviving Bank") and shall continue to be governed by the banking laws of
the North Carolina.
(c) The name of the Surviving Bank shall continue to be "Bank of Union".
The Articles of Incorporation and Bylaws of the Surviving Bank shall continue in
effect until amended as provided by law.
(d) All assets of the Interim Bank as they exist at the Effective Time of
the Merger shall pass to and vest in the Surviving Bank without any conveyance
or other transfer. The Surviving Bank shall be responsible and liable for all of
the liabilities of every kind and description of each of the merging banks
existing as of the Effective Time of the Merger.
(e) The business of the Surviving Bank after the Merger shall continue to
be that of a North Carolina state banking corporation and shall continue to be
conducted at its main office located in Monroe, North Carolina and at its
legally established branches.
(f) At the Effective Time, the Surviving Bank will have capitalization,
surplus and undivided profits as may be required by applicable law to effect the
Merger.
(g) Following the effectiveness of the Merger,
(1) the following two individuals shall be elected to the membership of the
Board of Directors of Union:
Lawrence M. Kimbrough; and
J. Roy Davis, Jr.
(2) the following four individuals shall be elected to the membership of
the Board of Directors of First Charter:
H. Clark Goodwin
James B. Fincher
Dr. Jerry E. McGee
Frank H. Hawfield, Jr.
In addition, Mr. Goodwin will become a member of the Executive Committee of
the First Charter Board of Directors.
2.02 TIME AND PLACE OF CLOSING. The closing of the transactions
contemplated hereby (the "Closing") will take place at the offices of counsel to
First Charter in Charlotte, North Carolina at 10:00 A.M. on the date that the
Effective Time occurs, or at such other time, and at such place, as may be
mutually agreed upon by First Charter and Union.
2.03 EFFECTIVE TIME. The effective time of the Merger (the "Effective
Time") shall occur on the date and at the time specified in Articles of Merger
to be filed with the North Carolina Secretary of State following approval of the
Merger by the Commission. Unless otherwise agreed by the parties hereto, the
Effective Time shall occur on or promptly after the first business day following
the last to occur of (i) the expiration of all required waiting periods
following the date of the order of the Federal Reserve Board approving the
Merger pursuant to the BHCA, the date of the order of the FDIC approving the
Merger pursuant to the Bank Merger Act or the date of the order of the
Commission approving the Merger pursuant to the North Carolina General Statutes,
as applicable, (ii) the effective date of the last order, approval, or exemption
of any other federal or state regulatory agency approving or exempting the
Merger if such action is required, (iii) the expiration of all required waiting
periods after the filing of all notices to all federal or state regulatory
agencies required for consummation of the Merger, and (iv) the date on which the
shareholders of Union and First Charter have each approved this Agreement, in
each case as contemplated hereby.
2.04 RESERVATION OF RIGHT TO REVISE TRANSACTION; FURTHER ACTIONS.
(a) First Charter may at any time change the method of effecting the
acquisition of Union by First Charter (including, without limitation, the
provisions as set forth in ARTICLE III) if and to the extent that it deems such
a change to be desirable; provided, however, that no such change shall (A) alter
or change the amount or the kind of the consideration to be received by the
holders of Union Common Stock as provided for in this Agreement; (B) adversely
affect the tax treatment to Union shareholders as a result of receiving the
consideration (in the opinion of First Charter's tax counsel); (C) take the form
of an asset purchase agreement; (D) effect an acquisition in which Union shall
not continue to operate as a separate banking corporation immediately following
the Effective Time; or (E) alter or change the employment arrangements described
in SECTION 8.13.
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(b) To facilitate the Merger and the acquisition, each of the parties will
execute such additional agreements and documents and take such other actions as
First Charter determines necessary or appropriate.
2.05 EXECUTION OF STOCK OPTION AGREEMENT. Immediately after the execution
of this Agreement and as a condition thereto, Union is executing and delivering
to First Charter the Stock Option Agreement.
ARTICLE III
MANNER OF CONVERTING SHARES
3.01 CONVERSION.
(a) Subject to the provisions of this ARTICLE III and of ARTICLE I, at the
Effective Time, by virtue of the Merger and without any action on the part of
the holders thereof, the shares of the constituent corporations shall be
converted as follows:
(i) Each of the shares of capital stock of the Interim Bank issued and
outstanding immediately prior to the Effective Time, and all rights in
respect thereof, shall, IPSO FACTO, at the Effective Time, and without any
action on the part of First Charter or the Interim Bank, be converted into
and exchanged for one share of common stock of Union, and thereafter the
certificates representing shares of the Interim Bank shall be cancelled;
(ii) Each of the shares of Union Common Stock held by First Charter or
any of its wholly owned Subsidiaries or Union or its wholly owned
Subsidiaries immediately prior to the Effective Time, other than shares
held by First Charter or Union or any of their respective wholly owned
Subsidiaries in a fiduciary capacity or as a result of debts previously
contracted, shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor; and
(iii) Each other share of Union Common Stock issued and outstanding
immediately prior to the Effective Time shall, IPSO FACTO, at the Effective
Time, and without any action on the part of the holders thereof, be
converted into and become the right to receive a fractional number of
shares of First Charter Common Stock equal to the Exchange Ratio.
(b) Each Union Option outstanding as of the Effective Time shall be treated
in accordance with the provisions of SECTION 8.07.
(c) Notwithstanding any other provision of this Agreement:
(i) Each holder of shares of Union Common Stock exchanged pursuant to
the Merger, or of options to purchase shares of Union Common Stock, who
would otherwise have been entitled to receive a fraction of a share of
First Charter Common Stock (after taking into account all certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of First
Charter Common Stock multiplied by the Fair Market Value of one share of
First Charter Common Stock on the last business day preceding the Effective
Time or the date of exercise, as the case may be. No such holder will be
entitled to dividends, voting rights or any other rights as a shareholder
in respect of any fractional share; and
(ii) No shares of First Charter Common Stock shall be issued with
respect to the conversion of any shares of Union Common Stock held by a
shareholder who shall have taken action necessary to allow such shareholder
to make a claim to be paid the value of such shareholder's shares in cash
under applicable laws providing appraisal rights to dissenting
shareholders, unless and until such time as any such rights are waived.
(d) At the Effective Time, the stock transfer books of Union shall be
closed as to holders of Union Common Stock immediately prior to the Effective
Time and no transfer of Union Common Stock by any such holder shall thereafter
be made or recognized. If, after the Effective Time, certificates are properly
presented in accordance with ARTICLE IV of this Agreement to the exchange agent,
which shall be selected by First Charter (the "Exchange Agent"), such
certificates shall be canceled and exchanged for certificates representing the
number of whole shares of First Charter Common Stock and a check representing
the amount of cash in lieu of fractional shares, if any, into which the Union
Common Stock or Union Option represented thereby was converted in the Merger.
Notwithstanding any other provision of this Agreement, neither First Charter,
the Surviving Bank nor the Exchange Agent shall be liable to a holder of Union
Common Stock for any amount paid or property delivered in good faith to a public
official pursuant to any applicable abandoned property, escheat, or similar law.
3.02 ANTI-DILUTION PROVISIONS. The Exchange Ratio shall be adjusted
appropriately to reflect any stock dividends, splits, recapitalizations or other
similar transactions with respect to the First Charter Common Stock where the
record date of such transaction occurs prior to the Effective Time.
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ARTICLE IV
EXCHANGE OF SHARES
4.01 EXCHANGE PROCEDURES. Before or promptly after the Effective Time,
First Charter and Union shall cause the Exchange Agent to mail appropriate
transmittal materials (which shall specify that delivery shall be effected, and
risk of loss and title to the certificates theretofore representing shares of
Union Common Stock shall pass, only upon proper delivery of such certificates to
the Exchange Agent) to the former shareholders of Union. After the Effective
Time, each holder of shares of Union Common Stock issued and outstanding at the
Effective Time (other than shares to be canceled pursuant to SECTION 3.01(A)(II)
or shares as to which rights of appraisal as described in SECTION 3.01(C)(II)
have been perfected) shall surrender the certificate or certificates theretofore
representing such shares, together with such transmittal materials properly
executed, to the Exchange Agent and promptly upon surrender shall receive in
exchange therefor the consideration provided in SECTION 3.01 of this Agreement,
together with all declared but unpaid dividends in respect of such shares
following the Effective Time. The certificate or certificates for Union Common
Stock so surrendered shall be duly endorsed as the Exchange Agent may require.
To the extent provided by SECTION 3.01(C), each holder of shares of Union Common
Stock issued and outstanding at the Effective Time also shall receive, upon
surrender of the certificate or certificates representing such shares, cash in
lieu of any fractional shares of First Charter Common Stock to which such holder
would otherwise be entitled. First Charter shall not be obligated to deliver the
consideration to which any former holder of Union Common Stock is entitled as a
result of the Merger until such holder surrenders his certificate or
certificates representing shares of Union Common Stock for exchange as provided
in this ARTICLE IV. In addition, certificates surrendered for exchange by any
person constituting an "affiliate" of Union for purposes of Rule 145(c) under
the Securities Act shall not be exchanged for certificates representing whole
shares of First Charter Common Stock until First Charter has received a written
agreement from such person as provided in SECTION 8.06. If any certificate for
shares of First Charter Common Stock, or any check representing cash or declared
but unpaid dividends, is to be issued in a name other than that in which a
certificate surrendered for exchange is issued, the certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer and the
person requesting such exchange shall affix any requisite stock transfer tax
stamps to the certificate surrendered or provide funds for their purchase or
establish to the satisfaction of the Exchange Agent that such taxes are not
payable.
4.02 VOTING AND DIVIDENDS. Former shareholders of record of Union shall be
entitled to vote after the Effective Time at any meeting of First Charter
shareholders the number of whole shares of First Charter Common Stock into which
their respective shares of Union Common Stock are converted, regardless of
whether such holders have exchanged their certificates representing Union Common
Stock for certificates representing First Charter Common Stock in accordance
with the provisions of this Agreement. Until surrendered for exchange in
accordance with the provisions of SECTION 4.01, each certificate theretofore
representing shares of Union Common Stock (other than shares to be canceled
pursuant to SECTION 3.01) shall from and after the Effective Time represent for
all purposes only the right to receive shares of First Charter Common Stock and
cash, as set forth in this Agreement. No dividend or other distribution payable
to the holders of record of First Charter Common Stock, at or as of any time
after the Effective Time, shall be paid to the holder of any certificate
representing shares of Union Common Stock issued and outstanding at the
Effective Time until such holder physically surrenders such certificate for
exchange as provided in SECTION 4.01, promptly after which time all such
dividends or distributions shall be paid (without interest).
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF UNION
Union represents and warrants to First Charter, subject to such exceptions
and limitations as are set forth below or in the Union Disclosure Schedule, as
follows:
5.01 ORGANIZATION, STANDING, AND AUTHORITY. Union is a commercial banking
corporation duly organized, validly existing and in good standing under the laws
of the State of North Carolina. Union is duly qualified to do business and in
good standing in all jurisdictions (whether federal, state, local or foreign)
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified and in which the failure to be duly qualified
would have a material adverse effect on the financial condition, results of
operations or business (the "Condition") of Union and its Subsidiaries on a
consolidated basis or on the ability of Union to consummate the transactions
contemplated hereby (a "Material Adverse Effect"). Union has all requisite
corporate power and authority to carry on its business as now conducted and to
own, lease and operate its assets, properties and business, and to execute and
deliver this Agreement and perform the terms of this Agreement. Union has in
effect all federal, state, local and foreign governmental, regulatory and other
authorizations, permits and licenses (collectively, "Authorizations") necessary
for it to own or lease its properties and assets and to carry on its business as
now conducted, the absence of which, either individually or in the aggregate,
would have a Material Adverse Effect. Union does not operate a trust department
or engage in any trust activities.
5.02 UNION CAPITAL STOCK.
(a) The authorized capital stock of Union consists of 6,000,000 shares
of Union Common Stock, and there are no other classes of authorized capital
stock. As of the date hereof, there are outstanding 2,192,270 shares of
Union Common Stock. At June 30, 1995, Union had stated capital of
$2,740,337, additional paid-in capital of $5,061,579 and retained earnings
of $3,328,289. All of the issued and outstanding shares of Union Common
Stock are duly and validly issued and outstanding and are fully paid and
nonassessable (except to the extent assessable under applicable North
Carolina banking law). None of the outstanding shares of the Union Common
Stock has been issued in violation of any preemptive rights or any
provision of Union's Articles of Incorporation. As of the date hereof,
Union has reserved 100,626 shares of Union Common Stock for issuance under
the Union Options, and no other shares of capital stock have been reserved
for issuance for any other purpose.
(b) Except as set forth in SECTION 5.02(B) OF THE UNION DISCLOSURE
SCHEDULE, there are no shares of capital stock or other equity securities
of Union outstanding and no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for, shares of the
capital stock of Union or contracts, commitments, understandings or
arrangements by which Union is or may be bound to issue additional shares
of its capital stock or options, warrants or rights to purchase or acquire
any additional shares of its capital stock. There are no contracts,
commitments, understandings or arrangements by which Union or any of its
Subsidiaries is or may be bound to transfer any shares of the capital stock
of any Subsidiary of Union, and there are no agreements, understandings or
commitments relating to the right of Union to vote or to dispose of such
shares.
(c) Except as set forth in SECTION 5.02(C) OF THE UNION DISCLOSURE
SCHEDULE, there are no securities required to be issued by Union under any
Union Stock Plan, dividend reinvestment or similar plan.
5.03 SUBSIDIARIES. SECTION 5.03 OF THE UNION DISCLOSURE SCHEDULE contains a
complete list of Union's subsidiaries, and their respective jurisdictions of
incorporation. Except as set forth in SECTION 5.03 OF THE UNION DISCLOSURE
SCHEDULE, Union owns no stock or other equity interest in any corporation,
partnership or other entity. All of the outstanding securities of each
Subsidiary are owned by Union, and no equity securities are or may become
required to be issued by reason of any options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of any
Subsidiary, and there are no contracts, commitments, understandings or
arrangements by which any Subsidiary is bound to issue additional shares of its
capital stock or options, warrants or rights to purchase or acquire any
additional shares of its capital stock. All of the shares of capital stock of
each Subsidiary are fully paid and nonassessable and are owned free and clear of
any claim, lien, pledge or encumbrance of whatsoever kind ("Liens"). Each
Subsidiary (i) is duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is incorporated or organized, (ii) is
duly qualified to do business and in good standing in all jurisdictions (whether
federal, state, local or foreign) where its ownership or leasing of property or
the conduct of its business requires it to be so qualified and in which the
failure to be so qualified would have a Material Adverse Effect, (iii) has all
requisite corporate power and authority to own or lease its properties and
assets and to carry on its business as now conducted and (iv) has in effect all
Authorizations necessary for it to own or lease its properties and assets and to
carry on its business as now conducted, the absence of which
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Authorizations, individually or in the aggregate, would have a Material Adverse
Effect. SECTION 5.03 OF THE DISCLOSURE SCHEDULE contains a true and accurate
description of the business activities of all Subsidiaries.
5.04 AUTHORIZATION OF MERGER AND RELATED TRANSACTIONS.
(a) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action in respect thereof on the part
of Union, including approval of the Merger by its Board of Directors,
subject to the approval of the shareholders of Union with respect to the
Merger to the extent required by applicable law. This Agreement, subject to
any requisite shareholder approval hereof with respect to the Merger,
represents a valid and legally binding obligation of Union, enforceable
against Union in accordance with its terms, except as such enforcement may
be limited by the Remedies Exception.
(b) Except as set forth in SECTION 5.04(B) OF THE UNION DISCLOSURE
SCHEDULE, neither the execution and delivery of this Agreement by Union,
nor the consummation by Union of the transactions contemplated hereby nor
compliance by Union with any of the provisions hereof will (i) conflict
with or result in a breach of any provision of Union's Articles of
Incorporation or bylaws, (ii) constitute or result in a breach of any term,
condition or provision of, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give rise
to any right of termination, cancellation or acceleration with respect to,
or result in the creation of any Lien upon, any property or assets of any
of Union or its Subsidiaries pursuant to any note, bond, mortgage,
indenture, license, agreement, lease or other instrument or obligation to
which any of them is a party or by which any of them or any of their
properties or assets may be subject, and that would, in any such event,
have a Material Adverse Effect, or (iii) subject to receipt of the
requisite approvals referred to in SECTIONS 9.01(A) and 9.01(B) of this
Agreement, violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Union or its Subsidiaries or any of their
properties or assets.
