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REGISTRATION NO. 33-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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. ( )
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO AMOUNT TO BE OFFERING PRICE AGGREGATE OFFER-
BE REGISTERED REGISTERED PER UNIT ING PRICE
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Common Stock................ 1,644,672 shares (1) $20,558,400(2)
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TITLE OF EACH CLASS AMOUNT OF
OF SECURITIES TO REGISTRATION
BE REGISTERED FEE
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Common Stock................ $7,090
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(1) Not applicable.
(2) Computed in accordance with Rule 457(f) under the Securities Act of 1933, as
amended, based on the average of the bid and asked prices on October 2, 1995
of the securities to be received by the Registrant in exchange for the
securities registered hereby.
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;
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;
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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The following redherring text is rotated 90 degrees on the right side
of this page:
Information contained herein is subject to completion or amendment.
A registration statement relating to these securities has been
filed with the Securities and Exchange Commission. These securities
may not be sold nor may offers to buy be accepted prior to the
time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any sale
of these securities in any State in which such offer, solicitation
or sale would be unlawful prior to registration or qualification
under the securities laws of any State.
PRELIMINARY COPY SUBJECT TO COMPLETION, DATED OCTOBER 3, 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 , 1995 TO BE HELD ON DECEMBER , 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."
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 , 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
, 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 OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
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 , 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
AVAILABLE INFORMATION............................. PAGE3
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....... 3
SUMMARY............................................... 4
THE SPECIAL MEETINGS.................................. 13
General............................................. 13
Date, Place and Time................................ 13
Proxies............................................. 13
Solicitation of Proxies............................. 14
Record Date and Voting Rights....................... 14
Recommendation of the Boards of Directors........... 15
THE MERGER............................................ 15
Description of the Merger........................... 15
Effective Time of the Merger........................ 16
Exchange of Certificates............................ 16
Background of and Reasons for the Merger............ 16
Opinions of Financial Advisors...................... 19
Effect on Employee Stock Options.................... 24
Conditions to the Merger............................ 24
Conduct of Business Prior to the Merger............. 24
Modification, Waiver and Termination................ 25
Certain Federal Income Tax Consequences............. 26
Management and Operations After the Merger.......... 27
Interests of Certain Persons in the Merger.......... 27
Stock Option Agreement Between First Charter and
Union............................................ 28
Dissenters' Rights of Shareholders.................. 30
Accounting Treatment................................ 30
Bank Regulatory Matters............................. 31
Restrictions on Resales by Affiliates............... 32
Dividend Reinvestment Plan.......................... 32
PRICE RANGE OF COMMON STOCK AND DIVIDENDS............. 33
Market Prices....................................... 33
Dividends........................................... 34
PRO FORMA CONDENSED FINANCIAL INFORMATION............. 35
INFORMATION ABOUT FIRST CHARTER....................... 39
General............................................. 39
Management and Additional Information............... 39
Supervision and Regulation.......................... 39
INFORMATION ABOUT UNION............................... 41
General............................................. 41
Voting Securities and Beneficial Ownership
Thereof.......................................... 42
Management and Additional Information............... 42
Supervision and Regulation.......................... 42
COMPARISON OF FIRST CHARTER COMMON STOCK AND UNION
COMMON STOCK........................................ 43
First Charter Common Stock.......................... 43
Union Common Stock.................................. 44
Comparison of Voting and Other Rights............... 45
LEGAL OPINIONS........................................ 47
EXPERTS............................................... 47
SHAREHOLDER PROPOSALS................................. 47
INDEPENDENT PUBLIC ACCOUNTANTS........................ 47
OTHER MATTERS......................................... 48
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
Regarding Dissenters' 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; (b) its Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1995 and June 30, 1995; (c) its
Current Report on Form 8-K filed September 22, 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 April 5, 1991; 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 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; (b) its Quarterly Reports on Form
F-4 for the quarters ended March 31, 1995 and 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
, 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. 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 ,
December , 1995 at p.m., local time, at the Cabarrus Country Club,
located on Weddington Road, in Concord, North Carolina. Only holders of record
of First Charter
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Common Stock at the close of business on , 1995 will be entitled
to vote at the First Charter Special Meeting. At such date, there were
outstanding and entitled to vote 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 , December , 1995 at
p.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 , 1995 will be entitled
to vote at the Union Special Meeting. At such date, there were outstanding and
entitled to vote 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 % 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 % 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."
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."
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 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
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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 respective 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 either 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 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
6
<PAGE>
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
First Charter has generally 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 three years after the Effective Time, subject to certain
limitations. First Charter has also agreed to provide certain employee benefits
to certain officers of Union 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."
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."
7
<PAGE>
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."
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 , 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 , 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
, 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."
8
<PAGE>
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth selected comparative unaudited per share
data for (a) First Charter on a historical basis and on a pro forma basis
assuming the Merger had been effective for the periods presented and (b) 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."
9
<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.
10
<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.
11
<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.
12
<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
, 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
, December , 1995 at p.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 ,
December , 1995 at p.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
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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
, 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 shares of First Charter Common Stock held of record
by approximately 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
North Carolina 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 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 shares, or %, 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
shares of First Charter Common Stock for various accounts. Of these,
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 , 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 shares of Union Common
Stock held of record by approximately 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
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the holders of 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 shares, or %, 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 %, of the Union Common
Stock. In addition, as of such date directors and executive officers of First
Charter beneficially owned shares, or %, 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."
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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 representing shares of Union Common Stock held by First
Charter or FCNB, except shares 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
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continually evaluated potential mergers with or acquisitions of stable financial
institutions with similar banking philosophies located in markets compatible
with that of First Charter. For the reasons discussed below, the Board of
Directors of First Charter determined that Union would make an excellent merger
partner.
The senior management of First Charter had preliminary, informal contact
with the senior management of Union regarding a potential merger 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
philosophy, 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 with 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. First
Charter and Union proceeded to conduct due diligence with respect to the other
and proceeded to negotiate an agreement of merger which contemplated the
Exchange Ratio and a structure that would allow Union to continue its existence
as a state banking institution. 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 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 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 (A) provide opportunities to achieve
economies of scale that should improve the efficiency and profitability of the
combined entity; (B) improve the ability of Union to compete with the many
financial institutions doing business in Union's market area and the surrounding
counties; (C) provide a source for increases in revenues for the combined entity
through the addition of trust and other services not currently offered by Union
and generally result in an institution better able to respond to the needs of
its customers in the community.
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, it 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 to permit it to remain competitive.
The increasing consolidation in the financial services industry increased the
competitive
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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.
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. In response thereto, and 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 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.
Simultaneously, management was considering its own internal expansion
pursuant to the guidelines of the Plan. At this time, it was concentrating its
efforts on ways to expand into South Carolina. The Riegle-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 assessed the feasibility of affiliating with another
financial institution in South Carolina and consulted with investment advisors
and other professionals about the economic and legal viability of such a
transaction. After an analysis of the plausibility of such a strategy, it was
determined that no South Carolina affiliation could enhance its shareholder
value or produce enhanced products and services any greater than a similar
affiliation with a North Carolina based, community oriented financial
institution.
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. 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 two other financial
institutions who had expressed interest in developing a proposal whereby Union
would affiliate with either of the other institutions. At that time the Board
engaged legal counsel and Baxter Fentriss to advise the Board on this issue 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 proposed
transaction, from a financial point of view, was 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.
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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 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 the date of
this Joint Proxy Statement-Prospectus 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 AS OF THE DATE OF THIS JOINT PROXY
STATEMENT-PROSPECTUS, 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
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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 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
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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 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 the date hereof, 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.
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 financial advisory
services from time to time over the past two years, for which Wheat First has
received fees in customary amounts. 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 is 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 outlook. A written opinion
dated as of the date of this Joint Proxy Statement-Prospectus 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 AS OF THE DATE OF THIS JOINT
PROXY STATEMENT-PROSPECTUS, 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 it 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. 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. 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 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.
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 for its services. In
addition, Union has agreed to pay Baxter Fentriss an additional $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.
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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 its 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.
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;
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(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 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
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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 either 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, (a) the proposed Merger will constitute a reorganization
within the meaning of Section 368(a)(1) of the Code; (b) 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; (c) 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); (d) 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; (e) 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 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 (f) 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.
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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 the record date for the Union Special Meeting, the directors and
executive officers of Union and their affiliates beneficially owned an aggregate
of shares, or % of the outstanding shares, of Union Common
Stock and are expected to beneficially own % of the shares of First
Charter Common Stock outstanding immediately following the Effective Time. Such
number of shares of Union Common Stock reported as beneficially owned 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. As of the record date for the Union Special Meeting, such
persons beneficially owned an aggregate of shares, or %, of
the Union Common Stock.
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 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.
In addition, First Charter has agreed to provide certain additional
benefits to each of Messrs. H. Clark Goodwin, President and Chief Executive
Officer of Union, David C. McGuirt, Executive Vice President of Union, and James
T. Mathews, Jr., Senior Vice President of Union. 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 at the market price as
of the Effective Time. 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.
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
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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
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;
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(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 12-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 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.
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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.
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.
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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 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.
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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 (a) the
further registration under the Securities Act of the shares of First Charter
Common Stock to be transferred, (b) compliance with Rule 145 promulgated under
the Securities Act (permitting limited sales under certain circumstances) or (c)
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 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.
32
<PAGE>
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 September
30, 1995, First Charter Common Stock was held of record by approximately
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 September 30, 1995,
Union Common Stock was held of record by approximately 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 )..................................................
</TABLE>
33
<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
Fourth Quarter (through ).................................................
</TABLE>
34
<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.
35
<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.
36
<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.
37
<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.
38
<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. 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
39
<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 percent 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 percent of which must consist of Tier 1
capital. Risk-based capital ratios are calculated by dividing Tier I 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 percent and the minimum total
capital ratio is 8 percent. First Charter's Tier 1 and total risk-based capital
ratios under these guidelines at June 30, 1995 were 16.13 percent and 17.33
percent, respectively.
The leverage ratio is determined by dividing Tier 1 capital by adjusted
total assets. Although the stated minimum ratio is 3 percent, most banking
organizations are required to maintain ratios of at least 100 to 200 basis
points above 3 percent. First Charter's leverage ratio at June 30, 1995 was
11.61 percent. 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 percent 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 percent, a total capital ratio of at
least 10 percent and a leverage ratio of at least 5 percent and not be subject
to a capital directive order. An "adequately capitalized" institution must have
a Tier 1 capital ratio of at least 4 percent, a total capital ratio of at least
8
40
<PAGE>
percent and a leverage ratio of at least 4 percent, or 3 percent 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 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.
41
<PAGE>
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.
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)................................. 362,563 16.54
</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 -- 3,076 shares; Mr. Little -- 11,962 shares; Ms. Vickery -- 11,753
shares; and all current directors and executive officers as a group --
84,484 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 North Carolina State 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
42
<PAGE>
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 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 percent and 13.50 percent,
respectively, and a leverage ratio of 8.30 percent.
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, shares of First Charter Common Stock were reserved for issuance
under various employee benefit plans of First Charter, 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 .
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
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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 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
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 dissenter's 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.
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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 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.
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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 the provision of First Charter's 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 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
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."
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<PAGE>
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 traded on the NASDAQ National Market. 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 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 the 1996 proxy 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
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<C> <S> <C>
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>
A-2
<PAGE>
<TABLE>
<CAPTION>
PAGE
<C> <S> <C>
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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<TABLE>
<CAPTION>
PAGE
<C> <S> <C>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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
INTERIM BANK:
By:
PRESIDENT
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<PAGE>
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.
A-29
<PAGE>
(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.
B-1
<PAGE>
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 its 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
management and that such forecasts and projections will be realized in the
amounts and in the time periods currently estimated by such management. 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
<PAGE>
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
C-1
<PAGE>
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
D-1
<PAGE>
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.
D-2
<PAGE>
(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.
D-3
<PAGE>
(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.
D-4
<PAGE>
(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.
D-5
<PAGE>
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>
II-1
<PAGE>
<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*
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
</TABLE>
* To be filed by amendment.
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 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:
II-2
<PAGE>
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, 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-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Concord, State of North
Carolina, on October 3, 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
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 Director October 3, 1995
(LAWRENCE M. KIMBROUGH) (Principal Executive Officer)
/s/ ROBERT O. BRATTON Executive Vice President (Principal Financial October 3, 1995
(ROBERT O. BRATTON) and Principal Accounting Officer)
Director October , 1995
(WILLIAM R. BLACK)
*JANE B. BROWN Director October 3, 1995
(JANE B. BROWN)
*GRADY S. CARPENTER Director October 3, 1995
(GRADY S. CARPENTER)
*MICHAEL R. COLTRANE Director October 3, 1995
(MICHAEL R. COLTRANE)
*J. ROY DAVIS, JR. Director October 3, 1995
(J. ROY DAVIS, JR.)
*J. KNOX HILLMAN, JR. Director October 3, 1995
(J. KNOX HILLMAN, JR.)
*BRANSON C. JONES Director October 3, 1995
(BRANSON C. JONES)
*D. C. LINN, JR. Director October 3, 1995
(D. C. LINN, JR.)
*ROBERT F. LOWRANCE Director October 3, 1995
(ROBERT F. LOWRANCE)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
<S> <C> <C>
*HUGH H. MORRISON Director October 3, 1995
(HUGH H. MORRISON)
*T. DAVID PROPST Director October 3, 1995
(T. DAVID PROPST)
*ROBERT L.WALL Director October 3, 1995
(ROBERT L. WALL)
*JAMES B. WIDENHOUSE Director October 3, 1995
(JAMES B. WIDENHOUSE)
* By /s/ LAWRENCE M. KIMBROUGH
LAWRENCE M. KIMBROUGH, ATTORNEY-IN-FACT
</TABLE>
II-5
<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*
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
</TABLE>
* To be filed by amendment.
<PAGE>
LIST OF SCHEDULES TO
AGREEMENT AND PLAN OF MERGER
BETWEEN
FIRST CHARTER CORPORATION AND BANK OF UNION
September 13, 1995
Disclosure Schedule Item Description
Section 5.02(b) Outstanding Shares of Union Capital
Stock and Options and Agreements
Pertaining Thereto
Section 5.02(c) Securities Required to be Issued by
Union
Section 5.03 Union Subsidiaries
5.04(b) Provisions Conflicting with
Execution and Delivery of the Merger
Agreement by Union
5.06 Union Liabilities
5.07 Unresolved Union Tax Matters
5.11 Failures to Comply with Laws by
Union
5.12(a) Union Benefit Plans
5.12(b) Failures of Union Benefit Plans to
Comply with Terms of ERISA and/or
Internal Revenue Code
5.12(d) Union Obligations for Retiree Health
a n d Life Benefits under Union
Benefit Plans
5.12(e) Material Impacts Upon Union Benefit
Plans to be Caused by Execution and
Delivery of Merger Agreement
5.13(a) Union Employment Agreements
5.13(e) Union Leases
5.15 Material Legal Proceedings Against
Union
<PAGE>
5.16 Events Having a Materially Adverse
Impact Upon the Condition of Union
Since 12/31/94
5.21 Interests of Directors and Executive
Officers in Contracts and/or
Properties Material to the Business
of Union
5.23 Brokers and Finders Acting for Union
and/or Its Officers, Directors and
Employees
2
<PAGE>
RESTATED CHARTER
OF
FIRST CHARTER CORPORATION
The undersigned Corporation, pursuant to action by its
board of directors and without a vote of its shareholders,
hereby executes this Restated Charter for the purpose of
integrating into one document its original articles of
incorporation and all amendments thereto, and to that end
does hereby set forth:
1. The name of the Corporation is First Charter
Corporation.
2. The period of duration of the Corporation shall be
perpetual.
3. The purposes for which the Corporation is
organized are:
(a) to purchase, own, and hold the stock of other
corporations, and to do every act and thing covered
generally by the denomination "bank holding corporation" or
"holding corporation," and especially to direct the
operations of banks, banking associations or other
corporations through the ownership of stock therein;
(b) to purchase, subscribe for, acquire, own,
hold, sell, exchange, assign, transfer, create security
interests in, pledge, or otherwise dispose of shares of the
capital stock, or any bonds, notes, securities, or evidences
of indebtedness created by any other corporation or
corporations organized under the laws of this state or any
other state and also bonds or evidences of indebtedness of
the United States or of any state, district, territory or
subdivision or municipality thereof and to issue in exchange
therefor shares of the capital stock, bonds, notes, or other
obligations of the Corporation and while the owner thereof
to exercise all the rights, powers and privileges of
ownership including the right to vote on any shares of stock
so owned;
(c) to promote, lend money to, and guarantee the
dividends, stocks, bonds, notes, evidences of indebtedness,
contracts, or other obligations of, and otherwise aid in any
manner which shall be lawful, any corporation or association
of which any bonds, stocks or other securities or evidences
of indebtedness shall be held by or for the Corporation, or
in which, or in the welfare of which, the Corporation shall
have any interest, and to do any acts and things permitted
by law and designed to protect, preserve, improve, or
enhance the value of any such bonds, stocks, or other
securities or evidences of indebtedness or the property of
the Corporation;
(d) to engage in any other lawful act or activity
for which corporations may be organized under Chapter 55 of
the General Statutes of North Carolina, entitled "Business
<PAGE>
Corporation Act," including, but not limited to,
manufacturing, purchasing or otherwise acquiring, owning,
mortgaging, pledging, selling, assigning and transferring,
or otherwise disposing of, investing, trading, dealing in
and with, goods, wares and merchandise and property of every
class and description, whether real, personal, mixed,
tangible, or intangible; entering into or serving in any
kind of management, investigative, advisory, promotional,
protective, insurance, guarantyship, suretyship, fiduciary
or representative relationship or capacity for any persons
or corporations whatsoever; and
(e) to engage in, conduct and operate any other
business which may be deemed adapted, directly or
indirectly, to add to the profits of its business or to
increase the value of its property.
In furtherance and not in limitation of the power
conferred by the laws of the State of North Carolina upon
corporations organized for the foregoing purposes, the
Corporation shall have power to borrow money, to lend money,
to guarantee obligations, to purchase, construct, lease or
otherwise acquire, own, hold, use, maintain, operate or
otherwise manage or control, sell, exchange, lease,
mortgage, pledge or otherwise dispose of, property of any
kind or character, real, personal or mixed, tangible or
intangible, necessary, useful or convenient therefor, and to
acquire, hold, mortgage, pledge or dispose of shares, bonds
and other evidences of indebtedness and securities of the
United States of America or any state or municipality
therein or of any domestic or foreign Corporation.
The foregoing clauses shall be construed as enumerating
specific purposes and powers, but no recitation, expression
or declaration of specific purposes or powers herein
enumerated shall be deemed to be exclusive, but it is hereby
expressly declared that all other lawful purposes and powers
not inconsistent therewith are hereby included.
The Board of Directors of the Corporation shall have
the authority to adopt resolutions approving the
indemnification, to the fullest extent permitted by Chapter
55 of the North Carolina General Statutes, of any person
made a party to any action or proceeding, whether civil,
criminal or administrative, by reason of the fact that such
person was serving as director, officer, employee or agent
of the Corporation.
4. The aggregate number of shares which the
Corporation shall have authority to issue is 10,000,000
shares of $5.00 par value Common Stock.
5. The stated capital of the Corporation is Fourteen
Million, Five Hundred and Fifty-Six Thousand, Three Hundred
and Thirty Dollars ($14,556,330).
2
<PAGE>
6. The shareholders of the Corporation shall have no
preemptive right to acquire additional or treasury shares of
the Corporation.
7. The address of the registered office of the
Corporation is 22 Union Street, North, Post Office Box 228,
Concord, Cabarrus County, North Carolina, 28025-0228 and the
name of the registered agent at such address is Robert O.
Bratton.
8. (a) The board of directors of the Corporation
shall be and is divided into three classes, Class I, Class
II and Class III, which shall be as nearly equal in number
as possible. Each director shall serve for a term ending on
the date of the third annual meeting of shareholders
following the annual meeting at which the director was
elected; provided, however, that each initial director named
herein shall hold office until the annual meeting of
shareholders shows as follows:
TERM OF OFFICE EXPIRES
DIRECTORS IN: WITH ANNUAL MEETING IN:
Class I 1984
Class II 1985
Class III 1986
A director elected to fill a vacancy shall serve for
the remainder of the present term of office of the class to
which he was elected.
(b) The number of directors constituting the
initial board of directors shall be fourteen, and the names
and addresses of the persons who are to serve as directors
until the appropriate annual meeting of shareholders, or
until their successors are elected and qualify, are:
NAME ADDRESS
CLASS I
G. N. Bisanar 23 Union Street, North
Concord, North Carolina 28025
L. D. Coltrane, III 151 Ingleside Drive, S.E.
Concord, North Carolina 28025
L. R. Miller 126 Marshdale Avenue, S.W.
Concord, North Carolina 28025
G. H. Richmond, Jr. 68 Cabarrus Avenue, East
Concord, North Carolina 28025
3
<PAGE>
CLASS II
L. D. Coltrane, Jr. 68 Cabarrus Avenue, East
Concord, North Carolina 28025
J. Roy Davis, Jr. 300 U.S. Highway 29, South
Concord, North Carolina 28025
Ladd W. Hamrick, Jr. 68 Lake Concord Road, N.E.
Concord, North Carolina 28025
J. Archie Smith Highway 73 West
Mt. Pleasant, North Carolina 28124
William H. Taylor 338 Sunnyside Drive, S.E.
Concord, North Carolina 28025
CLASS III
Frank A. Dusch, Jr. 334 Dellwood Court, S.E.
Concord, North Carolina 28025
J. Knox Hillman, Jr. 24 Cabarrus Avenue, East
Concord, North Carolina 28025
J. F. Jackson 177 Eastover Drive, S.E.
Concord, North Carolina 28025
Branson C. Jones 189 Ravine Circle, S.E.
Concord, North Carolina 28025
Robert L. Wall 767 Williamsburg Drive, N.E.
Concord, North Carolina 28025
9. The name and address of the sole incorporator are:
NAME ADDRESS
L. D. Coltrane, III 151 Ingleside Drive, S.E.
Concord, North Carolina 28025
10. The Corporation shall not 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 the assets or dispose of by any means
all or substantially all of the stock or assets of any major
subsidiary of the Corporation unless such consolidation,
merger, conveyance or disposition is approved (a) by the
affirmative vote of not less than seventy-five percent (75%)
of the aggregate voting power of the outstanding stock
entitled to vote thereon, and (b) by the affirmative vote of
not less than seventy-five percent (75%) of the aggregate
voting power of the outstanding stock entitled to vote
thereon, which shall include the affirmative vote of at
4
<PAGE>
least fifty percent (50%) of the voting power of the
outstanding stock of shareholders entitled to vote thereon
other than controlling shareholders, (i) if the shareholder
entitled to vote thereon is a person who, including
affiliates of such person, is the beneficial owner (as the
terms are defined in the Securities Exchange Act of 1934 and
in the rules thereunder) of more than twenty percent (20%)
of the voting power of the Corporation (a "controlling
shareholder"), provided that shares held, voted or otherwise
controlled by a person as a trustee, plan administrator,
officer of the Corporation or otherwise pursuant to an
employee benefit plan of the Corporation or of an affiliate
of the Corporation shall not be deemed to be beneficially
owned by any person for the purpose of determining whether a
person is a controlling shareholder, and (ii) if, prior to
the acquisition of twenty percent (20%) of the voting power
of the Corporation by a shareholder, the Board of Directors
of the Corporation had not unanimously approved such
consolidation, merger, conveyance or disposition. If there
is a controlling shareholder, this Section 10 can be
amended only by the affirmative vote of the voting power of
the Corporation then required to approve a consolidation,
merger, conveyance or disposition under this Section 10.
11. The vote of three-quarters of the number of
directors fixed in the manner provided in the Bylaws of the
Corporation shall be required for the approval of a plan of
merger or plan of consolidation or similar plan of the
Corporation with any other corporation(s) or entity(ies) in
which the Corporation is the acquired corporation or for
adopting a resolution recommending a sale, lease or exchange
of all or substantially all the property of the Corporation.
The Board of Directors of the Corporation, when
evaluating any offer of another party to (a) make a tender
or exchange offer for any equity security of the
Corporation, (b) merge or consolidate the Corporation with
another corporation, or (c) purchase or otherwise acquire
all or substantially all of the properties and assets of the
Corporation, shall, in connection with the exercise of its
judgment in determining what is in the best interests of the
Corporation and its shareholders, give due consideration to
all relevant factors, including without limitation, the
social and economic effects on the employees, customers and
other constituents of the Corporation and its subsidiaries
and on the communities in which the Corporation and its
subsidiaries operate or are located. The provisions of this
Section 11 may be amended only by the affirmative vote of
the voting power of the Corporation as would be required at
the time of such amendment to amend Section 10 hereof.
12. To the fullest extent permitted by the North
Carolina Business Corporation Act, as the same exists or may
hereafter be amended, a director of the Corporation shall
not be personally liable to the Corporation, its
shareholders or otherwise for
5
<PAGE>
monetary damage for breach of duty as a director. Any
repeal or modification of this Section 12 shall be
prospective only and shall not adversely affect any
limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or
modification.
13. This Restated Charter purports merely to restate
but not to change the provisions of the original articles of
incorporation of the Corporation as supplemented and
amended, and there is no discrepancy, other than as
expressly permitted by Section 55-105 of the General
Statutes of North Carolina, between the said provisions and
the provisions of this Restated Charter.
IN WITNESS WHEREOF, this statement is executed by the
President and Secretary of the Corporation this 21 day of
June, 1989.
By: Lawrence M. Kimbrough
President
By: James W. Townsend, Jr.
Secretary
6
<PAGE>
STATE OF NORTH CAROLINA
COUNTY OF CABARRUS
Lawrence M. Kimbrough and James W. Townsend, Jr., each
being duly sworn, deposes and says that he signed the
foregoing RESTATED CHARTER of FIRST CHARTER CORPORATION, in
the capacity indicated; that the statements therein
contained are true; and that he was authorized so to sign.
Lawrence M. Kimbrough
James W. Townsend, Jr.
Sworn to and subscribed before me
this 21st day of June, 1989.
Peggy F. Faggart
Notary Public
My Commission Expires:
5/11/92
________________
7
<PAGE>
EXHIBIT 5.1
SMITH HELMS MULLISS & MOORE, L.L.P.
ATTORNEYS AT LAW
POST OFFICE BOX 31247
227 NORTH TRYON STREET (28202)
CHARLOTTE, NORTH CAROLINA 28231
Telephone 704/343-2000
Facsimile 704/334-8467
October 2, 1995
First Charter Corporation
22 Union Street, North
Concord, North Carolina 28025
RE: REGISTRATION STATEMENT ON FORM S-4 RELATED TO 1,644,672
SHARES OF COMMON STOCK
Ladies and Gentlemen:
We have acted as counsel to First Charter Corporation, a North Carolina
corporation (the "Corporation"), in connection with the registration under the
Securities Act of 1933, as amended, pursuant to the Registration Statement on
Form S-4 (the "Registration Statement") filed with the Securities and Exchange
Commission (the "Commission") on October 3, 1995 related to 1,644,672 shares
(the "Shares") of the Corporation's common stock, $5 par value (the "Common
Stock"), to be issued by the Corporation in connection with the merger of an
interim state banking subsidiary to be formed by the Corporation with and into
Bank of Union, a North Carolina state-chartered commercial bank ("Union"). This
opinion letter is Exhibit 5.1 to the Registration Statement.
In rendering this opinion, we have reviewed resolutions of the Board of
Directors of the Corporation approving the Merger and issuance of the Shares.
Based on the foregoing, we are of the opinion that the Shares are legally
authorized, and when the Registration Statement shall have been declared
effective by order of the Commission and such Shares shall have been issued upon
the terms and conditions set forth in the Registration Statement, then the
Shares shall be validly issued, fully paid and nonassessable.
We hereby consent (1) to be named in the Registration Statement and in the
prospectus contained therein as attorneys who passed upon the legality of the
Shares and (2) to the filing of a copy of this opinion as Exhibit 5.1 to the
Registration Statement.
Very truly yours,
/s/ SMITH HELMS MULLISS & MOORE, L.L.P.
FIRST
CHARTER
CORPORATION
YOUR BEST LIFETIME FINANCIAL PARTNER
1994
ANNUAL REPORT
<PAGE>
CORPORATE INFORMATION
CORPORATE HEADQUARTERS
First Charter Corporation
22 Union Street, North
P. O. Box 228
Concord, N. C. 28026-0228
(704) 786-3300
NC Toll Free 1-800-422-4650
AUDITORS
KPMG Peat Marwick LLP
Suite 2800
Two First Union Center
Charlotte, N. C. 28282
CORPORATE COUNSEL
Smith Helms Mulliss & Moore, L.L.P.
227 North Tryon Street
Charlotte, N. C. 28202
SUBSIDIARY
First Charter National Bank
P. O. Box 228
Concord, N. C. 28026-0228
STOCK LISTING
The NASDAQ National Market
Symbol: FCTR
MARKET MAKERS
Dean Witter Reynolds, Inc.
Interstate/Johnson Lane Corporation
J.C. Bradford Co.
Wheat First Securities, Inc..
TRANSFER AGENT
First Charter National Bank
SHAREHOLDERS' MEETING
Cabarrus Country Club
Concord, N. C.
April 25, 1995 at 3:00 p.m.
FORM 10-K
Copies of First Charter Corporation's Annual Report to
the Securities and Exchange Commission, Form 10-K,
may be obtained without charge by writing
Robert O. Bratton, Chief Financial Officer, P. O. Box
228, Concord, N. C. 28026-0228
STOCK INFORMATION AND DIVIDENDS
First Charter Corporation's common stock, $5.00
par value (the "Common Stock"), is traded on the
National Association of Securities Dealers Automated
Quotation National Market System ("The NASDAQ
National Market") under the symbol "FCTR". The
following table sets forth the high and low sales price for
the Common Stock for the periods indicated, as adjusted
to reflect the stock split effected in the form of a 33 1/3 %
stock dividend paid in the fourth quarter of 1994. The
table also sets forth per share cash dividend information
for the periods indicated, as adjusted to reflect the stock
split effected in the form of a 33 1/3% stock dividend paid
in the fourth quarter of 1994. See "Management's
Discussion and Analysis of Results of Operations and
Financial Condition" contained elsewhere in this report
for a description of limitations on the ability of the
Corporation to pay dividends.
As of February 17, 1995, there were 1,039 sharehold-
ers of record of the Corporation's Common Stock.
QUARTERLY COMMON STOCK PRICE RANGES AND DIVIDENDS
<TABLE>
<CAPTION>
1994 1993
QUARTER HIGH LOW DIVIDEND High Low Dividend
<S> <C> <C> <C> <C> <C> <C>
First Quarter $12.94 $11.06 $.090 $ 9.19 $ 6.75 $ .075
Second Quarter 14.63 12.56 .090 10.13 8.44 .075
Third Quarter 15.00 13.88 .100 10.31 9.56 .075
Fourth Quarter 15.50 14.44 .130 11.44 9.75 .083
</TABLE>
<PAGE>
FIRST CHARTER CORPORATION AND SUBSIDIARY
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth certain selected consolidated financial data
concerning First Charter Corporation for the five years ended December 31, 1994.
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 and a 20% stock dividend declared in the fourth quarter of 1992. This
information should be read in conjunction with the Management's Discussion and
Analysis of Results of Operations and Financial Condition appearing elsewhere in
this report, and is qualified in its entirety by reference to the more detailed
consolidated financial statements of the Corporation and notes thereto.
<TABLE>
<CAPTION>
Years ended December 31,
(DOLLARS IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS) 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income.......................... $ 21,858 $ 19,192 $ 18,706 $ 20,660 $ 22,427
Interest expense......................... 7,360 6,631 7,465 10,379 12,003
Net interest income...................... 14,498 12,561 11,241 10,281 10,424
Provision for loan losses................ 575 285 397 1,470 883
Net interest income after provision for
loan losses........................ 13,923 12,276 10,844 8,811 9,541
Noninterest income....................... 3,480 3,425 3,157 3,052 2,586
Noninterest expense...................... 10,051 10,142 9,789 9,359 8,713
Income before income taxes............... 7,352 5,559 4,212 2,504 3,414
Income taxes............................. 2,092 1,390 919 406 854
Net income before cumulative effect
of change in accounting principle... 5,260 4,169 3,293 2,098 2,560
Cumulative effect of change in
accounting principle................... - 300 - - -
Net income............................. $ 5,260 $ 4,469 $ 3,293 $ 2,098 $ 2,560
PER SHARE DATA:
Net income before cumulative effect of
accounting change (primary and
fully diluted)..................... $ 1.12 $ 0.89 $ 0.70 $ 0.45 $ 0.55
Net income (primary and fully diluted)... 1.12 0.95 0.70 0.45 0.55
Cash dividends declared.................. 0.41 0.31 0.25 0.23 0.23
Period-end book value.................... 8.09 7.60 6.83 6.36 6.15
BALANCE SHEET DATA (AT PERIOD END):
Securities available for sale............ $ 30,803 $ 21,519 $ - $ - $ -
Investment securities.................... 61,039 66,085 84,799 60,587 66,356
Loans, net............................... 200,918 173,103 160,102 153,841 155,431
Allowance for loan losses................ 2,816 2,602 2,750 2,377 2,235
Total assets............................. 324,049 285,190 277,446 241,637 245,875
Deposits................................. 266,353 243,364 229,995 204,354 206,169
Borrowed funds........................... 17,734 4,439 13,847 5,700 8,672
Total liabilities........................ 286,585 249,837 245,386 211,837 217,088
Total shareholders' equity............... 37,463 35,353 32,061 29,800 28,787
RATIOS:
Net income to average shareholders'
equity................................. 14.37 % 13.32 % 10.66 % 7.13 % 9.09 %
Net income to average total assets....... 1.74 1.63 1.30 0.86 1.06
Net interest income to average earning
assets (tax equivalent)............. 5.61 5.38 5.20 4.98 5.28
Average loans to average deposits........ 73.77 71.76 74.59 76.47 76.89
Net loans charged off during period to
average loans........................ 0.19 0.26 0.02 0.84 0.30
</TABLE>
<PAGE>
LETTER TO SHAREHOLDERS
Dear Fellow Shareholders:
Our commitment to being the Best Lifetime Financial Partner in the markets
we serve is proving to be a very rewarding strategy for us. The excellent
results we achieved in 1994 are directly attributable to a proactive attitude
we've taken toward customer service. Nothing must stand in the way of our
delivering first-rate service to our retail and commercial customers.
The progress we have made means, in turn, greater and more challenging
opportunities for our employees. And, of paramount interest, increased earnings
and improved return on equity in 1994 produced a superior return for you, our
shareholders.
As you know, 1994 was Year Two of our 5-year strategic plan and I'm pleased
to report that all components of our income statement have improved nicely. Our
1994 net interest margin was quite strong. We enjoyed good growth in earning
assets. We continue to become a more efficient business as we leverage our
people, our technology and our facilities better. And, in keeping with our
mission to be a high performance institution, it's gratifying to confirm that we
achieved a return on average assets of 1.74% in 1994.
In our obsession to provide superior service to our customers, the key is
the development of an aggressive sales culture. We must recognize throughout
the First Charter organization that we must serve more people more effectively
every day.
The action plans that guide us are critical. They contribute the day-to-
day cohesion that's essential, particularly as we encourage our managers to
probe for opportunities in today's emerging technologies and nontraditional
banking services. Recognizing that our better competitors are doing the same,
we are redoubling our emphasis on training and retraining. We want our people
to thoroughly understand our products, those offered by our competition, and to
relate that knowledge to the constantly changing needs of our customers.
Our prospects for further progress during the coming
FIRST CHARTER
YOUR BEST LIFETIME
FINANCIAL PARTNER
(Photo appears here with the following caption:)
J. Roy Davis, Jr., President of S & D Coffee, Inc. and Chairman of
First Charter's Board of Directors (second from left), explains S&D
tasting procedures to (l-to-r) Duard C. Linn, Jr., Vice Chairman of
First Charter's Board; Lawrence M. Kimbrough, President and Chief
Executive Officer for First Charter; Robert O. Bratton, First
Charter Executive Vice President (standing) and Robert G. Fox,
Jr., First Charter Executive Vice President.
2
<PAGE>
(Photo appears here with the following caption:)
Present and past First Charter Corporation directors gathered recently
at River Run Country Club. Those attending included (l-to-r along
veranda) Lawrence M. Kimbrough, President and Chief Executive
Officer; J.F. Jackson; James B. Widenhouse; Branson C. Jones; Robert
F. Lowrance; Grady S. Carpenter; J. Archie Smith; Robert G. Fox, Jr.;
J. Knox Hillman, Jr.; J.W. McGee, Jr.; (l-to-r on steps) Duard C. Linn, Jr.,
Vice Chairman; George W. Liles, M.D.; (l-to-r on lawn closest to veranda)
G.N. Bisanar; Robert O. Bratton; Ladd W. Hamrick, Jr., M.D.;
L.R. Miller; T. David Propst; Kyle E. Black, M.D.; William R. Black,
M.D.; Jane B. Brown; Robert L. Wall; and (l-to-r in foreground) J.
Roy Davis, Jr., Chairman; Frank A. Dusch, Jr.; Hugh M. Morrison
and John Hugh Williams.
year are quite encouraging. First Charter continues to benefit from an
improving economy and from the dynamic markets we serve. We're containing
noninterest expense. And we expect continued growth this year in noninterest
(continued)
(Bar graph appears here with the following plot points:)
<TABLE>
<CAPTION>
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 cents 11 cents 14 cents 17 cents 18 cents 21 cents 23 cents 23 cents 25 cents 31 cents 41 cents
</TABLE>
First Charter Corporation shareholders have experienced a 310% increase in
their cash dividends since 1984.
3
<PAGE>
(Photo appears here with the following caption:)
Recently affiliating with First Charter as Executive Vice President
and Trust Executive: Phillip M. Floyd.
income as products such as our new CheckCard/VISAR debit card attract more
customers to us.
We shall be introducing an exciting check-imaging service this year that
will provide our checking customers, both consumer and commercial, with digital
reproductions of canceled checks. This new concept will greatly facilitate the
managing of one's finances. We'll also be promoting our FIRST ACCOUNTS(SM) low
cost banking services and our FirstNEIGHBORS(SM) affordable mortgage loans.
All of our lending activities will be more focused during 1995.
We see significant opportunities for additional growth in our Trust
Division as Phillip M. Floyd has affiliated with us as Executive Vice President
and Trust Executive. Phillip enjoys an excellent reputation among his peers and
has invaluable experience with structuring fee-generating trust services that
emphasize financial counseling. Such services will be a perfect complement to
our FirstPARTNERS(SM) asset allocation program which has been well received
since its introduction this past year.
I am also delighted to confirm that, in January of this year, your Board
of Directors approved the election of Lisa B. Boylen, Patricia K. Horton,
Donna J. Kenney and Kathryn B. Reese to the position of Senior Vice President
with your bank. This action recognized the many contributions that each of
these officers has made in recent years.
First Charter operates within a strategic plan that allows for an interplay
with the dynamics of the very changing and competitive marketplace. We are
comfortable with the management of risk. And I'm pleased with the growing
confidence I sense throughout First Charter that we'll meet each new challenge
eagerly and imaginatively, something you'd expect from your Best Lifetime
Financial Partner.
Sincerely,
(Signature of Lawrence M. Kimbrough)
Lawrence M. Kimbrough
President and Chief Executive Officer
(Photo appears here with the following caption:)
Elected in 1995 to the position of Senior Vice President with First Charter
(L-to-R): Kathryn B. Reese, Lisa B. Boylen, Donna J. Kenney and
Patricia K. Horton.
Efficiency Ratio
(Bar graph appears here with the following plot points:)
1991 1992 1993 1994
64.9 63.0 58.6 54.2
The ratio indicates the amount of expense incurred to generate
revenues. The lower the ratio, the more flexibility an
organization has regarding its competitive position and its
potential to increase earnings.
4
<PAGE>
ENHANCING
SHAREHOLDER
VALUE
(Five bar graphs appear on this page with the following plot points:)
Deposit/Loan Growth
(Dollars in Millions)
1991 1992 1993 1994
Loans, Net 153.8 160.1 173.1 200.9
Deposits 204.4 230.0 243.4 266.3
This chart reports year-end outstandings for loans and deposits.
Return On Average Assets
1991 1992 1993 1994
0.86 1.30 1.52* 1.74
*Excludes cumulative effect of change in accounting principle.
ROAA reflects the earnings generated on all of our assets. This ratio
measures our productivity. It is one of the best indicators of earnings
efficiency and it allows for a comparison between institutions without
regard to size.
Common Stock Price Performance
12/31 Closing Price
1991 1992 1993 1994
5.25 7.50 11.25 14.63
Restated to reflect stock dividends declared in 1992 and 1994.
This chart depicts the closing bid at year-end for First Charter stock.
Earnings Per Share
1991 1992 1993 1994
0.45 0.70 0.89 1.12
Restated to reflect stock dividends declared in 1992 and 1994.
Net income is divided by the average shares outstanding for the year.
Return on Average Equity
1991 1992 1993 1994
7.13 10.66 12.42* 14.37
*Excludes cumulative effect of change in accounting principle.
This ratio represents the return on a shareholder's investment.
5
<PAGE>
(A full-page photo appears with the following caption:)
Lawrence Kimbrough chats with Sharon and Anthony Chiccarello of Kannapolis at
the bank's Kannapolis Hoedown.
<PAGE>
FIRST CHARTER
MAKING
A DIFFERENCE
For over one hundred years, First Charter has been making a difference in the
communities we serve. It may be coordinating efforts with local officials to
promote our FirstNEIGHBORS(SM) affordable home loans. Or working with civic
leaders in planning for an expanded community center. Or helping a couple
through our Trust Division as they plan for retirement. Whatever the need,
First Charter can be counted upon to help.
(Three photos appear on this page with the following captions:)
Steve Osborne, Concord Community Development Administrator, with
new home owner, Subrina Harris.
Robert Mathis (left), Concord Fourth Ward Alderman, and Gregory
Steward, Coordinator for Concord's Project LIFT program, with First
Charter's Marie Kluttz.
Punch and Willene Belvin of Mooresville with First Charter's Nancy Mills
(right).
7
<PAGE>
(Full page photo appears here with the following caption:)
First Charter's Jim Steere (left) with Ernie Irvan at Irvan's farm
in Rowan County.
<PAGE>
FIRST CHARTER
INVOLVED
AND HELPING
First Charter is involved and helping in so many ways. We assist several
prominent NASCAR drivers with their financial needs. We recently helped with
the building of a superb YMCA facility in Landis. Through the CHAPS parenting
program, First Charter provides budgeting and money management guidance to
those seeking such help. And we routinely furnish financing for home builders
and developers throughout our marketing area.
(Three photos appear on this page with the following captions:)
D.C. Linn (left), Landis businessman and Vice Chairman of First Charter's Board
of Directors, with Dan Matthews of the bank.
Audrey McRae and her son, Michael, with First Charter's Jerold Marlow.
Dale Black (left), President of Carolina Living Builders, with Buddy
Caldwell of First Charter.
9
<PAGE>
First Charter has provided financial guidance throughout the construction and
establishment of a highly regarded private school. We help deserving students
explore career opportunities through our participation in the INROADS program.
And to help care personnel, patients and their visitors, we've installed a
convenient automatic teller machine at a major health care facility. If
there's a need, we try to help. How can First Charter help you?
(Three photos appear with the following captions:)
Decorating for the holidays are (l-to-r) Hayden Horton, Betsy Bratton (on
ladder), Headmaster Richard Snyder (kneeling), Jock Liles (contractor), First
Charter's Bob Bratton, Dennis Yates (architect), Meredith Gilbert and Samantha
Kaebe (kneeling), H.T. Thomas and Mike Chreitzberg (architect).
(Left) Thomas R. Revels, President and Chief Executive Officer of Cabarrus
Memorial Hospital, with Linda Gibson of First Charter.
First Chater's Kathryn Reese with Eric Smith.
10
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
First Charter Corporation
We have audited the accompanying consolidated balance sheets of First
Charter Corporation and subsidiary as of December 31, 1994 and 1993, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1994. These
consolidated financial statements are the responsibility of First Charter's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of First
Charter Corporation and subsidiary at December 31, 1994 and 1993, and the
results of their operations and cash flows for each of the years in the three-
year period ended December 31, 1994, in conformity with generally accepted
accounting principles.
As discussed in notes 1(a) and 1(e) to the consolidated financial
statements, First Charter adopted the provisions of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," on December 31, 1993 and Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," on January 1, 1993.
KPMG Peat Marwick LLP
Charlotte, North Carolina
January 20, 1995
11
<PAGE>
FIRST CHARTER CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 18,110,298 $ 12,857,677
Securities available for sale: (note 3)
U. S. Government obligations............................ 16,083,594 19,045,000
U. S. Government agency obligations..................... 8,911,518 -
Mortgage-backed securities.............................. 2,519,763 -
Other................................................... 3,288,447 2,473,553
Total securities available for sale................... 30,803,322 21,518,553
Investment securities: (note 4)
(market value of $58,602,959, and $68,430,703 at 12/31/94
and 12/31/93, respectively)
U. S. Government obligations............................ - 3,002,455
U. S. Governent agency obligations...................... 7,985,901 1,000,000
Mortgage-backed securities................................ 16,260,021 22,612,675
State and municipal obligations, nontaxable.............. 36,792,641 39,470,258
Total Investment securities....................... 61,038,563 66,085,388
Loans (notes 5, 6, and 13).................................. 203,935,504 175,792,789
Less: Unearned income................................... (201,331) (87,684)
Allowance for loan losses............................... (2,816,172) (2,602,147)
Loans, net.......................................... 200,918,001 173,102,958
Premises and equipment, net (note 7)........................ 7,247,098 6,535,173
Other assets (note 5)....................................... 5,931,370 5,090,118
Total assets........................................ $324,048,652 $285,189,867
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits, domestic:
Noninterest-bearing...................................... $ 48,037,213 $ 39,095,820
Interest-bearing......................................... 218,315,321 204,268,104
Total deposits...................................... 266,352,534 243,363,924
Short-term borrowings (note 8).............................. 17,734,069 4,439,212
Other liabilities........................................... 2,498,467 2,033,515
Total liabilities................................... 286,585,070 249,836,651
SHAREHOLDERS' EQUITY (NOTE 12):
Common stock - $5 par value; authorized,
10,000,000 shares; issued and outstanding,
4,632,250 shares in 1994 and 3,488,633
shares in 1993........................................ 23,161,250 17,443,165
Additional paid-in capital.................................. 672 5,933,438
Unrealized gain on securities available for sale............ 96,150 728,535
Retained earnings........................................... 14,205,510 11,248,078
Total shareholders' equity............................ 37,463,582 35,353,216
Commitments (note 13)
Total liabilities and shareholders'
equity............................................ $324,048,652 $285,189,867
</TABLE>
See accompanying notes to consolidated financial statements.
12
<PAGE>
FIRST CHARTER CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans................................$16,388,189 $ 13,671,894 $13,497,959
Federal funds sold.......................................... 150,427 56,329 109,978
Securities available for sale............................. 1,725,177 - -
Investment securities:
Taxable.................................................. 1,460,840 3,524,229 3,632,552
Non-taxable............................................. 2,133,698 1,939,380 1,465,759
Total interest income............................. 21,858,331 19,191,832 18,706,248
INTEREST EXPENSE:
Deposits:
Demand................................................ 997,476 990,520 1,093,885
Money market.......................................... 795,273 988,173 1,325,998
Savings and time...................................... 5,119,184 4,453,163 4,840,330
Short-term borrowings..................................... 448,046 199,456 205,177
Total interest expense......................... 7,359,979 6,631,312 7,465,390
Net interest income................................... 14,498,352 12,560,520 11,240,858
Provision for loan losses (note 6).......................... 575,000 285,000 397,000
Net interest income after provision for loan
losses.............................................. 13,923,352 12,275,520 10,843,858
NONINTEREST INCOME:
Trust income.............................................. 1,382,159 1,262,459 1,143,901
Service charges on deposit accounts....................... 1,487,978 1,512,103 1,487,058
Insurance and other commissions........................... 193,972 182,940 155,531
Securities available for sale transactions, net........... 40,685 - -
Investment securities transactions, net................... 38,761 98,681 (45,236)
Other..................................................... 336,282 368,727 416,163
Total noninterest income........................... 3,479,837 3,424,910 3,157,417
NONINTEREST EXPENSE:
Salaries and fringe benefits (note 11).................... 5,292,764 5,337,532 5,182,102
Occupancy and equipment................................... 1,323,754 1,399,082 1,514,927
Other (note 9)............................................ 3,434,999 3,404,971 3,091,860
Total noninterest expense.......................... 10,051,517 10,141,585 9,788,889
Income before income taxes........................ 7,351,672 5,558,845 4,212,386
Income taxes (note 10)...................................... 2,092,000 1,390,000 919,000
Net income before cumulative effect of a
change in accounting principle........................5,259,672 4,168,845 3,293,386
Cumulative effect on prior years (to December 31, 1992)
of changing the method of accounting for income
taxes.................................................. - 300,000 -
Net income............................................$ 5,259,672 $ 4,468,845 $ 3,293,386
PRIMARY INCOME PER SHARE DATA:
Net income before cumulative effect...................... $ 1.12 $ 0.89 $ 0.70
Net income from cumulative effect.......................... - 0.06 -
Net income........................................... $ 1.12 $ 0.95 $ 0.70
Average common and common equivalent shares ................ 4,696,899 4,720,492 4,697,846
INCOME PER SHARE DATA ASSUMING FULL DILUTION:
Net income before cumulative effect....................... $ 1.12 $ 0.89 $ 0.70
Net income from cumulative effect..........................$ - $ 0.06 $ -
Net income.................................................$ 1.12 $ 0.95 $ 0.70
Average common equivalent shares........................... 4,701,195 4,727,132 4,717,280
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE>
FIRST CHARTER CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
<TABLE>
<CAPTION>
Unrealized
Additional gain/(loss)
Common Paid-in Retained in value
Stock Capital Earnings of securities Total
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1991............... $ 14,643,340 $ 3,288,172 $ 11,936,036 $ (67,200) $29,800,348
Net income for 1992...................... - - 3,293,386 - 3,293,386
Cash dividends of $.25 per share......... - - (1,142,783) - (1,142,783)
Stock dividend of 20% per share
(note 12).............................. 2,934,725 2,934,726 (5,869,451) - -
Unrealized gain in value of
marketable equity securities........... - - - 18,900 18,900
Recognition of loss on write-down
in value of marketable equity
securities............................. - - - 48,300 48,300
Stock options exercised and Dividend
Reinvestment Plan stock issued
(note 12).............................. 30,285 12,153 - - 42,438
Balance December 31, 1992................ 17,608,350 6,235,051 8,217,188 - 32,060,589
Net income for 1993...................... - - 4,468,845 - 4,468,845
Cash dividends of $.31 per share......... - - (1,437,955) - (1,437,955)
Purchase and retirement of common
stock.................................. (205,877) (343,801) - - (549,678)
Stock options exercised and Dividend
Reinvestment Plan stock issued
(note 12).............................. 40,692 42,188 - - 82,880
Unrealized gain on securities
available for sale..................... - - - 728,535 728,535
Balance December 31, 1993............... 17,443,165 5,933,438 11,248,078 728,535 35,353,216
Net income for 1994...................... - - 5,259,672 - 5,259,672
Cash dividends of $.41 per share......... - - (1,892,627) - (1,892,627)
Purchase and retirement of common stock (310,065) (687,639) (68,773) - (1,066,477)
Stock options exercised and Dividend
Reinvestment Plan stock issued (note 12). 229,999 212,184 - - 442,183
Stock split effected in the form of a
33 1/3% stock dividend (note 12)..... 5,798,151 (5,457,311) (340,840) - -
Unrealized loss on securities available
for sale............................... - - - (632,385) (632,385)
Balance December 31, 1994................ $ 23,161,250 $ 672 $ 14,205,510 $ 96,150 $37,463,582
</TABLE>
See accompanying notes to consolidated financial statements.
14
<PAGE>
FIRST CHARTER CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................... $ 5,259,672 $ 4,468,845 $ 3,293,386
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses............................... 575,000 285,000 397,000
Depreciation............................................ 550,292 630,476 830,065
Premium amortization and discount accretion,
net................................................... (38,044) 287,858 192,010
Net gain on investment securities transactions.......... (38,761) (98,681) 45,236
Net gain on securities available for sale
transactions.......................................... (40,685) - -
Net gain on sale of premises and equipment.............. (2,843) - -
(Increase) decrease in other assets.................... (407,038) 39,371 147,457
Increase (decrease) in other liabilities................ 442,831 489,159 (237,921)
Net cash provided by operating activities............. 6,300,424 6,102,028 4,667,233
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities.............. 3,010,938 8,069,893 3,000,000
Proceeds from sales of securities available for
sale.................................................... 2,129,991 - -
Proceeds from maturities and issuer calls
of investment securities................................. 34,860,470 19,060,941 7,935,810
Proceeds from maturities of securities available for
sale.................................................... 2,221,458 - -
Purchase of investment securities......................... (32,698,838) (28,931,050) (35,317,808)
Purchase of securities available for sale................. (14,681,171) - -
Net increase in loans..................................... (28,419,944) (13,430,882) (6,883,570)
Proceeds from sale of premises and equipment, net......... 2,843 - 18,180
Purchase of premises and equipment........................ (1,262,217) (580,782) (1,259,655)
Net cash used by investing activities................... (34,836,470) (15,811,880) (32,507,043)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand, NOW,
money market, and savings accounts...................... 29,493,573 21,616,256 38,318,238
Net decrease in certificates of deposit................... (6,504,963) (8,246,906) (12,677,226)
Net increase (decrease) in securities sold under
repurchase agreements and other
short-term borrowings................................... 13,294,857 (9,407,468) 8,146,284
Purchase of common stock .................................. (1,066,477) (549,678) -
Net increase in advances for taxes and insurance.......... 22,121 - -
Proceeds from issuance of common stock upon
exercise of stock options............................... 442,183 82,880 42,438
Cash dividends paid....................................... (1,892,627) (1,437,955) (1,142,783)
Net cash provided by financing activities............. 33,788,667 2,057,129 32,686,951
Net increase (decrease) in cash and cash
equivalents........................................... 5,252,621 (7,652,723) 4,847,141
Cash and cash equivalents at beginning of year.......... 12,857,677 20,510,400 15,663,259
Cash and cash equivalents at end of year................ $ 18,110,298 $12,857,677 $ 20,510,400
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest................................................ $ 7,309,741 $ 6,706,153 $ 7,809,702
Income taxes............................................ $ 1,975,443 $ 1,528,601 $ 964,690
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
Transfers of loans and premises and equipment
to other real estate owned.............................. $ 29,901 $ 154,465 $ 529,192
Unrealized gain (loss) in value of marketable
equity securities.................................. $ - $ - $ 18,900
Investment securities transferred to available for
sale.................................................... $ - $20,324,233 $ -
Unrealized gain (loss) in value of securities
available for sale (net of
tax of effect of ($404,313) in 1994
and $465,785 in 1993)........................... $ (632,385) $ 728,535 $ -
Issuance of stock dividends............................... $ 5,798,151 $ - $ 5,869,451
</TABLE>
See accompanying notes to consolidated financial statements.
15
<PAGE>
FIRST CHARTER CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993, AND 1992
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a description of the more significant accounting and
reporting policies which First Charter Corporation (the "Corporation") and its
subsidiary, First Charter National Bank (the "Bank") follow in preparing and
presenting their consolidated financial statements. In consolidation, all
significant intercompany accounts and transactions have been eliminated.
(A) SECURITIES - In May 1993, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." SFAS No. 115
addresses the accounting and reporting for investments in equity securities that
have readily determinable fair values and all investments in debt securities.
At the time of purchase the classification of the securities is determined.
Securities are classified into three categories as follows:
- investment securities - reported at amortized cost,
- trading securities - reported at fair value with unrealized gains and
losses included in earnings, or
- securities available-for-sale - reported at fair value with unrealized
gains and losses reported as a separate component of stockholders' equity (net
of tax effect).
On December 31, 1993, the Corporation adopted the provisions of SFAS No.
115 and classified certain US Treasury Notes and equity securities as securities
available-for-sale. The Corporation recorded a fair value adjustment for this
change in accounting principle amounting to $1,194,320 for the unrealized gain
on securities available-for-sale. The Corporation also recorded an increase to
deferred income taxes payable of $465,785 as well as an increase to
stockholders' equity for $728,535. The Corporation intends to hold these
securities for an indefinite period of time but may sell them prior to maturity.
All other securities have been classified as investment securities because
management has determined that the Corporation has the intent and the ability to
hold all such securities until maturity.
At December 31, 1992 all securities were reported at amortized cost.
Gains and losses on sales of securities are recognized when realized on a
specific identification basis. Premiums and discounts are amortized into
interest income using a level yield method.
(B) LOANS - Loans are carried at their principal amount outstanding.
Interest income is recorded as earned on an accrual basis. The determination to
discontinue the accrual of interest is based on a review of each loan.
Generally, interest is discontinued on loans 90 days past due as to principal or
interest unless in management's opinion collection of both principal and
interest is assured by way of collateralization, guaranties or other security
and the loan is in the process of collection.
Mortgage loans held for sale are valued at the lower of cost or market as
determined by outstanding commitments from investors or current investor yield
requirements, calculated on the aggregate loan basis.
The Corporation is on the allowance method in providing for loan losses.
Accordingly, all loan losses are charged to the allowance for loan losses and
all recoveries are credited to it. The provision for loan losses is based on
past loan loss experience and other factors which, in management's judgment,
deserve current recognition in estimating possible loan losses. Such other
factors considered by management include the growth and composition of the loan
portfolio, the relationship of the allowance for loan losses to outstanding
loans, and economic conditions. While management uses the best information
available to make evaluations, future adjustments may be necessary if economic
and other conditions differ substantially from the assumptions used.
16
<PAGE>
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowances for loan losses
and losses on real estate owned. Such agencies may require the Bank to recognize
additions to the allowances based on their judgments about information available
to them at the time of their examination.
(C) DEPRECIATION - Depreciation of premises and equipment is provided over
the estimated useful lives of the respective assets primarily on the straight-
line basis. Leasehold improvements are amortized on a straight-line basis over
the terms of the respective leases.
(D) FORECLOSED PROPERTIES - Foreclosed properties are included in other
assets and represent real estate acquired through foreclosure or deed in lieu
thereof and are carried at the lower of cost (principal balance of the former
loan plus costs of obtaining title and possession) or fair value, less estimated
costs to sell. Generally such properties are appraised annually and the carrying
value, if greater than the appraised value, is adjusted with a charge to income.
(E) INCOME TAXES - In February 1992, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (Statement 109) which supersedes Statement 96.
Under the asset and liability method of Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using the enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Under Statement 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
Effective January 1, 1993, the Company adopted Statement 109 and has
reported the cumulative effect of that change in the method of accounting for
income taxes in the 1993 consolidated statement of income.
(F) INCOME PER SHARE - Primary income per share and income per share
assuming full dilution are computed based on the weighted average number of
shares outstanding, including common equivalent shares applicable to employees'
stock options. Income per share for periods prior to 1994 has been restated for
the effects of the 20% stock dividend declared in the fourth quarter of 1992 and
a stock split effected in the form of a 33 1/3% stock dividend declared and
distributed in the fourth quarter of 1994.
(G) LOAN FEES AND COSTS - Nonrefundable loan fees and certain direct costs
associated with originating or acquiring loans are deferred and recognized over
the life of the related loans as an adjustment to interest income.
(H) CASH FLOWS - For purposes of reporting cash flows, cash and cash
equivalents include cash on hand, amounts due from banks and federal funds sold.
Generally, federal funds are sold for one-day periods.
(I) FAIR VALUE OF FINANCIAL INSTRUMENTS - Statement of Financial Accounting
Standards No. 107, "Disclosures About Fair Value of Financial Instruments"
("Statement 107") was issued by the Financial Accounting Standards Board in
December 1991. Statement 107 requires disclosures about fair value of all
financial instruments. Fair value estimates, methods, and assumptions are set
forth in note 14.
(2) FINANCIAL STATEMENT PRESENTATIONS AND RELATED MATTERS
Reclassifications of certain amounts in the 1993 and 1992 consolidated
financial statements have been made to conform with the financial statement
presentation for 1994. The reclassifications have no effect on net income or
total shareholders' equity as previously reported.
17
<PAGE>
(3) SECURITIES AVAILABLE FOR SALE
Securities available for sale at December 31, 1994 and 1993 are summarized as
follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED CARRYING
COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
1994
U.S. Government Obligations....... $16,044,698 $39,073 $ (177) $16,083,594
U.S. Government Agency obligations. 9,009,013 - (97,495) 8,911,518
Mortgage-backed securities ....... 2,754,951 - (235,188) 2,519,763
Equity Securities................. 2,837,037 451,410 - 3,288,447
Total............................. $30,645,699 $490,483 $ (332,860) $30,803,322
1993
U.S. Government Obligations ....... $18,082,792 $962,208 $ - $19,045,000
Equity Securities.................. 2,241,441 232,112 - 2,473,553
Total.............................. $20,324,233 $1,194,320 $ - $21,518,553
</TABLE>
Securities with an aggregate carrying value of $15,083,750 at December
31, 1994 were pledged to secure public deposits and securities sold under
agreements to repurchase. Proceeds from the sale of securities available for
sale were $2,129,991 with gross gains of $74,142 and gross losses of $33,457 in
1994.
(4) INVESTMENT SECURITIES
Investment securities at December 31, 1994 and 1993 are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
1994
U.S. Government agency obligations.... $ 7,985,901 $ - $ (16,726) $ 7,969,175
Mortgage-backed securities............ 16,260,021 84,265 (910,035) 15,434,251
State and municipal obligations....... 36,792,641 622,267 (2,215,375) 35,199,533
Total............................. $ 61,038,563 $ 706,532 $ (3,142,136) $ 58,602,959
1993
U.S. Government obligations........... $ 3,002,455 $ 12,233 $ - $ 3,014,688
U.S. Government agency obligations... 1,000,000 6,875 - 1,006,875
Mortgage-backed securities............ 22,612,675 478,118 (110,302) 22,980,491
State and municipal obligations....... 39,470,258 2,169,071 (210,680) 41,428,649
Total............................. $ 66,085,388 $ 2,666,297 $ (320,982) $ 68,430,703
</TABLE>
Securities with an aggregate market value of $11,256,688 at December 31,
1994 were pledged to secure public and trust deposits and securities sold under
agreements to repurchase.
Proceeds from the sale of investment securities were $3,010,938, $8,069,893,
and $3,000,000 for 1994, 1993, and 1992 respectively. Gross gains of $38,761
and no gross losses were realized in 1994, gross gains of $153,460 and gross
losses of $54,779 were realized in 1993 and gross gains of $3,064 and no gross
losses were realized in 1992.