(c) Other than (i) in connection or compliance with the provisions of
applicable state corporate and securities laws, the Securities Act, the
Exchange Act, and the rules and regulations of the SEC or the FDIC
promulgated thereunder (the "Securities Laws"), and (ii) consents,
authorizations, approvals or exemptions required from the Federal Reserve
Board, the FDIC, or the Commission, no notice to, filing with,
authorization of, exemption by, or consent or approval of any public body
or authority is necessary for the consummation by Union of the Merger and
the other transactions contemplated in this Agreement.
5.05 SECURITIES REPORTING DOCUMENTS AND FINANCIAL STATEMENTS. Union (i) has
delivered to First Charter true and complete copies of the consolidated balance
sheets and the related consolidated statements of income, cash flows and changes
in shareholders' equity (including related notes and schedules) of Union and its
consolidated Subsidiaries as of and for the periods ended June 30, 1995 and
December 31, 1994 included in a quarterly report on Form F-4 or an annual report
on Form F-2, as the case may be, filed by Union pursuant to the Securities Laws,
and (ii) has furnished First Charter with a true and complete copy of each
report, schedule, registration statement and definitive proxy statement filed by
Union with the FDIC from and after January 1, 1992 (each a "Securities Reporting
Document"), which are all the documents (other than preliminary material) that
Union was required to file with the FDIC since such date and all of which
complied when filed in all material respects with all applicable laws and
regulations, and (iii) will deliver to First Charter promptly upon the filing
thereof with the FDIC copies of the consolidated balance sheets and related
consolidated statements of income, cash flows and changes in shareholders'
equity (including related notes and schedules) included in any Securities
Reporting Documents filed subsequent to the date hereof (clauses (i) and (iii),
collectively, the "Union Financial Statements"). The Union Financial Statements
(as of the dates thereof and for the periods covered thereby) (A) are or will be
in accordance with the books and records of Union and its Subsidiaries, which
are or will be complete and accurate in all material respects and which have
been or will have been maintained in accordance with good business practices,
and (B) present or will present fairly the consolidated financial position and
the consolidated results of operations, changes in shareholders' equity and cash
flows of Union and its Subsidiaries as of the dates and for the periods
indicated, in accordance with GAAP consistently applied except as disclosed,
subject in the case of interim financial statements to normal recurring year-end
adjustments and except for the absence of certain footnote information in the
unaudited statements. Union has delivered to First Charter (i) copies of all
management letters prepared by Coopers & Lybrand (and any predecessor thereto)
delivered to Union since January 1, 1992 and (ii) copies of audited balance
sheets and related statements of income, changes in shareholders' equity and
cash flows for any Subsidiary of Union since January 1, 1992 for which a
separate audit has been performed.
5.06 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in SECTION
5.06 OF THE UNION DISCLOSURE SCHEDULE, neither Union nor any of its Subsidiaries
has any obligations or liabilities (contingent or otherwise), except obligations
and liabilities (i) which are fully accrued or reserved against in the
consolidated balance sheet of Union and its Subsidiaries as of
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December 31, 1994 included in the Union Financial Statements or reflected in the
notes thereto, or (ii) which are immaterial and were incurred after December 31,
1994 in the ordinary course of business consistent with past practice.
5.07 TAX MATTERS. Except as set forth in SECTION 5.07 OF THE UNION
DISCLOSURE SCHEDULE:
(a) All Tax Returns required to be filed by or on behalf of Union or
any of its Subsidiaries have been timely filed, or requests for extensions
have been timely filed, granted and have not expired, for periods ending on
or before December 31, 1994, and all such Tax Returns filed are complete
and accurate in all material respects.
(b) All Taxes which have become due have been paid.
(c) There is no audit examination, deficiency or refund litigation or
matter in controversy with respect to any Taxes. All Taxes due with respect
to completed and settled examinations or concluded litigation have been
paid or adequately reserved for.
(d) Union has not executed an extension or waiver of any statute of
limitations on the assessment or collection of any Tax due that is
currently in effect.
(e) Adequate provision for any Taxes due or to become due for Union
and any of its Subsidiaries for any period or periods through and including
June 30, 1995, has been made and is reflected on the June 30, 1995
financial statements included in the Union Financial Statements. Deferred
Taxes of Union and its Subsidiaries have been provided for in the Union
Financial Statements in accordance with GAAP, applied on a consistent
basis.
(f) Union and its Subsidiaries have collected and withheld all Taxes
which they have been required to collect or withhold and have timely
submitted all such collected and withheld amounts to the appropriate
authorities. Union and its Subsidiaries are in compliance with the back-up
withholding and information reporting requirements under (1) the Code, and
(2) any state, local or foreign laws, and the rules and regulations,
thereunder.
(g) Neither Union nor any of its Subsidiaries has made any payments,
is obligated to make any payments, or is a party to any contract, agreement
or other arrangement that could obligate it to make any payments that would
not be deductible under Section 280G of the Code.
5.08 ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses (the
"Allowance") shown on the consolidated balance sheet of Union and its
Subsidiaries as of June 30, 1995 included in the Union Financial Statements is,
and the Allowance shown on the consolidated balance sheet of Union and its
Subsidiaries as of dates subsequent to the execution of this Agreement will be,
in each case as of the dates thereof, adequate to provide for losses relating to
or inherent in the loan and lease portfolios (including accrued interest
receivables) of Union and its Subsidiaries; other extensions of credit
(including letters of credit and commitments to make loans or extend credit) by
Union and its Subsidiaries; and the off balance sheet exposures of Union and its
Subsidiaries.
5.09 OTHER TAX AND REGULATORY MATTERS. Neither Union nor any of its
Subsidiaries has taken or agreed to take any action or has any knowledge of any
fact or circumstance that would (i) prevent the transactions contemplated
hereby, including the Merger, from qualifying as a reorganization within the
meaning of Section 368 of the Code, or (ii) materially impede or delay receipt
of any approval referred to in SECTION 9.01(B).
5.10 PROPERTIES. Except as disclosed in any Securities Reporting Document
filed since December 31, 1994 and prior to the date hereof, Union and its
Subsidiaries have good and marketable title, free and clear of all Liens, to all
their properties and assets whether tangible or intangible, real, personal or
mixed, reflected in the Union Financial Statements as being owned by Union and
its Subsidiaries as of the date hereof. All buildings, and all fixtures,
equipment and other property and assets which are material to its business on a
consolidated basis, held under leases or subleases by any of Union or its
Subsidiaries are held under valid instruments enforceable in accordance with
their respective terms, subject to the Remedies Exception. All of Union's and
Union's Subsidiaries' equipment in regular use has been well maintained and is
in good serviceable condition, reasonable wear and tear excepted.
5.11 COMPLIANCE WITH LAWS.
(a) Except as set forth in SECTION 5.11 OF THE UNION DISCLOSURE
SCHEDULE, each of Union and its Subsidiaries is in compliance with all
laws, rules, regulations, policies, guidelines, reporting and licensing
requirements and orders applicable to its business or to its employees
conducting its business, and with its internal policies and procedures,
except for failures to comply which will not result in a Material Adverse
Effect.
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(b) Except as set forth in SECTION 5.11 OF THE UNION DISCLOSURE
SCHEDULE, neither Union nor any of its Subsidiaries has received any
notification or communication from any agency or department of any federal,
state or local government, including but not limited to the Federal Reserve
Board, the FDIC, the Commission, the SEC and the staffs thereof
(collectively, the "Regulatory Authorities") (i) asserting that any of
Union or its Subsidiaries is not in substantial compliance with any of the
statutes, regulations, or ordinances which such Regulatory Authority
enforces, or the internal policies and procedures of such company, (ii)
threatening to revoke any license, franchise, permit or governmental
authorization which is material to the Condition of Union and its
Subsidiaries on a consolidated basis, (iii) requiring or threatening to
require Union or any of its Subsidiaries, or indicating that Union or any
of its Subsidiaries may be required, to enter into a cease and desist
order, agreement or memorandum of understanding or any other agreement
restricting or limiting or purporting to restrict or limit, in any manner
the operations of Union or any of its Subsidiaries, including, without
limitation, any restriction on the payment of dividends, or (iv) directing,
restricting or limiting, or purporting to direct, restrict or limit in any
manner the operations of Union or any of its Subsidiaries, including,
without limitation, any restriction on the payment of dividends (any such
notice, communication, memorandum, agreement or order described in this
sentence herein referred to as a "Regulatory Agreement").
(c) Neither Union nor any of its Subsidiaries has at any time
consented to or entered into any Regulatory Agreement.
(d) Neither Union nor any of its Subsidiaries is required to give
prior notice to a federal banking agency of the proposed addition of an
individual to its board of directors or the employment of an individual as
a senior executive officer.
5.12 EMPLOYEE BENEFIT PLANS.
(a) Union has delivered or made available to First Charter prior to
the execution of this Agreement true and complete copies (or, in the case
of bonus or other incentive plans, summaries thereof and financial data
with respect thereto) of all pension, retirement, profit-sharing, deferred
compensation, stock option, employee stock ownership, severance pay,
vacation, bonus or other material incentive plans, all other employee
programs, arrangements or agreements, whether arrived at through collective
bargaining or otherwise, all medical, vision, dental or other health plans,
all life insurance plans and all other employee benefit plans or fringe
benefit plans, including, without limitation, all "employee benefit plans"
as that term is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), currently adopted by,
maintained by, sponsored in whole or in part by, or contributed to by Union
or any of its Subsidiaries or any affiliate thereof for the benefit of any
Employee or under which any Employee is eligible to participate and under
which Union or any of its Subsidiaries could have any liability, contingent
or otherwise (collectively, the "Union Benefit Plans"). Any of the Union
Benefit Plans which is an "employee pension benefit plan," as that term is
defined in Section 3(2) of ERISA, is referred to herein as a "Union ERISA
Plan." Any of the Union Benefit Plans pursuant to which Union is or may
become obligated to, or obligated to cause any of its Subsidiaries or any
other Person to, issue, deliver or sell shares of capital stock of Union or
any of its Subsidiaries, or grant, extend or enter into any option,
warrant, call, right, commitment or agreement to issue, deliver or sell
shares, or any other interest in respect of capital stock of Union or any
of its Subsidiaries, is referred to herein as a "Union Stock Plan." No
Union Benefit Plan is or has been a multiemployer plan within the meaning
of Section 3(37) of ERISA. Union has set forth in SECTION 5.12(A) OF THE
UNION DISCLOSURE SCHEDULE (i) a list of all of the Union Benefit Plans,
(ii) a list of Union Benefit Plans that are Union ERISA Plans, (iii) a list
of Union Benefit Plans that are Union Stock Plans and (iv) a list of the
number of shares covered by, exercise prices for, and holders of, all stock
options granted and available for grant under the Union Stock Plans.
(b) All Union Benefit Plans are in compliance with the applicable
terms of ERISA and the Code and any other applicable laws, rules and
regulations the breach or violation of which could reasonably be expected
to result in a Material Adverse Effect.
(c) All liabilities under any Union Benefit Plan are fully accrued or
reserved against in the Union Financial Statements in accordance with GAAP
applied on a consistent basis. No Union ERISA Plan which is a defined
benefit pension plan has any "unfunded current liability," as that term is
defined in Section 302(d)(8)(A) of ERISA, and the present fair market value
of the assets of any such plan exceeds the plan's "benefit liabilities," as
that term is defined in Section 4001(a)(16) of ERISA, when determined under
actuarial factors that would apply if the plan terminated in accordance
with all applicable legal requirements.
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(d) Neither Union nor any of its Subsidiaries has any obligations for
retiree health and life benefits under any Union Benefit Plan or otherwise,
except as set forth in SECTION 5.12(D) OF THE UNION DISCLOSURE SCHEDULE.
There are no restrictions on the rights of Union or its Subsidiaries to
amend or terminate any such Union Benefit Plan without incurring any
material liability thereunder, except for such restrictions as would not
have a Material Adverse Effect.
(e) Except as set forth in SECTION 5.12(E) OF THE UNION DISCLOSURE
SCHEDULE, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, golden parachute or
otherwise) becoming due to any Employees under any Union Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any Union
Benefit Plan or (iii) result in any acceleration of the time of payment or
vesting of any such benefits.
5.13 COMMITMENTS AND CONTRACTS. Except as set forth in SECTION 5.13 OF THE
UNION DISCLOSURE SCHEDULE, neither Union nor any of its Subsidiaries is a party
or subject to any of the following (whether written or oral, express or
implied):
(a) any employment contract or understanding (including any
understandings or obligations with respect to severance or termination pay
liabilities or fringe benefits) with any Employees, including in any such
person's capacity as a consultant (other than those which are terminable at
will without penalty by Union or such Subsidiary);
(b) any labor contract or agreement with any labor union;
(c) any contract not made in the usual, regular and ordinary course of
business containing non-competition covenants which limit the ability of
Union or any of its Subsidiaries to compete in any line of business or
which involve any restriction of the geographical area in which Union or
its Subsidiaries may carry on its business (other than as may be required
by law or applicable Regulatory Authorities);
(d) any other contract or agreement which is material to the Condition
of Union or involves money or other property with a value in excess of
$100,000;
(e) any real property lease with annual rental payments aggregating
$1,000 or more;
(f) any employment or other contract requiring the payment of
additional amounts as "change of control" payments as a result of
transactions contemplated by this Agreement;
(g) any agreement with respect to (i) the acquisition of the assets or
stock of another financial institution or (ii) the sale of one or more bank
branches; or
(h) any agreement or arrangement which involves hedging, options or
any similar trading activity or interest rate exchanges or swaps or other
derivative contracts.
5.14 MATERIAL CONTRACT DEFAULTS. Neither Union nor any of its Subsidiaries
is, or has received any notice or has any knowledge that any party is, in
default in any respect under any contract, agreement, commitment, arrangement,
lease, insurance policy or other instrument to which Union or any of its
Subsidiaries is a party or by which Union or any of its Subsidiaries or the
assets, business or operations thereof may be bound or affected or under which
it or its respective assets, business or operations receives benefits, except
for those defaults which would not have, individually or in the aggregate, a
Material Adverse Effect; 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.
5.15 LEGAL PROCEEDINGS. Except as set forth in SECTION 5.15 OF THE UNION
DISCLOSURE SCHEDULE, there are no actions, suits, proceedings or investigations
instituted or pending or, to the best knowledge of Union's management,
threatened against Union or any of its Subsidiaries, or against any property,
asset, interest or right of any of them, that might reasonably be expected to
result in a judgment in excess of $25,000 or that might reasonably be expected
to threaten or impede the consummation of the transactions contemplated by this
Agreement. Neither Union nor any of its Subsidiaries is a party to any agreement
or instrument or is subject to any charter or other corporate restriction or any
judgment, order, writ, injunction, decree, rule, regulation, code or ordinance
that, individually or in the aggregate, might reasonably be expected to have a
Material Adverse Effect, or, except as referred to in SECTION 5.04(C), might
reasonably be expected to threaten or impede the consummation of the
transactions contemplated by this Agreement.
5.16 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1994, except
(i) as disclosed in any Securities Reporting Document filed since December 31,
1994 and prior to the date hereof or (ii) as set forth in SECTION 5.16 OF THE
UNION
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DISCLOSURE SCHEDULE, neither Union nor any of its Subsidiaries has (A) incurred
any material liability, (B) suffered any material adverse change in its
Condition, (C) failed to operate its business consistent in all material
respects with past practice or (D) changed any accounting practices.
5.17 REGULATORY REPORTS. Since January 1, 1992, Union and each of its
Subsidiaries have filed on a timely basis all reports and statements, together
with all amendments required to be made with respect thereto (collectively,
"Regulatory Reports"), that were required to be filed with (i) the FDIC,
including, without limitation, all Forms F-2, F-3, F-4 and F-5, (ii) the Federal
Reserve Board, (iii) the Commission, and (iv) any other applicable state
securities or banking authorities. No Securities Reporting Document contained
any information that was false or misleading with respect to any material fact
or omitted to state any material fact necessary in order to make the statements
therein not misleading.
5.18 STATEMENTS TRUE AND CORRECT. None of the information supplied or to be
supplied by Union for inclusion in the registration statement on Form S-4, or
other appropriate form, to be filed with the SEC by First Charter under the
Securities Act in connection with the transactions contemplated by this
Agreement (the "Registration Statement"), or the joint proxy statement to be
used by Union and First Charter to solicit any required approval of their
respective shareholders as contemplated by this Agreement (the "Joint Proxy
Statement") will, in the case of the Joint Proxy Statement, when it is first
mailed to the shareholders of Union or First Charter, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which such statements are made, not misleading, or, in the case of the
Registration Statement, when it becomes effective, be false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements therein not misleading, or, in the case of the
Joint Proxy Statement or any amendment thereof or supplement thereto, at the
time of the meeting of the shareholders of either First Charter (the "First
Charter Shareholders' Meeting") or Union (the "Union Shareholders' Meeting"),
each to be held pursuant to SECTION 8.03 of this Agreement, including any
adjournments thereof, be false or misleading with respect to any material fact
or omit to state any material fact necessary to correct any statement or remedy
any omission in any earlier communication with respect to the solicitation of
any proxy for the Union Shareholders' Meeting or the First Charter Shareholders'
Meeting. All documents that Union is responsible for filing with any Regulatory
Authority in connection with the transactions contemplated hereby will comply as
to form in all material respects with the provisions of applicable law,
including applicable provisions of the Securities Laws. The information which is
set forth in the Union Disclosure Schedule by Union for the purposes of this
Agreement is true and accurate in all material respects.