18
<PAGE>
(5) LOANS
Loans at December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Commercial, financial and agricultural... $ 34,354,732 $ 35,069,185
Real estate - construction............... 24,683,500 16,141,642
Real estate - mortgage................... 121,266,164 104,065,362
Installment.............................. 23,631,108 20,516,600
Total.................................. $203,935,504 $175,792,789
Nonaccrual loans included above.......... $ 2,033,122 $ 1,903,741
</TABLE>
Interest income that would have been recorded on nonaccrual loans and
restructured loans for the years ended December 31, 1994, 1993, and 1992, had
they performed in accordance with their original terms, amounted to
approximately $219,000, $162,000, and $380,000, respectively. Interest income
on all such loans included in the results of operations for 1994, 1993, and 1992
amounted to approximately $99,000, $69,000, and $283,000, respectively.
Included in other assets at December 31, 1994 and 1993 are foreclosed
properties (other real estate owned) with a net book value of $1,841,628 and
$2,258,100, respectively.
The following is a reconciliation of loans outstanding to executive
officers, directors and their associates for the year ended December 31, 1994.
<TABLE>
<CAPTION>
<S> <C>
Balance at December 31, 1993............................. $ 5,366,112
New loans................................................ 3,108,411
Principal repayments..................................... (4,436,170)
Balance at December 31, 1994............................. $ 4,038,353
</TABLE>
In the opinion of management, these loans are made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other borrowers. Such loans, in the opinion
of management, do not involve more than the normal risks of collectibility.
19
<PAGE>
(6) ALLOWANCE FOR LOAN LOSSES
The following is a summary of the changes in the allowance for loan losses
for each of the years in the three-year period ended December 31, 1994:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Beginning Balance.................. $2,602,147 $2,749,604 $2,377,247
Add:
Provision charged to operations... 575,000 285,000 397,000
3,177,147 3,034,604 2,774,247
Less:
Loan charge-offs.................. 579,763 538,217 333,552
Less loan recoveries.............. 218,788 105,760 308,909
Net loan charge-offs........... 360,975 432,457 24,643
Ending balance.................... $2,816,172 $2,602,147 $2,749,604
</TABLE>
(7) PREMISES AND EQUIPMENT
Premises and equipment at December 31, 1994 and 1993 are summarized as
follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Land............................. $3,847,447 $ 3,235,837
Buildings........................ 4,727,546 4,650,575
Furniture and equipment.......... 5,632,592 5,112,327
Leasehold improvements........... 481,009 462,851
14,688,594 13,461,590
Less accumulated depreciation and
amortization.................... 7,441,496 6,926,417
Premises and equipment, net...... $7,247,098 $ 6,535,173
</TABLE>
(8) SHORT-TERM BORROWINGS
The following is a schedule of securities sold under repurchase agreements,
federal funds purchased and Federal Home Loan Bank ("FHLB") borrowings.
<TABLE>
<CAPTION>
1994
INTEREST MAXIMUM
BALANCE RATE AVERAGE OUTSTANDING
AS OF AS OF AVERAGE INTEREST AT ANY
DECEMBER 31 DECEMBER 31 BALANCE RATE MONTH-END
<S> <C> <C> <C> <C> <C>
Federal funds purchased, securities
sold under agreements to
repurchase and FHLB borrowings........ $17,734,069 4.92% $10,908,418 4.11% $17,734,069
</TABLE>
At December 31, 1994 the Corporation had two available lines of credit each
in the amount of $30,000,000 with the FHLB. At December 31, 1994, $6,000,000 of
these lines were outstanding at market interest rates for the specific advance
program and maturity. In addition, the Corporation is required to pledge
collateral to secure the advances as described in the line of credit agreements.
20
<PAGE>
<TABLE>
<CAPTION>
1993
Interest Maximum
Balance Rate Average Outstanding
as of as of Average Interest at Any
December 31 December 31 Balance Rate Month-End
<S> <C> <C> <C> <C> <C>
Federal funds purchased
and securities sold under
agreements to repurchase... $4,439,212 2.69% $7,027,979 2.84% $13,604,574
</TABLE>
(9) OTHER NONINTEREST EXPENSE
Components of other noninterest expense in excess of one percent of the
aggregate amount of total interest income and total noninterest income are as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Advertising............................... $ 408,182 $ 307,109 $ 324,830
Professional and other outside services... 743,772 891,892 649,808
FDIC insurance............................ 543,902 505,674 468,558
Printing, stationery and supplies......... 336,793 275,726 283,821
Foreclosed properties..................... 69,719 240,229 220,974
Other..................................... 1,332,631 1,184,341 1,143,869
Total noninterest expense............... $3,434,999 $ 3,404,971 $3,091,860
</TABLE>
(10) INCOME TAX
As discussed in note 1, the Corporation adopted Statement 109 as of January
1, 1993. The cumulative effect of this change in accounting for income taxes
of $300,000 is determined as of January 1, 1993 and is reported separately in
the consolidated statement of earnings for the year ended December 31,
1993.
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
Current Deferred Total
<S> <C> <C> <C>
Year ended December 31, 1994
Federal..................... $ 1,670,269 $ 85,731 $ 1,756,000
State ...................... 316,000 20,000 336,000
Total....................... $ 1,986,269 $ 105,731 $ 2,092,000
Year ended December 31, 1993
Federal..................... $ 1,265,000 $ (48,000) $ 1,217,000
State....................... 176,000 (3,000) 173,000
Total....................... $ 1,441,000 $ (51,000) $ 1,390,000
Year ended December 31, 1992
Federal..................... $ 956,000 $ (160,000) $ 796,000
State....................... 123,000 - 123,000
Total....................... $ 1,079,000 $ (160,000) $ 919,000
</TABLE>
21
<PAGE>
Income tax expense was $2,092,000, $1,390,000 and $919,000 for the years
ended December 31, 1994, 1993 and 1992, respectively and differed from the
amounts computed by applying the U.S. federal income tax rate of 34% to pretax
income as a result of the following:
<TABLE>
<CAPTION>
1994 1993 1992
% OF % of % of
PRETAX Pretax Pretax
AMOUNT INCOME Amount Income Amount Income
<S> <C> <C> <C> <C> <C> <C>
Income before income taxes.............. $ 7,351,672 $5,558,845 $4,212,386
Tax at federal income tax rate.......... 2,499,568 34.0% 1,890,007 34.0% 1,432,211 34.0%
Reasons for differences:
Tax exempt income.................... (672,474) (9.1) (611,858) (11.0) (454,973) (10.8)
Change in amount of
unrecognized tax benefits
relating to future net
deductible amounts................ - - - - 44,026 1.0
Federal alternative minimum
tax (credit)...................... - - - - (241,766) (5.7)
State income tax, net of
federal benefit................... 221,760 3.0% 114,180 2.0 81,180 1.9
Other................................... 43,146 0.6% (2,329) 0.0 58,322 1.4
Total................................. $ 2,092,000 28.5% $1,390,000 25.0% $ 919,000 21.8%
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1994 and 1993 are presented below:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Deferred Tax Assets:
Provision for loan losses................................... $ 815,883 $ 695,891
Accelerated depreciation for tax purposes under
straight line depreciation for financial statement
purposes.................................................. 8,771 9,089
Accrued expenses deductible when paid for tax
purposes.................................................. 67,951 43,125
Interest income for tax purposes over
financial statement purposes............................. - 39,267
Other real estate basis for tax purposes over
financial statement basis............................... - 59,591
Other..................................................... 19,208 21,238
Total gross deferred tax assets.......................... 911,813 868,201
Less valuation allowance.................................... - -
Deferred tax asset net of valuation...................... 911,813 868,201
Deferred Tax Liabilities:
Installment sale income for financial purposes over
tax purposes............................................ (6,816) (50,356)
Unrealized gain on securities available for sale.......... (61,472) (465,785)
Tax over book accrued expenses............................ (113,025) -
Other..................................................... (134,972) (55,114)
Total gross deferred tax liability....................... (316,285) (571,255)
Net deferred tax asset................................... $ 595,528 $ 296,946
</TABLE>
A portion of the change in the net deferred tax asset relates to unrealized
gains and losses on securities available for sale. The related current period
deferred tax benefit of $404,313 has been recorded directly to shareholder's
equity. The balance of the change in the net deferred tax asset results from the
current period deferred tax expense of $105,731.
No valuation allowance for deferred tax assets was required at December 31,
1994 or December 31, 1993. It is management's belief that realization of the
deferred tax asset is more likely than not.
Tax returns for 1992 and subsequent years are subject to examination by the
taxing authorities.
22
<PAGE>
The tax effect of changes in temporary differences during 1992 is presented
below:
<TABLE>
<CAPTION>
1992
<S> <C>
Provision for loan losses............................................................... $ (99,029)
Accelerated depreciation for tax purposes over (under) straight-line
depreciation for financial statement purposes......................................... (61,136)
Consulting and non-compete expenses for financial statement
purposes as compared to the amount deductible for income
tax purposes........................................................................... 3,764
Deferred loan fees and costs for financial statement purposes
as compared to recognizable fees and deductible costs
for income tax purposes ............................................................... (24,871)
Other, net.............................................................................. 21,272
Total .............................................................................. $(160,000)
</TABLE>
(11) RETIREMENT PLAN CONTRIBUTION
The Corporation has a qualified Retirement Savings Plan (401(k) Plan) for
all eligible employees. The provisions of the plan provide that the Corporation
will annually contribute three percent of covered compensation and match a
discretionary percentage, 119% in 1994, of contributions made by participating
employees, who may contribute between one and six percent of their covered
compensation. The Corporation's aggregate contribution was $355,253, $348,811
and $314,791 for 1994, 1993 and 1992, respectively.
(12) COMMON STOCK
On October 10, 1994, the Board of Directors of the Corporation declared a
stock split effected in the form of a 33 1/3% Common Stock dividend payable on
December 16, 1994 to shareholders of record on November 18, 1994. On October 14,
1992, the Board of Directors of the Corporation declared a 20% Common Stock
dividend payable on January 15, 1993 to shareholders of record on December 18,
1992. All per share data in the consolidated financial statements has been
retroactively adjusted for the stock dividends.
Under the terms of the First Charter Corporation Comprehensive Stock Option
Plan (the "Comprehensive Plan"), stock options (which can be incentive stock
options or non-qualified stock options) may be periodically granted to key
employees. Depending on the type of options granted, their terms may be for up
to ten years and shall generally be exercisable in five equal annual, cumulative
installments beginning not earlier than six months from the date of grant. In no
event shall the exercise price for each option granted be less than the fair
value of the common stock as of the date of grant. A maximum of 240,000 shares
(as adjusted to reflect the stock dividends) are reserved for issuance under the
comprehensive plan.
Under the terms of the 1991 and 1993 Employee Stock Purchase Plans (the
"ESPP"), stock options are periodically granted to employees, based on their
eligibility and compensation, at a price not less than 90% of the fair market
value of the shares at the date of grant. The option period is generally for a
term of two years. A maximum of 133,333 shares (as adjusted to reflect the
stock dividends) are reserved for issuance under the 1993 ESPP. The 1991 ESPP
expired in January, 1994.
The Corporation maintains the Dividend Reinvestment and Stock Purchase Plan
(the "DRIP"), pursuant to which 200,000 shares (as adjusted to reflect the stock
dividends) of common stock of the Corporation have been reserved for issuance.
Shareholders may elect to participate in the DRIP and have dividends on shares
of common stock reinvested and may make optional cash payments of up to $2,500
per calendar quarter to be invested in common stock of the Corporation. Pursuant
to the terms of the DRIP, upon reinvestment of the dividends and optional cash
payments the
23
<PAGE>
Corporation can either issue new shares valued at the then current market
value of the common stock or can purchase shares of common stock in the open
market. Newly issued common stock (14,690 shares) was distributed during the
first and second quarters of 1994. During the remaining quarters, reinvested
cash dividends and optional cash payments were used to purchase common stock on
the open market.
The following is a summary of activity under the Comprehensive Plan and
the 1993 and 1991 ESPP. All options outstanding at December 31, 1994 have been
adjusted to reflect the stock dividends.
<TABLE>
<CAPTION>
Option Balance at Balance at
Price Jan. 1, 1994 Grants Exercises Forfeits Dec. 31, 1994 Exercisable
<S> <C> <C> <C> <C> <C> <C> <C>
INCENTIVE STOCK OPTION
Options................... $ 4.37 17,053 - 2,053 800 14,200 8,039
.......................... $ 6.41 31,787 - 2,347 960 28,480 16,320
.......................... $ 10.50 38,933 - - 2,160 36,773 15,573
.......................... $ 14.72 - 28,933 - - 28,933 -
Available ............... - 135,867 (28,933) - - 106,934 -
1991 EMPLOYEE STOCK
PURCHASE PLAN
Options.................. $ 5.25 25,990 - 25,990 - - -
1993 EMPLOYEE STOCK
PURCHASE PLAN
Options...................... $ 10.13 - 25,740 - - 25,740 -
</TABLE>
(13) COMMITMENTS AND OFF BALANCE SHEET RISK
In the normal course of business, there are outstanding various commitments
to extend credit which are not reflected in the consolidated financial
statements. At December 31, 1994, preapproved but unused lines of credit for
loans totalled $49,621,745 and standby letters of credit aggregated $664,221.
These amounts represent the Bank's exposure to credit risk, and in the opinion
of management have no more than the normal lending risk that the Bank commits to
its borrowers. If these commitments are drawn, the Bank will obtain collateral
if it is deemed necessary based on management's credit evaluation of the
borrower. Collateral obtained varies but may include accounts receivable,
inventory and commercial or residential real estate. Management expects that
these commitments can be funded through normal operations.
The Bank grants primarily commercial and installment loans to customers
throughout its market area, which consists of Cabarrus, Rowan and Mecklenburg
Counties. The real estate loan portfolio can be affected by the condition of
the local real estate markets.
Average daily Federal Reserve balance requirements for the year ended
December 31, 1994 amounted to $1,449,000.
24
<PAGE>
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS
CASH, FEDERAL FUNDS SOLD AND SHORT-TERM BORROWINGS
The carrying amounts of cash, federal funds sold and short-term borrowings
approximate fair value because of the short maturity of these instruments.
SECURITIES AVAILABLE FOR SALE
The fair value of debt securities is based on bid prices published in
financial newspapers or bid quotations received from securities dealers.
The fair value of Corporate stock is estimated at the average between the
bid and ask prices published in financial newspapers. The fair value of the
remaining equity securities is estimated at the carrying value due to the
absence of market sources and similar instruments.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1994 At December 31, 1993
AMORTIZED FAIR Amortized Fair
(DOLLARS IN THOUSANDS) COST VALUE Cost Value
<S> <C> <C> <C> <C>
U.S. Government obligations
Due in one year or less................. $ 7,027 $ 7,033 $ 2,007 $ 2,015
Due after one year through five years... 9,018 9,050 16,076 17,030
U.S. Government agency obligations
Due in one year or less................. 2,009 2,007 - -
Due after one year through five years... 7,000 6,905 - -
Mortgage-backed securities
Adjustable Rate........................ 2,755 2,520 - -
Equity securities........................... 2,837 3,288 2,241 2,474
Total securities available for sale......... $ 30,646 $ 30,803 $ 20,324 $ 21,519
</TABLE>
INVESTMENT SECURITIES
The fair value of debt securities, except certain state and municipal
obligations, is estimated based on bid prices published in financial newspapers
or bid quotations received from securities dealers. The fair value of certain
state and municipal obligations is not readily available through market sources
other than dealer quotations, so fair value estimates are based on quoted market
prices of instruments similar to those being valued, adjusted for differences
between the quoted instruments and the instruments being valued.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1994 At December 31, 1993
AMORTIZED FAIR Amortized Fair
(DOLLARS IN THOUSANDS) COST VALUE Cost Value
<S> <C> <C> <C> <C>
U. S. Government obligations:
Due in one year or less.............................. $ - $ - $ 3,002 $ 3,013
U. S. Government agency obligations:
Due in one year or less.............................. 7,986 7,969 - -
Due after one year through five years................ - - 1,000 1,007
Mortgage-backed securities:
Fixed rate........................................... 16,260 15,434 22,612 22,982
State and municipal obligations:
Due in one year or less.............................. 1,943 1,965 3,455 3,580
Due after one year through five years................ 3,047 3,166 2,964 3,167
Due after five years through ten years............... 23,861 22,861 19,095 20,321
Due after ten years.................................. 7,942 7,208 13,957 14,361
Total investment securities ............................... $61,039 $ 58,603 $66,085 $68,431
</TABLE>
25
<PAGE>
LOANS
For purposes of estimating fair value of loans, the portfolio is segregated
by type based on similar characteristics such as commercial, real estate
mortgage, real estate construction and installment. The portfolio is further
divided into fixed and adjustable rate interest terms and by performing and
nonperforming categories.
The fair value of performing loans is calculated by discounting estimated
cash flows using current rates at which similiar loans would be made to
borrowers with similar credit risk. Cash flows for fixed rate loans are based
on the weighted average maturity of the specific loan category. The majority of
adjustable rate loans are prime based and are repriced either immediately or
monthly as prime changes.
The fair value of nonaccrual loans is based on the book value of each loan
less an applicable reserve for credit losses. The reserve for credit losses is
determined on a loan by loan basis based on either recent external appraisals or
internal assessments using available market information and specific borrower
information.
The following table presents fair value information for loans.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1994 At December 31, 1993
CARRYING ESTIMATED Carrying Estimated
(DOLLARS IN THOUSANDS) AMOUNT FAIR VALUE Amount Fair Value
<S> <C> <C> <C> <C>
Commercial, financial
and agricultural:
Adjustable...................... $ 19,577 $ 19,576 $ 21,826 $ 21,827
Fixed........................... 13,929 13,431 13,090 13,346
Real estate-construction
Adjustable...................... 19,100 19,099 13,662 13,662
Fixed........................... 4,982 4,394 1,624 1,640
Real estate-mortgage
Adjustable...................... 64,309 64,307 65,831 65,847
Fixed........................... 56,395 53,600 37,461 37,940
Installment
Adjustable...................... 1,958 1,958 2,505 2,505
Fixed........................... 21,652 21,010 17,890 17,888
Nonaccrual............................ 2,033 1,273 1,904 1,497
Total Loans........................... 203,935 198,648 175,793 176,152
Less: Unearned income............... (201) - (88) -
Allowance for loan losses..... (2,816) - (2,602) -
Loans, net...................... $200,918 $198,648 $173,103 $176,152
</TABLE>
26
<PAGE>
DEPOSIT LIABILITIES
The fair value of demand deposits, savings accounts and money market
deposits is the amount payable on demand as of December 31, 1994. The fair
value of certificates of deposit is based on the discounted value of
contractual cash flows. The discount rate is estimated using the rates
currently offered for deposits of similar remaining maturities.
The following table presents fair value information for deposits.
<TABLE>
<CAPTION>
At December 31, 1994 At December 31, 1993
CARRYING ESTIMATED Carrying Estimated
(Dollars in thousands) AMOUNT FAIR VALUE Amount Fair Value
<S> <C> <C> <C> <C>
Demand deposits - non-interest bearing................ $ 48,037 $ 48,037 $ 39,096 $ 39,096
Demand deposits - interest bearing.................... 50,855 50,855 50,982 50,982
Insured money market accounts......................... 32,183 32,183 35,149 35,149
Savings deposits...................................... 86,469 86,469 62,825 62,825
Certificates of deposit:
Floating rate certificates........................ 8,068 8,068 8,376 8,376
Maturing in six months or less.................... 26,785 26,680 32,701 32,734
Maturing between six months and one year.......... 7,787 7,650 10,264 10,309
Maturing between one and three years.............. 6,005 5,727 3,623 3,652
Maturing beyond three years....................... 164 164 348 371
Total................................................. $266,353 $265,833 $243,364 $243,494
</TABLE>
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
The large majority of commitments to extend credit and standby letters
of credit are at variable rates and/or have relatively short terms to
maturity. Therefore, the fair value for these financial instruments is
considered to approximate the carrying value.
27
<PAGE>
LIMITATIONS
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from
offering for sale at one time the Corporation's entire holdings of a particular
financial instrument. Because no market exists for a significant portion of the
Corporation's financial instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on-and-off balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. For example, the Bank has a substantial trust department
that contributes net fee income annually. The trust department is not considered
a financial instrument, and its value has not been incorporated into the fair
value estimates. Other significant assets and liabilities that are not
considered financial assets or liabilities include the mortgage brokerage
operations, and premises and equipment. In addition, tax ramifications related
to the realization of the unrealized gains and losses can have a significant
effect on fair value estimates and have not been considered in any of the
estimates.
(15) FIRST CHARTER CORPORATION
The principal asset of the Corporation is its investment in the Bank, and
its principal source of income is dividends from such subsidiary. Certain
regulatory and other requirements restrict the lending of funds by the Bank to
the Corporation and the amount of dividends which can be paid to the
Corporation. In addition, the Comptroller of the Currency may prohibit the
payment of dividends by a national bank if it determines that such payment would
constitute an unsafe or unsound practice. At December 31, 1994, the Bank had
available undivided profits of approximately $10,422,000 for payment of
dividends without obtaining prior regulatory approval. At December 31, 1994,
approximately $24,028,000 of the Corporation's investment in its subsidiary was
restricted as to transfer to the Corporation without obtaining prior regulatory
approval.
28
<PAGE>
The Parent Company's balance sheet data as of December 31, 1994 and 1993 and
related income and cash flow statement data for each of the years in the three-
year period ended December 31, 1994 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash.................................................... $ 494,685 $ 1,582,144
Securities available for sale........................... 2,089,695 1,333,402
Investment in the Bank.................................. 34,450,886 32,510,663
Receivable from the Bank................................ 600,000 382,000
Fixed assets........................................... 587,035 -
Other assets 19,523 19,523
$ 38,241,824 $ 35,827,732
Accrued liabilities..................................... $ 778,242 $ 474,516
Shareholders' equity.................................... 37,463,582 35,353,216
$ 38,241,824 $ 35,827,732
INCOME STATEMENT DATA:
Dividends from the Bank................................. $ 2,450,000 $ 1,438,000 $ 1,141,000
Loss on write-down in value of marketable
equity securities...................................... - - (48,300)
Other operating income (expense)....................... 103,292 3,765 (38,263)
Income before equity in undistributed net
income of subsidiary................................... 2,553,292 1,441,765 1,054,437
Equity in undistributed net income of
subsidiary............................................ 2,706,380 3,027,080 2,238,949
Net income............................................. $ 5,259,672 $ 4,468,845 $ 3,293,386
CASH FLOW STATEMENT DATA:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................. $ 5,259,672 $ 4,468,845 $ 3,293,386
Net gain on securities available for sale
transactions.......................................... (74,142) - -
Recognition of loss on write-down in value
of marketable equity securities........................ - - 48,300
Increase in accrued liabilities......................... 218,200 31,945 88,467
Decrease (increase) in other assets.................... - (19,079) 1,415
Increase in receivable from the Bank.................... (218,000) (30,000) (89,000)
Increase in investment in the Bank...................... (2,706,380) (3,027,080) (2,238,949)
Net cash provided by operating activities.............. 2,479,350 1,424,631 1,103,619
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of available for sale securities............... (626,594) - -
Purchase of investment securities....................... - (615,690) (5,350)
Purchase of premises and equipment...................... (587,035) - -
Proceeds from sale of securities available for
sale.................................................. 163,741 - -
Net cash used by investing activities.................. (1,049,888) (615,690) (5,350)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of common stock................................ (1,066,477) (549,678) -
Proceeds from issuance of common stock upon
exercise
of stock options....................................... 442,183 82,880 42,438
Cash dividends paid..................................... (1,892,627) (1,437,955) (1,142,783)
Net cash used by financing activities................... (2,516,921) (1,904,753) (1,100,345)
Net decrease in cash.................................. (1,087,459) (1,095,812) (2,076)
Cash at beginning of year............................... 1,582,144 2,677,956 2,680,032
Cash at end of year..................................... $ 494,685 $ 1,582,144 $ 2,677,956
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
Unrealized gain (loss) in value of marketable
equity securities..................................... $ - $ - $ 18,900
Investment securities transferred to available for
sale.................................................. $ - $ 1,101,290 $ -
Unrealized gain in value of securities available
for sale (net of tax effect of $85,526 and $90,524)...$ 133,772 $ 141,588 $ -
Unrealized gain (loss) in value of securities
available for sale of the subsidiary bank (net of tax
effect of ($489,839) and 375,261)..................... $ (766,157) $ 587,947 $ -
Issuance of stock dividend............................. $ 5,798,151 $ - $ 5,869,451
</TABLE>
29
<PAGE>
(16) SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
1994
(DOLLARS IN THOUSANDS, EXCEPT INCOME FIRST SECOND THIRD FOURTH
PER SHARE) QUARTER QUARTER QUARTER QUARTER TOTAL
<S> <C> <C> <C> <C> <C>
Total interest income..................... $ 4,856 $ 5,278 $5,707 $6,017 $21,858
Total interest expense.................... 1,647 1,728 1,905 2,080 7,360
Net interest income....................... 3,209 3,550 3,802 3,937 14,498
Provision for loan losses................. 75 125 150 225 575
Total noninterest income.................. 931 891 860 798 3,480
Total noninterest expense................. 2,528 2,510 2,439 2,574 10,051
Income taxes.............................. 376 491 647 578 2,092
Net income................................ $ 1,161 $ 1,315 $1,426 $1,358 $ 5,260
Per share data:
Primary income per share.................. $ 0.25 $ 0.28 $ 0.30 $ 0.29 $ 1.12
Income per share assuming full dilution... $ 0.25 $ 0.28 $ 0.30 $ 0.29 $ 1.12
</TABLE>
<TABLE>
<CAPTION>
1993
(DOLLARS IN THOUSANDS, EXCEPT INCOME First Second Third Fourth
PER SHARE) Quarter Quarter Quarter Quarter Total
<S> <C> <C> <C> <C> <C>
Interest income.............................. $ 4,732 $ 4,683 $ 4,803 $ 4,974 $ 19,192
Interest expense............................. 1,700 1,676 1,629 1,626 6,631
Net interest income.......................... 3,032 3,007 3,174 3,348 12,561
Provision for loan losses.................... - 105 180 - 285
Noninterest income........................... 772 798 817 1,038 3,425
Noninterest expense.......................... 2,501 2,419 2,447 2,775 10,142
Income taxes................................. 337 304 342 407 1,390
Net income before cumulative effect
of a change in accounting principle........ 966 977 1,022 1,204 4,169
Cumulative effect of prior years of
changing the method of accounting for
income taxes.............................. 300 - - - 300
Net income................................... $ 1,266 $ 977 $ 1,022 $ 1,204 $ 4,469
Primary income per share data:
Net income before cumulative effect.........$ 0.21 $ 0.20 $ 0.22 $ 0.26 $ 0.89
Net income from cumulative effect........... 0.06 - - - 0.06
Net income................................. $ 0.27 $ 0.20 $ 0.22 $ 0.26 $ 0.95
Income per share data assuming full dilution:
Net income before cumulative effect...... $ 0.21 $ 0.20 $ 0.22 $ 0.26 $ 0.89
Net income from cumulative effect........ 0.06 - - - 0.06
Net income................................... $ 0.27 $ 0.20 $ 0.22 $ 0.26 $ 0.95
</TABLE>
30
<PAGE>
First Charter Corporation and Subsidiary
Management's Discussion and Analysis of Results of
Operations and Financial Condition
First Charter Corporation (the "Corporation"), headquartered in Concord
NC, is a North Carolina bank holding company. First Charter National Bank
(the "Bank"), the wholly owned subsidiary of the Corporation, is a full-
service bank and trust company with twelve offices located in Cabarrus, Rowan
and northern Mecklenburg counties.
Through its branch locations, the Bank provides a wide range of deposit
accounts; commercial, consumer, home equity and residential mortgage loans;
personal corporate trust services; safe deposit boxes; and automated banking.
The following discussion and analysis should be read in conjunction with
the consolidated financial statements of the Corporation and the notes thereto
included elsewhere in this report.
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
1994 VERSUS 1993
Overview
First Charter Corporation earned $5,259,672, or $1.12 per share in 1994,
a 26.2% increase from $4,168,845, or $0.89 per share in 1993 (excluding the
effect of a change in the method of accounting for income taxes). A key
factor contributing to the increase in net income was a 15.4% increase in net
interest income. These earnings equate to a return on average assets of 1.74%
for 1994, compared to 1.52% for 1993 and a return on average equity of 14.37%
in 1994, versus 12.42% in 1993. The 1993 ratios exclude the effect of the
change in accounting method in 1993.
Total assets at December 31, 1994, were $324,048,652, up 13.6% from the
level at year-end 1993. Gross loans increased 16.0% to $203,935,504 and total
deposits increased 9.5% to $266,352,534.
Liquidity
Liquidity is the ability to maintain cash flows adequate to fund
operations and meet obligations and other commitments on a timely and cost-
effective basis. Liquidity is provided by the ability to attract deposits,
flexible repricing schedules in a sizeable portion of the loan portfolio,
current earnings, a strong capital base and the ability to use alternative
funding sources that complement normal sources. Management's asset-liability
policy is to maintain or enhance the net interest margin and provide adequate
liquidity to meet continuing loan demand and withdrawal requirements and to
service normal operating expenses. If additional funding sources were needed,
the Bank could use the investment portfolio to secure public deposits, draw on
approved Federal Fund lines at correspondent banks, and borrow from the
Federal Reserve discount window. In addition to these sources, the Bank is a
member of the Federal Home Loan Bank ("FHLB") System, which provides access to
FHLB lending sources. Another source of liquidity is the securities available
for sale portfolio. See "Securities Available for Sale" for a further
discussion. Management believes the Bank's sources of liquidity are adequate
to meet loan demand, operating needs and deposit withdrawal requirements.
Asset Liability Management and Interest Rate Sensitivity
One of the primary objectives of asset/liability management is to
maximize net interest margin while minimizing the earnings risk associated
with changes in interest rates. One method used to manage interest rate
sensitivity is to measure, over various time periods, the interest rate
sensitivity positions, or gaps; however, this method addresses only the
magnitude of timing differences and does not address earnings or market value.
Management uses an earnings simulation model to assess the amount of earnings
at risk due to changes in interest rates. This model is updated monthly and
is based on a range of interest rate scenarios. Management believes this
method more accurately measures interest rate risk.
The Bank's balance sheet is liability sensitive, meaning that in a given
period there will be more liabilities than assets subject to immediate
repricing as market rates change. Because immediately rate sensitive interest
bearing liabilities exceed rate sensitive assets, the earnings position could
improve in a declining rate environment and could deteriorate in a rising rate
environment, depending on the correlation of rate changes in these two
categories. At December 31, 1994 total rate sensitive liabilities through one
year were $224.9 million compared to rate sensitive assets of $135.8 million
for a cumulative gap of $89 million. Although interest rates increased during
1994, the
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earnings position improved because interest income was positively
impacted by the increases in the prime rate of interest from 6.0% at December
31, 1993 to 8.5% at December 31, 1994. Funding costs increased, but not as
quickly or in the same magnitude as the repricing of prime-based loans. As
liabilities are repriced in response to rising rates, net interest income
could decline.
Capital Resources
At December 31, 1994, total stockholders' equity was $37,463,582, a 6.0%
increase from 1993. The increase in capital is primarily attributable to
retained earnings. Cash dividends declared in 1994 were $.41 compared to $.31
in 1993. The Corporation also declared and paid a 33 1/3% stock dividend during
the fourth quarter of 1994. Assuming the 1994 fourth quarter dividend of $.13
per share remains unchanged during 1995, projected cash dividend payments to
shareholders will increase 26.8% in 1995.
During 1994, the Corporation purchased and retired approximately 62,000
shares of its common stock for $1,066,477. The shares were purchased and
retired to maintain the level of shares outstanding in anticipation of new
shares to be issued under the Corporation's various stock purchase and stock
option plans.