5.19 INSURANCE. Union and each of its Subsidiaries are currently insured,
and during each of the past five calendar years have been insured, for
reasonable amounts against such risks as companies engaged in a similar business
would, in accordance with good business practice, customarily be insured. The
policies of fire, theft, liability (including directors and officers liability
insurance) and other insurance maintained with respect to the assets or
businesses of Union and its Subsidiaries provide adequate coverage against all
pending or threatened claims, and the fidelity bonds in effect as to which any
of Union or any of its Subsidiaries is a named insured are sufficient for their
purpose.
5.20 LABOR. No work stoppage involving Union or its Subsidiaries is pending
or, to the best knowledge of Union's management, threatened. Neither Union nor
any of its Subsidiaries is involved in, or, to the best knowledge of Union's
management, threatened with or affected by, any labor or other
employment-related dispute, arbitration, lawsuit or administrative proceeding.
Employees of Union and its Subsidiaries are not represented by any labor union,
and, to the best knowledge of Union's management, no labor union is attempting
to organize employees of Union or any of its Subsidiaries.
5.21 MATERIAL INTERESTS OF CERTAIN PERSONS. Except as disclosed in Union's
Proxy Statement for its 1995 Annual Meeting of Shareholders or as set forth in
SECTION 5.21 OF THE UNION DISCLOSURE SCHEDULE, no executive officer or director
of Union, or any "associate" (as such term is defined in Rule 14a-1 under the
Exchange Act) of any such executive officer or director, has any material
interest in any material contract or property (real or personal), tangible or
intangible, used in or pertaining to the business of Union or any of its
Subsidiaries.
5.22 REGISTRATION OBLIGATIONS. Neither Union nor any of its Subsidiaries is
under any obligation, contingent or otherwise, currently in effect or which will
survive the Merger by reason of any agreement to register any of its securities
under the Securities Act.
5.23 BROKERS AND FINDERS. Except as set forth in SECTION 5.23 OF THE UNION
DISCLOSURE SCHEDULE, neither Union nor any of its Subsidiaries nor any of their
respective officers, directors or employees has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions or finder's fees, and no broker or finder has acted directly or
indirectly for Union or any of its Subsidiaries in connection with this
Agreement or the transactions contemplated hereby.
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5.24 STATE TAKEOVER LAWS. Union has taken all steps necessary to
irrevocably exempt the transactions contemplated by this Agreement from any
applicable state takeover law and from any applicable charter or contractual
provision containing change of control or anti-takeover provisions.
5.25 ENVIRONMENTAL MATTERS. To Union's best knowledge, neither Union, any
of its Subsidiaries, nor any properties owned or operated by Union or any of its
Subsidiaries or held as collateral by Union or any of its Subsidiaries has been
or is in violation of or liable under any Environmental Law, except for such
violations or liabilities that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect. There are no actions, suits
or proceedings, or demands, claims, notices or investigations (including without
limitation notices, demand letters or requests for information from any
environmental agency) instituted or pending, or to the best knowledge of Union's
management, threatened relating to any properties owned or operated by Union or
any of its Subsidiaries under any Environmental Law, except for liabilities or
violations that would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
"Environmental Law" means any federal, state, local or foreign law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with any
Regulatory Authority relating to (i) the protection, preservation or restoration
of the environment (including, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, surface soil, subsurface soil, plant
and animal life or any other natural resource), and/or (ii) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of any substance presently listed,
defined, designated or classified as hazardous, toxic radioactive or dangerous,
or otherwise regulated, whether by type or by quantity, including any material
containing any such substance as a component.
5.26 OWNERSHIP OF SHARES. To the best knowledge of Union, no individual,
corporation, partnership, association or other entity owns, directly or
indirectly, more than five percent (5%) of the shares of Union Common Stock.
5.27 INSURANCE OF DEPOSITS. The deposits of Union are insured by the Bank
Insurance Fund of the FDIC; all premiums due such fund been paid in full in a
timely fashion and, to the best of its knowledge, Union is in material
compliance with the applicable regulations and requirements of such agency.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF FIRST CHARTER
First Charter represents and warrants to Union as follows:
6.01 ORGANIZATION, STANDING AND AUTHORITY. First Charter is a corporation
duly organized, validly existing and in good standing under the laws of the
State of North Carolina. First Charter National Bank ("FCNB") is a national
banking association duly organized, validly existing and in good standing under
the national banking laws. Each of First Charter and FCNB is duly qualified to
do business and in good standing in all jurisdictions (whether federal, state,
local or foreign) where its ownership or leasing of property or the conduct of
its business requires it to be so qualified and in which the failure to be duly
qualified would have a material adverse effect on the Condition of First Charter
and its Subsidiaries taken as a whole. Each of First Charter and FCNB has all
requisite corporate power and authority to carry on its business as now
conducted and to own, lease and operate its assets, properties and business, and
in the case of First Charter, to execute and deliver this Agreement and perform
the terms of this Agreement. First Charter is duly registered as a bank holding
company under the BHCA. Each of First Charter and FCNB has in effect all
Authorizations necessary for it to own or lease its properties and assets and to
carry on its business as now conducted, the absence of which, either
individually or in the aggregate, would have a material adverse effect on the
Condition of First Charter and its Subsidiaries on a consolidated basis.
6.02 FIRST CHARTER CAPITAL STOCK. The authorized capital stock of First
Charter consists of 10,000,000 shares of First Charter Common Stock. At June 30,
1995, there were outstanding approximately 4,643,641 shares of First Charter
Common Stock. All of the issued and outstanding shares of First Charter Common
Stock are duly and validly issued and outstanding and are fully paid and
nonassessable.
6.03 AUTHORIZATION OF MERGER AND RELATED TRANSACTIONS.
(a) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action in respect thereof on the part
of First Charter, including approval of the Merger and the issuance of
First Charter Common Stock in connection therewith by its Board of
Directors, subject to the approval of the shareholders of First Charter
with respect to the Merger to the extent required
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by applicable law. This Agreement, subject to any requisite shareholder
approval hereof with respect to the Merger, represents a valid and legally
binding obligation of First Charter, enforceable against First Charter in
accordance with its terms, except as such enforcement may be limited by the
Remedies Exception.
(b) Neither the execution and delivery of this Agreement by First
Charter, nor the consummation by First Charter of the transactions
contemplated hereby nor compliance by First Charter with any of the
provisions hereof will (i) conflict with or result in a breach of any
provision of First Charter's Articles of Incorporation or bylaws, (ii)
constitute or result in a breach of any term, condition or provision of, or
constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any Lien upon, any property or assets of any of First Charter
or its Subsidiaries pursuant to any note, bond, mortgage, indenture,
license, agreement, lease or other instrument or obligation to which any of
them is a party or by which any of them or any of their properties or
assets may be subject, and that would, in any such event, have a material
adverse effect on the Condition of First Charter and its Subsidiaries on a
consolidated basis or the ability of First Charter to consummate the
transactions contemplated hereby, or (iii) subject to receipt of the
requisite approvals referred to in Section 9.01 of this Agreement, violate
any order, writ, injunction, decree, statute, rule or regulation applicable
to First Charter or any of its Subsidiaries or any of their properties or
assets.
6.04 FINANCIAL STATEMENTS. First Charter (i) has delivered to Union copies
of the consolidated balance sheets and the related consolidated statements of
income, consolidated statements of changes in shareholders' equity and
consolidated statements of cash flows (including related notes and schedules) of
First Charter and its consolidated Subsidiaries as of and for the periods ended
June 30, 1995 and December 31, 1994 included in a quarterly report filed on Form
10-Q or an annual report filed on Form 10-K, as the case may be, filed by First
Charter pursuant to the Securities Laws (each, a "First Charter SEC Document"),
and (ii) until the Closing will deliver to Union promptly upon the filing
thereof with the SEC copies of the consolidated balance sheets and related
consolidated statements of income, consolidated statements of changes in
shareholders' equity and consolidated statements of cash flows (including
related notes and schedules) included in any First Charter SEC Documents filed
subsequent to the execution of this Agreement (clauses (i) and (ii),
collectively, the "First Charter Financial Statements"). The First Charter
Financial Statements (as of the dates thereof and for the periods covered
thereby) (A) are or will be in accordance with the books and records of First
Charter and its Subsidiaries, which are or will be complete and accurate in all
material respects and which have been or will have been maintained in accordance
with good business practices, and (B) present or will present fairly the
consolidated financial position and the consolidated results of operations,
changes in shareholders' equity and cash flows of First Charter and its
Subsidiaries as of the dates and for the periods indicated, in accordance with
GAAP, subject in the case of interim financial statements to normal recurring
year-end adjustments and except for the absence of certain footnote information
in the unaudited statements.
6.05 FIRST CHARTER SEC REPORTS. Since January 1, 1992, First Charter has
filed on a timely basis all reports and statements, together with all amendments
required to be made with respect thereto, that it is required to file with the
SEC. No First Charter SEC Document with respect to periods beginning on or after
January 1, 1992 and until the Closing contained or will contain any information
that was false or misleading with respect to any material fact or omitted or
will omit to state any material fact necessary in order to make the statements
therein not misleading.
6.06 STATEMENTS TRUE AND CORRECT. None of the information supplied or to be
supplied by First Charter for inclusion in the Registration Statement or the
Joint Proxy Statement will, in the case of the Joint Proxy Statement, when it is
first mailed to the shareholders of First Charter or Union, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which such statements are made, not misleading or, in the case of the
Registration Statement, when it becomes effective, be false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements therein not misleading, or, in the case of the
Joint Proxy Statement or any amendment thereof or supplement thereto, at the
time of either the First Charter Shareholders' Meeting or the Union
Shareholders' Meeting, be false or misleading with respect to any material fact
or omit to state any material fact necessary to correct any statement or remedy
any omission in any earlier communication with respect to the solicitation of
any proxy for the First Charter Shareholders' Meeting or the Union Shareholders'
Meeting. All documents that First Charter is responsible for filing with any
Regulatory Authority in connection with the transactions contemplated hereby
will comply as to form in all material respects with the provisions of
applicable law, including applicable provisions of the Securities Laws.
6.07 CAPITAL STOCK. At the Effective Time, the First Charter Common Stock
issued pursuant to the Merger will be duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights.
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6.08 TAX AND REGULATORY MATTERS. Neither First Charter nor any of its
Subsidiaries has taken or agreed to take any action or has any knowledge of any
fact or circumstance that would materially impede or delay receipt of any
approval referred to in SECTION 9.01(B).
6.09 LITIGATION. There are no judicial proceedings of any kind or nature
pending or, to the knowledge of First Charter, threatened against First Charter
before any court or arbitral tribunal or before or by any governmental
department, agency or instrumentality involving the validity of the First
Charter Common Stock or the transactions contemplated by this Agreement.
6.10 BROKERS AND FINDERS. Except as previously disclosed to Union, neither
First Charter nor any of its Subsidiaries nor any of their respective officers,
directors or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or indirectly for
First Charter or any of its Subsidiaries in connection with this Agreement or
the transactions contemplated hereby.
6.11 ENVIRONMENTAL MATTERS. To First Charter's best knowledge, neither
First Charter, any of its Subsidiaries, nor any properties owned or operated by
First Charter or any of its Subsidiaries or held as collateral by First Charter
or any of its Subsidiaries has been or is in violation of or liable under any
Environmental Law, except for such violations or liabilities that, individually
or in the aggregate, are not reasonably likely to have a material adverse effect
on the Condition of First Charter and its Subsidiaries on a consolidated basis.
There are no actions, suits or proceedings, or demands, claims, notices or
investigations (including without limitation notices, demand letters or requests
for information from any environmental agency) instituted or pending, or to the
best knowledge of First Charter's management, threatened relating to any
properties owned or operated by First Charter or any of its Subsidiaries under
any Environmental Law, except for liabilities or violations that would not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the Condition of First Charter and its Subsidiaries on a
consolidated basis.
ARTICLE VII
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
7.01 CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME. During the period
from the date of this Agreement to the Effective Time, Union shall, and shall
cause each of its Subsidiaries to, (i) conduct its business in the usual,
regular and ordinary course consistent with past practice and (ii) use its best
efforts to maintain and preserve intact its business organization, employees and
advantageous business relationships and retain the services of its officers and
key employees.
7.02 FORBEARANCES. During the period from the date of this Agreement to the
Effective Time, Union shall not, and shall not permit any of its Subsidiaries
to, without the prior written consent of First Charter (and Union shall provide
First Charter with prompt notice of any events referred to in this SECTION 7.02
occurring after the date hereof):
(a) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money (other than short-term
indebtedness incurred to refinance short-term indebtedness, it being
understood and agreed that incurrence of indebtedness in the ordinary
course of business shall include, without limitation, the creation of
deposit liabilities, purchases of federal funds, sales of certificates of
deposit and entering into repurchase agreements), assume, guarantee,
endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity, or make
any loan or advance other than in the ordinary course of business
consistent with past practice;
(b) adjust, split, combine or reclassify any capital stock or
otherwise make any change with respect to its authorized capital stock;
make, declare or pay any dividend or make any other distribution on, or
directly or indirectly redeem, purchase or otherwise acquire, any shares of
its capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, or grant any stock
appreciation rights or grant any individual, corporation or other entity
any right to acquire any shares of its capital stock; or issue any
additional shares of capital stock, or any securities or obligations
convertible into or exchangeable for any shares of its capital stock,
except pursuant to the exercise of Union Options outstanding as of the date
hereof and pursuant to the Stock Option Agreement;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of
its properties or assets to any individual, corporation or other entity, or
cancel, release or assign any indebtedness to any such person or any claims
held by any such person;
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(d) make any material investment either by purchase of stock or
securities, contributions to capital, property transfers, or purchase of
any property or assets of any other individual, corporation or other
entity;
(e) enter into or terminate any contract or agreement involving annual
payments in excess of $1,000 and which cannot be terminated without penalty
upon 30 days notice, or make any change in, or extension of, any of its
leases or contracts involving annual payments in excess of $1,000 and which
cannot be terminated without penalty upon 30 days notice;
(f) increase or modify in any manner the compensation or fringe
benefits of any of its Employees or pay any pension or retirement allowance
not required by any existing plan or agreement to any such Employees, or
become a party to, amend or commit itself to any pension, retirement,
profit-sharing or welfare benefit plan or agreement or employment agreement
with or for the benefit of any Employee or accelerate the vesting of any
stock options or other stock-based compensation; provided the foregoing
shall not prevent the continued accrual and payment in the ordinary course
of benefits under the existing cash incentive bonus plan for key employees
of Union in accordance with the terms of such plan; and provided further,
that Union may put in effect regularly scheduled salary increases which are
either (i) approved in advance by First Charter or (ii) consistent with the
budgets for Union which have been approved by First Charter;
(g) take any action, or refrain from taking any action, that would
prevent or impede the Merger from qualifying as a reorganization within the
meaning of Section 368 of the Code or from qualifying for
pooling-of-interests accounting treatment;
(h) settle any claim, action or proceeding involving the payment of
money damages in excess of an amount which, together with all other claims,
actions or proceedings previously settled, exceeds $20,000;
(i) amend its Articles of Incorporation or its bylaws;
(j) fail to maintain its Regulatory Agreements, material licenses and
permits or to file in a timely fashion all federal, state, local and
foreign tax returns;
(k) make any capital expenditures of more than $10,000 individually or
$25,000 in the aggregate;
(l) fail to maintain each Union Benefit Plan or timely make all
contributions or accruals required thereunder in accordance with GAAP
applied on a consistent basis; or
(m) agree to, or make any commitment to, take any of the actions
prohibited by this SECTION 7.02.
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ARTICLE VIII
ADDITIONAL AGREEMENTS
8.01 ACCESS AND INFORMATION.
(a) During the period from the date of this Agreement through the Effective
Time:
(i) Union shall, and shall cause its Subsidiaries to, afford First
Charter, and its accountants, counsel and other representatives, full
access during normal business hours to the properties, books, contracts,
tax returns, commitments and records of Union and its Subsidiaries at any
time, and from time to time, for the purpose of conducting any review or
investigation reasonably related to the Merger, and Union and its
Subsidiaries will cooperate fully with all such reviews and investigations.
(ii) First Charter shall afford Union and its accountants, counsel and
other representatives reasonable access during normal business hours to the
properties, books, contracts, tax returns, commitments and records of First
Charter and its Subsidiaries at any time and from time to time, for the
purpose of conducting any review or investigation reasonably related to the
Merger, and First Charter and its Subsidiaries will cooperate fully with
all such reviews and investigations.
(b) During the period from the date of this Agreement through the Effective
Time, Union shall furnish to First Charter (i) all Regulatory Reports referred
to in Section 5.17 promptly upon the filing thereof, (ii) a copy of each Tax
Return filed by it and (iii) monthly and other interim financial statements in
the form prepared by Union for its internal use. During this period, Union also
shall notify First Charter promptly of any material change in the Condition of
Union or any of its Subsidiaries.
(c) Notwithstanding the foregoing provisions of this SECTION 8.01, no
investigation by the parties hereto made heretofore or hereafter shall affect
the representations and warranties of the parties which are contained herein,
and each such representation and warranty shall survive such investigation.
(d) Each of First Charter and Union agrees that it will keep confidential
any information furnished to it by the other in connection with the transactions
contemplated by this Agreement, except to the extent that such information (i)
was already known to First Charter or Union, as the case may be, and was
received from a source other than the other party or any of its respective
Subsidiaries, directors, officers, employees or agents, (ii) thereafter was
lawfully obtained from another source, or (iii) is required to be disclosed to
the SEC, the OCC, the Federal Reserve Board, FDIC, the Commission or any other
governmental agency or authority, or is otherwise required to be disclosed by
law. Each of First Charter and Union agrees not to use such information, and to
implement safeguards and procedures that are reasonably designed to prevent such
information from being used, for any purpose other than in connection with the
transactions contemplated by this Agreement.
(e) Union shall cooperate, and shall cause its Subsidiaries, accountants,
counsel and other representatives to cooperate, with First Charter and its
accountants, counsel and other representatives, in connection with the
preparation by First Charter of any applications and documents required to
obtain the Approvals, which cooperation shall include providing all information,
documents and appropriate representations as may be necessary in connection
therewith.
(f) From and after the date of this Agreement, each of First Charter and
Union shall use its reasonable best efforts to satisfy or cause to be satisfied
all conditions to their respective obligations under this Agreement. While this
Agreement is in effect, neither First Charter nor Union shall take any actions,
or omit to take any actions, which would cause this Agreement to become
unenforceable in accordance with its terms.
8.02 REGISTRATION STATEMENT. First Charter shall (a) prepare and file the
Registration Statement with the SEC as soon as is reasonably practicable, (b)
use its best efforts to cause the Registration Statement to become effective,
and (c) take any action required to be taken under any applicable state blue sky
or securities laws in connection therewith. Union and its Subsidiaries shall
furnish First Charter with all information concerning Union, its Subsidiaries
and the holders of Union Common Stock as First Charter may reasonably request in
connection with the foregoing and also shall promptly cooperate in the
preparation of and file the Joint Proxy Statement with the FDIC.
8.03 SHAREHOLDER APPROVALS. Each of First Charter and Union shall call a
meeting of its respective shareholders to be held as soon as practicable for the
purpose of voting upon the Merger and related matters. The respective Boards of
Directors of First Charter and Union shall submit for approval of its
shareholders the matters to be voted upon at the First Charter Shareholders'
Meetings or the Union Shareholders' Meeting, as the case may be, and shall
recommend approval of such matters and use its best efforts (including, without
limitation, soliciting proxies for such approvals) to obtain such shareholder
approval. In this regard, by their execution of this Agreement, each member of
the Board of Directors of Union agrees to vote
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in favor of the consummation of the Merger at the Union Shareholders' Meeting
and to use his or her best efforts to obtain the approval of the Merger by the
shareholders of Union.
8.04 PRESS RELEASES. Prior to the public dissemination of any press release
or other public disclosure of information about this Agreement, the Merger or
any other transaction contemplated hereby, the parties to this Agreement shall
mutually agree as to the form and substance of such release or disclosure.
8.05 NOTICE OF DEFAULTS. Union shall promptly notify First Charter of (i)
any material change in its business, operations or prospects, (ii) any
complaints, investigations or hearings (or communications indicating that the
same may be contemplated) of any Regulatory Authority, (iii) the institution or
the threat of litigation involving such party, or (iv) any event or condition
that might be reasonably expected to cause any of its representations,
warranties or covenants set forth herein not to be true and correct in all
material respects as of the Effective Time.
8.06 MISCELLANEOUS AGREEMENTS AND CONSENTS; AFFILIATES AGREEMENTS. Subject
to the terms and conditions of this Agreement, each of the parties hereto agrees
to cooperate and use its respective best efforts to take, or cause to be taken,
all action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement as expeditiously as reasonably
practicable, including, without limitation, using their respective best efforts
to lift or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions contemplated
hereby. First Charter and Union shall, and shall cause each of their respective
Subsidiaries to, use their best efforts to effect all filings and obtain all
Approvals necessary or, in the reasonable opinion of First Charter or Union,
desirable for the consummation of the transactions contemplated by this
Agreement, including without limitation the approvals of Federal Reserve Board,
the FDIC and the Commission. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of First Charter shall be deemed to
have been granted authority in the name of Union to take all such necessary or
desirable action.
Without limiting the foregoing, Union will, at the request of First
Charter, take such actions as may be reasonably necessary to identify each of
its "affiliates" for purposes of Rule 145 under the Securities Act and to cause
each person so identified to deliver to First Charter within 10 days after the
execution of this Agreement a written agreement in form and substance
satisfactory to First Charter providing that such person shall not sell, pledge,
transfer or otherwise dispose of any shares of Union Common Stock owned by such
person prior to the Effective Time or any capital stock to be received by such
person as part of the Merger Consideration except in compliance with the
applicable provisions of the Securities Act and until such time as financial
results covering at least 30 days of combined operations of First Charter and
Union shall have been published.
8.07 CONVERSION OF STOCK OPTIONS.
(a) At the Effective Time, all rights with respect to Union Common Stock
pursuant to stock options ("Union Options") granted by Union under the Union
Benefit Plans, which are outstanding at the Effective Time, whether or not then
exercisable, shall be converted into and become rights with respect to First
Charter Common Stock, and First Charter shall assume each Union Option, in
accordance with the terms of the stock option plan under which it was issued and
the stock option agreement by which it is evidenced. From and after the
Effective Time, and subject to the provisions of SECTION 3.01(C), (i) each Union
Option assumed by First Charter may be exercised solely for shares of First
Charter Common Stock, (ii) the number of shares of First Charter Common Stock
subject to each Union Option shall be equal to the number of shares of Union
Common Stock subject to such Union Option immediately prior to the Effective
Time multiplied by the Exchange Ratio and (iii) the per share exercise price
under each such Union Option shall be adjusted by dividing the per share
exercise price under each such option by the Exchange Ratio and rounding down to
the nearest cent; PROVIDED, HOWEVER, that the terms of each Union Option shall,
in accordance with its terms, be subject to further adjustment as appropriate to
reflect any stock split, stock dividend, recapitalization or other similar
transaction subsequent to the Effective Time. It is intended that the foregoing
assumption shall be undertaken in a manner that will not constitute a
"modification" as defined in Section 425 of the Code, as to any Union Option
which is an "incentive stock option," as defined in Section 422 of the Code.
(b) Except as provided herein or as otherwise agreed in writing by the
parties, (i) the provisions of the Union Stock Plans and any other plan, program
or arrangement pursuant to which Union may, or may be required to, issue stock
or stock-based compensation, shall be terminated by the Effective Time, and (ii)
Union shall ensure that following the Effective Time no holder of Union Options
or any participant in any Union Stock Plan shall have any right thereunder to
acquire any equity securities of Union or any of its Subsidiaries.
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8.08 CERTAIN CHANGE OF CONTROL MATTERS. From and after the date hereof,
Union shall take all action necessary so that the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby will not
(i) result in any payment (including without limitation severance, unemployment
compensation, golden parachutes or otherwise) becoming due to any Employees
under any Union Benefit Plan or otherwise, (ii) increase any benefits otherwise
payable under any Union Benefit Plan or (iii) result in any acceleration of the
time of payment or vesting of any such benefits.
8.09 CERTAIN ACTIONS. No party shall take any action which would adversely
affect or delay the ability of either First Charter or Union to obtain any
necessary approvals of any Regulatory Authority or other governmental authority
required for the transactions contemplated hereby or to perform its covenants
and agreements under this Agreement. No party shall take any action that would
prevent or impede the Merger from qualifying as a reorganization within the
meaning of Section 368 of the Code.
8.10 ACQUISITION PROPOSALS. Union shall not, and shall not permit its
officers, directors and employees and any investment banker, attorney,
accountant, or other agent retained by it or its Subsidiaries to, (i) initiate,
encourage or solicit, directly or indirectly, the making of any proposal or
offer (an "Acquisition Proposal") to acquire all or any significant part of the
business and properties or capital stock of Union or its Subsidiaries, whether
by merger, consolidation or other business combination, purchase of securities
or assets, tender offer or exchange offer or otherwise, or initiate, directly or
indirectly, any contact with any person in an effort to or with a view towards
soliciting any Acquisition Proposal, or (ii) participate in any discussions or
negotiations regarding, or furnish to any other person any information with
respect to, an Acquisition Proposal or (iii) enter into any agreements to effect
an Acquisition Proposal. In the event Union receives an Acquisition Proposal or
such discussions are sought to be initiated or continued with Union, it shall
promptly inform First Charter as to the material terms thereof.
8.11 POOLING OPINION. First Charter shall use its best efforts to obtain by
the Effective Date the opinion of KPMG Peat Marwick, LLP, independent certified
accountants for First Charter, to the effect that First Charter may account for
the Merger as a pooling-of-interests, which opinion shall be updated to the
Effective Time.
8.12 FAIRNESS OPINIONS.
(a) Union shall use its best efforts to obtain by the date of the mailing
of the Joint Proxy Statement an opinion of an investment banking or appraisal
firm acceptable to Union and to First Charter to the effect that the Exchange
Ratio is fair to Union's shareholders from a financial point of view.
(b) First Charter shall use its best efforts to obtain by the date of the
mailing of the Joint Proxy Statement an opinion of an investment banking or
appraisal firm satis-factory to First Charter to the effect that the Exchange
Ratio is fair to the shareholders of First Charter from a financial point of
view.
8.13 EMPLOYMENT ARRANGEMENTS. First Charter agrees to provide the benefits
provided in Annex I attached hereto.
8.14 INSURANCE CONTINUATION. First Charter shall use its reasonable efforts
(and Union shall cooperate prior to the Effective Time in these efforts) to
maintain in effect for a period of three years after the Effective Time Union's
existing directors' and officers' liability insurance policy (provided that
First Charter may substitute therefor (i) policies of at least the same coverage
and amounts containing terms and conditions which are substantially no less
advantageous or (ii) with the consent of Union given prior to the Effective
Time, any other policy) with respect to claims arising from facts or events
which occurred prior to the Effective Time and covering persons who are
currently covered by such insurance; provided, that, in lieu of maintaining such
insurance coverage, First Charter may agree to indemnify such covered persons
against liabilities arising out of acts or omissions occurring at or prior to
the Effective Time. If the amount of the premiums necessary to maintain or
procure such insurance coverage exceeds an amount equal to $20,000, First
Charter shall use its reasonable efforts to maintain the most advantageous
policies of directors' and officers' liability insurance obtainable for a
premium equal to $20,000.
ARTICLE IX
CONDITIONS
9.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each of First Charter and Union to effect the Merger
and the other transactions contemplated hereby shall be subject to the
fulfillment or waiver at or prior to the Effective Time of the following
conditions:
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(a) Shareholders of each of Union and First Charter shall have
approved all matters relating to the Merger required under applicable law
at their respective Shareholders' Meetings.
(b) This Agreement, the Merger and the other transactions contemplated
hereby shall have been approved by the Federal Reserve Board, the FDIC, the
Commission and any other Regulatory Authorities whose approval is required
for consummation of the transactions contemplated hereby, which approvals
are subject to no conditions that in the judgment of First Charter would
restrict it or its Subsidiaries or affiliates in their respective spheres
of operations and business activities after the Effective Time.
(c) The Registration Statement shall have been declared effective and
shall not be subject to a stop order or any threatened stop order.
(d) Neither First Charter nor Union shall be subject to any active
litigation which seeks any order, decree or injunction of a court or agency
of competent jurisdiction to enjoin or prohibit the consummation of the
Merger.
(e) Each of First Charter and Union shall have received an opinion of
Smith Helms Mulliss & Moore, L.L.P., tax counsel to First Charter, or other
counsel to First Charter, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code and no gain or
loss will be recognized by the shareholders of Union to the extent that
they receive solely First Charter Common Stock in exchange for their Union
Common Stock in the Merger.
(f) Each of First Charter and Union shall have received the fairness
opinions contemplated by SECTION 8.12.
9.02 CONDITIONS TO OBLIGATIONS OF UNION TO EFFECT THE MERGER. The
obligations of Union to effect the Merger shall be subject to the fulfillment or
waiver at or prior to the Effective Time of the following additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of First Charter set forth in ARTICLE VI hereof shall be true and correct
in all material respects as of the date of this Agreement and as of the
Effective Time (as though made on and as of the Effective Time except to
the extent such representations and warranties are by their express
provisions made as of a specified date) and Union shall have received a
certificate signed by the chairman and chief executive officer, executive
vice president or other duly authorized officer of First Charter to that
effect.
(b) PERFORMANCE OF OBLIGATIONS. First Charter shall have performed in
all material respects all obligations required to be performed by it under
this Agreement prior to the Effective Time, and Union shall have received a
certificate signed by the chairman and chief executive officer, executive
vice president or other duly authorized officer of First Charter to that
effect.
(c) OTHER DOCUMENTS AND INFORMATION. First Charter shall have provided
Union true, correct and complete copies, certified as appropriate, of its
Articles of Incorporation, Bylaws, resolutions, incumbency certificates and
such other documents and information as may be reasonably requested by
Union or its counsel.
(d) OPINION OF COUNSEL. Union shall have received a written opinion of
counsel for First Charter, in form and substance reasonably satisfactory to
and covering such matters as are reasonably requested by Union.
9.03 CONDITIONS TO OBLIGATIONS OF FIRST CHARTER TO EFFECT THE MERGER. The
obligations of First Charter to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Union set forth in ARTICLE V hereof shall be true and correct in all
material respects as of the date of this Agreement as of the Effective Time
(as though made on and as of the Effective Time except to the extent such
representations and warranties are by their express provisions made as of a
specified date) and First Charter shall have received a certificate signed
by the chairman or the chief executive officer or other duly authorized
officer of Union to that effect.
(b) PERFORMANCE OF OBLIGATIONS. Union shall have performed in all
material respects all obligations required to be performed by it under this
Agreement prior to the Effective Time, and First Charter shall have
received a certificate signed by the chairman or the chief executive
officer or other duly authorized officer of Union to that effect.
(c) OTHER DOCUMENTS AND INFORMATION. Union shall have provided First
Charter true, correct and complete copies, certified as appropriate, of its
Articles of Incorporation, Bylaws, resolutions, incumbency certificates and
such other documents as may be reasonably requested by First Charter or its
counsel.
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(d) OPINION OF COUNSEL. First Charter shall have received a written
opinion of counsel for Union in form and substance reasonably satisfactory
to and covering such matters as are reasonably requested by First Charter.
(e) AFFILIATES' LETTERS. First Charter shall have received the letters
from all affiliates of Union as contemplated by SECTION 8.06 hereof.
(f) POOLING OPINION. First Charter shall have received an opinion from
KPMG Peat Marwick, LLP, to the effect that the Merger may be accounted for
as a pooling-of-interests.