The primary source of funds for dividends paid by the Corporation to its
shareholders is dividends received from the Bank. The amount of dividends
that the Bank may pay is subject to regulation by the Office of the
Comptroller of the Currency (OCC). Under current regulations, the amount that
may be paid in any one year without approval of the OCC is the sum of its net
profits for that year and its retained net profits for the preceding two
years. In addition, the OCC may prohibit the payment of dividends by a
national bank if it determines that such payment would constitute an unsafe or
unsound practice. At December 31, 1994, the Bank had available undivided
profits of approximately $10,422,000 for payment of dividends without
obtaining prior regulatory approval. In 1995, the Bank can initiate dividend
payments without the approval of the OCC in an amount not exceeding its
retained net profits for 1993 and 1994 (approximately $5,733,000) plus an
additional amount equal to its net profits for 1995 up to the date of any such
dividend declaration.
The Corporation must comply with regulatory capital requirements
established by the Federal Reserve Board (FRB). These standards require the
Corporation to maintain a minimum ratio of Tier I Capital (as defined) to
total risk-weighted assets of 4.00% and a minimum ratio of Total Capital (as
defined) to risk-weighted assets of 8.00%. Tier I Capital is comprised of
total shareholders' equity calculated in accordance with generally accepted
accounting principles less certain intangible assets, and Total Capital is
comprised of Tier I Capital plus certain adjustments, the largest of which for
the Corporation is the general allowance for loan losses. Risk-weighted
assets refer to the on- and off-balance sheet exposures of the Corporation
adjusted for their related risk levels using amounts set forth in FRB
regulations.
In addition to the risk-based capital requirements described above, the
Corporation is subject to a leverage capital requirement, which calls for a
minimum ratio of Tier I Capital (as defined previously) to total assets of 3%
to 5%.
At December 31, 1994, the Corporation and the Bank were in compliance
with all existing capital requirements as summarized in the table below.
<TABLE>
<CAPTION>
Risk-Based Capital
Leverage Capital Tier 1 Capital Total Capital
Amount Percentage (1) Amount Percentage (2) Amount Percentage (2)
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Actual.................. $36,963 11.41% $36,963 16.42% $39,776 17.67%
Required............... 12,958 4.00 9,002 4.00 18,005 8.00
Excess.................. 24,005 7.41 27,961 12.42 21,771 9.67
</TABLE>
(1) Percentage of total adjusted assets. The FRB minimum
leverage ratio requirement is 3% to 5%, depending on the
institution's composite rating as determined by its
regulators. The FRB has not advised the Corporation of any
specific requirement applicable to it.
(2) Percentage of risk-weighted assets.
Regulatory Recommendations
Management is not presently aware of any current recommendations to the
Corporation or to the Bank by regulatory authorities which, if they were to be
implemented, would have a material effect on the Corporation's liquidity,
capital resources, or operations.
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BALANCE SHEET ANALYSIS
Securities Available for Sale
Securities available for sale are a component of the Corporation's
asset/liability management strategy and may be sold in response to liquidity
needs, changes in interest rates, changes in prepayment risk, and other
factors. They are accounted for at fair value with unrealized gains and
losses recorded as a separate component of stockholders' equity.
At December 31, 1994, securities available for sale were $30,803,322 or
9.5% of total assets compared to $21,518,553 or 7.5% of total assets at year-
end 1993. During a period of rising interest rates and a time of increased
loan demand, management purchased short term agency obligations and adjustable
rate mortgage-backed securities to increase its flexibility to manage the
balance sheet and thus attempt to maintain a stable net interest margin. The
fair value of these assets is approximately $157,000 above their amortized
cost at December 31, 1994. The average yield on the securities available for
sale portfolio was 7.02% at December 31, 1994.
The average life of the portfolio was 4.52 years at December 31, 1994
compared to 2.31 years at year-end 1993.
Investment Securities
Investment securities totaled $61,038,563 or 18.8% of total assets at
December 31, 1994. Investment securities are carried at cost and adjusted for
amortization of premiums and accretion of discounts. The market value of
investment securities at December 31, 1994 was $58,602,959.
The investment securities portfolio decreased approximately $5 million
due to the sale of two U.S. Treasury notes, both of which were sold less than
ninety days from scheduled maturity, paydowns in the mortgage-backed portfolio
and maturities in the municipal portfolio. During the year excess funds were
invested in sixty day Federal Home Loan Bank discount notes as an alternative
to federal funds.
The average yield earned on investment securities in 1994 was 7.34%
compared to 7.69% in 1993. The average maturity of the portfolio was 7.31
years at December 31, 1994 compared to 8.73 years at year-end 1993.
Loans
As a result of increased loan demand during 1994, gross loans increased
16.0% to $203,935,504 at December 31, 1994, from $175,792,789 at December 31,
1993.
The loan portfolio at December 31, 1994 was composed of 16.8%
commercial, financial, and agricultural loans, 12.1% real estate construction
loans, 59.5% real estate mortgage loans, and 11.6% installment loans. This
compares to a composition of 19.9% commercial, 9.2% real estate construction,
59.2% real estate mortgage, and 11.7% installment at December 31, 1993. The
increase in construction loans is attributable to an increase in real estate
building in the Corporation's market area. Approximately $14,000,000 of the
real estate mortgage loans are loans for which the principal source of
repayment comes from the sale of real estate. The remaining $107,266,000 of
real estate mortgage loans are (i) other commercial loans for which the
primary source of repayment is derived from the ongoing cash flow of the
business and which are also collateralized by real estate - $63,401,000, (ii)
personal installment loans which are collateralized by real estate -
$23,363,000, (iii) home equity loans - $13,492,000, and (iv) individual
residential mortgage loans - $7,010,000.
Asset Quality
Nonperforming assets at December 31, 1994 were $5,062,343 or 2.5% of
gross loans and foreclosed properties compared to $4,375,918 or 2.5% at
December 31, 1993. The level of nonperforming assets is presented in the
table below:
December 31, December 31,
1994 1993
Nonaccrual loans $2,033,122 $1,903,741
Loans 90 days or more
past due and still
accruing 1,187,593 214,077
Foreclosed Property 1,527,666 1,944,138
Other Real Estate 313,962 313,962
Interest income that would have been recorded on nonaccrual loans for
the year ended December 31, 1994, had they performed according to their
original terms amounted to approximately $219,000. Interest income on
nonaccrual loans included in the results of operations for the year amounted
to approximately $99,000.
Accruing loans 90 days or more past due increased to .58% of gross loans
at December 31, 1994 compared to .12% of gross loans at December 31, 1993.
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Management's policy for any accruing loan past due greater than 90 days is to
perform an analysis of the loan, including a consideration of the financial
position of the borrower(s) and any guarantor(s) as well as the value of the
collateral, and to make an assessment as to whether collectibiltiy of the
principal and the interest appears probable. Based on such a review,
management has determined it is probable that the principal as well as the
accruing interest on these loans will be collected in full.
Net charge-offs for the year were $360,975 or .19% of average loans
compared to $432,000 or .26% of average loans in 1993.
Foreclosed property declined 21.4% to $1,527,666 at December 31, 1994
from $1,944,138 at December 31, 1993. At December 31, 1994 two parcels of
land comprised 94.9% of the 1994 balance. Management is currently negotiating
the sale of these two properties.
All estimates of the loan portfolio risk elements, including the
adequacy of the allowance for loan losses, are subject to general and local
economic conditions, among other factors, which are unpredictable and beyond
management's control. Since a significant portion of the loan portfolio is
comprised of real estate loans and loans to area businesses, a continued risk
is that the real estate market and economic conditions could change and could
result in future losses or require increases in the provision for loan losses.
Management uses several measures to control this risk. For example, all loans
over a certain dollar amount must receive an in-depth review by an analyst in
the Bank's Credit Administration department. Any issues regarding risk
assessments of those credits are addressed by the bank's loan administration
and senior credit officer and factored into management's decision to originate
or renew the loan. Large commitments above $750,000 are reviewed and approved
by a senior loan committee comprised of senior management, the senior credit
officer and senior lending officers of the bank. Loans above $1,500,000 are
reviewed by the loan committee of the Board of Directors. The Corporation
also continues to employ an independent third party risk assessment group to
review the underwriting, documentation and risk grading analysis and render a
semiannual opinion of the adequacy of the allowances for loan losses. This
third party group reviews all loan relationships over $250,000 and a sampling
of all other credits.
Management uses the information developed from the procedures described
above in evaluating and grading the loan portfolio. This continual grading
process is used to monitor the credit quality of the loan portfolio and to
assist management in determining the appropriate level of the allowance for
loan losses. For a further discussion of this system, see "Allowance and
Provision for Loan Losses."
In the normal course of business, there are outstanding various
commitments to extend credit which are not reflected in the consolidated
financial statements. At December 31, 1994, preapproved but unused lines of
credit for loans totalled $49,621,745 and standby letters of credit aggregated
$664,221. The amounts represent the Bank's exposure to credit risk, and in
the opinion of management have no more than the normal lending risk that the
Bank commits to its borrowers. If these commitments are drawn, the Bank will
obtain collateral if it is deemed necessary based on management's credit
evaluation of the borrower. Collateral obtained varies but may include
accounts receivable, inventory, and commercial or residential real estate.
Management expects that these commitments can be funded through normal
operations.
The Bank grants primarily commercial and installment loans to customers
throughout its market area, which consists of Cabarrus, Rowan and northern
Mecklenburg Counties. The real estate loan portfolio can be affected by the
condition of the local real estate markets.
Deposits
Total deposits at December 31, 1994 were $266,352,534, a 9.4% increase
from a 1993 year-end level of $243,363,924. Average non-interest bearing
demand deposits increased $6.0 million or 16.8%; average interest bearing
demand deposits increased $4.8 million or 10.7%; average insured money market
accounts decreased $4.6 million or 12.0%; average savings deposits increased
$19.3 million or 35.6%; while average certificates of deposit decreased $4.9
million or 8.5%. The majority of deposit growth was in a penalty free
certificate of deposit product for customers over the age of fifty. Because
the certificate is penalty free and the customer may exercise the option to
redeem the certificate and open a new certificate at a higher rate as many
times as the customer wishes, regulation requires that the certificate be
classified as a savings deposit, thus the increase in savings deposits.
EARNINGS PERFORMANCE
Net Interest Income
Net interest income, the difference between total interest income and
total interest expense, is the Corporation's principal source of earnings.
For the year ended December 31, 1994 net interest income was
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$14,498,352, an increase of 15.4% from net interest income of
$12,560,520 in 1993. The increase is attributable to an increase in the
level of interest earning assets as well as an improvement in the net
interest margin (the difference between the yield on earning assets and
the interest rate paid for liabilities to support those assets) to 5.61%
in 1994 from 5.38% in 1993. The improvement in the margin is
attributable to an increase in yields on loans with only a slight
increase in funding costs.
The average yield on earning assets was 8.25% in 1994 compared to 8.01%
in 1993. The average rate paid on interest-bearing deposits and borrowings
was 3.32% compared to 3.27% in 1993. See "Asset/Liability Management" for
additional discussion.
Allowance and Provision for Loan Losses
Management utilizes a system for risk grading the loan portfolio to
determine the appropriate amount of the allowance for loan losses. This
analysis is performed monthly and is independent from any analysis in
conjunction with the origination of loans. Individual loans are assigned a
risk grade based on their credit quality, which is subject to change as
conditions warrant. Any changes in those risk assessments as determined by
the outside risk assessment group is also considered. Each grade determines
the percentage of the outstanding loan balance allocated to the loan loss
reserve. Loans with the weaker credit quality are individually analyzed to
determine a specific allowance which reflects management's best estimate of
the risk associated with each credit. An estimate of an allowance is made for
all other loans in the portfolio based on their assigned risk grade, type of
loan and other matters related to credit risk. In the allowance for loan loss
analysis process, the bank also aggregates the loans into pools of similar
credits and reviews the historical loss experience associated with these pools
as additional criteria to allocate the allowance to each category. The model
also takes into consideration off-balance sheet credit loss. However, at
December 31, 1994, a reserve for off-balance sheet credit loss was not
considered necessary based on management's review of off-balance sheet items.
In addition, there were no realized credit losses due to off-balance sheet
activities for the three years ended December 31, 1994.
The provision for loan losses for 1994 was $575,000 compared to $285,000
in 1993. The increase in the provision was primarily attributable to the
increase in gross loans outstanding. The allowance for loan losses as a
percentage of gross loans outstanding was 1.38% at December 31, 1994 compared
to 1.48% at year-end 1993.
Noninterest Income
Noninterest income was $3,479,837 in 1994 compared to $3,424,910 in
1993. Trust income increased approximately $120,000 or 9.5%. The increase is
attributable to fees recognized on several estate settlements that may be
nonrecurring and an increase in fees. Although deposits increased in 1994,
service charges decreased approximately $24,000. The decrease was primarily
in commercial accounts resulting from the maintenance of higher deposit
balances and an increase in the earnings credit rate for balances. The
decrease in other noninterest income is attributable to decreases in mortgage
originations sold on a brokered basis. Gains on investment securities were
related to calls in the municipal portfolio and the sale of two U.S. Treasury
notes, both of which were sold less than ninety days from scheduled maturity.
Noninterest Expense
Total noninterest expense was $10,051,517 in 1994 compared to
$10,141,585 in 1993, a 0.9% decrease. During the first quarter of 1994, the
Bank completed a comprehensive reorganization plan that simplified management
structure, changed some positions from full-time to part-time and eliminated
several positions. As a result of this, salary expense decreased
approximately $228,000, but was partially offset by increases in management
bonuses and 401-(k) matching contributions. The increase in these two items
is attributable to improved profitability in 1994. Total salaries and
benefits decreased approximately $45,000 or 0.8%. It is expected that salary
expense will be basically unchanged in 1995 inclusive of normal salary
increases and the addition of several new positions.
Occupancy and equipment decreased approximately $75,000 or 5.4% due to a
reduction in depreciation expense. The reduction is the result of major
investments in fixed assets during 1989 and 1988 which were fully depreciated
in 1993 or mid-1994. The Corporation has made a commitment to invest
approximately $650,000 in check imaging technology in 1995; therefore
occupancy and equipment should increase in 1995.
Total advertising expense for 1994 increased approximately $101,000 or
32.9%. The increase is attributable to production and marketing related to
several new products including a debit card, a lower cost checking and savings
account, and a first time home buyers mortgage product.
Other professional fees decreased approximately $148,000 due to fees
paid to consultants in the
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fourth quarter of 1993 related to the reorganization in 1994. Also,
during the third quarter of 1994, a significant portion of the
investment management of trust assets, previously out-sourced, was
brought in-house.
Stationery and supplies increased approximately $61,000 due to printing
and production cost of the annual report and annual meeting.
Other noninterest expense increased approximately $148,000. This
increase is attributable to various items including an increase in software
maintenance, processing expenses and one time fees associated with the debit
card, increased postage, dues and education, and property taxes paid on a
problem asset.
Total income tax expense for 1994 was $2,092,000 versus $1,390,000 in
1993. The increase is attributable to an increase in income before income
taxes and an increase in the effective tax rate from 25% in 1993 to 28.5% in
1994. The change in the effective rate is attributable to a decrease in tax-
exempt income relative to income before income taxes.
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
1993 VERSUS 1992
First Charter Corporation earned $4,468,845, or $0.95 per share, in 1993,
a 35.7% increase from $3,293,386, or $0.70 per share in 1992. Of that amount,
$300,000 represented the cumulative effect on prior years of adopting
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
(Statement 109). Net income, excluding the effect of the accounting change,
was $4,168,845, or $0.89 per share, representing a 26.7% increase over 1992.
Earnings increased primarily due to higher net interest income.
Total assets at December 31, 1993 were $285,189,867, up 2.8% from the
level at year-end 1992. Gross loans increased 7.9% to $175,792,789 and total
deposits increased 5.8% to $243,363,924.
Excluding the effect of the change in accounting method, the
Corporation's return on average assets was 1.52% for 1993, compared with 1.30%
in 1992. The return on average equity was 12.42% in 1993, versus 10.66% in
1992.
On December 31, 1993, the Corporation adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("Statement 115"), which was issued by the Financial
Accounting Standards Board in May 1993.
In accordance with Statement 115, the Corporation reclassified, as of
December 31, 1993, $18.1 million of U.S. Treasury notes and $2.2 million of
equity securities, that previously were held as investment securities, as
securities available for sale. The Corporation recorded a fair value
adjustment for this change in accounting principle amounting to $1,194,300 for
the unrealized gain on securities available for sale. The Corporation also
recorded an increase to deferred income taxes payable of $465,785 as well as
an increase to stockholders' equity of $728,535. Securities available for
sale represent 7.5% of total assets at December 31, 1993.
At December 31, 1993, investment securities were $66,085,388, which
represented 23.2% of total assets. Investment securities were carried at
cost, adjusted for amortization of premiums and accretion of discounts in
accordance with Statement 115 because management determined that the
Corporation had the ability and the intent to hold them to maturity. At
December 31, 1992 investment securities were $84,798,582, which represented
30.6% of total assets. During 1992, all securities were classified as
investment securities because of the Corporation's intent to hold them on a
long-term basis and were accordingly carried at amortized cost.
During 1993 the Bank purchased approximately $15.4 million in nontaxable
securities, $5.0 million in U.S. Treasury notes and $7.1 million in mortgage-
backed securities. These purchases were primarily funded by maturities in the
portfolio and prepayments in the mortgage-backed security portfolio. The Bank
also purchased approximately $1,475,000 in equity securities of which $870,000
was Federal Home Loan Bank stock purchased as a requirement for FHLB
membership.
The average yield earned on investment securities in 1993 was 7.69%
compared to 8.47% in 1992. The average maturity of the portfolio was 8.73
years at December 31, 1993 compared to 6.14 years at December 31, 1992. The
maturity extension was due to the addition of $15.4 million of nontaxable
securities which were purchased in the ten to fifteen year range. The market
value of investment securities at December 31, 1993 was $68,430,703.
As a result of increased emphasis in consumer lending and the purchase
of several groups of seasoned commercial real estate mortgage loans and
residential mortgage loans, gross loans increased 7.9% to $175,792,789 at
December 31, 1993, from $162,923,958 at December 31, 1992.
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The composition of the portfolio changed somewhat as the level of real
estate construction loans as a percentage of the total portfolio declined to
9.2% in 1993 from 11.5% in 1992 and installment loans increased to 11.7% in
1993 compared to 10.4% in 1992. The change in the composition was
attributable to the increased emphasis in consumer lending. Commercial loans
comprised 19.9% of the portfolio compared to 19.7% in 1992; and real estate
mortgage comprised 59.2% of the portfolio compared to 58.4% in 1992.
Approximately $12,000,000 of real estate mortgage loans were loans for which
the principal source of repayment comes from the sale of real estate. The
remaining $92,065,000 of real estate mortgage loans were (i) other commercial
loans for which the primary source of repayment is derived from the ongoing
cash flow of the business and which are also collateralized by real estate,
(ii) home equity loans, and (iii) individual mortgage loans. During the
latter part of 1993, the Bank increased its emphasis on originating
residential mortgage loans and began retaining a portion of these loans in its
portfolio. Prior to this time, the Bank acted only as a correspondent lender.
Nonperforming assets at December 31, 1993 were $4,314,357 or 2.4% of
gross loans and foreclosed properties compared to $8,142,592 or 4.9% at
December 31, 1992. The level of nonperforming assets is presented in the
table below.
December 31, December 31,
1993 1992
Loans:
Nonaccrual loans $ 1,903,741 $2,039,000
Loans 90 days or more past due and
still accruing 214,077 213,000
Restructured loans - 3,266,000
Foreclosed Property 1,944,138 2,320,630
Other Real Estate 313,962 303,962
The reduction in restructured loans was attributable to a single, large
commercial real estate development loan. This loan was removed from
restructured status in June 1993 because the loan was restructured at a market
rate of interest and had performed in accordance with the restructured terms
for twelve months.
During 1993 a $780,000 loan for which the repayment source is dependent
upon the sale of real estate was classified as nonaccrual. In addition, based
on management's analysis of this loan, a specific reserve of $150,000 was
recorded in the third quarter of 1993. Also during 1993 several credits were
either paid out or charged off, resulting in a net decrease in nonaccruals of
approximately $135,000 from 1992. Accruing loans 90 days or more past due
remained at a low level of .12% of gross loans at December 31, 1993 compared
to .13% of gross loans at December 31, 1992. Management's policy for any
accruing loan past due greater than 90 days is to perform an analysis of the
loan, including a consideration of the financial position of the borrower(s)
and any guarantor(s) as well as the value of the collateral, and to make an
assessment as to whether collectibility of the principal and the interest
appears probable. Based on such a review, management determined that it is
probable that the principal as well as the accruing interest on these loans
would be collected in full.
Net charge-offs for the year were approximately $432,000 or .26% of
average loans compared to net charge-offs of approximately $25,000 or .02% of
average loans in 1992. The increase in net charge-offs was primarily the
result of two fully reserved loans which were charged off in the first and
second quarters of 1993.
Foreclosed property declined 19.4% to $1,944,138 at December 31, 1993
from $2,320,630 at December 31, 1992. The December 31, 1993 balance consisted
of 13 individual properties. One parcel of undeveloped land comprised 73.7%
of the total at December 31, 1993. During the third quarter of 1993, this
property was successfully rezoned to allow for a mix of single family and
multi family development. Eleven of the remaining 12 properties were
residential. Three of these properties, representing 14.7% of the total, were
under sales contracts at December 31, 1993.
Deposits were $243,363,924 at year-end 1993 compared with $229,994,574
at year-end 1992, a 5.8% increase. Average non-interest bearing deposits
increased $2.7 million or 8.2%; average interest bearing demand deposits
increased $7.4 million or 19.5%; average savings deposits increased $17.3
million or 46.7%; while average time certificates of deposit decreased $8.0
million or 12.1%.
For the year ended December 31, 1993 net interest income was
$12,560,520, an increase of 11.7% from net interest income of $11,240,858 for
1992. The increase was attributable to higher volumes of interest earning
assets as well as an improvement in the net interest margin.
The average level of interest earning assets increased approximately
$21.4 million while average interest bearing liabilities increased
approximately $17.0 million. The increase in interest earning assets was
comprised of a $15.0 million increase in the average level of investment
securities and a $7.5 million increase in the average level of loan
outstandings. The net
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interest margin improved from 5.20% in 1992 to 5.38% in 1993 primarily
because the average tax equivalent yield earned on earning assets
declined only 43 basis points, while the average rate paid on interest
bearing liabilities declined 75 basis points. A major factor
contributing to the improved spread was the Bank's ability to reduce its
cost of funds during 1993 as time deposits matured and were repriced at
lower current market rates.
The provision for loan losses for 1993 was $285,000, a decrease of
$112,000, or 28.2% from 1992. The decrease in the provision was primarily
attributable to lower provision requirements based on the Corporation's
reserve modeling process. The allowance for loan losses as a percentage of
gross loans outstanding, excluding loans held for sale, decreased to 1.48% at
year-end 1993 from 1.69% at year-end 1992. The lower provision and allowance
requirements resulted from an overall improvement in the Corporation's loan
portfolio as borrowers' financial position strengthened due to improving
economic conditions, as well as the payoff of several credits which had large
specific reserve allocations.
Noninterest income was $3,424,910 at December 31, 1993, representing a
$267,493 or 8.5% increase over 1992. Trust income increased $119,000 or 10.4%
due to an increase in trust assets. Securities gains increased $144,000 due
to gains recognized on the sale of several U.S. Treasury notes and the absence
in 1993 of the loss recognized in 1992 on the write-down of a marketable
equity security of $48,300.
Total noninterest expense increased approximately $353,000, or 3.6%, at
December 31, 1993. Salary and fringe benefits increased $155,000, or 3.0%.
This increase was attributable to an increase in the amount accrued for
bonuses and 401-(k) matching contributions and an increase in health insurance
premiums. The payment of bonuses and increased 401-(k) matching contributions
were attributable to improved profitability in 1993.
Occupancy and equipment decreased $116,000 or 7.6%. This was primarily
related to a decrease in depreciation expense. There were major expenditures
for furniture and equipment for branches which opened in 1987 and 1988 and new
data processing hardware and software purchased in 1987. These items were
fully depreciated in 1992 or mid-1993, resulting in the reduction in
depreciation expense.
Professional fees increased $242,000 or 37.3%. The increase was
attributable to the use of consultants to evaluate efficiency and productivity
in the branch network. Increases in FDIC insurance were attributable to
increases in the deposit base. Other noninterest expenses increased because
of increases in mainframe software maintenance, federal reserve charges, and
securities safekeeping fees of the trust department.
Total income tax expense for 1993 was $1,390,000 versus $919,000 in
1992. The increase was attributable to an increase in income before taxes and
an increase in the effective tax rate from 21.8% in 1992 to 25.0% in 1993.
The change in the effective rate was attributable to the absence in 1993 of
the utilization of approximately $242,000 of alternative minimum tax credits
in 1992.
Accounting and Regulatory Matters
Impairment of Loans
The Financial Accounting Standards Board (FASB) has issued Standard No.
114 "Accounting by Creditors for Impairment of a Loan," which requires that
all creditors value all specifically reviewed loans for which it is probable
that the creditor will be unable to collect all amounts due (principal and
interest) according to the terms of the loan agreement at either the present
value of expected cash flows discounted at the loan's effective interest rate,
or if more practical, the market price or value of collateral. This Standard
is required for fiscal years beginning after December 15, 1994. The FASB also
issued Standard No. 118, "Accounting by Creditors for Impairment of a Loan --
Income Recognition and Disclosures," that amends FASB Standard No. 114 to
allow a creditor to use existing methods for recognizing interest income on an
impaired loan and by requiring additional disclosures about how a creditor
recognizes interest income related to impaired loans. This Standard is to be
implemented concurrently with Standard No. 114. The Corporation does not
expect these Standards to have a material effect on its consolidated financial
statements.
Derivative Financial Instruments and Fair Value of Financial Instruments
The FASB has issued Standard No. 119 "Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments." This Standard
requires disclosures about derivative financial instruments - futures,
forward, swap, and option contracts, and other financial instruments with
similar characteristics. It also amends existing requirements of FASB
Statements No. 105, "Disclosure of Information about Financial Instruments
with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of
Credit Risk," and FASB Statement No. 107, "Disclosures about Fair Value of
Financial Instruments." This Standard is required for financial statements
issued for fiscal years ending after December 15, 1994. The Corporation
currently does not engage in derivative transactions.
38
<PAGE>
Impairment of Long-Lived Assets
The FASB has issued an Exposure Draft, "Accounting for the Impairment of
Long-Lived Assets," that proposes accounting for the impairment of long-lived
assets, identifiable intangibles and goodwill related to those assets. It
would require the carrying amount of impaired assets be reduced to fair value.
This proposed statement would be effective for financial statements issued for
fiscal years beginning after December 15, 1994. The Corporation has not
determined the effect, if any, of this proposed Standard on its consolidated
financial statements.
Mortgage Servicing Rights, Excess Servicing Receivables, and Securitization of
Mortgage Loans
The FASB issued an Exposure Draft, "Accounting for Mortgage Servicing
Rights and Excess Servicing Receivables and for Securitization of Mortgage
Loans." This proposed statement would require that an entity recognize as
separate assets rights to service mortgage loans for others, regardless of how
such servicing rights were acquired. An entity that acquires mortgages
servicing rights through either the purchase or origination of mortgage loans
and sells those loans with servicing rights retained would allocate some of
the cost of the loans to the mortgage servicing rights. Additionally, the
proposed statement would require that securitization of mortgage loans be
accounted for as sales of mortgage loans and acquisition of mortgage backed
securities and that capitalized mortgage servicing rights and capitalized
excess servicing receivables be assessed for impairment. Impairment would be
measured based on fair value. The proposed statement would be applied
prospectively in fiscal years beginning after December 15, 1995, to
transactions in which an entity acquires mortgage servicing rights and to
impairment evaluation of all capitalized mortgage servicing rights and
capitalized excess servicing receivables whenever acquired. Retroactive
application would be prohibited. The Corporation has not determined the
effect, if any, of this proposed statement on its consolidated financial
statements.
39
<PAGE>
FIRST CHARTER CORPORATION AND
FIRST CHARTER NATIONAL BANK BOARD OF DIRECTORS
WILLIAM R. BLACK, M.D.
ONCOLOGIST
JANE B. BROWN
PRIVATE INVESTOR
GRADY S. CARPENTER
PRESIDENT,
SECURITY OIL COMPANY
MICHAEL R. COLTRANE
PRESIDENT,
THE CONCORD TELEPHONE COMPANY
J. ROY DAVIS, JR.
PRESIDENT,
S & D COFFEE, INC.
CHAIRMAN,
FIRST CHARTER CORPORATION AND
FIRST CHARTER NATIONAL BANK
J. KNOX HILLMAN, JR.
PRESIDENT,
SHUFORD INSURANCE AGENCY, INC.
BRANSON C. JONES
CONSULTING VICE PRESIDENT,
OILES AMERICA CORPORATION
LAWRENCE M. KIMBROUGH
PRESIDENT AND
CHIEF EXECUTIVE OFFICER,
FIRST CHARTER CORPORATION AND
FIRST CHARTER NATIONAL BANK
DUARD C. LINN, JR.
PRIVATE BUSINESS CONSULTANT
VICE CHAIRMAN,
FIRST CHARTER CORPORATION AND
FIRST CHARTER NATIONAL BANK
ROBERT F. LOWRANCE
PRESIDENT,
A & A REALTY
HUGH H. MORRISON
PRESIDENT,
E. L. MORRISON CO., INC.
T. DAVID PROPST
PRESIDENT,
EARL'S TIRE STORE, INC.
ROBERT L. WALL
RETIRED
JAMES B. WIDENHOUSE
PRIVATE INVESTOR
OFFICERS OF FIRST CHARTER CORPORATION
LISA B. BOYLEN
ASSISTANT TREASURER
ROBERT O. BRATTON
EXECUTIVE VICE PRESIDENT,
TREASURER AND CHIEF FINANCIAL OFFICER
J. ROY DAVIS, JR.
CHAIRMAN OF THE BOARD
ROSE W. EDWARDS
ASSISTANT CORPORATE SECRETARY
ROBERT G. FOX, JR.
EXECUTIVE VICE PRESIDENT
DAVID E. KEUL
ASSISTANT CORPORATE SECRETARY
LAWRENCE M. KIMBROUGH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
DUARD C. LINN, JR.
VICE CHAIRMAN
JAMES W. TOWNSEND, JR.