ARTICLE X
TERMINATION
10.01 TERMINATION. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement, the Merger and the other
transactions contemplated hereby by the shareholders of First Charter and Union
or both, this Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time:
(a) by mutual consent of the Board of Directors of First Charter and
the Board of Directors of Union; or
(b) by the Board of Directors of First Charter or the Board of
Directors of Union if the Effective Time does not occur by June 30, 1996;
or
(c) by the Board of Directors of First Charter if the Federal Reserve
Board, the FDIC, the Commission or any other applicable Regulatory
Authority has approved the Merger subject to conditions that in the
judgment of First Charter would restrict it or its Subsidiaries or
affiliates in their respective spheres of operations and business
activities after the Effective Time; or
(d) by the Board of Directors of First Charter (if it is not in breach
of any of its obligations hereunder) pursuant to notice in the event of a
breach or failure by Union that is material in the context of the
transactions contemplated hereby of any representation, warranty, covenant
or agreement by Union contained herein which has not been, or cannot be,
cured within 30 days after written notice of such breach is given to Union;
or
(e) by the Board of Directors of Union (if it is not in breach of any
of its obligations hereunder) pursuant to notice in the event of a breach
or failure by First Charter that is material in the context of the
transactions contemplated hereby of any representation, warranty, covenant
or agreement by First Charter contained herein which has not been, or
cannot be, cured within 30 days after written notice of such breach is
given to First Charter; or
(f) by the Board of Directors of Union, if the Average Price of First
Charter Common Stock shall be less than $14.00 (unless the change in the
Average Price is directly attributable to an increase, decrease or change
in the number of outstanding shares of First Charter Common Stock due to a
recapitalization, reclassification, stock dividend, stock split or reverse
stock split, all without consideration, in which case such threshold price
of First Charter Common Stock of $14.00 shall be appropriately and
proportionately adjusted). "Average Price" shall mean the average of the
daily Fair Market Value of First Charter Common Stock for the twenty
consecutive trading days ending the date that is four business days before
the Effective Time; or
(g) by the Board of Directors of First Charter if First Charter
determines that either (A) the stockholders' equity of Union is less than
reported in the consolidated balance sheet as of June 30, 1995 of Union
included in the Union Financial Statements, or (B) that the loan portfolio
of Union presents a risk of noncollectibility unacceptable to First
Charter.
10.02 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to SECTION 10.01, this Agreement shall
become void and have no effect, except that (i) the provisions of SECTION
8.01(D) and SECTION 11.01 shall survive any such termination and abandonment,
and (ii) no party shall be relieved or released from any liability arising out
of an intentional breach of any provision of this Agreement.
10.03 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS FOLLOWING
THE EFFECTIVE TIME. Except for ARTICLES III and IV and SECTIONS 8.07 and 11.01,
none of the respective representations, warranties, obligations, covenants and
agreements of the parties shall survive the Effective Time.
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ARTICLE XI
GENERAL PROVISIONS
11.01 EXPENSES. Each party hereto shall bear its own expenses incident to
preparing, entering into and carrying out this Agreement and to consummating the
Merger, except that First Charter and Union shall divide equally all printing
expenses and filing fees incurred in connection with this Agreement, the
Registration Statement and the Joint Proxy Statement.
11.02 ENTIRE AGREEMENT. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein) contains
the entire agreement between the parties hereto with respect to the transactions
contemplated hereunder, and such Agreement supersedes all prior arrangements or
understandings with respect thereto, written or oral. The terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors. Nothing in this Agreement, expressed or
implied, is intended to confer upon any individual, corporation or other entity,
other than First Charter, Union and the Interim Bank or their respective
successors, any rights, remedies, obligations or liabilities under or by reason
of this Agreement.
11.03 AMENDMENTS. To the extent permitted by law, this Agreement may be
amended by a subsequent writing signed by each of First Charter and Union;
PROVIDED, HOWEVER, that the provisions hereof relating to the manner or basis in
which shares of Union capital stock will be exchanged for the Merger
Consideration shall not be amended after the First Charter Shareholders' Meeting
or the Union Shareholders' Meeting without any requisite approval of the holders
of the issued and outstanding shares of First Charter Common Stock or Union
Common Stock, as the case may be, entitled to vote thereon.
11.04 WAIVERS. Prior to or at the Effective Time, each of First Charter and
Union shall have the right to waive any default in the performance of any term
of this Agreement by the other, to waive or extend the time for the compliance
or fulfillment by the other of any and all of the other's obligations under this
Agreement and to waive any or all of the conditions precedent to its obligations
under this Agreement, except any condition which, if not satisfied, would result
in the violation of any law or applicable governmental regulation.
11.05 NO ASSIGNMENT. None of the parties hereto may assign any of its
rights or delegate any of its obligations under this Agreement to any other
person or entity. Any such purported assignment or delegation that is made
without the prior written consent of the other parties to this Agreement shall
be void and of no effect.
11.06 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, or by registered or certified mail, postage prepaid to
the persons at the addresses set forth below (or at such other address as may be
provided hereunder), and shall be deemed to have been delivered as of the date
so delivered:
<TABLE>
<S> <C>
Union: Bank of Union
201 North Charlotte Avenue
Monroe, North Carolina 28110
Attention: H. Clark Goodwin
President
Copy to Counsel: Ward and Smith, P.A.
Two Hannover Square, Suite 2400
Post Office Box 2091
Raleigh, North Carolina 27602
Attention: Anthony Gaeta, Jr.
First Charter: First Charter Corporation
22 Union Street North
Post Office Box 228
Concord, North Carolina 28026-0228
Attention: Lawrence M. Kimbrough
President
Copy to Counsel: Smith Helms Mulliss & Moore, L.L.P
Post Office Box 31247
Charlotte, North Carolina 28231
Attention: J. Richard Hazlett
</TABLE>
11.07 SPECIFIC PERFORMANCE. The parties hereby acknowledge and agree that
the failure of Union to fulfill any of its covenants and agreements hereunder,
including the failure to take all such actions as are necessary on its part to
cause the
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consummation of the Merger, will cause irreparable injury to First Charter for
which damages, even if available, will not be an adequate remedy. Accordingly,
Union hereby consents to the issuance of injunctive relief by any court of
competent jurisdiction to compel performance of Union's obligations or any
arbitration award hereunder and to the granting by any such court of the remedy
of the specific performance by Union hereunder.
11.08 ARBITRATION. (A) ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE
PARTIES HERETO, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH
THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, NORTH CAROLINA LAW), THE
RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OR
JUDICIAL ARBITRATION AND MEDIATION SERVICES/ENDISPUTE, INC. ("JAMS"), AND THE
"SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL
RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY
COURT HAVING JURISDICTION. ANY PARTY TO THIS AGREEMENT MAY BRING AN ACTION,
INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY
CONTROVERSY OR CLAIM UNDER THIS AGREEMENT IN ANY COURT HAVING JURISDICTION OVER
SUCH ACTION.
(B) THE ARBITRATION SHALL BE CONDUCTED (1) IN THE CITY OF CHARLOTTE, NORTH
CAROLINA OR (2) IN SUCH OTHER LOCATION AS AGREED BY THE PARTIES AND BY JAMS WHO
WILL APPOINT AN ARBITRATOR; IF JAMS IS UNABLE OR LEGALLY PRECLUDED FROM
ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL
SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND
FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE
PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR AN ADDITIONAL 60 DAYS.
(C) ANY SERVICE OF PROCESS UNDER AN ARBITRATION OR ANY OTHER LEGAL
PROCEEDING WILL BE DEEMED TO BE EFFECTIVE AS TO EITHER PARTY TO THIS AGREEMENT
WHEN SUCH SERVICE OF PROCESS IS DELIVERED TO THE COUNSEL FOR THE RESPECTIVE
PARTIES AS IDENTIFIED IN SECTION 11.06.
11.09 GOVERNING LAW. This Agreement shall in all respects be governed by
and construed in accordance with the laws of the State of North Carolina.
11.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original, but all
of which together shall constitute one and the same instrument.
11.11 CAPTIONS. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
11.12 SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement, or in any other instrument referred to herein,
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument.
IN WITNESS WHEREOF, First Charter and Union have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of the
date first written above.
FIRST CHARTER CORPORATION
By: /s/ LAWRENCE M. KIMBROUGH
PRESIDENT
BANK OF UNION
By: /s/ H. CLARK GOODWIN
PRESIDENT
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BOARD DIRECTORS OF BANK OF UNION
/s/ JOHN A. CROOK, JR. (SEAL)
JOHN A. CROOK, JR.
/s/ J. EARL CULBRETH (SEAL)
J. EARL CULBRETH
/s/ D. A. DAVIS (SEAL)
D. A. DAVIS
/s/ WILLIAM C. DESKINS (SEAL)
WILLIAM C. DESKINS
/s/ JAMES B. FINCHER (SEAL)
JAMES B. FINCHER
/s/ H. CLARK GOODWIN (SEAL)
H. CLARK GOODWIN
/s/ EARL J. HAIGLER (SEAL)
EARL J. HAIGLER
/s/ FRANK W. HAWFIELD, JR. (SEAL)
FRANK H. HAWFIELD, JR.
/s/ CHARLES E. HULSEY (SEAL)
CHARLES E. HULSEY
/s/ CALLIE F. KING (SEAL)
CALLIE F. KING
/s/ JOSEPH L. LITTLE (SEAL)
JOSEPH L. LITTLE
/s/ FRED C. LONG (SEAL)
FRED C. LONG
/s/ JERRY E. MCGEE (SEAL)
JERRY E. MCGEE
/s/ DAVID C. MCGUIRT (SEAL)
DAVID C. MCGUIRT
/s/ LANE D. VICKERY (SEAL)
LANE D. VICKERY
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ANNEX I
EMPLOYMENT ARRANGEMENTS
Immediately after the Effective Date, the following employee benefit
arrangements will be provided:
A.CLARK GOODWIN
(i) STOCK OPTION: First Charter will issue to Mr. Goodwin an option to
purchase 15,000 shares of First Charter Common Stock at the market
price as of the Effective Time. The option will be exercisable
beginning six months from the date of grant and ratably over the
years between the date of grant and his normal retirement date. The
right to exercise the option will be cumulative over its lifetime.
In the event that "pooling of interests" accounting treatment
requires it, the grant may have to be subdivided into two grants. In
such event, the second grant will follow the first as soon as
possible.
(ii) INCENTIVE COMPENSATION: Mr. Goodwin will be eligible to
participate in the First Charter Executive Incentive
Compensation Plan ("EICP") at the Executive Vice President
level (30% of his current annual base salary). First Charter
performance will determine the level of the EICP pool, and
one-half of individual awards will be allocated based on First
Charter performance and one-half will be discretionary and
based on individual performance. Mr. Goodwin's individual
goals would be based on the annual performance plan for Union
as agreed to by Union and the First Charter Board of
Directors.
(iii) SUPPLEMENTARY RETIREMENT BENEFIT: First Charter will
continue funding of Mr. Goodwin's current life
insurance-based, supplementary retirement benefit
through his normal retirement date at the current annual
premium level of $7,800.
B. DAVID MCGUIRT
(i) STOCK OPTION: First Charter will issue to Mr. McGuirt an option to
purchase 8,000 shares of First Charter Common Stock at the market
price at the Effective Time. The option will be exercisable
beginning six months from the date of grant and ratably over five
years from date of grant on a cumulative basis. The term of the
option will be ten years.
(ii) INCENTIVE COMPENSATION: Mr. McGuirt will be eligible to
participate in the EICP at the Executive Vice President level
(20% of his current annual base salary). First Charter
performance will determine the level of the EICP pool, and
one-half of individual awards will be allocated based on
First Charter performance and one-half will be discretionary
and based on individual performance. Mr. McGuirt's individual
goals would be based on the annual performance plan for Union
as agreed to by the Union and the First Charter Board of
Directors.
(iii) SUPPLEMENTARY RETIREMENT BENEFIT: First Charter will
continue funding of his current live insurance-based,
supplementary retirement benefit through his normal
retirement date at the current annual premium level of
$5,556.
C. JIM MATTHEWS
STOCK OPTION: First Charter will issue to Mr. Matthews an option to
purchase 5,000 shares of First Charter Common Stock at the market price
at the Effective Time. The option will be exercisable beginning six
months from the date of grant ratably over five years from date of grant
on a cumulative basis. The term of the option will be ten years.
D. GENERAL:
(i) AUTOMOBILES: Bank owned automobiles will be provided to Messrs.
Goodwin and McGuirt through the term of their employment contracts.
The existing Union policy concerning make, trade date,
depreciation, personal use, etc. will apply.
(ii) CLUB MEMBERSHIP DUES: Rolling Hills Country Club, Charlotte
City Club, and Tower Club dues for Mr. Goodwin will continue
to be reimbursed through normal retirement date. Rolling
Hills Country Club dues for Mr. McGuirt will continue to be
reimbursed along with comparable dues presently being paid or
reimbursed for other Union officers. Reimbursement for
entertainment and other business-related expenses will be
provided under the then current First Charter policies and
procedures.
(iii) VACATION BENEFIT: Messrs. Goodwin and McGuirt will be
entitled to 20 days of paid vacation each calendar
year.
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(iv) CONVENTIONS AND MEETINGS: Messrs. Goodwin and
McGuirt will be entitled to attend conventions
and meetings of various state and national
associations in line with the established
practices of Union.
(v) AGE-WEIGHTED FORMULA FOR UNION RETIREMENT
PLAN: Appropriate current or deferred
compensation adjustments will be made for
Messrs. Goodwin and/or McGuirt if it is
determined that their respective
entitlements under the First Charter
Retirement Plan are less than the Union
Retirement Plan because of the
"age-weighted" formula used under that plan.
(vi) CONTINUATION OF DEPENDENT MEDICAL
INSURANCE COVERAGE FOR MRS. GOODWIN:
First Charter will attempt to secure
continuing dependent coverage under
the then current First Charter group
medical plan for Mr. Goodwin's wife
following Mr. Goodwin's retirement at
Mr. Goodwin's expense.
A-30
<PAGE>
APPENDIX B
[FORM OF OPINION OF WHEAT, FIRST SECURITIES, INC.]
[DATE]
Board of Directors
First Charter Corporation
22 Union Street North
Concord, NC 28026-0228
Members of the Board:
First Charter Corporation ("First Charter") and Bank of Union ("Union")
have entered into an Agreement and Plan of Merger, dated as of September 13,
1995 (the "Agreement"), pursuant to which Union will combine with First Charter
by means of the merger (the "Merger") of Union into a subsidiary of First
Charter Corporation. Upon consummation of the Merger, each of the outstanding
shares of the $1.25 par value common stock of Union ("Union Common Stock") will
be converted into 0.75 of a share (the "Exchange Ratio") of the $5.00 par value
common stock of First Charter ("First Charter Common Stock").
Wheat, First Securities, Inc. ("Wheat First"), as part of its investment
banking business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. In the ordinary course of our business as a broker-dealer, we
may, from time to time, have a long or short position in, and buy or sell, debt
or equity securities of First Charter or Union for our own account or for the
accounts of our customers. Wheat First will also receive a fee from First
Charter for rendering this opinion.
You have asked us whether, in our opinion, the Exchange Ratio is fair, from
a financial point of view, to the holders of First Charter Common Stock.
In arriving at the opinion set forth below, we have conducted discussions
with members of senior management of First Charter and Union concerning their
businesses and prospects and have reviewed certain publicly available business
and financial information and certain other information prepared or provided to
us in connection with the Merger, including, among other things, the following:
(1) Union's Annual Reports to Shareholders, Annual Reports on Form
F-2 and related financial information for the three fiscal years
ended December 31, 1994;
(2) Union's Quarterly Reports on Form F-4 and related financial
information for the quarters ended March 31 and June 30, 1995;
(3) First Charter's Annual Reports to Shareholders, Annual Reports on
Form 10-K and related financial information for the three fiscal
years ended December 31, 1994;
(4) First Charter's Quarterly Reports on Form 10-Q and related
financial information for the quarters ended March 31 and June
30, 1995;
(5) Certain publicly available information with respect to historical
market prices and trading activity for First Charter Common
Stock, Union Common Stock and for certain publicly traded
financial institutions which Wheat First deemed relevant;
(6) Certain publicly available information with respect to banking
companies and the financial terms of certain other mergers and
acquisitions which Wheat First deemed relevant;
(7) The Agreement;
(8) The Registration Statement on Form S-4 of First Charter,
including the Joint Proxy Statement-Prospectus;
(9) Other financial information concerning the businesses and
operations of First Charter and Union, including certain audited
financial information and certain internal financial analyses and
forecasts for First Charter and Union prepared by their
respective senior managements; and
(10) Such financial studies, analyses, inquiries and other matters as
we deemed necessary.
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In preparing our opinion, we have relied on and assumed the accuracy and
completeness of all information provided to us or publicly available, including
the representations and warranties of First Charter and Union included in the
Agreement, and we have not assumed any responsibility for independent
verification of such information. We have relied upon the managements of First
Charter and Union as to the reasonableness and achievability of their financial
and operational forecasts and projections, and the assumptions and bases
therefor, provided to us, and we have assumed that such forecasts and
projections reflect the best currently available estimates and judgments of such
managements and that such forecasts and projections will be realized in the
amounts and in the time periods currently estimated by such managements. We also
assumed, without independent verification, that the aggregate allowances for
loan losses and other contingencies for First Charter and Union are adequate to
cover such losses. Wheat First did not review any individual credit files of
First Charter or Union, nor did it make an independent evaluation or appraisal
of the assets or liabilities of First Charter or Union. We also assumed that, in
the course of obtaining the necessary regulatory approvals for the Merger, no
conditions will be imposed that will have a material adverse effect on the
contemplated benefits of the Merger, on a pro forma basis, to First Charter. Our
opinion is necessarily based upon market, economic and other conditions as they
exist and can be evaluated on the date hereof and the information made available
to us through the date hereof. Events occurring after that date could materially
affect the assumptions and conclusions contained in our opinion. We have not
undertaken to reaffirm or revise this opinion or otherwise comment on any events
occurring after the date hereof. Wheat First's opinion is directed only to the
fairness, from a financial point of view, of the Exchange Ratio to the holders
of First Charter Common Stock and does not address any other aspect of the
Merger or constitute a recommendation to any shareholder of First Charter as to
how such shareholder should vote with respect to the Merger. Wheat First's
opinion does not address the relative merits of the Merger as compared to any
alternative business strategies that might exist for First Charter, nor does it
address the effect of any other business combination in which First Charter
might engage.
It is understood that this opinion may be included in its entirety in the
Joint Proxy Statement-Prospectus. This opinion may not, however, be summarized,
excerpted from or otherwise publicly referred to without our prior written
consent.
On the basis of and subject to the foregoing, we are of the opinion that as
of the date hereof the Exchange Ratio is fair, from a financial point of view,
to the holders of First Charter Common Stock.
Very truly yours,
WHEAT, FIRST SECURITIES, INC.
B-2
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APPENDIX C
[FORM OF OPINION OF BAXTER FENTRISS AND COMPANY]
[DATE]
The Board of Directors
Bank of Union
201 N. Charlotte Ave.
Monroe, NC 28112
Dear Members of the Board:
Bank of Union, Monroe, North Carolina ("Union") and the First Charter
Corporation, Concord, North Carolina ("First Charter") have entered into an
Agreement providing for the acquisition of Union by First Charter
("Acquisition"). The terms of the Acquisition are set forth in the Agreement and
Plan of Merger dated September 13, 1995.
The terms of the Acquisition provide that, with the possible exception of
those shares as to which dissenter's rights may be perfected, each common share
of Union will be converted into 0.75 shares of common stock of First Charter.
You have asked our opinion as to whether the proposed transaction pursuant
to the terms of the Acquisition are fair to the respective shareholders of Union
from a financial point of view.
In rendering our opinion, we have evaluated the consolidated financial
statements of Union available to us from published sources. In addition, we
have, among other things: (a) to the extent deemed relevant, analyzed selected
public information of certain other financial institutions and compared Union
and First Charter from a financial point of view to the other financial
institutions; (b) considered the historical market price of the common stock of
Union and First Charter; (c) compared the terms of the Acquisition with the
terms of certain other comparable transactions to the extent information
concerning such acquisitions was publicly available; (d) reviewed the Agreement
and Plan of Merger and related documents; and (e) made such other analyses and
examinations as we deemed necessary. We also met with various senior officers of
Union and First Charter to discuss the foregoing as well as other matters that
may be relevant.
We have not independently verified the financial and other information
concerning Union, or First Charter or other data which we have considered in our
review. We have assumed the accuracy and completeness of all such information;
however, we have no reason to believe that such information is not accurate and
complete. Our conclusion is rendered on the basis of securities market
conditions prevailing as of the date hereof and on the conditions and prospects,
financial and otherwise, of Union and First Charter as they exist and are known
to us as of June 30, 1995.
It is understood that this opinion may be included in its entirety in any
communication by Union or the Board of Directors to the stockholders of Union.
The opinion may not, however, be summarized, excerpted from or otherwise
publicly referred to without our prior written consent.
Based on the foregoing, and subject to the limitations described above, we
are of the opinion that the terms of the Acquisition are fair to the
shareholders of Union from a financial point of view.
Very truly yours,
Baxter Fentriss and Company
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APPENDIX D
PROVISIONS OF NORTH CAROLINA LAW
RELATING TO DISSENTERS' APPRAISAL RIGHTS
ARTICLE XIII
DISSENTER'S RIGHTS
Part 1. Right to Dissent and Obtain Payment for Shares.
(SECTION MARK)55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right
when and in the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the
corporate action to which the dissenter objects, excluding any
appreciation or depreciation in anticipation of the corporate
action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and
equitable under all the circumstances, giving due consideration to
the rate currently paid by the corporation on its principal bank
loans, if any, but not less than the rate provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner
of shares to the extent of the rights granted by a nominee
certificate on file with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the
record shareholder.
(7) "Shareholder" means the record shareholder or the beneficiary
shareholder.
(SECTION MARK)55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a
party unless (i) approval by the shareholders of that corporation
is not required under G.S. 55-11-03(g) or (ii) such shares are
then redeemable by the corporation at a price not greater than the
cash to be received in exchange for such shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired,
unless such shares are then redeemable by the corporation at a
price not greater than the cash to be received in exchange for
such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a
sale pursuant to court order or a sale pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed in cash to the shareholders within one year after the
date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares
because it (i) alters or abolishes a preferential right of the
shares; (ii) creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for
the redemption or repurchase, of the shares; (iii) alters or
abolishes a preemptive right of the holder of the shares to
acquire shares or other securities; (iv) excludes or limits the
right of the shares to vote on any matter, or to cumulate votes;
(v) reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so
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created is to be acquired for cash under G.S. 55-6-04; or (vi)
changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of
the board of directors provides that voting or nonvoting
shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property, unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(SECTION MARK)55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial
shareholder asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
(SECTION MARK)(SECTION MARK)55-13-04 TO 55-13-19: Reserved for future
codification purposes.
Part 2. Procedure for Exercise of Dissenters' Rights.
(SECTION MARK)55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
(SECTION MARK)55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to
demand payment for his shares if the proposed action is
effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
(SECTION MARK)55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
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(b) The dissenters' notice must be sent no later than 10 days after the
corporate action was taken, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is
received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days
after the date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
(SECTION MARK)55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this Article.
(SECTION MARK)55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(SECTION MARK)55-13-25. OFFER OF PAYMENT.
(a) As soon as the proposed corporate action is taken, or upon receipt of a
payment demand, the corporation shall offer to pay each dissenter who complied
with G.S. 55-13-23 the amount the corporation estimates to be the fair value of
his shares, plus interest accrued to the date of payment, and shall pay this
amount to each dissenter who agrees in writing to accept it in full satisfaction
of his demand.
(b) The offer of payment must be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the
date of offer of payment, an income statement for that year, a
statement of cash flows for that year, and the latest available
interim financial statements, if any;
(2) A statement of the corporation's estimates of the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
(SECTION MARK)55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
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(SECTION MARK)55-13-27: Reserved for future codification purposes.
(SECTION MARK)55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S
OFFER OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate or reject the corporation's offer under G.S. 55-13-25 and demand
payment of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under G.S. 55-13-25
is less than the fair value of his shares or that the interest due
is incorrectly calculated;
(2) The corporation fails to make payment to a dissenter who accepts
the corporation's offer under G.S. 55-13-25 within 30 days after
the dissenter's acceptance; or
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within 60 days after
the date set for demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing (i) under
subdivision (a)(1) within 30 days after the corporation offered payment for his
shares or (ii) under subdivisions (a)(2) and (a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
(SECTION MARK)55-13-29: Reserved for future codification purposes.
Part 3. Judicial Appraisal of Shares.
(SECTION MARK)55-13-60. COURT ACTION.
(a) If a demand for payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the date of his payment
demand under G.S. 55-13-28 and petition the court to determine the fair value of
the shares and accrued interest. Upon service upon it of the petition filed with
the court, the corporation shall pay to the dissenter the amount offered by the
corporation under G.S. 55-13-25.
(a1) If the dissenter does not commence the proceeding within the 60-day
period, the dissenter shall have an additional 30 days to either (i) accept in
writing the amount offered by the corporation under G.S. 55-13-25, upon which
the corporation shall pay such amount to the dissenter in full satisfaction of
his demand, or (ii) withdraw his demand for payment and resume the status of a
nondissenting shareholder. A dissenter who takes no action within such 30-day
period shall be deemed to have withdrawn his dissent and demand for payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the petition. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on the question
of fair value. The appraisers have the powers described in the order appointing
them, or in any amendment to it. The parties are entitled to the same discovery
rights as parties in other civil proceedings. However, in a proceeding by a
dissenter in a public corporation, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
(SECTION MARK)55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
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(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with
the requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom
the fees and expenses are assessed acted arbitrarily, vexatiously,
or not in good faith with respect to the rights provided by this
Article.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefitted.
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PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
There are no provisions in the Registrant's Restated Articles of
Incorporation and no contracts between the Registrant and its directors and
officers nor resolutions adopted by the Registrant, relating to indemnification.
However, in accordance with the provisions of the NCBCA, the Registrant's Bylaws
provide that, in addition to the indemnification of directors and officers
otherwise provided by the NCBCA, the Registrant shall, under certain
circumstances, indemnify its directors, executive officers and certain other
designated officers against any and all liability and litigation expense,
including reasonable attorneys' fees, arising out of their status or activities
as directors and officers, except for liability or litigation expense incurred
on account of activities that were at the time known or reasonably should have
been known by such director or officer to be clearly in conflict with the best
interests of the Registrant. Pursuant to such bylaw and as authorized by
statute, the Registrant maintains insurance on behalf of its directors and
officers against liability asserted against such persons in such capacity
whether or not such directors or officers have the right to indemnification
pursuant to the bylaw or otherwise. In addition, the Registrant's Restated
Articles of Incorporation prevent the recovery by the Registrant or any of its
shareholders of monetary damages against its directors.
In addition to the above-described provisions, Sections 55-8-50 through
55-8-58 of the NCBCA contain provisions prescribing the extent to which
directors and officers shall or may be indemnified. Section 55-8-51 of the NCBCA
permits a corporation, with certain exceptions, to indemnify a current or former
director against liability if (i) he conducted himself in good faith, (ii) he
reasonably believed (x) that his conduct in his official capacity with the
corporation was in its best interests and (y) in all other cases his conduct was
at least not opposed to the corporation's best interests, and (iii) in the case
of any criminal proceeding, he had no reasonable cause to believe his conduct
was unlawful. A corporation may not indemnify a director in connection with a
proceeding by or in the right of the corporation in which the director was
adjudged liable to the corporation or in connection with a proceeding charging
improper personal benefit to him in which he was adjudged liable on such basis.
The above standard of conduct is determined by the Board of Directors or a
committee thereof or special legal counsel or the shareholders as prescribed in
Section 55-8-55.
Sections 55-8-52 and 55-8-56 of the NCBCA require a corporation to
indemnify a director or officer in the defense of any proceeding to which he was
a party because of his capacity as a director or officer against reasonable
expenses when he is wholly successful in his defense, unless the articles of
incorporation provide otherwise. Upon application, the court may order
indemnification of the director or officer if he is adjudged fairly and
reasonably so entitled under Section 55-8-54. Section 55-8-56 allows a
corporation to indemnify and advance expenses to an officer, employee or agent
who is not a director to the same extent as a director or as otherwise set forth
in the Corporation's articles of incorporation or bylaws or by resolution of the
Board of Directors.
In addition, Section 55-8-57 permits a corporation to provide for
indemnification of directors, officers, employees or agents, in its articles of
incorporation or bylaws or by contract or resolution, against liability in
various proceedings and to purchase and maintain insurance policies on behalf of
these individuals.
THE FOREGOING IS ONLY A GENERAL SUMMARY OF CERTAIN ASPECTS OF NORTH
CAROLINA LAW DEALING WITH INDEMNIFICATION OF DIRECTORS AND OFFICERS AND DOES NOT
PURPORT TO BE COMPLETE. IT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
RELEVANT STATUTES WHICH CONTAIN DETAILED SPECIFIC PROVISIONS REGARDING THE
CIRCUMSTANCES UNDER WHICH AND THE PERSON FOR WHOSE BENEFIT INDEMNIFICATION SHALL
OR MAY BE MADE AND ACCORDINGLY ARE INCORPORATED HEREIN BY REFERENCE AS EXHIBIT
99.10 OF THIS REGISTRATION STATEMENT.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits and financial statement schedules are filed with or
incorporated by reference in this Registration Statement:
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
<C> <S>
2.1 Agreement and Plan of Merger between First Charter and Union dated as of September 13, 1995 (included as Appendix
A to the Joint Proxy Statement-Prospectus, with the exception of a list of the schedules thereto, which is filed
as an exhibit hereto)
3(i) Restated Articles of Incorporation of First Charter**
3(ii) Bylaws of First Charter (incorporated herein by reference to Exhibit 3.2 of First Charter's Annual Report on Form
10-K for the fiscal year ended December 31, 1992)
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
<C> <S>
5.1 Opinion of Smith Helms Mulliss & Moore, L.L.P. regarding legality of shares**
8.1 Opinion of Smith Helms Mulliss & Moore, L.L.P. regarding federal income tax consequences
13.1 First Charter's 1994 Annual Report to Shareholders**
13.2 First Charter's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995**
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of Smith Helms Mulliss & Moore, L.L.P. (included in Exhibit 5.1)
23.5 Consent of Smith Helms Mulliss & Moore, L.L.P. (included in Exhibit 8.1)
23.6 Consent of Wheat, First Securities, Inc.*
23.7 Consent of Baxter Fentriss and Company*
23.8 Consent of Mr. H. Clark Goodwin
23.9 Consent of Mr. Frank H. Hawfield, Jr.
23.10 Consent of Mr. James B. Fincher
23.11 Consent of Dr. Jerry E. McGee
24.1 Power of Attorney and Certified Resolutions**
99.1 Notice of Special Meeting of Shareholders of First Charter
99.2 Form of Proxy for Special Meeting of Shareholders of First Charter
99.3 President's Letter to First Charter Shareholders
99.4 Notice of Special Meeting of Shareholders of Union
99.5 Form of Proxy for Special Meeting of Shareholders of Union
99.6 President's letter to Union Shareholders
99.7 Opinion of Wheat, First Securities, Inc. (included as Appendix B to this Joint Proxy Statement-Prospectus)*
99.8 Opinion of Baxter Fentriss and Company (included as Appendix C to the Joint Proxy Statement-Prospectus)*
99.9 Stock Option Agreement between First Charter and Union dated as of September 13, 1995 (incorporated herein by
reference to Exhibit 99.2 of First Charter's Current Report on Form 8-K filed September 22, 1995)
99.10 Provisions of North Carolina law regarding indemnification of directors and officers (incorporated herein by
reference to Exhibit 99.2 of First Charter's Registration Statement on Form S-8, Registration No. 33-60951)
99.11 Union's Annual Report on Form F-2 for the fiscal year ended December 31, 1994**
99.12 Amendment No. 1 to Union's Annual Report on Form F-2 for the fiscal year ended December 31, 1994**
99.13 Union's Quarterly Report on Form F-4 for the quarter ended March 31, 1995**
99.14 Union's Quarterly Report on Form F-4 for the quarter ended June 30, 1995**
99.15 Union's Current Report on Form F-3 filed May 3, 1995**
99.16 Union's Current Report on Form F-3 filed September 21, 1995**
99.17 Amendment No. 2 to Union's Annual Report on Form F-2 for the fiscal year ended December 31, 1994*
99.18 Amendment No. 1 to Union's Quarterly Report on Form F-4 for the quarter ended June 30, 1995*
</TABLE>
* To be filed by amendment.
** Previously filed.
ITEM 22. UNDERTAKINGS
(a)The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was
II-2
<PAGE>
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change in such information in the Registration Statement:
PROVIDED, HOWEVER, that paragraphs (a)(l)(i) and (a)(l)(ii) do not apply if
the Registration Statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(d)(1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(f) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request,
II-3
<PAGE>
and to send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed subsequent
to the effective date of the registration statement through the date of
responding to the request.
(g) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Concord, State of North Carolina, on November 8, 1995.