CORPORATE SECRETARY
40
<PAGE>
Report Design: Premark, Inc., High Point, NC
Photography: Ciarlante Photography, Charlotte, NC
Photography: J&B Kluttz Photography, Concord, NC
Printing: Concord Printing Company, Concord, NC
<PAGE>
FIRST
CHARTER
CORPORATION
CONCORD, NC
<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-15829
FIRST CHARTER CORPORATION
(Exact name of registrant as specified in its charter)
North Carolina 56-1355866
(State or other jurisdiction of (IRS Employer Identification No.
incorporation or organization)
22 Union Street, North, Concord, North Carolina 28025
(Address of principal executive offices) (Zip Code)
(704) 786-3300
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
4,642,873 shares of Common Stock, $5.00 par value, outstanding as of August
11, 1995.<PAGE>
<TABLE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<CAPTION>
FIRST CHARTER CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
ASSETS 1995 1994
<S> <C> <C>
Cash and due from banks . . . . . . . . . . . $ 17,342,232 $ 18,110,298
Federal Funds sold . . . . . . . . . . . . . 7,146,991 --
Securities available for sale:
U.S. Government obligations . . . . . . . . 11,702,054 16,083,594
U.S. Government agency obligations . . . . 15,995,765 8,911,518
Mortgage-backed securities . . . . . . . . 2,617,207 2,519,763
State and municipal obligations, nontaxable 305,580 --
Other . . . . . . . . . . . . . . . . . . . 4,349,867 3,288,447
Total securities available for sale . . . 34,970,473 30,803,322
Investment securities:
(Market value of $49,695,331, and $58,602,959
at 6/30/95 and 12/31/94, respectively)
U.S. Government agency obligations . . . . -- 7,985,901
Mortgage-backed securities . . . . . . . . 13,402,671 16,260,021
State and municipal obligations, nontaxable 36,038,295 36,792,641
Total investment securities . . . . . . . 49,440,966 61,038,563
Loans . . . . . . . . . . . . . . . . . . . . 219,600,798 203,935,504
Less: Unearned income . . . . . . . . . . . (303,646) (201,331)
Allowance for loan losses . . . . . . (2,905,988) (2,816,172)
Loans, net . . . . . . . . . . . . . . . 216,391,164 200,918,001
Premises and equipment, net . . . . . . . . . 7,864,892 7,247,098
Other assets . . . . . . . . . . . . . . . . 4,439,962 5,931,370
Total assets . . . . . . . . . . . . . . $ 337,596,680 $ 324,048,652
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits, domestic:
Noninterest-bearing . . . . . . . . . . . . $ 48,543,007 $ 48,037,213
Interest-bearing . . . . . . . . . . . . . 231,023,589 218,315,321
Total deposits . . . . . . . . . . . . . 279,566,596 266,352,534
Short-term borrowings . . . . . . . . . . . . 15,941,592 17,734,069
Other liabilities . . . . . . . . . . . . . . 2,286,338 2,498,467
Total liabilities . . . . . . . . . . . . 297,794,526 286,585,070
Shareholders' equity:
Common stock - $5 par value; authorized
10,000,000 shares, issued and outstanding,
4,633,641 shares at 6/30/95 and 4,632,250
shares at 12/31/94 . . . . . . . . . . . . 23,168,205 23,161,250
Additional paid-in capital . . . . . . . . . 42,110 672
Unrealized gain on securities available
for sale . . . . . . . . . . . . . . . . . 701,582 96,150
Retained earnings . . . . . . . . . . . . . . 15,890,257 14,205,510
Total shareholders' equity . . . . . . . 39,802,154 37,463,582
Total liabilities and shareholders' equity $337,596,680 $ 324,048,652
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
For the Six Months Ended
June 30, June 30,
Interest Income: 1995 1994
<S> <C> <C>
Interest and fees on loans . . . . . . . . . . . . . . . $10,093,403 $ 7,466,719
Federal funds sold . . . . . . . . . . . . . . . . . . . 129,049 78,698
Securities available for sale:
U.S. Government obligations . . . . . . . . . . . . . . 477,721 618,763
U.S. Government agency obligations . . . . . . . . . . 325,874 34,791
Mortgage-backed securities . . . . . . . . . . . . . . 75,913 47,337
State and municipal obligations, nontaxable . . . . . . 1,019 --
Other . . . . . . . . . . . . . . . . . . . . . . . . . 69,750 55,089
Investment securities:
U.S. Government obligations . . . . . . . . . . . . . . -- 10,882
U.S. Government agency obligations . . . . . . . . . . 65,406 58,136
Mortgage-backed securities . . . . . . . . . . . . . . 494,555 642,777
State and municipal obligations, nontaxable . . . . . . 997,793 1,121,048
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 15,850 --
Total interest income . . . . . . . . . . . . . . . . 12,746,333 10,134,240
Interest Expense:
Deposits:
Demand . . . . . . . . . . . . . . . . . . . . . . . . 520,756 485,247
Money Market . . . . . . . . . . . . . . . . . . . . . 443,145 370,559
Savings and time . . . . . . . . . . . . . . . . . . . 3,522,901 2,350,370
Short-term borrowings . . . . . . . . . . . . . . . . . . 362,491 168,781
Total interest expense . . . . . . . . . . . . . . . 4,849,293 3,374,957
Net interest income . . . . . . . . . . . . . . . . . 7,897,040 6,759,283
Provision for loan losses . . . . . . . . . . . . . . . . 225,000 200,000
Net interest income after provision for loan losses . 7,672,040 6,559,283
Noninterest income:
Trust income . . . . . . . . . . . . . . . . . . . . . . 662,280 718,682
Service charges on deposit accounts . . . . . . . . . . . 737,991 754,673
Insurance and other commissions . . . . . . . . . . . . . 91,352 101,521
Securities available for sale transactions, net . . . . . 6,830 57,698
Investment securities transactions, net . . . . . . . . . 4,298 10,571
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 167,366 178,522
Total noninterest income . . . . . . . . . . . . . . 1,670,117 1,821,667
Noninterest expense:
Salaries and fringe benefits . . . . . . . . . . . . . . 2,688,018 2,648,150
Occupancy and equipment . . . . . . . . . . . . . . . . . 702,220 664,609
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 1,667,797 1,725,763
Total noninterest expense . . . . . . . . . . . . . . 5,058,035 5,038,522
Income before income taxes . . . . . . . . . . . . . 4,284,122 3,342,428
Income taxes . . . . . . . . . . . . . . . . . . . . . . 1,281,000 867,000
Net Income . . . . . . . . . . . . . . . . . . . . . $ 3,003,122 $ 2,475,428
See accompanying notes to consolidated financial statements.<PAGE>
</TABLE>
<TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARY
EARNINGS PER SHARE DATA
<CAPTION>
For the Six Months Ended
June 30, June 30,
1995 1994
Primary income per share data:
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . $0.64 $0.53
Average common equivalent shares . . . . . . . . . . . 4,683,834 4,704,980
Income per share data assuming full dilution:
Net income . . . . . . . . . . . . . . . . . . . . . . $0.64 $0.53
Average common equivalent shares . . . . . . . . . . . 4,697,432 4,714,997
Cash dividends declared . . . . . . . . . . . . . . . . . $0.26 $0.18
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.
See accompanying notes to consolidated financial statements.<PAGE>
</TABLE>
<TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
For The Three Months Ended
June 30, June 30,
Interest Income: 1995 1994
<S> <C> <C>
Interest and fees on loans . . . . . . . . . . . . . . . $ 5,154,593 $ 3,945,810
Federal funds sold . . . . . . . . . . . . . . . . . . . 108,601 45,476
Securities available for sale:
U.S. Government obligations . . . . . . . . . . . . . . 221,383 311,318
U.S. Government agency obligations . . . . . . . . . . 186,766 24,384
Mortgage-backed securities . . . . . . . . . . . . . . 40,714 29,905
State and municipal obligations, nontaxable . . . . . . 1,019 --
Other . . . . . . . . . . . . . . . . . . . . . . . . . 29,787 23,309
Investment securities:
U.S. Government obligations . . . . . . . . . . . . . . -- --
U.S. Government agency obligations . . . . . . . . . . 21,049 31,916
Mortgage-backed securities . . . . . . . . . . . . . . 232,966 310,016
State and municipal obligations, nontaxable . . . . . . 498,154 556,345
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 15,850 --
Total interest income . . . . . . . . . . . . . . . . 6,510,882 5,278,479
Interest Expense:
Deposits:
Demand . . . . . . . . . . . . . . . . . . . . . . . . 265,620 250,181
Money Market . . . . . . . . . . . . . . . . . . . . . 222,483 183,366
Savings and time . . . . . . . . . . . . . . . . . . . 1,934,786 1,196,674
Short-term borrowings . . . . . . . . . . . . . . . . . . 190,424 97,408
Total interest expense . . . . . . . . . . . . . . . 2,613,313 1,727,629
Net interest income . . . . . . . . . . . . . . . . . 3,897,569 3,550,850
Provision for loan losses . . . . . . . . . . . . . . . . 100,000 125,000
Net interest income after provision for loan losses . 3,797,569 3,425,850
Noninterest income:
Trust income . . . . . . . . . . . . . . . . . . . . . . 344,510 329,110
Service charges on deposit accounts . . . . . . . . . . . 371,249 379,188
Insurance and other commissions . . . . . . . . . . . . . 46,410 50,880
Securities available for sale transactions, net . . . . . (19,064) 340,969
Investment securities transactions, net . . . . . . . . . -- 1,360
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 87,999 88,880
Total noninterest income . . . . . . . . . . . . . . 831,104 890,387
Noninterest expense:
Salaries and fringe benefits . . . . . . . . . . . . . . 1,298,281 1,260,128
Occupancy and equipment . . . . . . . . . . . . . . . . . 338,837 331,664
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 906,504 918,766
Total noninterest expense . . . . . . . . . . . . . . 2,543,622 2,510,558
Income before income taxes . . . . . . . . . . . . . 2,085,051 1,805,679
Income taxes . . . . . . . . . . . . . . . . . . . . . . 625,000 491,000
Net Income . . . . . . . . . . . . . . . . . . . . . $ 1,460,051 $ 1,314,679
See accompanying notes to consolidated financial statements.<PAGE>
</TABLE>
<TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARY
EARNINGS PER SHARE DATA
<CAPTION>
For the Three Months Ended
June 30, June 30,
1995 1994
Primary income per share data:
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . $0.31 $0.28
Average common equivalent shares . . . . . . . . . . . 4,684,889 4,695,161
Income per share data assuming full dilution:
Net income . . . . . . . . . . . . . . . . . . . . . . $0.31 $0.28
Average common equivalent shares . . . . . . . . . . . 4,693,715 4,702,019
Cash dividends declared . . . . . . . . . . . . . . . . . $0.13 $0.09
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
See accompanying notes to consolidated financial statements.<PAGE>
</TABLE>
<TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the six months ended June 30, 1995
<CAPTION>
Unrealized
Add'l Gain in
Common Paid-in Retained value of
Stock Capital Earnings securities Total
Balance,
<C> <C> <C> <C> <C> <C>
December 31, 1994 . . . . $ 23,161,250 $ 672 $ 14,205,510 $ 96,150 $ 37,463,582
Net income for the
six months ended
June 30, 1995 . . . . . . -- -- 3,003,122 -- 3,003,122
Cash dividends of $.26
per share . . . . . . . . -- -- (1,203,625) -- (1,203,625)
Purchase and retirement
of common stock . . . . . (120,500) (132,275) (114,750) -- (367,525)
Stock options exercised
and Dividend Reinvestment
Plan stock issued . . . . 127,455 173,713 -- -- 301,168
Unrealized gain on
securities available
for sale . . . . . . . . . -- -- -- 605,432 605,432
Balance,
June 30, 1995 . . . . . . $ 23,168,205 $ 42,110 $ 15,890,257 $ 701,582 $ 39,802,154
See accompanying notes to consolidated financial statements.<PAGE>
</TABLE>
<TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the Six Months Ended
June 30, June 30,
1995 1994
Cash flows from operating activities:
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 3,003,122 $ 2,475,428
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses . . . . . . . . . . . . . . . 225,000 200,000
Depreciation . . . . . . . . . . . . . . . . . . . . . . 323,245 282,817
Premium amortization and discount accretion, net . . . . (70,067) 57,891
Net gain on investment securities transactions . . . . . (4,298) (10,571)
Net gain on securities available for sale transactions . (6,830) (57,698)
Net loss (gain) on sale of premises and equipment . . . 2,477 (2,843)
Decrease in other assets . . . . . . . . . . . . . . . . 1,104,329 55,180
Decrease in other liabilities . . . . . . . . . . . . . (275,368) (351,586)
Net cash provided by operating activities . . . . . . 4,301,610 2,648,618
Cash flows from investing activities:
Proceeds from sales of investment securities . . . . . . . 1,725,292 3,010,937
Proceeds from sales of securities available for sale . . . 11,033,420 106,188
Proceeds from maturities and issuer calls of
investment securities, net . . . . . . . . . . . . . . . 18,763,888 15,275,100
Proceeds from maturities of securities available for sale 6,111,558 102,433
Purchase of investment securities . . . . . . . . . . . . (8,848,558) (10,923,181)
Purchase of securities available for sale . . . . . . . . (20,281,583) (6,504,211)
Net increase in loans . . . . . . . . . . . . . . . . . . (15,698,163) (10,055,979)
Proceeds from sale of premises and equipment . . . . . . . 8,125 2,843
Purchase of premises and equipment . . . . . . . . . . . . (936,640) (375,564)
Net cash used in investing activities . . . . . . . . (8,122,527) (9,361,434)
Cash flows from financing activities:
Net increase in demand, NOW, Money Market and
savings accounts . . . . . . . . . . . . . . . . . . . . 7,024,686 9,013,547
Net increase (decrease) in certificates of deposit . . . . 6,189,376 (2,412,248)
Net increase (decrease) in securities sold under
repurchase agreements and other short-term borrowings . (1,792,477) 6,108,983
Net increase in advances for taxes and insurance . . . . . 48,239 35,623
Purchase of common stock . . . . . . . . . . . . . . . . . (367,525) (625,788)
Proceeds from issuance of common stock . . . . . . . . . . 301,168 336,339
Dividends paid . . . . . . . . . . . . . . . . . . . . . . (1,203,625) (838,173)
Net cash provided (used) by financing activities . . 10,199,842 11,618,283
Net increase in cash and cash equivalents . . . . . . . . 6,378,925 4,905,467
Cash and cash equivalents at beginning of period . . . . . 18,110,298 12,857,677
Cash and cash equivalents at end of period . . . . . . . . $ 24,489,223 $ 17,763,144
(Continued)<PAGE>
</TABLE>
<TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<CAPTION>
For the Six Months Ended
June 30, June 30,
1995 1994
Supplemental disclosures of cash flow information:
Cash paid during the year for:
<S> <C> <C>
Interest . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,636,179 $ 3,382,622
Income taxes . . . . . . . . . . . . . . . . . . . . . . . $ 1,479,771 $ 805,443
Supplemental disclosure of non-cash transactions:
Transfer of loans and premises and equipment to other
real estate owned . . . . . . . . . . . . . . . . . . . -- $ 29,901
Unrealized gains (loss) in value of securities available
for sale (net of tax effect of $387,079 and $(227,997)
for 1995 and 1994, respectively) . . . . . . . . . . . . $ 605,432 $ (356,612)
See accompanying notes to consolidated financial statements.
<PAGE>
</TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARY
NOTES TO INTERIM FINANCIAL STATEMENTS
1. Primary earnings per share and income per share assuming
full dilution are computed based on the weighted average
number of shares outstanding during the period, including
Common Stock equivalent shares applicable to stock
options, assuming the exercise of outstanding stock
options at market value per share.
2. In certain instances, amounts reported in the 1994
financial statements have been reclassified to present
them in the format selected for 1995. Such
reclassifications have no effect on net income or
shareholders' equity as previously reported.
3. The information furnished in this report reflects all
adjustments which are, in the opinion of management,
necessary to present a fair statement of the financial
condition and the results of operations for the interim
period. All such adjustments were of a normal recurring
nature.
4. Effective January 1, 1995 the Corporation adopted
Financial Accounting Standards Board ("Statement 114") No.
114 "Accounting by Creditors for Impairment of a Loan".
This Statement requires that all creditors value all
specifically reviewed loans for which it is probable that
the creditor will be unable to collect all amounts due
(principal and interest) according to the terms of the
loan agreement at either the present value of expected
cash flows discounted at the loan's effective interest
rate, or the fair value of the collateral for certain
collateral dependent loans. At June 30, 1995 the
allowance for loan losses related to loans that were
identified for evaluation in accordance with Statement 114
was determined based on one of the methods discussed
above.
The following table presents changes in the allowance for
loan losses at June 30, 1995:
Beginning Balance $2,816,172
Add:
Provision charged to operations 225,000
3,041,172
Less:
Loan charge-offs 198,985
Less loan recoveries 63,801
Net loan charge-offs 135,184
Ending Balance $2,905,988<PAGE>
At June 30, 1995, the recorded investment in loans that
were considered to be impaired under Statement 114 was $2,613,005
(of which $2,216,906 was on nonaccrual). The related allowance
for loan losses on these loans was $1,056,377. The average
recorded investment in impaired loans for the six months ended
June 30 1995 was $2,634,825. For the six months ended June 30,
1994, the Corporation recognized interest income on impaired
loans of $20,274, none of which was recognized using the cash
method of income recognition.<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The consolidated balance sheets of First Charter
Corporation (the "Corporation") represent account balances for
the Corporation and its wholly owned banking subsidiary, First
Charter National Bank (the "Bank").
LIQUIDITY
The Bank's major source of liquidity is its core deposit
base. Liquidity is further provided by maturities in the
investment portfolio, the ability to secure public deposits, the
availability of Federal fund lines at correspondent banks and the
ability to borrow from the Federal Reserve Bank discount window.
In addition to these sources, the Bank is a member of the Federal
Home Loan Bank ("FHLB") System which provides access to FHLB
lending sources. Another source of liquidity is the securities
available for sale portfolio which may be sold in response to
liquidity needs. Management believes the Bank's sources of
liquidity are adequate to meet operating needs and deposit
withdrawal requirements.
CAPITAL RESOURCES
At June 30, 1995, total shareholders' equity was
$39,802,154, or $8.59 per share compared to $37,463,582, or $8.09
per share at December 31, 1994.
The following table represents the required capital
guidelines as issued by the Federal Reserve Bank ("FRB") and the
Corporation's compliance with the standards as of June 30, 1995.
Risk-Based Capital
Leverage Capital Tier 1 Capital Total Capital
Amount % (1) Amount % (2) Amount % (2)
Actual 39,100 11.61 39,100 16.13 42,006 17.33
Required 13,476 4.00 9,698 4.00 19,396 8.00
Excess 25,624 7.61 29,402 12.13 22,610 9.33
(1) Percentage of total adjusted assets. The FRB minimum
leverage ratio requirement is 3% to 5%, depending on the
institution's composite rating as determined by its regulators.
The FRB has not advised the Corporation of any specific
requirements applicable to it.
(2) Percentage of risk-weighted assets.<PAGE>
REGULATORY RECOMMENDATIONS
Management is not presently aware of any current
recommendations to the Corporation or to the Bank by regulatory
authorities which, if they were to be implemented, would have a
material effect on the Corporation's liquidity, capital
resources, or operations.
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Net income for the three month period ended June 30, 1995
was $1,460,051, or $0.31 share versus $1,314,679, or $0.28 per
share for the comparable period in 1994 which represents a 11.1%
increase. Net income for the six month period ended June 30,
1995 was $3,003,122, or $0.64 share versus $2,475,428, or $0.53
per share for the comparable period in 1994 which represents a
21.3% increase. The increases are primarily attributable to
increases in net interest income. On an annualized basis, these
results represent a return on average assets of 1.87% versus
1.69% at June 30, 1994 and a return on average equity of 15.38%
versus 13.76%.
Loan demand was strong during the first six months of
1995. As a result, gross loans increased 7.7% to $219,600,798
from $203,935,504 at December 31, 1994. Total deposits increased
5.0% to $279,566,596 from $266,352,534 at December 31, 1994.
Investment securities totaled $49,440,966 at June 30, 1995
for a decrease of approximately $11.6 million from December 31,
1994. The decrease was primarily due to the sale of seasoned
mortgage-backed securities with a greater than 85% paydown,
paydowns in the mortgage backed portfolio, maturities of short-
term U. S. government agency obligations and maturities of
municipal securities. Investment securities had gross
unrealized gains of $1,318,930 and gross unrealized losses of
$1,064,565 at June 30, 1995. Securities available for sale
totaled $34,970,473 at June 30, 1995 for an increase of
approximately $4.2 million. The increase was primarily due to
purchases of U. S. government agency obligations. Proceeds from
sales and maturities in the investment and securities available
for sale portfolios were used to fund the increased loan demand
and to reinvest in additional securities. The carrying value of
securities available for sale was $1,150,132 above their
amortized cost at June 30, 1995 which represents gross unrealized
gains of $1,215,294 and gross unrealized losses of $65,162.
Total assets at June 30, 1995 were $337,596,680 compared
to $324,048,652 at December 31, 1994. Asset growth is
attributable to increases in loan balances.
For the three and six month periods ended June 30, 1995
net interest income before provision for loan losses increased
$346,000 and $1,138,000, respectively, over the comparable
periods in 1994. The increases are attributable to an increase<PAGE>
in the level of interest earning assets, as well as an
improvement in the net interest margin to 5.67% at June 30, 1995
compared to 5.42% at June 30, 1994. The average yield on earning
assets was 8.94% at June 30, 1995 compared to 7.92% at June 30,
1994. The average interest-bearing liabilities increased, and
the average rate paid on interest-bearing liabilities increased
to 4.14% at June 30, 1995 compared to 3.14% at June 30, 1994.
Management continues to assess interest rate risk based on
an earnings simulation model. The Bank's balance sheet is
liability sensitive, meaning that in a given period there will be
more liabilities than assets subject to immediate repricing as
market rates change. Because immediately rate sensitive
interest-bearing liabilities exceed rate sensitive assets, the
earnings position could improve in a declining rate environment
and could deteriorate in a rising rate environment, depending on
the correlation of rate changes in these two categories.
Although rates increased during the periods analyzed, the
earnings position improved because interest income was positively
impacted by the increases in the prime rate of interest from June
30, 1994 to June 30, 1995. Funding costs increased, but not as
quickly or in the same magnitude as the repricing of prime-based
loans. As liabilities are repriced in response to rising rates,
net interest income could decline.
The provision for loan losses for the six months ended
June 30, 1995 was $225,000 compared to $200,000 for the six
months ended June 30, 1994. The increase in the provision was
primarily attributable to the increase in gross loans
outstanding. The allowance as a percentage of gross loans was
1.33% at June 30, 1995 compared to 1.38% at December 31, 1994.
Management continues to perform a monthly analysis of the
allowance utilizing a system for risk grading the portfolio.
Based on this review, management believes the allowance to be
adequate.
Nonperforming assets at June 30, 1995 were $4,058,671 or
1.84% of gross loans and foreclosed properties compared to
$5,062,343 or 2.46% at December 31, 1994. The level of
nonperforming assets is presented in the following table.
June 30, December 31,
1995 1994
Loans:
Nonaccrual loans $2,308,449 $2,033,122
Loans 90 days or more past
due and still accruing 539,268 1,187,593
Foreclosed Property 896,992 1,527,666
Other Real Estate 313,962 313,962
The decrease in foreclosed properties is primarily
attributable to a sale of a commercial real estate property
during the second quarter of 1995. This sale resulted in a
realized gain of approximately $46,000.<PAGE>
Net charge-offs for the six month period ended June 30,
1995 were $135,000 compared to $270,000 for the same period in
1994.
Interest income that would have been recorded on
nonaccrual loans for the six months ended June 30, 1995, had they
performed in accordance with their original terms, amounted to
approximately $118,000. Interest income on nonaccrual loans
included in the results of operations for the six months ended
June 30, 1995 amounted to approximately $12,500.
Noninterest income decreased approximately $59,000 or 6.7%
for the three month period ended June 30, 1995 over the
comparable period in 1994. The major component of this decrease
was lower gains on securities available for sale.
Noninterest income decreased approximately $152,000 or
8.3% for the six month period ended June 30, 1995 over the
comparable period in 1994. The major components of this decrease
were lower trust income due to the absence of one-time estate
fees earned in 1994, lower service charges due to lower
commercial account service charges and lower gains on securities
available for sale.
Noninterest expense increased approximately $33,000 or
1.3% and $20,000 or 0.4% for the three and six month periods
ended June 30, 1995, respectively, over the comparable period in
1994. Salaries and fringe benefits increased primarily due to a
higher level of full-time equivalents in 1995 over the comparable
periods in 1994. Occupancy and equipment increased due to the
initial cost of check imaging software and hardware.
Efficiencies from this new process are expected to be realized in
the latter part of 1995. Decreases have occurred in other
professional fees, advertising, other insurance, foreclosed
properties and other expenses.
Total income tax expense for the three and six month
periods ended June 30, 1995 increased $134,000 and $414,000,
respectively, over the comparable periods in 1994. The increase
is attributable to an increase in income before taxes and an
increase in the effective tax rate. <PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of matters to a Vote of Security Holders.
(a) First Charter Corporation's Annual Meeting of
Shareholders was held on April 25, 1995.
(b) The following directors were elected for three-year
terms expiring in 1997.
Broker
For Withholding Non Votes
J. Knox Hillman, Jr. 3,225,509.455 9,492.000 0.0000
Lawrence M. Kimbrough 3,234,682.455 319.000 0.0000
Robert F. Lowrance 3,225,509.455 9,492.000 0.0000
Robert L. Wall 3,223,934.450 11,067.005 0.0000
James B. Widenhouse 3,225,509.455 9,492.000 0.0000
The following directors' terms of office continued after
the annual meeting:
William R. Black
Jane B. Brown
Grady S. Carpenter
Michael R. Coltrane
J. Roy Davis, Jr.
Branson C. Jones
Duard C. Linn, Jr.
Hugh H. Morrison
T. David Propst
(c) A brief description of the other matters (exclusive of
procedural matters) voted upon at the meeting is set forth
below.
A motion to ratify the adoption of the 1996 First Charter
Corporation Employee Stock Purchase Plan was adopted by a
vote of the majority of the shares of the Corporation's
Common Stock present or represented by proxy and entitled
to vote, as follows:
For: 3,637,551.569
Against: 42,400.372
Abstained: 27,633.727
Broker Non Votes 137,555.000
A motion to ratify the adoption of the First Charter
Corporation Restricted Stock Award Plan was adopted by a
vote of the majority of the shares of the Corporation's
Common Stock present or represented by proxy and entitled
to vote, as follows:
For: 3,546,431.303
Against: 86,119.789
Abstained: 72,115.576
Broker Non Votes 140,155.000<PAGE>
A motion to ratify the action of the Board of Directors
in selection of KPMG Peat Marwick LLP as independent
public accountants for 1995 was adopted by a vote of
the majority of the votes cast with respect to shares
of the Corporation's Common Stock as follows:
For: 3,833,116.642
Against: 466.618
Abstained: 11,557.400
Broker Non Votes 0.000
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No.
(per Exhibit Table
in item 601 of
Regulation S-K) Description of Exhibits
3.1 Restated Charter of the
Registrant, incorporated
herein by reference to
Exhibit 3.1 of the
Registrant's Annual Report
on Form 10-K for the fiscal
year ended December 31,
1994 (Commission File No.
0-15829).
3.2 By-laws of the Registrant,
as amended, incorporated
herein by reference to
Exhibit 3.2 of the
Registrant's Annual Report
on Form 10-K for the fiscal
year ended December 31,
1992 (Commission File No.
0-15829).
11 Statements regarding
computation of per share
earnings.
27 Financial Data Schedules
(b) No reports on Form 8-K were filed this quarter.<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
FIRST CHARTER CORPORATION
(Registrant)
Date: August 11, 1995 By \s\ Robert O. Bratton
Robert O. Bratton
Executive Vice President and
Principal Financial and
Accounting Officer<PAGE>
EXHIBIT INDEX
Exhibit No.
(per Exhibit Table
in item 601 of Sequential
Regulation S-K) Description of Exhibits Page Number
11 Statements regarding
computation of per share
earnings.
27 Financial Data Schedules <PAGE>
<TABLE>
FIRST CHARTER CORPORATION Exhibit 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<CAPTION>
For the Six Months Ended
June 30, June 30,
1995 1994
NET INCOME PER SHARE COMPUTED AS FOLLOWS:
PRIMARY:
<S> <C> <C>
1. Net income . . . . . . . . . . . . . . . . . . . . $ 3,003,122 $ 2,475,428
2. Weighted average common shares outstanding . . . . 4,633,094 4,667,808
3. Incremental shares under stock options
computed under the treasury stock method
using the average market price of issuer's
stock during the periods . . . . . . . . . . . . 50,740 37,172
4. Weighted average common shares and common
equivalent shares outstanding . . . . . . . . . 4,683,834 4,704,980
5. Net income per share . . . . . . . . . . . . . . . $ 0.64 $ 0.53
(Item 1 Divided by Item 4)
FULLY DILUTED:
1. Net income . . . . . . . . . . . . . . . . . . . . $ 3,003,122 $ 2,475,428
2. Weighted average common shares outstanding . . . . 4,633,094 4,667,808
3. Incremental shares under stock options
computed under the treasury stock method
using the higher of the average or ending
market price of issuer's stock at the end
of the periods . . . . . . . . . . . . . . . . . 64,338 47,189
4. Weighted average common shares and common
equivalent shares outstanding . . . . . . . . . 4,697,432 4,714,997
5. Net income per share . . . . . . . . . . . . . . . $ 0.64 $ 0.53
(Item 1 Divided by Item 4)
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.
</TABLE>
<PAGE>
<TABLE>
FIRST CHARTER CORPORATION Exhibit 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (Continued)
<CAPTION>
For the Three Months Ended
June 30, June 30,
1995 1994
NET INCOME PER SHARE COMPUTED AS FOLLOWS:
PRIMARY:
<S> <C> <C>
1. Net income . . . . . . . . . . . . . . . . . . . . $ 1,460,051 $ 1,314,679
2. Weighted average common shares outstanding . . . . 4,631,764 4,655,232
3. Incremental shares under stock options
computed under the treasury stock method
using the average market price of issuer's
stock during the periods . . . . . . . . . . . . 53,125 39,929
4. Weighted average common shares and common
equivalent shares outstanding . . . . . . . . . 4,684,889 4,695,161
5. Net income per share . . . . . . . . . . . . . . . $ 0.31 $ 0.28
(Item 1 Divided by Item 4)
FULLY DILUTED:
1. Net income . . . . . . . . . . . . . . . . . . . . $ 1,460,051 $ 1,314,679
2. Weighted average common shares outstanding . . . . 4,631,764 4,655,232
3. Incremental shares under stock options
computed under the treasury stock method
using the higher of the average or ending
market price of issuer's stock at the end
of the periods . . . . . . . . . . . . . . . . . 61,951 46,787
4. Weighted average common shares and common
equivalent shares outstanding . . . . . . . . . 4,693,715 4,702,019
5. Net income per share . . . . . . . . . . . . . . . $ 0.31 $ 0.28
(Item 1 Divided by Item 4)
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.