FIRST CHARTER CORPORATION
By: /s/ LAWRENCE M. KIMBROUGH
LAWRENCE M. KIMBROUGH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
<S> <C> <C>
/s/ LAWRENCE M. KIMBROUGH President, Chief Executive Officer and November 8, 1995
(LAWRENCE M. KIMBROUGH) Director (Principal Executive Officer)
/s/ ROBERT O. BRATTON Executive Vice President (Principal November 8, 1995
(ROBERT O. BRATTON) Financial and Principal Accounting
Officer)
Director November , 1995
(WILLIAM R. BLACK)
*JANE B. BROWN Director November 8, 1995
(JANE B. BROWN)
*GRADY S. CARPENTER Director November 8, 1995
(GRADY S. CARPENTER)
*MICHAEL R. COLTRANE Director November 8, 1995
(MICHAEL R. COLTRANE)
*J. ROY DAVIS, JR. Director November 8, 1995
(J. ROY DAVIS, JR.)
*J. KNOX HILLMAN, JR. Director November 8, 1995
(J. KNOX HILLMAN, JR.)
*BRANSON C. JONES Director November 8, 1995
(BRANSON C. JONES)
*D. C. LINN, JR. Director November 8, 1995
(D. C. LINN, JR.)
*ROBERT F. LOWRANCE Director November 8, 1995
(ROBERT F. LOWRANCE)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
<S> <C> <C>
*HUGH H. MORRISON Director November 8, 1995
(HUGH H. MORRISON)
*T. DAVID PROPST Director November 8, 1995
(T. DAVID PROPST)
*ROBERT L.WALL Director November 8, 1995
(ROBERT L. WALL)
*JAMES B. WIDENHOUSE Director November 8, 1995
(JAMES B. WIDENHOUSE)
* By /s/ LAWRENCE M. KIMBROUGH
LAWRENCE M. KIMBROUGH, ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE NO.
<C> <S> <C>
2.1 Agreement and Plan of Merger between First Charter and Union dated as of September 13, 1995 (included
as Appendix A to the Joint Proxy Statement-Prospectus, with the exception of a list of the schedules
thereto, which is filed as an exhibit hereto)
3(i) Restated Articles of Incorporation of First Charter**
3(ii) Bylaws of First Charter (incorporated herein by reference to Exhibit 3.2 of First Charter's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992)
5.1 Opinion of Smith Helms Mulliss & Moore, L.L.P. regarding legality of shares**
8.1 Opinion of Smith Helms Mulliss & Moore, L.L.P. regarding federal income tax consequences
13.1 First Charter's 1994 Annual Report to Shareholders**
13.2 First Charter's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995**
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of Smith Helms Mulliss & Moore, L.L.P. (included in Exhibit 5.1)
23.5 Consent of Smith Helms Mulliss & Moore, L.L.P. (included in Exhibit 8.1)
23.6 Consent of Wheat, First Securities, Inc.*
23.7 Consent of Baxter Fentriss and Company*
23.8 Consent of Mr. H. Clark Goodwin
23.9 Consent of Mr. Frank H. Hawfield, Jr.
23.10 Consent of Mr. James B. Fincher
23.11 Consent of Dr. Jerry E. McGee
24.1 Power of Attorney and Certified Resolutions**
99.1 Notice of Special Meeting of Shareholders of First Charter
99.2 Form of Proxy for Special Meeting of Shareholders of First Charter
99.3 President's Letter to First Charter Shareholders
99.4 Notice of Special Meeting of Shareholders of Union
99.5 Form of Proxy for Special Meeting of Shareholders of Union
99.6 President's letter to Union Shareholders
99.7 Opinion of Wheat, First Securities, Inc. (included as Appendix B to this Joint Proxy Statement-
Prospectus)*
99.8 Opinion of Baxter Fentriss and Company (included as Appendix C to the Joint Proxy Statement-
Prospectus)*
99.9 Stock Option Agreement between First Charter and Union dated as of September 13, 1995 (incorporated
herein by reference to Exhibit 99.2 of First Charter's Current Report on Form 8-K filed September
22, 1995)
99.10 Provisions of North Carolina law regarding indemnification of directors and officers (incorporated
herein by reference to Exhibit 99.2 of First Charter's Registration Statement on Form S-8,
Registration No. 33-60951)
99.11 Union's Annual Report on Form F-2 for the fiscal year ended December 31, 1994**
99.12 Amendment No. 1 to Union's Annual Report on Form F-2 for the fiscal year ended December 31, 1994**
99.13 Union's Quarterly Report on Form F-4 for the quarter ended March 31, 1995**
99.14 Union's Quarterly Report on Form F-4 for the quarter ended June 30, 1995**
99.15 Union's Current Report on Form F-3 filed May 3, 1995**
99.16 Union's Current Report on Form F-3 filed September 21, 1995**
99.17 Amendment No. 2 to Union's Annual Report on Form F-2 for the fiscal year ended December 31, 1994*
99.18 Amendment No. 1 to Union's Quarterly Report on Form F-4 for the quarter ended June 30, 1995*
</TABLE>
* To be filed by amendment.
** Previously filed.
SMITH HELMS MULLISS & MOORE, L.L.P.
Attorneys at Law
227 North Tryon Street
Charlotte, North Carolina 28202
(704) 343-2000
November 8, 1995
First Charter Corporation
22 Union Street North
Concord, NC 28026-0228
Bank of Union
201 North Charlotte Avenue
Monroe, NC 28110
Re: Merger of First Charter Corporation and Bank of Union:
Federal Income Tax Consequences
Ladies and Gentlemen:
We have served as tax counsel to First Charter Corporation
("First Charter") in connection with the adoption of the
Agreement and Plan of Merger, dated as of September 13, 1995 (the
"Merger Agreement"), by and between First Charter and Bank of
Union ("Union"). Except to the extent otherwise defined herein,
capitalized terms used herein have the same meaning set forth in
the Merger Agreement.
The Merger Agreement, as part of an integrated transaction,
provides for the incorporation by First Charter of Interim Bank
of Union, a controlled subsidiary of First Charter ("Interim
Bank"). Interim Bank will then immediately be merged with and
into Union in accordance with the laws of the State of North
Carolina (the "Merger"). Union will survive the merger and the
separate corporate existence of Interim Bank will cease.
Pursuant to the Merger Agreement, each outstanding share of Union
common stock ("Union Common Stock"), subject to the exercise of
dissenters' rights, will be converted into and exchanged for
shares of First Charter common stock ("First Charter Common
Stock") pursuant to the Exchange Ratio provided by the Merger
Agreement (the "Exchange"). No fractional shares of First
Charter Common Stock will actually be issued to exchanging
holders of Union Common Stock, and cash will be issued in lieu
thereof. No shares of Interim Bank stock will be issued to
exchanging holders of Union Common Stock. Consummation of the
merger is subject to certain conditions set forth in the Merger
Agreement.
<PAGE>
November 8, 1995
Page 2
In rendering this opinion we have assumed, without
independent verification, the genuineness of all signatures, the
authenticity of original documents submitted to us as originals,
and the Nconformity to the originals of all documents submitted
to us as certified, conformed, or photostatic copies. We have
further assumed that each of the parties to the Merger Agreement
has the requisite corporate power and authority to enter into and
to perform the Merger Agreement and the transactions contemplated
thereby, that the Merger Agreement has been duly authorized,
executed and delivered by and constitutes a legal, valid and
binding obligation of each of the parties thereto, and that all
requisite regulatory approvals have been duly obtained.
We have been provided with a copy of a letter dated of even
date herewith in which the Chief Executive Officer of each of
First Charter and Union, respectively, makes certain
representations regarding the transaction (the
"Representations").
In rendering the opinions set forth below, we have
considered the Merger Agreement, the Representations, applicable
case law and applicable provisions of (i) the Internal Revenue
Code of 1986, as amended and as presently in effect (the
"Code"), (ii) the regulations adopted under the Code, (iii) the
Revenue Rulings and Revenue Procedures published under and with
respect to the Code and (iv) the North Carolina General Statutes
as presently in effect and regulations promulgated thereunder.
No assurance can be given that legislative, administrative or
judicial decisions or interpretations may not be forthcoming that
would differ materially from the opinions set forth herein. In
addition it should be noted that an opinion of counsel represents
only that counsel's best legal judgment and has no binding effect
on the Internal Revenue Service or North Carolina Department of
Revenue or official status of any kind.
Based upon the matters and resources we have considered, we
are of the opinion that, upon consummation of the Merger in
strict accordance with all the terms and conditions of the Merger
Agreement, the transaction will be treated as follows for federal
income tax purposes:
(a) The merger of Interim Bank with and into Union
will constitute a reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(E) of the Code. First Charter,
Interim Bank and Union will each be "a party to the
reorganization" within the meaning of Section 368(b) of the Code.
<PAGE>
November 8, 1995
Page 3
(b) No gain or loss will be recognized by First
Charter or Interim Bank on the transfer of Interim Bank's assets
to Union and the assumption by Union of the liabilities, if any,
of Interim Bank.
(c) No gain or loss will be recognized by Union upon
the receipt of Interim Bank's assets.
(d) No gain or loss will be recognized by those Union
shareholders who receive solely First Charter Common Stock
(including fractional shares) in exchange for their Union Common
Stock.
(e) The tax basis of the First Charter Common Stock
(including fractional shares) received by the Union shareholders
will be the same as the tax basis of the Union Common Stock
surrendered in exchange therefor.
(f) The holding period of the First Charter Common
Stock (including fractional shares) received by the Union
shareholders will include the period during which the Union
Common Stock surrendered in exchange therefor was held, provided
that the Union Common Stock was held as a capital asset on the
date of consummation of the Merger and Exchange.
(g) The payment of cash to a Union shareholder in lieu
of the actual issuance of fractional shares of First Charter
Common Stock will be treated for federal income tax purposes as
if such fractional shares were in fact distributed as part of the
exchange and the cash was then distributed by First Charter in
redemption of such fractional shares subject to Section 302 of
the Code. If the redemption meets one of the four tests set
forth in that section, the shareholder will be treated as if he
sold such fractional shares of First Charter Common Stock for the
amount of cash received, and such shareholder will recognize gain
(or loss) to the extent that the amount of the cash received
exceeds (or is less than) the shareholder's tax basis allocable
to such fractional shares. Any gain or loss recognized will be
capital gain or loss, assuming that the fractional shares of
First Charter Common Stock would have been a capital asset in the
hands of the shareholder. If none of the four tests provided in
Section 302 is met, the assumed redemption will be treated as a
dividend, and the shareholder will most likely be required to
recognize as ordinary income the full amount of the cash
received.
(h) The receipt of cash by a dissenting Union
shareholder will be treated as received by that shareholder as a
distribution by Union in redemption of such shareholder's Union
Common Stock, subject to the provisions and limitations of
Section
<PAGE>
November 8, 1995
Page 4
302 of the Code. If the redemption meets one of the four
tests set forth in that section, the shareholder will be treated
as if he sold his shares of Union Common Stock for the amount of
cash received, and such shareholder will recognize gain (or loss)
to the extent that the amount of the cash received exceeds (or is
less than) the shareholder's tax basis applicable to his shares
of Union Common Stock. Any gain or loss recognized will be
capital gain or loss, assuming that the shares of Union Common
Stock are a capital asset in the hands of the shareholder. If
none of the four tests provided in Section 302 is met, the
assumed redemption will be treated as a dividend, and the
shareholder will most likely be required to recognize as ordinary
income the full amount of the cash received.
We are of the further opinion that the Merger and Exchange
will be treated in substantially the same manner for North
Carolina income tax purposes as for federal income tax purposes.
Except to the extent specifically provided herein, no
opinion is expressed or implied concerning the federal income tax
consequences of the transactions described in the Merger
Agreement or the consequences under any other federal, state or
local tax laws.
The opinions expressed herein are for the exclusive benefit
of First Charter, Union and their respective shareholders in
connection with the transactions described in the Merger
Agreement, and may not be relied upon by them for any other
purpose, or used, circulated, quoted or relied upon by any other
person or entity for any purpose without our prior consent. We
consent to the filing of this letter as an exhibit to the
Registration Statement.
This opinion is specifically limited to those matters
expressed herein, effective as of the date hereof. We assume no
duty to inform you of any changes in our opinion hereafter due to
any change in law or facts that may hereafter occur or come to
our attention.
Very truly yours,
SMITH HELMS MULLISS & MOORE, L.L.P.
<PAGE>
<PAGE>
EXHIBIT 23.1
CONSENT OF KPMG PEAT MARWICK LLP
BOARD OF DIRECTORS
FIRST CHARTER CORPORATION
We consent to the incorporation by reference in this Registration Statement
on Form S-4 of First Charter Corporation of our report on the consolidated
financial statements included in the 1994 Annual Report to Shareholders which is
incorporated by reference in the 1994 Form 10-K of First Charter Corporation and
to the reference to our firm under the heading "Experts" in the Joint Proxy
Statement-Prospectus. Our report refers to a change in the method of accounting
for investments and a change in the method of accounting for income taxes in
1993.
KPMG PEAT MARWICK LLP
Charlotte, North Carolina
November 8, 1995
<PAGE>
EXHIBIT 23.2
CONSENT OF COOPERS & LYBRAND L.L.P.
We consent to the incorporation by reference in this registration statement
on Form S-4 of First Charter Corporation of our report, which includes an
explanatory paragraph which explains that the Company changed its method of
accounting for certain investments in debt and equity securities in 1994, dated
February 3, 1995, on our audit of the 1994 consolidated financial statements of
Bank of Union as included in its 1994 Annual Report on Form F-2. We also consent
to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Charlotte, North Carolina
November 7, 1995
<PAGE>
EXHIBIT 23.3
CONSENT OF KPMG PEAT MARWICK LLP
BOARD OF DIRECTORS
BANK OF UNION
We consent to the incorporation by reference in this Registration Statement
on Form S-4 of First Charter Corporation of our report on the 1993 and 1992
consolidated financial statements of Bank of Union dated February 11, 1994
incorporated by reference in the 1994 Annual Report on Form F-2 of Bank of
Union, and to the reference to our Firm under the heading "Experts" in the Joint
Proxy Statement-Prospectus.
KPMG PEAT MARWICK LLP
Charlotte, North Carolina
November 8, 1995
<PAGE>
EXHIBIT 23.8
CONSENT OF DIRECTOR DESIGNEE
The undersigned hereby consents, pursuant to Rule 438 under the Securities
Act of 1933, as amended, to the reference to him under the caption "Management
and Operations After the Merger" in the Summary and under the captions "THE
MERGER -- Management and Operations After the Merger" and "THE
MERGER -- Interests of Certain Persons in the Merger" in the Joint Proxy
Statement -- Prospectus constituting part of this Registration Statement.
/s/ H. CLARK GOODWIN
H. CLARK GOODWIN
Dated: November 8, 1995
<PAGE>
EXHIBIT 23.9
CONSENT OF DIRECTOR DESIGNEE
The undersigned hereby consents, pursuant to Rule 438 under the Securities
Act of 1933, as amended, to the reference to him under the caption "Management
and Operations After the Merger" in the Summary and under the captions "THE
MERGER -- Management and Operations After the Merger" and "THE
MERGER -- Interests of Certain Persons in the Merger" in the Joint Proxy
Statement -- Prospectus constituting part of this Registration Statement.
/s/ FRANK H. HAWFIELD, JR.
FRANK H. HAWFIELD, JR.
Dated: November 8, 1995
<PAGE>
EXHIBIT 23.10
CONSENT OF DIRECTOR DESIGNEE
The undersigned hereby consents, pursuant to Rule 438 under the Securities
Act of 1933, as amended, to the reference to him under the caption "Management
and Operations After the Merger" in the Summary and under the captions "THE
MERGER -- Management and Operations After the Merger" and "THE
MERGER -- Interests of Certain Persons in the Merger" in the Joint Proxy
Statement -- Prospectus constituting part of this Registration Statement.
/s/ JAMES B. FINCHER
JAMES B. FINCHER
Dated: November 8, 1995
<PAGE>
EXHIBIT 23.11
CONSENT OF DIRECTOR DESIGNEE
The undersigned hereby consents, pursuant to Rule 438 under the Securities
Act of 1933, as amended, to the reference to him under the caption "Management
and Operations After the Merger" in the Summary and under the captions "THE
MERGER -- Management and Operations After the Merger" and "THE
MERGER -- Interests of Certain Persons in the Merger" in the Joint Proxy
Statement -- Prospectus constituting part of this Registration Statement.