</TABLE>
<PAGE>
[ARTICLE] 9
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] JUN-30-1995
[CASH] 17342
[INT-BEARING-DEPOSITS] 0
[FED-FUNDS-SOLD] 7147
[TRADING-ASSETS] 0
[INVESTMENTS-HELD-FOR-SALE] 34970
[INVESTMENTS-CARRYING] 49441
[INVESTMENTS-MARKET] 49695
[LOANS] 219297
[ALLOWANCE] 2906
[TOTAL-ASSETS] 337597
[DEPOSITS] 279567
[SHORT-TERM] 15942
[LIABILITIES-OTHER] 2286
[LONG-TERM] 0
[COMMON] 23168
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 16634
[TOTAL-LIABILITIES-AND-EQUITY] 337597
[INTEREST-LOAN] 10093
[INTEREST-INVEST] 2637
[INTEREST-OTHER] 16
[INTEREST-TOTAL] 12746
[INTEREST-DEPOSIT] 4487
[INTEREST-EXPENSE] 362
[INTEREST-INCOME-NET] 7897
[LOAN-LOSSES] 225
[SECURITIES-GAINS] 11
[EXPENSE-OTHER] 5058
[INCOME-PRETAX] 4284
[INCOME-PRE-EXTRAORDINARY] 4284
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 3003
[EPS-PRIMARY] .64
[EPS-DILUTED] .64
[YIELD-ACTUAL] 5.67
[LOANS-NON] 2308
[LOANS-PAST] 539
[LOANS-TROUBLED] 0
[LOANS-PROBLEM] 0
[ALLOWANCE-OPEN] 2816
[CHARGE-OFFS] 199
[RECOVERIES] 64
[ALLOWANCE-CLOSE] 2906
[ALLOWANCE-DOMESTIC] 2906
[ALLOWANCE-FOREIGN] 0
[ALLOWANCE-UNALLOCATED] 0
</TABLE>
<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
October 2, 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 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
October 2, 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
October 2, 1995
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of First
Charter Corporation, and the several undersigned Officers
and Directors thereof whose signatures appear below, hereby
makes, constitutes and appoints Lawrence M. Kimbrough and
Robert O. Bratton, and each of them acting individually,
its, his and her true and lawful attorneys with power to act
without any other and with full power of substitution, to
execute, deliver and file in its, his and her name and on
its, his and her behalf, and in each of the undersigned
Officer's and Director's capacity or capacities as shown
below, (a) a Registration Statement of First Charter
Corporation on Form S-4 (or other appropriate form) with
respect to the registration under the Securities Act of
1933, as amended, of up to 1,644,672 shares of common stock
of First Charter Corporation to be issued in exchange for
shares of common stock, par value $1.25 per share, of Bank
of Union, upon consummation of the proposed merger of an
interim banking subsidiary of First Charter Corporation with
and into Bank of Union, and any and all documents in support
thereof or supplemental thereto and any and all amendments,
including any and all post-effective amendments, to the
foregoing (hereinafter called the "Registration Statement"),
and (b) such registration statements, petitions,
applications, consents to service of process or other
instruments, any and all documents in support thereof or
supplemental thereto, and any and all amendments or
supplements to the foregoing, as may be necessary or
advisable to qualify or register the securities covered by
said Registration Statement under such securities laws,
regulations or requirements as may be applicable; and each
of First Charter Corporation and said Officers and Directors
hereby grants to said attorneys, and to each of them, full
power and authority to do and perform each and every act and
thing whatsoever as said attorneys or attorney may deem
necessary or advisable to carry out fully the intent of this
power of attorney to the same extent and with the same
effect as First Charter Corporation might or could do, and
as each of said Officers and Directors might or could do
personally in his or her capacity or capacities as
aforesaid, and each of First Charter Corporation and said
Officers and Directors hereby ratifies and confirms all acts
and things which said attorneys or attorney might do or
cause to be done by virtue of this power of attorney and
its, his, or her signature as the same may be signed by said
attorneys or attorney, or any of them, to any or all of the
following (and/or any and all amendments and supplements to
any or all thereof): such Registration Statement under the
Securities Act of 1933, as amended, and all such
registration statements, petitions, applications, consents
to service of process and other instruments, and any and all
documents in support thereof or supplemental thereto, under
such securities laws, regulations and requirements as may be
applicable.
IN WITNESS WHEREOF, First Charter Corporation has caused
this power of attorney to be signed on its behalf, and each
of the undersigned Officers and Directors in the capacity or
capacities noted has hereunto set his or her hand as of the
date indicated below.
FIRST CHARTER CORPORATION
By: /s/ Lawrence M. Kimbrough
Lawrence M. Kimbrough
President and Chief Executive
Officer
Dated: September 20, 1995
<TABLE>
<CAPTION>
Signature Title Date
<C> <C> <C>
/s/ Lawrence M. Kimbrough President, Chief Executive September 20, 1995
(Lawrence M. Kimbrough) Officer and Director
(Principal Executive Officer)
/s/ Robert O. Bratton Executive Vice President September 20, 1995
(Robert O. Bratton) (Principal Financial
and Principal Accounting
Officer)
<PAGE>
Director September 20, 1995
(William R. Black)
/s/ Jane B. Brown Director September 20, 1995
(Jane B. Brown)
/s/ Grady S. Carpenter Director September 20, 1995
(Grady S. Carpenter)
/s/ Michael R. Coltrane Director September 20, 1995
(Michael R. Coltrane)
/s/ J. Roy Davis, Jr. Director September 20, 1995
(J. Roy Davis, Jr.)
/s/ J. Knox Hillman, Jr. Director September 20, 1995
(J. Knox Hillman, Jr.)
/s/ Branson C. Jones Director September 20, 1995
(Branson C. Jones)
/s/ D. C. Linn, Jr. Director September 20, 1995
(D. C. Linn, Jr.)
/s/ Robert F. Lowrance Director September 20, 1995
(Robert F. Lowrance)
/s/ Hugh H. Morrison Director September 20, 1995
(Hugh H. Morrison)
/s/ T. David Propst Director September 20, 1995
(T. David Propst)
/s/ Robert L. Wall Director September 20, 1995
(Robert L. Wall)
/s/ James B. Widenhouse Director September 20, 1995
(James B. Widenhouse)
</TABLE>
2
<PAGE>
<PAGE>
RESOLUTIONS
OF THE BOARD OF DIRECTORS OF
FIRST CHARTER CORPORATION
September 13, 1995
WHEREAS, in the judgment of the Board of Directors, the
acquisition of Bank of Union ("Union") by way of a merger of a
newly formed, state-chartered interim banking subsidiary of the
Corporation (the "Interim Bank") with and into Union in
consideration for the issuance of shares of Common Stock, $5 par
value per share, of the Corporation (the "Common Stock") in
exchange for all the outstanding shares of common stock of Union
(the "Merger"), all pursuant to a Plan and Agreement of Merger
(the "Agreement"), the form of which has been presented to the
Board of Directors and which is by reference made a part hereof,
would be advisable and for the best interests of the Corporation
and its shareholders;
WHEREAS, pursuant to the Agreement the number of shares of
the Common Stock to be exchanged for common stock of Union shall
be up to 1,644,672 subject to adjustment under certain
circumstances pursuant to the terms of the Agreement;
NOW, THEREFORE, BE IT RESOLVED, that the Agreement,
substantially in the form provided to the Board of Directors, and
the terms and provisions therein, including the Merger and the
issuance of up to 1,644,672 shares of Common Stock (the "Shares")
in connection therewith, are hereby approved;
RESOLVED FURTHER, that the Chairman of the Board or the
President and Chief Executive Officer and the Secretary or any
Assistant Secretary, under the seal of the Corporation, hereby
are authorized, empowered and directed to execute and deliver
said Agreement, with such changes, omissions and modifications
therein as may be approved by the person executing such
Agreement, such execution of the Agreement conclusively to
constitute approval of the same;
RESOLVED FURTHER, that the form of Stock Option Agreement
presented to the Board of Directors and by reference made a part
hereof (the "Stock Option Agreement") is hereby approved, and the
Chairman of the Board or President and Chief Executive Officer
and the Secretary or any Assistant Secretary, under seal of the
Corporation, hereby are authorized, empowered and directed to
execute and deliver said Stock Option Agreement, with such
changes, omissions and modifications therein as may be approved
by the person executing such Stock Option Agreement, such
execution of the Stock Option Agreement conclusively to
constitute approval of the same;
RESOLVED FURTHER, that the Board of Directors recommends
that the Agreement and the transactions contemplated thereby,
including the Merger and the issuance of the Shares, be presented
to the
<PAGE>
shareholders of the Corporation for their approval at a
special meeting to be called for such purpose;
RESOLVED FURTHER, that the officers of the Corporation
hereby are authorized, empowered and directed, subject to the
terms and conditions of the Agreement, to do any and all things
necessary to effectuate and consummate said Agreement as may be
prescribed by law or as they may deem necessary or advisable, to
prepare all documentation and to effect all filings and obtain
appropriate permits, consents, approvals and authorizations of
all third parties, including without limitation the filing of an
acquisition application and other appropriate applications, if
required, for approval with the Board of Governors of the Federal
Reserve System, the Federal Deposit Insurance Corporation, the
North Carolina State Banking Commission and any other applicable
regulatory agency, the formation of the Interim Bank as a
subsidiary of the Corporation to facilitate the Merger and the
publication of notice of the proposed acquisition as may be
required by law and to execute personally or by attorney-in-fact
such required filings or amendments or supplements to such
required filings and otherwise to cause such filings and any
amendments thereto to become effective or otherwise approved;
RESOLVED FURTHER, that if the Agreement shall be authorized
and approved by the shareholders of the Corporation and the
shareholders of Union and the approval of the applicable
regulatory agencies is obtained, the officers of the Corporation
hereby are authorized, empowered and directed, subject to the
terms and conditions of said Agreement, to take such steps and to
do such things to effectuate and consummate said Agreement as may
be prescribed by law or as they deem necessary or advisable;
RESOLVED FURTHER, that the officers of the Corporation
hereby are authorized, empowered and directed to vote any of the
shares of the Interim Bank and any shares of the common stock of
Union as may be held by the Corporation other than in a fiduciary
capacity as may be necessary to effect the consummation of the
transaction;
RESOLVED FURTHER, that the Corporation hereby reserves, sets
aside and authorizes for issuance 1,644,672 shares of the
Corporation's authorized but unissued Common Stock, and the
appropriate officers of the Corporation hereby are authorized,
empowered and directed to issue (i) up to 1,644,672 of the
Shares, or such lesser or greater amount as may be necessary
pursuant to the terms of the Agreement, and (ii) options to
purchase up to 470 of the Shares, in connection with the
conversion and exchange of the issued and outstanding shares and
options to purchase shares, if any, of Union common stock in
accordance with the provisions for such conversion and exchange
as set forth in the Agreement;
RESOLVED FURTHER, that, in connection with the issuance of
the Shares pursuant to the Agreement, the officers of the
Corporation hereby are authorized, empowered and directed to
execute and file
2
<PAGE>
with the Securities and Exchange Commission (the "Commission")
a Registration Statement on Form S-4 (or such other form as
such officers, upon advice of counsel, may determine to be
necessary or appropriate) under the Securities Act of 1933, as
amended (the "Securities Act"), to execute and file all such
other instruments and documents, and to do all such other acts
and things in connection with said Registration Statement,
including the execution and filing of such amendment or
amendments (including any post-effective amendments) thereto, as
they may deem necessary or advisable to effect such filings and
to procure the effectiveness of said Registration Statement (and
any such post-effective amendments thereto) and to make such
supplements to the Prospectus forming a part of said Registration
Statement as may be required or otherwise as they may deem
advisable;
RESOLVED FURTHER, that Lawrence M. Kimbrough and Robert O.
Bratton, and each of them with full power to act without the
other, hereby are authorized and empowered to sign the aforesaid
Registration Statement and any amendments or amendments thereto
(including any post-effective amendments) on behalf of and as
attorneys for the Corporation and on behalf of and as attorneys
for any of the following: the Principal Executive Officer, the
Principal Financial Officer, the Principal Accounting Officer and
any other officer of the Corporation;
RESOLVED FURTHER, that Lawrence M. Kimbrough is hereby
designated as Agent for Service of the Corporation with all such
powers and functions as are provided by the General Rules and
Regulations of the Commission;
RESOLVED FURTHER, that the Shares, when issued and
distributed in accordance with and pursuant to the Agreement,
shall be fully paid and non-assessable and the holders of such
Shares shall be subject to no further call or liability with
respect thereto;
RESOLVED FURTHER, that the officers of the Corporation
hereby are authorized, empowered and directed, in the name of and
on behalf of the Corporation, to take all such actions and to
execute all such documents as such officers may deem necessary or
appropriate for compliance with the Securities Act or the
Securities Exchange Act of 1934, as amended, in connection with
the transactions contemplated by the Agreement;
RESOLVED FURTHER, that it is desirable and in the best
interest of the Corporation that the Shares to be issued in
accordance with and pursuant to the Agreement be qualified or
registered for distribution in various states where appropriate,
that the Chairman of the Board, the President and Chief Executive
Officer or any Executive Vice President and the Secretary or any
Assistant Secretary hereby are authorized to determine those
states in which appropriate action shall be taken to qualify or
register for distribution all or such part of such Shares as said
officers may deem advisable; that said officers are hereby
authorized to
3
<PAGE>
perform on behalf of the Corporation any and all acts as they
may deem necessary or advisable in order to comply with the
applicable laws of any such states, and in connection
therewith to execute and file all requisite papers and documents,
including, but not limited to, resolutions, applications,
reports, surety bonds, irrevocable consents and appointments of
attorneys for service of process; and the execution by such
officers of any such paper or document or the doing by them of
any act in connection with the foregoing matters shall
conclusively establish their authority therefor from the
Corporation and the approval and ratification by the Corporation
of the papers and documents so executed and the action so taken;
RESOLVED FURTHER, that such officers hereby are authorized,
empowered and directed to do any and all things which in their
judgment may be necessary or appropriate to obtain a permit,
exemption, registration or qualification for, and a dealer's
license with respect to, the distribution of the Shares in
accordance with the terms of the Agreement, under the securities
laws of any one or more of the states as such officers may deem
advisable and in connection therewith to execute, acknowledge,
verify, deliver, file and publish all applications, reports,
resolutions, consents, consents to service of process, powers of
attorney, commitments and other papers and instruments as may be
required under such laws and to take any and all further action
that they may deem necessary or appropriate to secure and to
maintain such permits, exemptions, registrations and
qualifications in effect for so long as they shall deem in the
best interest of the Corporation;
RESOLVED FURTHER, that First Charter National Bank hereby is
appointed Transfer Agent and Registrar for such Shares; and it is
hereby vested with all the power and authority with respect to
its actions as Transfer Agent and Registrar, respectively, with
respect to said Shares as it has heretofore been vested with for
the shares of Common Stock of the Corporation heretofore issued
and now outstanding;
RESOLVED FURTHER, that the Board of Directors hereby adopts,
as if expressly set forth herein, the form of any resolution
required by any authority to be filed in connection with any
applications, consents to service, issuer's covenants or other
documents, applications, reports or findings relating to the
foregoing resolutions if (i) in the opinion of the officers of
the Corporation executing same, the adoption of such resolutions
is necessary or desirable and (ii) the Secretary or an Assistant
Secretary of the Corporation evidences such adoption by inserting
in the minutes of this meeting copies of such resolutions, which
will thereupon be deemed to be adopted by the Board of Directors
with the same force and effect as if presented at this meeting;
4
<PAGE>
RESOLVED FURTHER, that the officers of the Corporation be,
and they hereby are, authorized, empowered and directed to do all
things necessary, appropriate or convenient to carry into effect
the foregoing resolutions, including the execution and delivery
of all such instruments, agreements, certificates, reports,
applications, notices, letters and other documents as may be
necessary, appropriate or convenient to carry into effect the
foregoing resolutions; and
RESOLVED FURTHER, that all actions heretofore taken by any
of the directors, officers, representatives or agents of the
Corporation or any of its affiliates in connection with the
Merger and any other transactions contemplated in the Agreement
or otherwise referred to in the foregoing resolutions hereby are
ratified, confirmed and approved in all respects as the act and
deed of the Corporation.
5
<PAGE>
FIRST CHARTER CORPORATION
CERTIFICATE OF SECRETARY
I, David E. Keul, Assistant Corporate Secretary of First Charter
Corporation, a corporation organized and existing under the laws
of the State of North Carolina (the "Corporation"), do hereby
certify that the foregoing is a true and correct copy of
resolutions duly adopted by the Board of Directors of the
Corporation at a meeting of the Board of Directors held on
September 13, 1995, at which meeting a quorum was present and
acting throughout, and that all such resolutions are in full
force and effect and have not been amended or rescinded as of the
date hereof.
IN WITNESS WHEREOF, I have hereupon set my hand and affixed
the seal of the Corporation this 3rd day of October, 1995.
/s/ David E. Keul
David E. Keul
Assistant Corporate Secretary
(Corporate Seal)
<PAGE>
<PAGE>
EXHIBIT 99.1
FIRST CHAPTER CORPORATION
22 Union Street
Concord, North Carolina 28025
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER , 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
, December , 1995 at p.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 by and between First Charter and Bank of
Union ("Union"), and the transactions contemplated thereby, which
include, among other things (i) the merger of an interim state banking
subsidiary of First Charter with and into Union (the "Merger") and (ii)
the issuance of 0.75 shares of common stock, $5 par value, of First
Charter for each outstanding share of common stock, $1.25 par value, of
Union 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 adjournment thereof;
Pursuant to the provisions of the North Carolina Business Corporation Act,
, 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
, 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 , and , 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 , 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 , December , 1995, p.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 between First Charter Corporation and Bank of Union and the
transactions contemplated thereby, which include, among other things (i)
the merger of an interim state banking subsidiary of First Charter
Corporation with and into Bank of Union (the "Merger"), and (ii) the
issuance of 0.75 shares of common stock, $5 par value, of First Charter
Corporation for each outstanding share of common stock, $1.25 par value,
of Bank of Union 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
, 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]
, 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 December ,
1995, at a.m., local time, at the Cabarrus Country Club, located on
Weddington Road, in Concord, North Carolina.
On September 13, 1995, First Charter and Bank of Union ("Union") entered
into an Agreement and Plan of Merger (the "Agreement") to combine Union with
First Charter by merging a wholly owned subsidiary of First Charter into Union.
The merger will result in Union becoming a subsidiary of First Charter and will
cause each share of Union common stock to be converted into 0.75 of a share of
First Charter common stock.
At our Special Meeting, you will be asked to consider and vote upon a
proposal to approve the Agreement, along with the issuance of First Charter
common stock to Union shareholders thereunder.
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.
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 format 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 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 APPOINTMENT CARD IN THE ENCLOSED POSTAGE-PAID
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 , 1995
NOTICE is hereby given that a Special Meeting of Shareholders (the "Special
Meeting") of Bank of Union (the "Bank") will be held at p.m., local time, on
December , 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 , 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: , 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 , 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 , 1995 at the Special Meeting of
Shareholders of the Bank to be held on December , 1995 at p.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 , 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 , 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]
, 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 December , 1995, at 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
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
<PAGE>
FEDERAL DEPOSIT INSURANCE CORPORATION
Washington, D.C.
FORM F-2
ANNUAL REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
FDIC Certificate No. 26400-8
BANK OF UNION
(Exact name of bank as specified in its charter)
NORTH CAROLINA 56-1423761
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
201 North Charlotte Avenue
Post Office Box 1459
Monroe, North Carolina 28112
(Address of principal office) (Zip Code)
Bank's telephone number, including area code (704) 289-9555
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.25 Par Value
(Title of Class)
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 10 is not contained herein, and will not be
contained, to the best of the Bank's knowledge, in definitive
proxy or information statements incorporated by reference in
Part III of this Form F-2 or any amendment of this Form F-2. [ ]
Indicate by check mark whether the Bank (1) has filed all
reports required to be filed by Section 13 of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Bank was required to file such reports),
and (2) has been subject to such filing requirements for the past
90 days. YES X NO ___
Based on the $7.38 bid price of the Bank's common stock on
March 15, 1995, the aggregate value of the common stock held by
nonaffiliates as of that date was $13,628,137.
As of March 15, 1995 the Registrant had 2,187,409 shares of
common stock issued and outstanding.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Bank's 1994 Annual Report to Shareholders
are incorporated by reference into Parts II and IV.
2. Portions of the Bank's definitive Proxy Statement dated
March 20, 1995, are incorporated by reference into Parts I
and III.
PART I
Item 1 - Business
General. Bank of Union (the "Bank"), Monroe, North
Carolina, was incorporated under the laws of the State of North
Carolina on February 22, 1985, and commenced operations as an
insured, state-chartered bank on October 14, 1985.
The Bank 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. The Bank 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. The Bank'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, the Bank makes
residential mortgage loans to its customers which the Bank then
sells to another mortgage lender. The Bank 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. The Bank also issues
VISA debit cards which allow customers to use a credit card to
access their checking accounts. The Bank does not provide trust
services except through a correspondent bank.
Branch Offices. The Bank 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.
Market and Competition. The Bank's primary geographic
market is Union County, North Carolina. Consistent with its
philosophy as a community bank, the Bank's deposits are derived
primarily from and it has concentrated the majority of its assets
in loans within Union County, although it also has certain loan
and deposit customers in surrounding areas. Commercial banking
in Union County and in North Carolina as a whole is extremely
competitive with
2
<PAGE>
state laws permitting state-wide branching. The Bank
competes directly for deposits in Union County with other
commercial banks, credit unions, agencies issuing United
States government securities and all other
organizations and institutions engaged in money market
transactions. In its lending activities, the Bank
competes with all other financial institutions as well as
consumer finance companies, mortgage companies and other
lenders engaged in the business of extending credit. In
Union County, six commercial banks presently operate a total
of 23 banking offices. The Bank's predominant
competitors in Union County are NationsBank and Wachovia Bank
of North Carolina, N.A. (two of the three largest
financial institutions in North Carolina), and United
Carolina Bank which has the largest market share in the
county.
Interest rates, both on loans and deposits, and prices of
services are significant competitive factors among financial
institutions generally. Office location, office hours, customer
service, community reputation and continuity of personnel are
also important competitive factors. The Bank's predominant
competitors have greater resources, broader geographic markets
and higher lending limits, and can offer more products and better
afford and make more effective use of media advertising, support
services and electronic technology than the Bank. The Bank
depends on its reputation as a community bank in its local
market, direct customer contact, its ability to make credit and
other business decisions locally, and personalized service to
counter these competitive disadvantages.
During September 1994, Congress approved legislation that,
effective one year after enactment, permits adequately
capitalized and managed bank holding companies to acquire control
of a bank in any state (the "Interstate Banking Law"), subject to
anti-trust provisions. The North Carolina Reciprocal Interstate
Banking Act currently permits a bank or bank holding company in
another state to acquire a North Carolina bank or bank holding
company if the laws of the other state permit North Carolina bank
holding companies to acquire banks and bank holding companies in
that state. Under the Interstate Banking Law, beginning on June
1, 1977, banks also will be permitted to merge with one another
across state lines, subject to concentration, capital and
Community Reinvestment Act requirements and regulatory approval.
A state can authorize mergers earlier than June 1, 1997, or it
can opt out of interstate branching by enacting legislation prior
to June 1, 1997. Effective with the date of enactment, the
Interstate Banking Law also lets a state choose to permit out-of-
state banks to open new branches within its borders. If a state
chooses to allow interstate acquisitions of branches, then an
out-of-state bank also may acquire branches by merger. The North
Carolina Interstate Branch Banking Act currently permits a bank
in another state to establish a branch in North Carolina (by de
novo entry, the purchase of an existing branch, or the purchase
of assets of or merger with a North Carolina bank) if the laws of
the other state permit North Carolina banks to establish branches
in that state.
Subsidiary. The Bank's wholly-owned subsidiary, B.O.U.
Financial, Inc. ("BOU"), offers limited securities services to
its customers, including discount brokerage services and mutual
funds
3
<PAGE>
pursuant through a marketing agreement with Royal Alliance
Associates, Inc. In addition, BOU offers certain life insurance
and annuity products to customers of the Bank.
Employees. As of March 15, 1995, the Bank employed 63 full-
time employees and ten part-time employees. The Bank is not a
party to a collective bargaining agreement, and considers its
relations with employees to be good.
Miscellaneous. In the opinion of management of the Bank, no
material part of the business of the Bank is dependent upon a
single customer or very few customers the loss of which would
have a material adverse affect on the Bank. Since the Bank
commenced operations, no significant amount of funds have been
expended on research activities relating to the development of
new services, and no new line of business requiring the
investment of a material amount of total assets has been
introduced to the public or is currently planned. The Bank does
not consider its business or a material portion thereof to be
seasonal.
Item 2 - Properties
The Bank's Main Office is located at 201 North Charlotte
Avenue, Monroe, North Carolina in a two-story building containing
approximately 6,850 square feet which was constructed by the Bank
in 1985 and which the Bank owns in fee simple. The Bank owns a
vacant lot adjacent to its Main Office which it holds for
possible future expansion.
The Bank's Indian Trail Branch containing approximately
2,400 square feet was constructed by the Bank during 1986 and the
building and land are leased from a third party under an
agreement providing for an original term of fifteen years which
expires on October 31, 2001. The Bank has options to renew the
lease for up to three consecutive, additional terms of five years
each. Lease payments under the agreement are $2,685 per month
The Bank's Skyway Drive Branch containing approximately
2,200 square feet was constructed by the Bank during 1988 on land
leased from a third party under an agreement which provides for
an original term of fifteen years which expires on February 1,
2003. The Bank has options to renew the lease for up to five
consecutive, additional terms of five years each. Lease payments
under the Agreement are $1,450 per month, and the Bank has an
option to purchase the property at the end of ten years at a
price of $200,000.
The Bank's Waxhaw Branch opened during 1989 is located in a
newly constructed building containing approximately 2,520 square
feet which is owned by the Bank in fee simple.
The Bank's Matthews Branch opened during 1992 is located in
a building containing approximately 2,775 square feet. This
facility is leased from a third party under an agreement which
provided for an original term of one year which expired on
March 31, 1993. The Bank has options to renew the lease for up
to three consecutive additional terms of one year each. The Bank
has exercised its
4
<PAGE>
option to renew, such renewal period to expire on March 31,
1996. Lease payments under the agreement currently are $3,000
per month.
All of the Bank's existing offices are freestanding, fully
equipped and in good condition, and have adequate parking and
drive-up banking facilities.
The Bank owns substantially all of its office furnishings
and banking and data processing equipment.
The Bank's operations and data processing departments are
located in an approximately 4,673 square foot portion of a
building leased from a third party under an agreement providing
for an original term of five years which expired on April 30,
1993. The Bank has options to renew the lease for up to two
consecutive, additional terms of five years each. The Bank has
exercised its option to renew with such renewal period to expire
on April 30, 1998. Lease payments under the agreement currently
are $3,831 per month.
The Bank's mortgage loan department and BOU are located in a
building containing approximately 2,000 square feet which is
leased from a third party under an agreement providing for an
original term of three years which expires on February 28, 1997.
The Bank has options to renew the lease for up to four
consecutive, additional terms of three years each. Lease payments
under the Agreement currently are $1,750 per month.
Item 3 - Legal Proceedings
There are no material pending legal proceedings, other than
ordinary routine litigation incidental to the business of the
Bank, to which it or its subsidiary is a party or to which its
property is subject.
Item 4 - Security Ownership of Certain Beneficial Owners and
Management
The information required by Item 4 is incorporated herein by
reference from pages 2 and 3 under the caption "Voting Securities
and Beneficial Ownership Thereof" of the Bank's definitive proxy
statement dated March 20, 1995.
PART II
Item 5 - Market for the Bank's Common Stock and Related Security
Holder Matters
The information required by Item 5 is incorporated herein by
reference from page 20 of the Bank's 1994 Annual Report to
Shareholders under the caption "Market For Bank's Common Stock".
The Bank's common stock is traded in the over-the-counter market,
and is listed in the National Daily Quotation Service "Pink
Sheets." Shares of the Bank's common stock are thinly traded.
5
<PAGE>
Item 6 - Selected Financial Data
The information required by Item 6 is incorporated herein by
reference from page 1 of the Bank's 1994 Annual Report to
Shareholders under the caption "Selected Financial Data".
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
The information contained on pages 3 through 5 of the Bank's
1994 Annual Report to Shareholders under the caption
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" is incorporated herein by reference. The
tables appearing on the following pages contain certain
additional statistical information about the Bank for the periods
and on the dates indicated therein.
6
<PAGE>
BANK OF UNION AND SUBSIDIARY
SCHEDULE I
Average Balances and Interest Yields/Rates
<TABLE>
<CAPTION>
1994 1993
Income/ Average Average Income/ Average Average
Expense Balance Yield/Rate Expense Balance Yield/Rate
<S> <C> <C> <C> <C> <C> <C>
(In thousands)
Interest-earning assets:
Interest-bearing bank deposits $ 131 $ 3,017 4.34% $ 49 $ 1,497 3.27%
Investment securities - taxable 944 17,368 5.44 714 12,530 5.70
Investment securities - nontaxable 406 6,595 6.16 356 5,455 6.53
Loans, net 6,553 75,823 8.64 5,623 67,992 8.27
Federal funds sold 69 1,615 4.27 70 2,399 2.92
Total interest - earning assets 8,103 104,418 7.76 6,812 89,873 7.58
Cash and due from Bank 5,253 4,615
Other assets 3,525 3,297
Total assets $113,196 $97,785
Interest-bearing liabilities:
Demand deposits (NOW) $ 216 $ 11,310 1.91% $ 200 $10,104 1.98%
Savings 143 6,495 2.20 116 4,861 2.39
Insured money market 333 14,596 2.28 308 13,596 2.27
Time deposits 2,279 52,611 4.33 2,067 48,002 4.31
Short-term borrowings 96 2,586 3.71 30 1,308 2.29
Other borrowings 121 1,865 6.49 5 82 6.10
Total interest-bearing liabilities 3,188 89,463 3.56 2,726 77,953 3.50
Demand deposits 13,472 10,649
Other liabilities 720 704
Stockholders' equity 9,541 8,479
Total liabilities and stockholders'
equity $113,196 $97,785
Net interest - income and spread $4,915 4.20% $4,086 4.08%
Net yield on earning assets 4.71% 4.55%
</TABLE>
7
<PAGE>
BANK OF UNION AND SUBSIDIARY
SCHEDULE I, (Continued)
Volume and Rate Variance Analysis
<TABLE>
<CAPTION>
From December 31, 1993 to December 31, 1994
Increase (Decrease) Due to Change In*
(In thousands) Rate Volume Total Change
<S> <C> <C> <C>
Interest income:
Interest-bearing bank deposits $ 24 $ 58 $ 82
Investment securities - taxable (39) 269 230
Investment securities - nontaxable (22) 72 50
Loans, net 267 663 930
Federal funds sold 27 (28) (1)
Total interest income 257 1,034 1,291
Interest expense:
Demand deposits (NOW) (7) 23 16
Savings (11) 38 27
Insured money market 2 23 25
Time deposits 11 201 212
Short-term borrowings 28 38 66
Other borrowings 4 112 116
Total interest expense 27 435 462
Net interest income $230 $ 599 $ 829
</TABLE>
<TABLE>
<CAPTION>
From December 31, 1992 to December 31, 1993
Increase (Decrease) Due to Change In*
(In thousands) Rate Volume Total Change
<S> <C> <C> <C>
Interest income:
Interest-bearing bank deposits $ (23) $ 68 $ 45
Investment securities - taxable (171) (177) (348)
Investment securities - nontaxable - 14 14
Loans, net (362) 367 5
Federal funds sold (7) 23 16
Total interest income (563) 295 (268)
Interest expense:
Demand deposits (NOW) (65) 31 (34)
Savings (17) 37 20
Insured money market (87) 15 (72)
Time deposits (417) (137) (554)
Short-term borrowings (9) 37 28
Other borrowings 1 4 5
Total interest expense (594) (13) (607)
Net interest income $ 31 $ 308 $ 339
</TABLE>
*Changes attributable to rate/volume are allocated to both rate
and volume on an equal basis.
8
<PAGE>
BANK OF UNION AND SUBSIDIARY
SCHEDULE II
Investment Portfolio
<TABLE>
<CAPTION>
1994 1993
Book Market Book Market
Value Value Value Value
<S> <C> <C> <C> <C>
(In thousands)
U.S. Treasury held to maturity $ 5,968 $ 5,734 $ - $ -
U.S. Treasury available for sale 2,010 1,958 6,230 6,367
U.S. Government Agency Obligations
held to maturity 7,928 7,779 - -
U.S. Government Agency Obligations
available for sale 5,116 4,793 7,044 7,067
States and political subdivisions
(nontaxable) held to maturity 7,180 7,166 5,666 6,291
$28,202 $27,430 $18,940 $19,725
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
After One Year After Five Years
Due Within but Within but within After
One Year Five Years Ten Years Ten Years
Amount Yield* Amount Yield* Amount Yield* Amount Yield*
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(In thousands)
U.S. Treasury held to maturity $ 992 5.28% $ 4,976 5.97% $ - - % $ - - %
U.S. Treasury available for
sale - - 2,010 6.85 - - - -
U.S. Government Agency Obliga-
tions held to maturity 3,480 6.18 4,246 7.20 - - 202 5.44
U.S. Government Agency Obliga-
tions available for sale - - 3,467 5.74 955 6.34 694 5.86
States and political subsdivi-
sions (nontaxable) held to
maturity 3,756 10.27 1,587 9.98 1,837 9.38
Total $4,472 5.98% $18,455 5.36% $2,542 6.23% $2,733 6.71%
</TABLE>
9
<PAGE>
BANK OF UNION AND SUBSIDIARY
SCHEDULE III
Loan Portfolio
<TABLE>
<CAPTION>
1994 1993
Percent Percent
of of
Amount Total Amount Total
<S> <C> <C> <C> <C>
(In thousands)
Commercial and agriculture $53,039 63.20% $48,151 65.52%
Real estate, construction 4,962 5.91 4,635 6.31
Real estate, mortgage 9,162 10.92 4,649 6.33
Installment 15,951 19.00 14,606 19.87
Mortgage loans held for sale 813 0.97 1,448 1.97
Total $83,927 100.00% $73,489 100.00%
</TABLE>
Maturity and Sensitivity to Change in Interest Rates
<TABLE>
<CAPTION>
December 31, 1994
After One
Year
One through After
Year Five Five
or Less Years Years Total
<S> <C> <C> <C> <C>
(In thousands)
Commercial and agriculture $39,549 $13,490 $ - $53,039
Real estate, construction 3,372 1,590 - 4,962
Total $42,921 $15,080 $ - $58,001
</TABLE>
December 31,
1994
Predetermined interest rate $40,942
Floating or adjustable interest rate 42,985
Total $83,927
December 31,
Nonaccrual Loans* 1994 1993
(In thousands)
Principal balance outstanding 488 411
Interest income that would have been recorded
if the loans had been current and accruing 36 68
*Loans greater than ninety days past due as to principal or
interest payments and still accruing are $22 and $3 at
December 31, 1994 and 1993.
Restructured Loans
As of December 31, 1994, the balance of restructured loans was
$625,000. As of December 31, 1993, restructured loans amounted
to $795,000.
10
<PAGE>
BANK OF UNION AND SUBSIDIARY
SCHEDULE IV
Statement of Loan Loss
December 31,
Allowance for loan losses: 1994 1993
(In thousands)
Beginning balance $1,298 $1,208
Provision for loan losses 264 550
Loan charge-offs:
Commercial and agriculture (290) (415)
Real estate, mortgage - -
Installment (21) (65)
Recoveries of loans previously charged-off:
Commercial and agriculture 59 18
Real estate, mortgage - -
Installment 5 2
Ending balance $1,315 $1,298
Net charge offs to average loans .33% .68%
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
Percentage Percentage
of Loans in of Loans in
Allowance Category to Allowance Category to
Amount Total Loans Amount Total Loans
<S> <C> <C> <C> <C>
(In thousands)
Type of loan:
Commercial and agricultural $ 831 63.20% $ 850 65.52%
Real estate, construction 78 5.91 82 6.31
Real estate, mortgage 143 10.92 82 6.33
Installment 250 19.00 258 19.87
Mortgage loans held for sale 13 0.97 26 1.97
Total $1,315 100.00% $1,298 100.00%
</TABLE>
The provision for loan losses is based upon management's estimate
of the amount needed to maintain the allowance for loan losses at
an adequate level to cover known and inherent risk of loss in the
loan portfolio. Management's evaluation of the adequacy of the
allowance is based on a review of individual loans, recent loss
experience, current economic conditions, the risk characteristics
of the various classifications of loans, the fair value of
underlying collateral and other factors.
11
<PAGE>
BANK OF UNION AND SUBSIDIARY
SCHEDULE V
Deposits
<TABLE>
<CAPTION>
1994 1993
Average Average
Average Interest Rate Average Interest Rate
Balance Expense Paid Balance Expense Paid
<S> <C> <C> <C> <C> <C> <C>
(In thousands)
Interest-bearing demand
deposits $11,310 $ 216 1.91% $10,104 $ 200 1.98%
Savings 6,495 143 2.20 4,861 116 2.39
Insured money markets 14,596 333 2.28 13,596 308 2.27
Time deposits 52,611 2,279 4.33 48,002 2,067 4.31
Total $85,012 $2,971 3.49% $76,563 $2,691 3.51%
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
Three Over Three Over Six Over
Months through through Twelve
or Less Six Months Twelve Months Months Total
<S> <C> <C> <C> <C> <C>
(In thousands)
Time, $100,000 or more $ 8,428 $ 2,046 $1,273 $ 3,244 $14,991
Other time 11,627 8,215 6,674 16,658 43,174
Total $20,055 $10,261 $7,947 $19,902 $58,165
</TABLE>
12
<PAGE>
BANK OF UNION AND SUBSIDIARY
SCHEDULE VI
Return on Equity and Assets
December 31,
1994 1993
Net income $ 1,310 $ 1,015
Average shareholders' equity 9,541 8,479
Average total assets 113,196 97,785
Dividends declared - -
Dividends per share - -
Primary income per share .60 .47
Income per share assuming full dilution .60 .47
Return on average assets 1.16% 1.04%
Return on average equity 13.73% 11.97%
Dividend payout ratio - -
Average equity to average asset ratio 8.43% 8.67%
NOTE: Dollars in thousands except per share amounts
13
<PAGE>
BANK OF UNION AND SUBSIDIARY
SCHEDULE VII
Other Borrowings
<TABLE>
<CAPTION>
Interest
Balance as of Rate as of Average
December 31, December 31, Average Interest Maximum
1994 1994 Balance Rate Outstanding
<S> <C> <C> <C> <C> <C>
(In thousands)
Federal funds purchased
and securities sold under
agreements to repurchase $ - - % $ 38 3.93% $ 1,250
Customer repurchase
agreements 1,807 5.24 2,548 3.66 6,081
Other borrowings 2,900 6.89 1,865 6.50 2,950
Total other borrowings $4,707 6.26% $4,451 4.85% $10,281
</TABLE>
<TABLE>
<CAPTION>
Interest
Balance as of Rate as of Average
December 31, December 31, Average Interest Maximum
1993 1993 Balance Rate Outstanding
<S> <C> <C> <C> <C> <C>
(In thousands)
Federal funds purchased
and securities sold under
agreements to repurchase $ - - % $ 4 3.28% $ 700
Customer repurchase
agreements 2,011 2.15 1,304 2.30 5,331
Other borrowings 1,000 5.91 82 5.81 1,000
Total other borrowings $3,011 3.40% $1,390 2.51% $7,031
</TABLE>
14
<PAGE>
Item 8 - Financial Statements and Supplementary Data
The financial statements required by Item 8 are incorporated
herein by reference from pages 7 through 18 of the Bank's 1994
Annual Report to Shareholders.
PART III
Item 9 - Directors and Executive Officers of the Bank
The information required by Item 9 is incorporated herein by
reference from pages 3 through 6 under the captions "Proposal 1:
Election of Directors", "Incumbent Directors", and "Executive
Officers" of the Bank's definitive proxy statement dated
March 20, 1995.
Item 10 - Management Remuneration and Transactions
The information required by Item 10 is incorporated herein
by reference from page 3, and pages 6 through 11 under the
captions "Director Compensation", "Executive Compensation",
"Incentive Compensation Plan", "401(k) Savings Plan", "Corporate
Executive Stock Plan", and "Indebtedness of Management" of the
Bank's definitive proxy statement dated March 20, 1995.
PART IV
Item 11 - Exhibits, Financial Statement Schedules, and Reports on
Form F-3
(a) (1) Financial Statements.
The following financial statements of the Bank are
incorporated herein by reference from the
indicated pages of the Bank's 1994 Annual Report
to Shareholders:
Independent Auditor's Report - page 6
Consolidated Balance Sheets - December 31, 1994
and 1993 - page 7
Consolidated Statements of Income - Years ended
December 31, 1994, 1993 and 1992 - page 8
Consolidated Statements of Changes in
Stockholders' Equity - Years ended December 31,
1994, 1993 and 1992 - page 9
Consolidated Statements of Cash Flows - Years
ended December 31, 1994, 1993 and 1992 - page 10
Notes to Consolidated Financial Statements - Years
ended December 31, 1994, 1993 and 1992 - pages 11
through 18
15
<PAGE>
(2) Financial Statement Schedules.
All financial statement schedules are omitted as
the information required to be included therein is
substantially included in the consolidated
financial statements listed above which are
incorporated herein by reference from the Bank's
1994 Annual Report to Shareholders or is not
applicable.
(b) Reports on Form F-3.
The Bank did not file a Current Report on Form F-3
during the three months ended December 31, 1994.
(c) Exhibits.
The following exhibits are filed herewith or
incorporated herein by reference.
Exhibit No. Description of Exhibit
1(a) Articles of Incorporation of the Bank, as
amended and currently in effect, are
incorporated herein by reference from
exhibits to the Bank's 1988 Annual Report on
Form F-2.
1(b) Bylaws of the Bank are incorporated herein by
reference from exhibits to the Bank's
Registration Statement on Form F-1. An
amendment to the Bank's Bylaws is
incorporated herein by reference from
exhibits to the Bank's 1987 Annual Report on
Form F-2.
2 Specimen of the Bank's Common Stock
certificate is incorporated herein by
reference from exhibits to the Bank's Current
Report on Form F-3 dated March 2, 1988.
3(a) Lease dated March 1, 1994, with George R.
Medlin and Hope L. Medlin is filed herewith.
3(b) Lease dated September 5, 1986, with Rushing
Construction Company is incorporated herein
by reference from exhibits to the Bank's 1987
Annual Report on Form F-2.
3(c) Lease dated February 3, 1988, with Edward G.
and Elizabeth Belle Faulkner is incorporated
herein by reference from exhibits to the
Bank's 1987 Annual Report on Form F-2.
3(d) Lease dated May 16, 1988, with Dickerson
Realty Corporation is incorporated herein by
reference from exhibits to the Bank's 1988
Annual Report on Form F-2.
16
<PAGE>
3(e) Amendment to lease dated January 26, 1990,
with Dickerson Realty Corporation is
incorporated herein by reference from
exhibits to the Bank's 1991 Annual Report on
Form F-2.
3(f) Lease dated March 23, 1992 with The Family
Partnership is incorporated herein by
reference from exhibits to the Bank's 1991
Annual Report on Form F-2.
3(g) Employment Agreement dated June 1, 1991
between the Bank and its President and Chief
Executive Officer is incorporated herein by
reference from exhibits to the Bank's 1991
Annual Report on Form F-2.
3(h) Employment Agreement dated June 1, 1991
between the Bank and its Executive Vice
President and Chief Administrative Officer is
incorporated herein by reference from
exhibits to the Bank's 1991 Annual Report on
Form F-2.
3(i) Employment Agreement dated June 1, 1991
between the Bank and its Senior Vice
President and Senior Consumer Loan Officer is
incorporated herein by reference from
exhibits to the Bank's 1991 Annual Report on
Form F-2.
3(j) Corporate Executive Stock Plan is
incorporated herein by reference from
exhibits to the Bank's 1987 Annual Report on
Form F-2.
6 Annual Report to Shareholders of the Bank for
the year ended December 31, 1994, is filed
herewith.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities
Exchange Act of 1934, the Bank has duly caused this annual report
to be signed on its behalf by the undersigned, thereunto duly
authorized.
BANK OF UNION
(Bank)
March 15, 1995 By: /s/ H. Clark Goodwin
H. Clark Goodwin, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Bank and in the capacities and on the
dates indicated.
/s/ Charla L. Kurtz March 15, 1995
Charla L. Kurtz, Controller (principal
financial and accounting officer)
/s/ John A. Crook, Jr. March 15, 1995
John A. Crook, Jr., Director
/s/ J. Earl Culbreth March 15, 1995
J. Earl Culbreth, Director
/s/ Dennison A. Davis March 15, 1995
Dennison A. Davis, Director
/s/ Dr. William C. Deskins March 15, 1995
Dr. William C. Deskins, Director
/s/ James B. Fincher March 15, 1995
James B. Fincher, Director
/s/ H. Clark Goodwin March 15, 1995
H. Clark Goodwin, President, Chief
Executive Officer and Director
(principal executive officer)
18
<PAGE>
/s/ Earl J. Haigler March 15, 1995
Earl J. Haigler, Director
/s/ Frank H. Hawfield, Jr. March 15, 1995
Frank H. Hawfield, Jr., Chairman
/s/ Charles E. Hulsey March 15, 1995
Charles E. Hulsey, Director
/s/ Callie F. King March 15, 1995
Callie F. King, Director
March __, 1995
Joseph L. Little, Director
/s/ Fred C. Long March 15, 1995
Fred C. Long, Director
/s/ Dr. Jerry E. McGee March 15, 1995
Dr. Jerry E. McGee, Director
/s/ David C. McGuirt March 15, 1995
David C. McGuirt, Director
/s/ Lane D. Vickery March 15, 1995
Lane D. Vickery, Director
19
<PAGE>
EXHIBIT 3(A)
<PAGE>
STATE OF NORTH CAROLINA
L E A S E
COUNTY OF UNION
THIS LEASE, made and entered into this 1st day of March,
1994, by and between GEORGE RONALD MEDLIN and wife, HOPE L.
MEDLIN, residents of Union County, North Carolina, hereinafter
called "Landlord" and BOU FINANCIAL, INC., a North Carolina
corporation with its principal office in Union County, North
Carolina, hereinafter called "Tenant";
WITNESSETH:
That WHEREAS, the Landlord is the owner of premises located
in Monroe Township, City of Monroe, Union County, North Carolina,
and more particularly described as follows:
SEE EXHIBIT A
WHEREAS, the Tenant desires to lease from the Landlord said
premises; and
WHEREAS, the Landlord has agreed to lease said premises to
the Tenant upon certain terms and conditions;
NOW, THEREFORE, for and in consideration of the mutual
covenants and conditions hereinafter described, the sum of ONE
DOLLAR ($1.00) and other valuable considerations, the Landlord
hereby leases to the Tenant, pursuant to certain terms and
conditions hereinafter set forth, all of the above described
property including improvements thereon, to the Tenant.
The terms and conditions of this lease are as follows:
1. TERM OF LEASE AND OPTION TO RE-NEW. The term of this
lease shall be for three (3) years beginning on the date
certified to be available for occupancy as evidenced by a
certificate of
<PAGE>
occupancy issued by the Department of Inspection
of Union County but not earlier than January 1, 1994, with an
option to the Tenant to renew the lease in accordance with the
terms hereof for as many as four (4) additional terms of three
(3) years each. This lease will automatically renew for the next
succeeding term, unless sixty (60) days prior to the expiration
of the then-existing term, the Tenant notifies the Landlord, in
writing, of Tenant's intention to not renew this lease.
2. RENT. The tenant shall pay a rental sum of One
Thousand Seven Hundred Fifty Dollars ($1750.00) per month,
monthly, on the 1st day of the month.
After the initial year of occupancy by Tenant, the Tenant
further agrees to pay one-half of any amount of increase in ad
valorem taxes which may be assessed by Union County and/or the
City of Monroe for any such increases during the applicable term
of this lease.
In addition to the inclusion of one-half (1/2) of amount of
increase in ad valorem taxes, after the initial three (3) year
term, the rental amount shall be adjusted annually thereafter
according to the previous three (3) year average increase, if
any, of the Producer's Price Index as measured and published by
the United States Department of Commerce. Commencing as of
January 1, 1998, and as of January 1 of each year thereafter (the
Adjustment Date), the Base Rent (the total annual rental for the
coming rental year) shall be adjusted as hereinafter provided:
1) The Producer Price Index, annual averages and changes, all
items published by the United States Department of Commerce (the
Index) which is
<PAGE>
published for the calendar year ended nearest the
Adjustment Date (the Extension Index) shall be compared with the
Index published for the calendar year immediately preceding the
calendar year of the Extension Index (the Beginning Index)*. If
the Extension Index differs from the Beginning Index, the Base
Rent shall be adjusted by the following formula:
New Adjusted Base Rent
equals
Base Rent as Previously Adjusted
multiplied by
EXTENSION INDEX MINUS BEGINNING INDEX
Beginning Index
Lessee shall thereafter pay to Lessor monthly in the manner
provided in this lease agreement the GREATER of the then existing
Base Rent as the same may have been adjusted theretofore or said
Base Rent adjusted in the manner set out above.
*It is agreed between the parties the Beginning Index for
the purpose of establishing thee rental for the year commencing
January 1, 1998, shall be the Index published for the calendar
year 1993 immediately preceding January 1, 1994.
The increase shall begin on the fourth year after the
initial three (3) year term and shall apply each year thereafter
during the term of this agreement.
3. TAXES. The Tenant shall pay all ad valorem taxes
assessed against its personal property located on the property
but the Landlord shall be responsible and pay for all real estate
ad valorem taxes except as stated in paragraph 2 above.
4. IMPROVEMENTS. The Tenant may install any banking
<PAGE>
equipment and fixtures at its sole expense and may remove the
same at the expiration of this lease provided the Tenant leaves
the premises in the same or similar condition as the premises
were in before the addition of the fixtures.
5. RESTRICTIONS ON USE AND SUB-LETTING. The Tenant may
use and occupy the leased property for any lawful purposes and
may assign this lease or sub-let said premises in part or in full
with the consent of the Landlord first being had and obtained, in
writing. Such permission and consent by the Landlord to the
assignment or sub-letting of said premises, either in whole or in
part, shall not be unreasonably withheld and such consent and
permission shall not relieve the Tenant, assignee or the
sub-tenant from any liability or claim on account of the
subsequent breach of any of the terms and conditions by any
sub-tenant. Provided, however, no space shall be sublet or
assigned to any realtor or builder.
6. MAINTENANCE. The Landlord shall be responsible and pay
for maintenance on the exterior (walls, etc.), roof, heating, air
conditioning systems, water and sewerage services for the
building. The Tenant shall be responsible and pay for minor
maintenance for the interior upkeep of the tenant's occupied
space, minor wear and tear excepted.
7. SURRENDER UPON TERMINATION. At the expiration of the
lease term, or any extension thereof the Tenant shall surrender
the leased property in as good condition as it was at the
beginning of the term, reasonable use and wear and damages by the
elements excepted.
<PAGE>
8. UTILITIES. The Tenant shall be responsible for all
utility bills and deposits for service to said premises.
9. RIGHT TO RE-ENTER. If the leased property shall be
deserted or vacated, or if proceedings are commenced against the
Tenant in any Court under a bankruptcy act or for the appointment
of a Trustee or received of the Tenant's property either before
or after the commencement of the lease term, or if there shall be
default in the payment of rent or any part thereof for more than
five days after written notice of such default by the Landlord,
or if there shall be default in the performance of any other
covenant, agreement, conditions, rule, or regulations herein
contained, or hereafter established on the part of the Tenant for
more than forty-five (45) days after written notice of such
default by the Landlord, this lease (if the Landlord so elects)
shall thereupon become null and void, and the Landlord shall have
the right to re-enter or repossess this leased property, either
by force, summary proceedings, surrender, or otherwise, and
dispossess and remove therefrom the Tenant, or the occupants
thereof, and their effect, without waiving any other rights that
the Landlord might have in the premises. The Tenant hereby
expressly waives the service of notice of intention to re-enter
or of instituting legal proceedings to that end.
10. ACCESS. The Landlord and its representatives may enter
the leased property, at any reasonable time, during actual
business hours, for the purpose of inspecting the leased
property, performing any work which the Landlord elects to
undertake, exhibiting the leased property for sale, lease or
mortgage
<PAGE>
financing, but such activities shall not interfere with
Tenant's normal business activities.
11. INSURANCE. Landlord shall keep the building insured
against fire and other such casualty. Tenant shall be
responsible for and pay for fire and other casualty coverage on
its contents as it may deem appropriate. In addition, tenant
shall provide Landlord with Certificate of Insurance naming
Landlord as additional insured in the amount of
$1,000,000.00/Personal Injury and $500,000.00/Property.
12. CASUALTY LOSSES. In case of damage by fire or other
casualty to the building on which the leased property is located,
without fault of the Tenant, if the damage is so extensive as to
amount to sixty (60%) per cent destruction of the leased property
or of such building, this lease shall cease, and the rent shall
be apportioned at the time of damage. In all other cases, where
the leased property is damaged by fire or other casualty without
fault of the Tenant, the Landlord shall repair the damage with
reasonable dispatch, and if the damage has rendered the leased
property untenable, in whole or in part, there shall be an
apportionment of the rent until the damage has been repaired.
13. CONDEMNATION. If the leased property, or any
substantial part thereof, shall be taken by eminent domain, this
lease shall expire on the date when the leased property shall be
so taken, and the rent shall be apportioned as of that date. Any
award shall be pro-rated between Tenant and Landlord, as they may
agree, for the actual taking of property of each and disruption
of business for tenant.
<PAGE>
14. LANDLORD'S LIABILITY. The Landlord shall not be liable
for injury or damage to personal property occurring within the
leased property, unless caused by or resulting from the
negligence of the Landlord or any of the Landlord's agents,
servants, or employees in the operation or maintenance of the
leased property or the building containing the leased property.
15. OPTION TO PURCHASE. Tenant shall have the option to
purchase the property and improvements which are the subject of
this lease:
a. At the end of the initial term or any other time during
the existence of this agreement and provided Tenant then occupies
the within leased space and Landlord decides to sell, the Tenant
shall have the first option (first right of refusal) to purchase
the property and improvements which are the subject of this lease
at the price agreed to between the parties, or at the price of
any bona fide offer to Landlord by another party (WHICH TENANT
MUST MATCH).
b. In the event Tenant exercises rights under 15.a., the
property SHALL INCLUDE THE ENTIRE BUILDING AND LOT (Real Estate).
c. Any option to purchase which may be agreed upon shall
not be assignable by Tenant.
16. COVENANT OF QUIET ENJOYMENT. The Landlord covenants
that the Tenant, upon the payment of the rent herein reserved and
upon the performance of all of the terms of this Lease, shall at
all times during the Lease term and during any extension or
renewal term, enjoy the leased property without any disturbance
from the Landlord or from any other person claiming through the
Landlord.
17. BINDING ON SUCCESSORS. This agreement shall be binding
upon the parties and their successors and assigns.
18. COMMISSIONER OF BANKS PROVISION. NOTWITHSTANDING ANY
OTHER PROVISIONS CONTAINED IN THIS LEASE, IN THE EVENT THE TENANT
<PAGE>
IS CLOSED OR TAKEN OVER BY THE BANKING AUTHORITY OF THE STATE OF
NORTH CAROLINA, OR OTHER BANK SUPERVISORY AUTHORITY, THE LANDLORD
MAY TERMINATE THE LEASE ONLY WITH THE CONCURRENCE OF SUCH BANKING
AUTHORITY OR OTHER BANK SUPERVISORY AUTHORITY, AND ANY SUCH
AUTHORITY SHALL IN ANY EVENT HAVE THE ELECTION EITHER TO CONTINUE
OR TO TERMINATE THE LEASE: PROVIDED, THAT IN THE EVENT THIS
LEASE IS TERMINATED, THE MAXIMUM CLAIM OF LANDLORD FOR DAMAGES OR
INDEMNITY FOR INJURY RESULTING FROM THE REJECTION OR ABANDONMENT
OF THE UNEXPIRED TERM OF THE LEASE SHALL IN NO EVENT BE IN AN
AMOUNT EXCEEDING THE RENT RESERVED BY THE LEASE, WITHOUT
ACCELERATION, FOR THE YEAR NEXT SUCCEEDING THE DATE OF THE
SURRENDER OF THE PREMISES TO THE LANDLORD, OR THE DATE OF
RE-ENTRY OF THE LANDLORD, WHICHEVER FIRST OCCURS, WHETHER BEFORE
OR AFTER THE CLOSING OF THE BANK, PLUS AN AMOUNT EQUAL TO THE
UNPAID RENT ACCRUED, WITHOUT ACCELERATION UP TO SUCH DATE.
19. NOTICE. Any notice under this lease must be in writing
and must be sent by registered or certified mail to the last
address of the party to whom the notice is to be given, as
designated by said party in writing. The Tenant hereby
designates its address as 201 N. Charlotte Avenue, Monroe, North
Carolina, 28112 and the Landlord hereby designates its address as
P.O. Box 307 Monroe, N.C. 28111.
IN WITNESS WHEREOF, the parties have hereunto set their
hands and seals, this 1st day of March, 1994.
<PAGE>
LANDLORD:
/s/ George Ronald Medlin (SEAL)
___________________________________
George Ronald Medlin
/s/ Hope L. Medlin (SEAL)
___________________________________
Hope L. Medlin
TENANT:
BOU FINANCIAL, INC.
By: /s/ H. Clark Goodwin
___________________________________
President
ATTEST:
/s/ David C. McGuirt
_________________________
Secretary
NORTH CAROLINA
UNION COUNTY
I, a Notary Public of the County and State aforesaid,
certify that GEORGE RONALD MEDLIN and wife, HOPE L. MEDLIN,
personally appeared before me this day and acknowledged the
execution of the foregoing instrument.
Witness my hand and official stamp or seal, this 1 day of
MARCH, 1994.
My commission expires: 7-14-97 PAMELA P. SANDERS NOTARY PUBLIC
NORTH CAROLINA
UNION COUNTY
I, a Notary Public of the County and State aforesaid,
certify that DAVID C. MCGUIRT, personally came before me this day
and acknowledged that HE is __________ Secretary of BOU
FINANCIAL, INC. a North Carolina corporation, and that by
authority duly given and as the act of the corporation, the
foregoing instrument was signed in its name by its __________
President, sealed with its corporate seal and attested by DAVID
C. MCGUIRT as its Secretary.
Witness my hand and official stamp or seal, this 1st day of
MARCH, 1994.
Mv commission expires: 4-04-95 ALICE K. HOLMES NOTARY PUBLIC
<PAGE>
EXHIBIT 6
<PAGE>
BANK OF UNION
ANNUAL
1994
REPORT
Union County's Only Local Bank
<PAGE>
TABLE OF CONTENTS
Selected Financial Data 1
Letter to Shareholder 2
Management's Discussion and Analysis of Financial
Condition and Results 3
of Operations (MD&A)
Report of Independent Accountants 6
Consolidated Balance Sheets 7
Consolidated Statements of Income 8
Consolidated Statements of Changes in Shareholders' Equity 9
Consolidated Statements of Cash Flows 10
Notes to Consolidated Financial Statements 11
Board of Directors, Officers and Advisory Boards 19
Shareholder Information 20
SELECTED FINANCIAL DATA
The following table sets forth certain selected financial data as of and for
the years ended December 31, 1994, 1993, 1992, 1991, and 1990.
<TABLE>
<CAPTION>
For the year ended December 31, 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Interest income $ 8,103,087 6,812,149 7,079,872 7,318,964 7,080,774
Interest expense 3,188,077 2,726,223 3,333,249 4,140,679 4,498,203
Net interest income 4,915,010 4,085,926 3,746,623 3,178,285 2,582,571
Provision for loan losses 264,000 550,000 545,000 208,500 316,000
Other income 2,174,445 1,664,998 1,335,412 839,837 926,948
Other expenses 4,954,053 3,747,564 3,421,976 2,821,572 2,593,534
Income taxes 561,400 437,997 292,692 250,991 112,434
Net income $ 1,310,002 1,015,363 822,367 737,059 487,551
Net income per share $ .60 .47 .38 .35 .25
Cash dividends declared per
share $ - - .10 - -
December 31, 1994 1993 1992 1991 1990
Total assets $ 123,413,131 106,570,466 93,615,794 92,857,060 77,440,892
Loans, net 82,612,599 72,191,377 67,592,699 59,236,923 51,699,501
Securities 27,827,803 18,938,971 16,354,594 23,643,812 13,940,131
Deposits 106,467,846 92,905,588 84,610,352 83,697,090 70,179,175
Shareholders' equity 10,074,741 9,009,832 7,985,804 7,316,590 6,360,552
</TABLE>
Note-Net income per share for prior periods has been restated to reflect the
5% stock dividends issued December 16, 1994, December 15, 1993, November 26,
1991 and November 20, 1990.
1
<PAGE>
DEAR SHAREHOLDER,
It is indeed a pleasure to report to you that your bank - UNION COUNTY'S
ONLY LOCAL BANK -posted record operating results in 1994.
At December 31, 1994, total assets were $123,413,131; representing an
increase of $16,842,665, or 15.8% over year end 1993. And while growth is
certainly a fundamental indicator of progress, the QUALITY of that growth is
even more important...
The following key financial results all represent landmarks in the history
of your bank:
(Bullet) Net income for the year was $1,310,002, a 29% increase over the
prior year;
(Bullet) Return on average assets was 1.16%; and
(Bullet) Return on average shareholders' equity
was 13.73%.
At the same time, deposits grew 14.6% to $106,467,846; and shareholders'
equity rose 11.8% to $10,074,741.
The outstanding financial performance of your bank during 1994 reflects our
continuing efforts to provide unparalleled products and service to the
individuals, families, and businesses in our local markets. Those efforts
include an aggressive new product development program, innovative marketing
techniques, and improved physical convenience for our valued customers.
In 1994 Bank of Union developed, introduced, and promoted four exclusive
new products in response to our customers' constantly changing financial needs
and wants:
1. AcceleRate CD(SM), the guaranteed certificate account that keeps pace with
rising interest rates automatically.
2. VISA Check Card, your `checkbook in a card.'
3. Our increasingly popular 15-year No Hassle Home Loan.
4. MoneyMaster CD(SM), the 36-month certificate with a premium interest yield.
Plus, our MasterCard/VISA cardholder base more than doubled during the last
year, and our merchant card services grew from 70, to over 500 merchants served.
THE MONEY JOURNAL, a new financial planning newsletter, was written,
produced, and distributed by BOU Financial. Your bank sponsored a special tour
of Old Salem, North Carolina, especially for CheckMaster 50+ customers. Bank of
Union was the sole sponsor of the 1994 local elections coverage on WIXE, and a
comprehensive Products & Services Manual was written and produced. All in all,
it was a noteworthy marketing year.
Early in the year, BOU Financial and Bank of Union Mortgage moved into new
offices at 2610 West Roosevelt Boulevard in Monroe. Both are now more convenient
than ever to their valued clientele.
In addition, Dr. Jerry E. McGee, president of Wingate College, was
appointed to the bank's board of directors in 1994. We are extremely pleased to
have someone of Dr. McGee's stature and academic standing serve as a board
member.
In last year's annual report, we promised you would begin to see the
results of the bank's three-year Business Plan and Strategic Operating Plan in
1994. Now that the results are in, we do hope you are as pleased as we are with
them.
On behalf of your entire board of directors, thank you for your continued
support and guidance. As always, your questions, comments, and suggestions are
encouraged and welcomed.
FOR UNION COUNTY'S ONLY LOCAL BANK,
(Signature of Frank H. Hawfield, Jr.) (Signature of H. Clark Goodwin)
Frank H. Hawfield, Jr. H. Clark Goodwin
CHAIRMAN PRESIDENT & CEO
2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (MD&A)
The following discussion is a summary of the financial condition of Bank of
Union. The analysis is intended to provide shareholders with management's
overview of the Bank's operations for the years ending December 31, 1994 and
1993.
FINANCIAL CONDITION
During 1994, the Bank's total assets increased 15.8%, growing from
$106,570,466 at December 31, 1993 to $123,413,131 at December 31, 1994. Deposits
grew from $92,905,588 at December 31, 1993 to $106,467,846 at the end of 1994.