/s/ JERRY E. MCGEE
DR. JERRY E. MCGEE
Dated: November 8, 1995
<PAGE>
EXHIBIT 99.1
FIRST CHARTER CORPORATION
22 Union Street
Concord, North Carolina 28025
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 14, 1995
TO THE SHAREHOLDERS:
Notice is hereby given that a Special Meeting of Shareholders (the "Special
Meeting") of First Charter Corporation ("First Charter") will be held at the
Cabarrus Country Club, located on Weddington Road in Concord, North Carolina, on
Thursday, December 14, 1995 at 10:00 a.m. for the following purposes:
1. To consider and vote on a proposal to approve the Agreement and Plan of
Merger, dated September 13, 1995, (the "Agreement") by and between First
Charter and Bank of Union ("Union"), and the transactions contemplated
thereby, which include, among other matters (i) the merger of an interim
state banking subsidiary of First Charter with and into Union (the
"Merger") at the effective time of the Merger and (ii) the issuance of
0.75 shares of First Charter common stock, $5 par value, for each
outstanding share of Union common stock, $1.25 par value, upon
consummation of the Merger, as more fully described in the enclosed
Joint Proxy Statement-Prospectus; and
2. To transact such other business as may properly come before the Special
Meeting or any adjournments thereof;
Pursuant to the provisions of the North Carolina Business Corporation Act,
November 7, 1995 has been fixed as the record date for the determination of
shareholders entitled to notice of and to vote at the Special Meeting and,
accordingly, only holders of common stock of First Charter of record at the
close of business on that date will be entitled to notice of and to vote at such
meeting and at any adjournment or adjournments thereof.
APPROVAL OF THE MERGER REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES
OF FIRST CHARTER COMMON STOCK VOTED WITH RESPECT THERETO. WHETHER OR NOT YOU
PLAN TO ATTEND THE SPECIAL MEETING, IT IS IMPORTANT THAT YOU MARK, DATE, SIGN
AND RETURN PROMPTLY THE PROXY CARD IN THE ENCLOSED, SELF-ADDRESSED, STAMPED
ENVELOPE. IF YOU ATTEND THE SPECIAL MEETING AND DESIRE TO REVOKE YOUR PROXY AND
VOTE IN PERSON, YOU MAY DO SO. IN ANY EVENT, A PROXY MAY BE REVOKED AT ANY TIME
BEFORE IT IS EXERCISED.
By Order of the Board of Directors
James W. Townsend, Jr.
SECRETARY
Concord, North Carolina
November , 1995
<PAGE>
EXHIBIT 99.2
[FORM OF PROXY CARD]
REVOCABLE PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
OF FIRST CHARTER CORPORATION
KNOW ALL MEN BY THESE PRESENTS, that the undersigned shareholder of First
Charter Corporation, a North Carolina corporation ("First Charter"), hereby
constitutes and appoints Grady S. Carpenter, T. David Propst and Jane B. Brown,
and each or either of them, severally as attorneys and proxies for the
undersigned, with full power of substitution, for and on behalf of the
undersigned to act and to vote as indicated on the reverse, according to the
number of shares of First Charter's Common Stock held of record by the
undersigned on November 7, 1995 and as fully as the undersigned would be
entitled to act and vote if personally present at the Special Meeting of
Shareholders to be held at Cabarrus Country Club on Thursday, December 14, 1995,
10:00 a.m. (local time) or at any adjournments or postponements thereof. Said
proxies are directed to vote as instructed on the matters set forth on the
reverse side of this card and otherwise at their discretion.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTIONS ARE GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1 ON THE REVERSE SIDE OF THIS CARD. SHOULD OTHER MATTERS
PROPERLY COME BEFORE THE SPECIAL MEETING, THE PROXIES WILL BE AUTHORIZED TO VOTE
THE SHARES REPRESENTED BY THIS APPOINTMENT OF PROXY IN THEIR DISCRETION. THIS
APPOINTMENT OF PROXY MAY BE REVOKED BY THE HOLDER OF THE SHARES TO WHICH IT
RELATES AT ANY TIME BEFORE IT IS EXERCISED BY FILING WITH THE SECRETARY OF FIRST
CHARTER CORPORATION A WRITTEN INSTRUMENT REVOKING IT OR A DULY EXECUTED
APPOINTMENT OF PROXY BEARING A LATER DATE OR BY ATTENDING THE SPECIAL MEETING
AND ANNOUNCING HIS OR HER INTENTION TO VOTE IN PERSON.
(PLEASE MARK, SIGN AND DATE THE REVERSE SIDE OF THIS CARD AND MAIL IT IN THE
ENCLOSED RETURN ENVELOPE.)
<PAGE>
[REVERSE SIDE OF PROXY CARD]
1. Proposal to approve the Agreement and Plan of Merger dated September 13,
1995, (the "Agreement") by and between First Charter Corporation and
Bank of Union ("Union"), and the transactions contemplated thereby,
which include, among other matters (i) the merger of an interim state
banking subsidiary of First Charter Corporation with and into Bank of
Union (the "Merger") at the effective time of the Merger and (ii) the
issuance of 0.75 shares of First Charter common stock, $5 par value, for
each outstanding share of Union common stock, $1.25 par value, upon
consummation of the Merger, all as more fully described in the
accompanying Joint Proxy Statement-Prospectus.
FOR AGAINST ABSTAIN
2. To vote the shares of First Charter Corporation Common Stock represented
by this appointment of proxy upon such other matters as may properly
come before the Special Meeting and any adjournments thereby in their
discretion.
By signing this proxy, the undersigned
hereby acknowledges receipt of the
Notice of Special Meeting, dated
November , 1995, and the accompanying
Joint Proxy Statement-Prospectus.
Signature of Shareholder
Signature of Shareholder (if held
jointly)
Please sign exactly as your name
appears on your stock certificate and
fill in the date. If your shares are
held jointly, all joint owners must
sign. If you are signing as a executor,
administrator, trustee, guardian,
custodian or corporate officer, please
give your full title as such.
Dated:
<PAGE>
EXHIBIT 99.3
[First Charter Corporation Letterhead]
November , 1995
Dear Fellow Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
First Charter Corporation ("First Charter"), which will be held on Thursday,
December 14, 1995, at 10:00 a.m., local time, at the Cabarrus Country Club,
located on Weddington Road, in Concord, North Carolina. At our Special Meeting,
you will be asked to consider and vote upon a proposal to approve an Agreement
and Plan of Merger, dated September 13, 1995, between First Charter and Bank of
Union ("Union"), and the transactions contemplated thereby, which include (1)
the merger of a wholly owned subsidiary of First Charter into Union and (2) the
issuance of 0.75 shares of common stock of First Charter for each outstanding
share of common stock of Union upon consummation of the Merger.
The proposed merger has been approved by the Board of Directors of each
company. Your Board of Directors believes that the merger provides enhanced
opportunities to maximize the individual and collective strengths of the two
companies in serving the interests of their shareholders, customers, employees
and communities. Your Board has determined that the merger is in the best
interest of First Charter and its shareholders and recommends that you vote FOR
approval of the Agreement. The investment banking firm of Wheat, First
Securities, Inc. has advised your Board of Directors that, in its opinion, as of
November , 1995, the exchange ratio of 0.75 of a share of First Charter common
stock for each share of Union common stock is fair to you from a financial point
of view.
Consummation of the merger is subject to certain conditions, including the
approval of the Agreement by First Charter's and Union's shareholders and the
approval of the merger by various regulatory agencies.
Specific information regarding the Special Meeting and the Agreement is
contained in the enclosed Notice of Special Meeting and Joint Proxy
Statement-Prospectus. Please read these materials carefully.
IT IS VERY IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL
MEETING, WHETHER OR NOT YOU PLAN TO ATTEND IN PERSON. THE AFFIRMATIVE VOTE OF A
MAJORITY OF THE SHARES OF FIRST CHARTER COMMON STOCK VOTED WITH RESPECT TO THE
MERGER IS REQUIRED TO APPROVE THE AGREEMENT. THEREFORE, I URGE YOU TO EXECUTE,
DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED, SELF-ADDRESSED, STAMPED
ENVELOPE AS SOON AS POSSIBLE TO ASSURE THAT YOUR SHARES WILL BE VOTED AT THE
SPECIAL MEETING.
On behalf of the Board of Directors, I thank you for your support and urge
you to vote FOR approval of the Agreement.
Sincerely,
LAWRENCE M. KIMBROUGH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
EXHIBIT 99.4
BANK OF UNION
201 N. Charlotte Avenue
Monroe, North Carolina 28112
Telephone: (704) 289-9555
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 14, 1995
NOTICE is hereby given that a Special Meeting of Shareholders (the "Special
Meeting") of Bank of Union (the "Bank") will be held at 10:00 a.m., local time,
on Thursday, December 14, 1995 at Rolling Hills Country Club on Roosevelt
Boulevard, Monroe, North Carolina for the following purposes:
1. PROPOSAL TO APPROVE PROPOSED MERGER. To consider and vote on a
proposal to approve the Agreement and Plan of Merger, dated as of
September 13, 1995, (the "Agreement"), by and between First Charter
Corporation ("First Charter") and the Bank and the transactions
contemplated pursuant to the Agreement, which include, among other
matters, (i) at the effective time, the Bank will become a wholly
owned subsidiary of First Charter (the "Merger"), and (ii) each
outstanding share of the common stock of the Bank (the "Bank
Stock"), will be exchanged for shares of the common stock of First
Charter pursuant to an exchange ratio set forth in the accompanying
Joint Proxy Statement-Prospectus; and
2. OTHER BUSINESS. To transact such other business as may properly
come before the Special Meeting or any adjournments thereof.
Under North Carolina law, each holder of Bank Stock has the right to
dissent from the Merger and to demand payment of the fair value of his or her
shares in the event the Merger is approved and consummated. The right of any
such shareholder to dissent is contingent upon strict compliance with the
requirements of Article 13 of the North Carolina Business Corporation Act
("Article 13"). The full text of Article 13 is attached as Appendix D to the
Joint Proxy Statement-Prospectus which accompanies this Notice and is
incorporated herein by reference.
Shareholders of record at the close of business on November 8, 1995 are
entitled to notice of, and to vote at, the Special Meeting and any adjournments
thereof.
The Board of Directors unanimously recommends that the shareholders vote to
approve the Agreement.
Each Bank shareholder is invited to attend the Special Meeting in person.
However, to ensure that a quorum is present at the Special Meeting, each
shareholder is urged to complete, date, sign and return promptly the enclosed
proxy in the enclosed pre-paid envelope. If you return the enclosed proxy, you
may still attend the Special Meeting and vote in person, in which case your
returned proxy will be void.
By Order of the Board of Directors
David C. McGuirt,
EXECUTIVE VICE PRESIDENT AND SECRETARY
Dated: November , 1995
<PAGE>
EXHIBIT 99.5
REVOCABLE PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
BANK OF UNION FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
DECEMBER 14, 1995
The undersigned shareholder of Bank of Union (the "Bank") hereby constitutes
and appoints William E. Davis, Charla L. Kurtz and David C. McGuirt, and each of
them, as attorneys-in-fact and proxies, with full power of substitution to
represent and vote as directed below, all shares of the common stock of the Bank
held of record by the undersigned on November 8, 1995 at the Special Meeting of
Shareholders of the Bank to be held on December 14, 1995 at 10:00 a.m., local
time, at Rolling Hills Country Club located on Roosevelt Boulevard, Monroe,
North Carolina, and at any adjournments thereof (the "Special Meeting").
1. PROPOSAL TO APPROVE MERGER. Proposal to approve the Agreement and Plan
of Merger, dated as of September 13, 1995 (the "Agreement"), by and
between the Bank and First Charter Corporation ("First Charter") and the
transactions contemplated pursuant to the Agreement, which include,
among other matters, (i) at the effective time, the Bank will become a
wholly owned subsidiary of First Charter (the "Merger"), and (ii) each
share of common stock of the Bank outstanding immediately prior to the
Merger will be exchanged for common stock of First Charter pursuant to
an exchange ratio set forth in the Joint Proxy Statement-Prospectus
dated November , 1995.
FOR AGAINST ABSTAIN
2. OTHER BUSINESS. To vote the shares of the Bank common stock represented
by this appointment of proxy upon such other matters as may properly
come before the Special Meeting and any adjournments thereof in
accordance with their best judgment.
PLEASE MARK, SIGN AND DATE THIS APPOINTMENT OF PROXY ON THE REVERSE SIDE AND
PROMPTLY RETURN IT USING THE ENCLOSED ENVELOPE.
<PAGE>
(continued from other side)
THE SHARES REPRESENTED BY THIS APPOINTMENT OF PROXY WILL BE VOTED AS
DIRECTED ABOVE. IN THE ABSENCE OF ANY DIRECTION, THE PROXIES WILL VOTE THE
SHARES REPRESENTED BY THIS APPOINTMENT OF PROXY FOR PROPOSAL 1. SHOULD OTHER
MATTERS PROPERLY COME BEFORE THE SPECIAL MEETING, THE PROXIES WILL BE AUTHORIZED
TO VOTE THE SHARES REPRESENTED BY THIS APPOINTMENT OF PROXY IN ACCORDANCE WITH
THEIR BEST JUDGMENT. THIS APPOINTMENT OF PROXY MAY BE REVOKED BY THE HOLDER OF
THE SHARES TO WHICH IT RELATES AT ANY TIME BEFORE IT IS EXERCISED BY FILING WITH
THE SECRETARY OF THE BANK A WRITTEN INSTRUMENT REVOKING IT OR A DULY EXECUTED
APPOINTMENT OF PROXY BEARING A LATER DATE OR BY ATTENDING THE SPECIAL MEETING
AND ANNOUNCING HIS OR HER INTENTION TO VOTE IN PERSON.
By signing this proxy, the undersigned
hereby acknowledges receipt of the Notice of
Special Meeting, dated November , 1995,
and the accompanying Joint Proxy
Statement-Prospectus of the Bank and First
Charter.
Dated: , 1995
Signature of Owner of Shares
Signature of Joint Owner of Shares (if any)
Instruction: Please sign above EXACTLY as
your name appears on this appointment of
proxy. Joint owners of shares should BOTH
sign. Fiduciaries or other persons signing
in a representative capacity should indicate
the authorized capacity in which they are
signing.
IMPORTANT: TO INSURE THAT A QUORUM IS PRESENT AT THE SPECIAL MEETING, PLEASE
SEND IN YOUR APPOINTMENT OF PROXY WHETHER OR NOT YOU PLAN TO ATTEND. EVEN IF YOU
SEND IN YOUR APPOINTMENT OF PROXY, YOU WILL BE ABLE TO VOTE IN PERSON AT THE
SPECIAL MEETING IF YOU SO DESIRE.
<PAGE>
EXHIBIT 99.6
[Bank of Union Letterhead]
November , 1995
Dear Bank of Union Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Bank of Union ("Union"), which will be held on Thursday, December 14, 1995, at
10:00 a.m., local time, at the Rolling Hills Country Club, located on Roosevelt
Boulevard, in Monroe, North Carolina. At this Special Meeting, you will be asked
to consider and vote upon a proposal to approve an Agreement and Plan of Merger
(the "Agreement") pursuant to which Union will merge with and into a wholly
owned subsidiary of First Charter Corporation ("First Charter"), and each share
of your Union common stock will be converted in a tax-free exchange into 0.75 of
a share of First Charter common stock.
The proposed merger has been approved by the Board of Directors of each
company. Your Board of Directors believes that the merger provides enhanced
opportunities to maximize the individual and collective strengths of the two
companies in serving the interests of their shareholders, customers, employees
and communities. Your Board has determined that the merger is in the best
interests of Union and its shareholders and recommends that you vote FOR
approval of the Agreement. The investment banking firm of Baxter Fentriss and
Company has advised your Board of Directors that, in its opinion, as of November
, 1995, the exchange ratio of 0.75 of a share of First Charter common stock
for each share of Union common stock is fair to you from a financial point of
view.
Consummation of the merger is subject to certain conditions, including the
approval of the Agreement by First Charter's and Union's shareholders and the
approval of the merger by various regulatory agencies.
Specific information regarding the Special Meeting and the Agreement is
enclosed in the formal Notice of Special Meeting and Proxy Statement-Prospectus.
Please read these materials carefully.
IT IS VERY IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL
MEETING, WHETHER OR NOT YOU PLAN TO ATTEND IN PERSON. THE AFFIRMATIVE VOTE OF
TWO-THIRDS OF ALL OF THE OUTSTANDING SHARES OF UNION COMMON STOCK IS REQUIRED TO
APPROVE THE AGREEMENT. THUS, A FAILURE TO VOTE WILL HAVE THE SAME EFFECT AS A
VOTE AGAINST THE AGREEMENT. THEREFORE, I URGE YOU TO EXECUTE, DATE AND RETURN
THE ENCLOSED PROXY APPOINTMENT CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS
SOON AS POSSIBLE TO ASSURE THAT YOUR SHARES WILL BE VOTED AT THE SPECIAL
MEETING. YOU SHOULD NOT SEND IN CERTIFICATES FOR YOUR UNION SHARES AT THIS TIME.
On behalf of the Board of Directors, I thank you for your support and urge
you to vote FOR approval of the Agreement.
Sincerely,
H. CLARK GOODWIN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