Net loans increased $10,421,222 to $82,612,599 at year end 1994.
The substantial increase in deposits reflects balanced growth in both
demand deposits and savings accounts. Deposits also grew due to new certificate
of deposit products introduced during the year, plus renewed interest in
traditional products due to increases in interest rates.
An analysis of the Bank's deposits indicates there is no individual
depositor who would have a significant effect on the Bank should such depositor
decide to transfer funds from the Bank.
The securities held to maturity and securities available for sale
portfolios at December 31, 1994 represented 22.5% of total assets. Investments
grew from $18,938,971 at December 31, 1993 to $27,827,803 at December 31, 1994.
This 46.9% increase was mostly due to growth in deposits and other borrowings.
LIQUIDITY AND CAPITAL
The Bank's primary sources of liquidity are deposits and prepayments of
principal and interest on loans. Also, the Bank has $6,751,456 in securities
available for sale that may be used for liquidity. Of the Bank's portfolio of
securities held to maturity, $4,472,991 will mature within one year.
In 1992, the Bank joined the Federal Home Loan Bank of Atlanta (FHLB.) As a
member, the Bank has access to various credit products offered by the FHLB to
use as a source of funds. As of December 31, 1994, there were borrowings of
$2,900,000 from the FHLB.
Total shareholders' equity was 8.2% and 8.5% of total assets at December
31, 1994 and 1993, respectively. At December 31, 1994, the Bank exceeded the
required minimum ratio of capital to adjusted total assets, as defined by the
banking regulators.
RESULTS OF OPERATIONS
The net results of operations during 1994 produced the 8th consecutive year
of profitability for the Bank. Net income for 1994 was $1,310,002 or $.60 per
share, an increase of 29.0% over year end 1993. Net income was $1,015,363 or
$.47 per share, and $822,367 or $.38 per share for 1993 and 1992, respectively.
For the year ended December 31, 1994, interest income increased $1,290,938
to $8,103,087, or 19.0% above the 1993 level, primarily due to increased yields
on loans and investments. Interest income for the year ended December 31, 1993
was $6,812,149, a 3.8% decrease from 1992. Interest on loans was 80.9%, 82.5%,
and 79.4% of total interest income for the years ended December 31, 1994, 1993,
and 1992, respectively.
(Two bar graphs appear with the following plot points:)
TOTAL ASSETS
(Millions)
90 91 92 93 94
77,440,892 92,857,060 93,615,794 106,570,466 123,413,131
LOANS
OUTSTANDING
(Millions)
90 91 92 93 94
51,699,501 59,236,923 67,592,699 72,191,377 82,612,599
3
<PAGE>
(MD&A CONTINUED)
Interest expense also increased in 1994, although not to such an extent as
did interest income. The increase was $461,854, or 16.9% from the 1993 level of
$2,726,223. The increase was partially due to increased balances in interest-
bearing deposits and also due to increases in interest rates. For the year ended
December 31, 1993, interest expense decreased $607,026, or 18.2% from the 1992
level of $3,333,249.
The provision for loan losses was $264,000 for 1994, $550,000 for 1993, and
$545,000 for 1992. Management decreased the provision in 1994, after evaluating
the current economic environment and analyzing the loan portfolio. The provision
was increased in 1993 and 1992 because of management's assessment of the
economic environment at that time. Nonaccrual loans were approximately $488,000
and $414,000 at December 31, 1994 and 1993, respectively.
Other operating income increased 30.6% and 24.7% in 1994 and 1993,
respectively. Most of the growth in other operating income for 1994 can be
attributed to substantial growth in the merchant credit card program. Also
during 1994, service charges on deposit accounts increased by $92,712 or 11.7%.
Other operating expenses increased 32.2% and 9.5% during 1994 and 1993,
respectively. The largest increase came from the credit card program, which
increased expenses by $781,012 in 1994. Compensation, payroll taxes and fringe
benefits expense increased 10.8% and 15.0% in 1994 and 1993, respectively.
EFFECTS OF INFLATION AND
CHANGING PRICES
A commercial bank has an asset and a liability structure that is distinctly
different from that of a company with substantial investments in plant and
inventory, because the major portion of its assets are monetary in nature. As a
result, a bank's performance may be significantly influenced by changes in
interest rates as discussed in previous sections of this discussion and
analysis. Although the banking industry is more affected by changes in interest
rates than by inflation in the prices of goods and services, inflation is a
factor which may influence interest rates, yet the frequency and magnitude of
interest rate fluctuations do not necessarily coincide with changes in the
general inflation rate. Inflation does affect operating expenses in that
personnel expenses and costs of supplies and outside services tend to increase
more during periods of high inflation.
ACCOUNTING MATTERS
The Bank will adopt Statement of Financial Accounting Standards (SFAS) 114,
"Accounting by Creditors for Impairment of a Loan," and SFAS 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosures," on
January 1, 1995. SFAS 114 amends SFAS 5, "Accounting for Contingencies," and
SFAS 15, "Accounting by Debtors and Creditors for Troubled Debt Restructurings,"
and prescribes the recognition criterion for loan impairment and the measurement
methods for certain impaired loans and loans whose terms are modified in
troubled-debt restructurings.
(Three bar graphs appear on this page with the following plot points:)
DEPOSITS
(Millions)
90 91 92 93 94
70,179,175 83,697,090 84,610,352 92,905,588 106,467,846
NET INCOME
(Thousands)
90 91 92 93 94
487,551 737,059 822,367 1,015,363 1,310,002
STOCKHOLDER'S
EQUITY
(Millions)
90 91 92 93 94
6,360,552 7,316,590 7,985,804 9,009,832 10,074,741
4
<PAGE>
The statement considers a loan to be impaired when it is probable that a
creditor will be unable to collect all amounts due (principal and interest)
according to the contractual terms (amount and timing) of the agreement.
Estimated future cash flows from the loan are discounted at the effective
interest rate of the loan (contractual rate adjusted for deferred loan fees and
costs and premium or discount.) The impairment constitutes the difference
between the discounted estimated future cash flows and the carrying amount of
the loan. The impairment is recorded though a valuation allowance. In addition,
at the time of a formal loan restructuring, the restructured loan is valued at
fair value, which becomes the recorded investment in the loan. SFAS 118 amends
SFAS 114 to allow a creditor to use existing methods for recognizing interest
income on an impaired loan, rather than the methods prescribed in SFAS 114. In
the opinion of management, adoption of these standards will not have a material
effect on the Bank's financial statements.
SFAS 107, "Disclosures about Fair Value of Financial Instruments," requires
disclosure of the fair value of financial instruments, both assets and
liabilities recognized and not recognized in the balance sheet, for which it is
practicable to estimate fair value. If estimating fair value is not practicable,
this Statement requires disclosure of descriptive information pertinent to
estimating the fair value of a financial instrument. Disclosures about fair
value are not required for certain financial instruments. SFAS 107 is effective
for entities with less than $150 million in total assets in the current balance
sheet for fiscal years ending after December 15, 1995. The Bank anticipates
adopting the standard as of December 31, 1995.
SFAS 119, "Disclosure about Derivative Financial Instruments and Fair Value
of Financial Instruments," requires disclosures about derivative financial
instruments - futures, forward, swap, and option contracts, and other financial
instruments with similar characteristics. It also amends existing requirements
of SFAS 105, "Disclosure of Information about Financial Instruments with Off-
Balance-Sheet Risk and Financial Instruments with Concentrations of Credit
Risk," and SFAS 107. This Statement requires disclosures about amounts, nature,
and terms of derivative financial instruments that are not subject to SFAS 105
because they do not result in off-balance-sheet risk of accounting loss. It
requires that a distinction be made between financial instruments held or issued
for trading purposes (including dealing and other trading activities measured at
fair value with gains and losses recognized in earnings) and financial
instruments held or issued for purposes other than trading. SFAS 119 is
effective for financial statements for fiscal years beginning after December 15,
1995, with earlier application encouraged. As of December 31, 1994, the Bank did
not hold any derivative financial instruments. As SFAS 119 relates only to
disclosure issues, no impact on the financial position of the Bank is expected
upon adoption.
(Bar graphs appearing on this page not reproduced.)
5
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Bank of Union:
We have audited the accompanying consolidated balance sheet of Bank of Union
and subsidiary as of December 31, 1994, and the related consolidated statements
of income, changes in shareholders' equity, and cash flows for the year ended
December 31, 1994. These financial statements are the responsibility of the
Bank's management. Our responsibility is to express an opinion on these
financial statements based on our audit. The consolidated financial statements
of the Bank and subsidiary as of and for each of the years in the two-year
period ended December 31, 1993 were audited by other auditors, whose report,
dated February 11, 1994, expressed an unqualified opinion on those financial
statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1994 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Bank of
Union and subsidiary as of December 31, 1994 and the consolidated results of
their operations and cash flows for the year then ended, in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the financial statements, in 1994 the Bank
changed its method of accounting for certain investments in debt and equity
securities in accordance with the provisions of the Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 115.
(Signature of Coopers & Lybrand L.L.P.)
Charlotte, North Carolina
February 3, 1995
6
<PAGE>
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
<TABLE>
<CAPTION>
ASSETS 1994 1993
<S> <C> <C>
Cash and due from banks $ 5,245,250 7,169,691
Interest-bearing due from banks 2,537,451 1,065,671
Federal funds sold 625,000 1,800,000
Interest-bearing bank time deposits 1,000,000 2,000,000
Securities available for sale (estimated market value of
$13,434,008 in 1993) 6,751,456 13,273,435
Securities held to maturity (estimated market value of
$20,678,808 in 1994 and $6,291,044 in 1993) 21,076,347 5,665,536
Loans 83,927,205 73,489,533
Less allowance for loan losses (1,314,606) (1,298,156)
Loans, net 82,612,599 72,191,377
Premises and equipment, net 1,596,493 1,687,856
Other assets 1,968,535 1,716,900
Total assets $123,413,131 106,570,466
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand:
Noninterest-bearing $15,663,116 12,179,954
Interest-bearing 26,037,405 27,098,402
Savings 6,602,084 5,911,158
Time, $100,000 or more 14,991,410 10,263,822
Other time 43,173,831 37,452,252
Total deposits 106,467,846 92,905,588
Drafts outstanding 1,413,398 1,038,635
Other borrowings 4,707,259 3,011,119
Other liabilities 749,887 605,292
Total liabilities 113,338,390 97,560,634
Commitments and other contingencies (notes 3, 5, and
6)
SHAREHOLDERS' EQUITY
Common stock-$1.25 par value; authorized
6,000,000 shares; issued and outstanding 2,184,979
shares in 1994 and 2,080,356 shares in 1993 2,731,224 2,600,445
Additional paid-in capital 5,039,149 4,439,185
Retained earnings 2,552,085 1,970,202
Unrealized losses on securities available for sale, net (247,717) -
Total shareholders' equity 10,074,741 9,009,832
Total liabilities and shareholders' equity $123,413,131 106,570,466
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1994, 1993, and 1992
<TABLE>
<CAPTION>
INTEREST INCOME: 1994 1993 1992
<S> <C> <C> <C>
Interest and fees on loans $6,552,526 5,622,713 5,617,964
Interest on Federal funds sold 68,826 70,633 53,982
Interest on interest-bearing bank deposits 131,587 49,073 3,971
Interest on investment securities:
U.S. Government and agency obligations 943,992 713,927 1,061,823
State, County, and municipal obligations 406,156 355,803 342,132
Total interest income 8,103,087 6,812,149 7,079,872
INTEREST EXPENSE:
Interest on deposits:
Demand 548,945 507,894 613,792
Savings 142,678 115,843 96,315
Time, $100,000 or more 540,145 461,090 550,272
Other time 1,738,647 1,606,453 2,070,635
Interest on other borrowings 217,662 34,943 2,235
Total interest expense 3,188,077 2,726,223 3,333,249
Net interest income 4,915,010 4,085,926 3,746,623
Provision for loan losses 264,000 550,000 545,000
Net interest income after provision for loan
losses 4,651,010 3,535,926 3,201,623
OTHER OPERATING INCOME:
Service charges on deposit accounts 882,911 790,199 643,328
Credit card fee income 858,470 113,762 62,643
Insurance and other commissions 127,667 148,062 151,159
Mortgage agency income 247,307 328,539 301,164
Gain (loss) on sale of investment securities (36,995) 211,507 127,882
Other 95,085 72,929 49,236
Total other operating income 2,174,445 1,664,998 1,335,412
OTHER OPERATING EXPENSES:
Compensation 1,745,509 1,585,905 1,390,837
Payroll taxes and fringe benefits 394,698 345,541 289,378
Occupancy 358,832 323,146 302,491
Equipment 350,558 349,083 378,978
Credit card program expenses 884,955 103,943 51,690
FDIC insurance 210,179 193,224 192,245
Professional services 123,003 116,520 88,153
Postage, printing, and supplies 212,342 196,400 191,793
Other 673,977 533,802 536,411
Total other operating expenses 4,954,053 3,747,564 3,421,976
Income before income taxes 1,871,402 1,453,360 1,115,059
Income tax expense 561,400 437,997 292,692
Net income $1,310,002 1,015,363 822,367
NET INCOME PER SHARE:
Net income per share $ 0.60 0.47 0.38
</TABLE>
8 See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 1994, 1993, and 1992
<TABLE>
<CAPTION>
Unrealized
Additional Gains (Losses) Total
Common Paid-in Retained on Securities Shareholders'
Stock Capital Earnings Available for Equity
Sale
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1991 $ 2,455,395 4,011,390 849,805 - 7,316,590
Issuance of 13,669 shares of common stock
from exercise of stock options 17,086 27,008 - - 44,094
Cash dividend ($.10 per share) - - (197,247) - (197,247)
Net income for 1992 - - 822,367 - 822,367
Balance at December 31, 1992 2,472,481 4,038,398 1,474,925 - 7,985,804
Issuance of 3,307 shares of common stock
from exercise of stock options 4,134 4,531 - - 8,665
Issuance of 99,064 shares of common stock
from 5% stock dividend 123,830 396,256 (520,086) - -
Net income for 1993 - - 1,015,363 - 1,015,363
Balance at December 31, 1993 2,600,445 4,439,185 1,970,202 - 9,009,832
Adjustment to beginning balance for change
in accounting principle, net of income
taxes of $54,595 - - - 105,978 105,978
Issuance of 606 shares of common stock
from exercise of stock options 758 1,866 - - 2,624
Issuance of 104,017 shares of common stock
from 5% stock dividend 130,021 598,098 (728,119) - -
Change in unrealized gains (losses) on
securities available for sale, net of income
tax benefit of $182,206 - - - (353,695) (353,695)
Net income for 1994 - - 1,310,002 - 1,310,002
Balance at December 31, 1994 $2,731,224 5,039,149 2,552,085 (247,717) 10,074,741
</TABLE>
See accompanying notes to consolidated financial statements.
9
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1994, 1993, 1992
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES: 1994 1993 1992
<S> <C> <C> <C>
Net income $ 1,310,002 1,015,363 822,367
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 264,000 550,000 545,000
Provision (benefit) for deferred taxes 14,664 (27,474) (114,000)
Depreciation and amortization 253,634 241,481 219,405
Amortization (accretion) on investment securities 11,382 39,954 54,665
(Gain) loss on sales of investment securities 36,995 (211,507) (127,882)
Gain on sales of premises and equipment (5,015) - -
Increase in other assets (188,590) (242,293) (54,404)
Increase (decrease) in other liabilities 144,595 (178,775) 39,310
Net cash provided by operating activities 1,841,667 1,186,749 1,384,461
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of interest-bearing bank time deposits 2,000,000 1,500,000 200,000
Purchases of interest-bearing bank time deposits (1,000,000) (3,500,000) (100,000)
Maturities of securities held to maturity 592,990 987,723 6,055,820
Maturities of securities available for sale 3,236,145 - -
Proceeds from sales of investment securities - 4,613,238 7,665,660
Proceeds from sales of securities available for sale 3,461,719 - -
Purchases of securities held to maturity (15,974,249) (8,013,785) (6,359,045)
Purchases of securities available for sale (629,142) - -
Net increase in loans made to customers (10,685,222) (5,148,678) (8,900,776)
Purchases of premises and equipment (120,974) (292,276) (162,146)
Proceeds from sales of premises and equipment 13,620 - -
Net cash used in investing activities (19,105,113) (9,853,778) (1,600,487)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 13,562,258 8,295,236 913,262
Increase (decrease) in drafts outstanding 374,763 803,065 (863,052)
Increase (decrease) in securities sold under
agreements to repurchase (203,860) 2,011,119 -
Proceeds from issuance of long-term borrowings 2,000,000 1,000,000 -
Principal repayments of long-term borrowings (100,000) - -
Proceeds from issuance of common stock 2,624 8,665 44,094
Dividends paid - - (197,247)
Net cash provided by (used in) financing
activities 15,635,785 12,118,085 (102,943)
Net increase (decrease) in cash and cash equivalents (1,627,661) 3,451,056 (318,969)
Cash and cash equivalents at beginning of year 10,035,362 6,584,306 6,903,275
Cash and cash equivalents at end of year $ 8,407,701 10,035,362 6,584,306
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 3,134,872 2,777,976 3,488,051
Income taxes 504,856 635,842 202,369
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Unrealized losses on investment securities, net $ 247,717 - -
Investment securities transferred to
securities available for sale - 13,273,435 -
</TABLE>
See accompanying notes to consolidated financial statements.
10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
(1) SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Bank of Union (the Bank) was incorporated and began banking operations in
1985. The Bank is engaged in general commercial banking, predominantly in Union
and Mecklenburg counties in North Carolina, and operates under the banking laws
of North Carolina and the Rules and Regulations of the Federal Deposit Insurance
Corporation.
The following is a description of the significant accounting and reporting
policies the Bank follows in preparing and presenting its financial statements.
(A) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Bank of Union and its wholly owned subsidiary BOU Financial, Inc. (BOU). In
consolidation, all significant intercompany items and transactions have been
eliminated.
(B) INVESTMENT SECURITIES
The Bank adopted Statement of Financial Accounting Standards No. 115 (SFAS
115), "Accounting for Certain Investments in Debt and Equity Securities", on
January 1, 1994. In accordance with SFAS 115, prior period financial statements
have not been restated to reflect the change in accounting principle. The
opening balance of shareholders' equity increased by $105,978 (net of $54,595 in
deferred income taxes) to reflect the net unrealized gain on securities
classified as available for sale that were previously carried at lower of
amortized cost or market. Management reviewed the investment securities
portfolio and, prior to adoption, classified securities as either held to
maturity or available for sale. In determining such classification, securities
that the Bank has the positive intent and ability to hold to maturity are
classified as securities held to maturity and are carried at amortized cost with
amortization of premiums and accretion of discounts recognized as adjustments to
interest income using the interest method. All other securities are classified
as securities available for sale and are carried at estimated fair value with
unrealized gains and losses included in shareholders' equity on an after-tax
basis. Gains and losses on sales of investment securities, computed based on
specific identification of the adjusted cost of each security, are included in
other income.
Prior to the adoption of SFAS 115, management determined the appropriate
classification of investment securities at the time of purchase. If management
had the intent and the Bank had the ability to hold the securities for the
foreseeable future, they were classified as investment securities and carried at
amortized cost. Investment securities to be held for an indefinite period of
time and not intended to be held to maturity or on a long-term basis were
classified as available for sale and carried at lower of aggregate amortized
cost or estimated market value.
(C) LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans are stated at the amount of unpaid principal less the allowance for
loan losses and net of deferred loan origination fees and costs. Interest income
is recognized when earned, on an accrual basis. Mortgage loans held for sale are
carried at lower of cost or market, as determined by commitments from investors.
The accrual of interest is generally discontinued on all loans that become
ninety days past due as to principal or interest unless they are well-
collateralized and in the process of collection.
The Bank uses the allowance method to provide for possible loan losses. The
provision for loan losses is based upon management's estimate of the amount
needed to maintain the allowance for loan losses at an adequate level to cover
known and inherent risk of loss in the loan portfolio. In determining the
provision amount, management gives consideration to current and anticipated
economic conditions, the growth and composition of the loan portfolio, the
relationship of the allowance for loan losses to outstanding loans, and other
risk factors. While management uses available information to recognize losses on
loans, future additions to the allowance may be necessary based on changes in
economic conditions. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review the Bank's allowance for
loan losses. Such agencies may require the Bank to recognize additions to the
allowance based upon their analysis of information available to them at the time
of their examination.
Loan origination, commitment, and certain other fees, and certain direct
loan origination costs are deferred, and the net amount is amortized as an
adjustment to loan yield over the contractual life of the related loans.
Effective January 1, 1995, the Bank will adopt Statement of Financial
Accounting Standards No. 114 (SFAS 114), "Accounting by Creditors for Impairment
of a Loan," and Statement of Financial Accounting Standards No. 118 (SFAS 118),
"Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures." The impact of adopting these statements is not expected to be
material to the Bank's consolidated financial statements.
11
<PAGE>
(D) FORECLOSED ASSETS
Assets acquired as a result of foreclosure are valued at the lower of the
recorded investment in the loan or fair value less estimated costs to sell. The
recorded investment is the sum of the outstanding principal loan balance and
foreclosure costs associated with the loan. Any excess of the recorded
investment over the fair value of the property received is charged to the
allowance for loan losses. Any subsequent write-downs are charged against other
expenses.
(E) PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation of premises and equipment is provided over the estimated useful
lives of the respective assets under the straight-line method. Expenditures for
major renovations are capitalized and those for ordinary maintenance and repairs
are charged to operating expenses as incurred. Upon disposition, the asset and
related accumulated depreciation are relieved and any resulting gain or loss is
charged to income.
(F) INTANGIBLE ASSETS
Intangible assets consist of a core deposit premium of approximately
$326,000, net of accumulated amortization of approximately $145,000 and $96,000
at December 31, 1994 and 1993, respectively. The amount, which is included in
other assets, is being amortized over seven years.
(G) MORTGAGE AGENCY INCOME
Mortgage agency income represents fees received from loan investors related
to single family residential mortgage loans.
(H) INCOME TAXES
Effective January 1, 1993, the Bank adopted Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." The
effect of adoption was not material. SFAS 109 requires that all deferred tax
asset and liability balances be determined by application to temporary
differences of the tax rate expected to be in effect when taxes become payable
or receivable. Temporary differences are differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax basis that will result in taxable or deductible amounts in future
years.
The Bank's temporary differences consist primarily of provision for loan
losses, unrealized losses on securities available for sale, and accelerated
depreciation.
Accounting Principles Board Opinion No. 11 (APB 11), "Accounting for Income
Taxes," was applied in 1992 and prior years. Under APB 11, deferred income taxes
are recognized for income and expense items that are reported in different years
for financial reporting purposes and income tax purposes using the tax rate
applicable for the year of the calculation.
(I) INCOME PER SHARE
Income per share is based on the weighted average number of shares
outstanding during the year. The effect of common stock equivalent shares
assuming the exercise of outstanding stock options on income per share is not
materially dilutive.
The income per share data for all periods shown in the consolidated
financial statements has been restated to reflect the 5% stock dividends issued
in 1993 and 1994.
(J)CASH FLOWS
For purposes of reporting cash flows, cash and cash equivalents include
cash and due from banks and Federal funds sold.
(K) FINANCIAL STATEMENT
PRESENTATION
Certain amounts for 1993 and 1992 were reclassified to conform with
financial statement presentation for 1994. The reclassifications have no effect
on shareholders' equity or net income as previously reported.
12
<PAGE>
(2) INVESTMENT SECURITIES
The carrying value and market value of securities available for sale at
December 31, 1994 and 1993, by maturity distribution, are shown below:
<TABLE>
<CAPTION>
Gross Gross
Carrying Unrealized Unrealized Market
Value Gains Losses Value
<S> <C> <C> <C> <C>
December 31, 1994
U.S. Government obligations:
After one but within five years $2,010,360 - (51,880) 1,958,480
U.S. Government agency obligations:
After one but within five years 2,098,578 - (115,192) 1,983,386
Mortgage-backed securities 3,017,846 - (208,256) 2,809,590
Total securities available for sale $7,126,784 - (375,328) 6,751,456
December 31, 1993
U.S. Government obligations:
Within one year $ 2,704,038 22,202 - 2,726,240
After one but within five years 3,525,880 114,985 - 3,640,865
6,229,918 137,187 - 6,367,105
U.S. Government agency obligations:
Within one year 800,284 26,809 - 827,093
After one but within five years 2,593,336 14,725 (277) 2,607,784
3,393,620 41,534 (277) 3,434,877
Mortgage-backed securities 3,649,897 4,132 (22,003) 3,632,026
Total securities available for sale $ 13,273,435 182,853 (22,280) 13,434,008
</TABLE>
13
<PAGE>
The carrying value and market value of securities held to maturity at
December 31, 1994 and 1993, by maturity distribution, are shown below:
<TABLE>
<CAPTION>
Gross Gross
Carrying Unrealized Unrealized Market
Value Gains Losses Value
<S> <C> <C> <C> <C>
December 31, 1994
U.S. Government obligations:
Within one year $ 992,558 - (8,555) 984,003
After one but within five years 4,975,640 - (225,632) 4,750,008
5,968,198 - (234,187) 5,734,011
U.S. Government agency obligations:
Within one year 3,480,437 - (16,799) 3,463,638
After one but within five years 4,116,003 - (110,359) 4,005,644
7,596,440 - (127,158) 7,469,282
Mortgage-backed securities 331,286 - (21,373) 309,913
State, county, and municipal obligations:
After one but within five years 3,756,067 101,924 (18,844) 3,839,147
After five but within ten years 1,587,662 27,556 (29,567) 1,585,651
After ten years 1,836,694 9,710 (105,600) 1,740,804
7,180,423 139,190 (154,011) 7,165,602
Total securities held to maturity $21,076,347 139,190 (536,729) 20,678,808
December 31, 1993
State, county, and municipal obligations:
After one but within five years $ 1,395,866 95,317 - 1,491,183
After five but within ten years 2,375,440 290,320 - 2,665,760
After ten years 1,894,230 240,020 (149) 2,134,101
Total securities held to maturity $ 5,665,536 625,657 (149) 6,291,044
</TABLE>
Proceeds from sales of investments during 1994, 1993 and 1992 were
$3,461,719, $4,613,238, and $7,665,660, respectively. Gross gains realized on
those sales were $1,625 for 1994, $211,507 for 1993, and $127,882 for 1992.
Gross losses realized were $38,620 for 1994 and none for 1993 and 1992.
At December 31, 1994 and 1993, securities held to maturity with an
aggregate par value of $6,055,000 and $8,935,000, respectively, were pledged to
secure public deposits.
(3) LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans at December 31, 1994 and 1993, are summarized as follows:
1994 1993
Commercial and agricultural $53,039,081 48,151,091
Real estate-construction 4,961,951 4,634,830
Real estate-mortgage 9,161,942 4,649,160
Installment 15,951,007 14,606,201
Mortgage loans held for sale 813,224 1,448,251
$83,927,205 73,489,533
14
<PAGE>
Changes in the allowance for loan losses during 1994, 1993, and 1992 are as
follows:
1994 1993 1992
Beginning balance $1,298,156 1,208,284 787,808
Provision charged to expense 264,000 550,000 545,000
Loans charged-off. (311,551) (479,811) (133,794)
Loan recoveries 64,001 19,683 9,270
Ending balance $1,314,606 1,298,156 1,208,284
At December 31, 1994 and 1993, the Bank had loans outstanding to executive
officers and directors and their affiliates of approximately $1,226,000 and
$1,612,000, respectively. During 1994, loans aggregating $614,000 were made to
and $1,000,000 were repaid by executive officers and directors and their
affiliates.
The Bank grants primarily commercial and installment loans to customers
throughout its market area, which consists primarily of Union and Mecklenburg
counties. The real estate portfolio can be affected by the condition of the
local real estate market. The commercial and installment portfolio can be
affected by local economic conditions.
Total loans past due more than 90 days and still accruing were
approximately $22,000 and $1,000 at December 31, 1994 and 1993, respectively. At
December 31, 1994 and 1993, nonaccrual and restructured loans were approximately
$814,000 and $1,206,000, respectively.
In the normal course of business, there are outstanding various commitments
to extend credit which are not reflected in the consolidated financial
statements. At December 31, 1994 and 1993, preapproved, but unused lines of
credit and commitment letters for loans totalled $17,726,000 and $14,548,000,
respectively, and standby letters of credit aggregated $360,000 and $1,340,000,
respectively. These commitments represent no more than the normal lending risk
that the Bank commits to its borrowers. If these commitments are drawn, the Bank
will obtain collateral, if it is deemed necessary, based on management's credit
evaluation of the borrower. No material losses are anticipated as a result of
these commitments. Management believes that these commitments can be funded
through normal operations.
(4) PREMISES AND EQUIPMENT
Premises and equipment at December 31, 1994 and 1993 are summarized as
follows:
Accumulated Net
Depreciation and Carrying
December 31, 1994 Cost Amortization Value
Land $ 354,688 - 354,688
Buildings 868,103 155,389 712,714
Furniture and equipment 1,313,522 811,650 501,872
Leasehold improvements 77,875 50,656 27,219
Total $2,614,188 1,017,695 1,596,493
December 31, 1993
Land $ 353,586 - 353,586
Buildings 867,057 133,708 733,349
Furniture and equipment 1,246,145 674,768 571,377
Leasehold improvements 72,103 42,559 29,544
Total $2,538,891 851,035 1,687,856
15
<PAGE>
(5) LEASES
The Bank leases a branch office, a subsidiary office, an operations
facility, land, and certain equipment under operating leases. Most of these
operating leases provide the Bank with the option after the initial lease term
either to purchase the property at the then fair value or renew its lease at the
then fair rental value. Future minimum lease payments under these leases at
December 31, 1994, are as follows:
1995 $125,600
1996 116,600
1997 99,100
1998 69,900
1999 49,600
2000 and thereafter 115,400
Total $576,200
Total lease expense was $182,861 for 1994, $165,998 for 1993, and $217,011
for 1992.
(6) EMPLOYEE BENEFIT PLAN
The Bank has a 401(k) savings plan available to substantially all employees.
The plan provides for participating employees to contribute up to 15% of their
covered compensation. The Bank will annually match 100% of the contributions
made by employees up to 4% of covered compensation. The Bank's expense for its
contributions in 1994, 1993, and 1992 amounted to approximately $95,900,
$66,100, and $42,200, respectively. Discretionary contributions of $39,000 and
$20,000 were included in expenses for 1994 and 1993, respectively.
(7) OTHER BORROWINGS
Other borrowings include Federal Home Loan Bank (FHLB) advances. The Bank
has the following FHLB borrowings outstanding at December 31, 1994:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Due in semi-annual principal payments beginning June
2, 1994 of $50,000 plus interest at 5.91% until
final payment on December 2, 2003 $ 900,000 1,000,000
Due in semi-annual principal payments beginning
January 21, 1995 of $71,429 plus interest at 7.43%
until final payment on July 21, 2001 1,000,000 -
Due in semi-annual principal payments beginning
January 21, 1995 of $71,429 plus interest at 7.24%
until final payment on July 21, 2001 1,000,000 -
$2,900,000 1,000,000
</TABLE>
The advances are secured by all stock in the FHLB ($379,700 and $308,200 at
December 31, 1994 and 1993, respectively,) and qualifying first mortgage loans.
Additionally, the Bank has a customer repurchase agreement with an
outstanding balance of $1,807,259 (paying 5.24%) and $2,011,118 (paying 2.15%)
at December 31, 1994 and 1993, respectively. This borrowing is collateralized by
U.S. Treasury securities.
16
<PAGE>
(8) INCOME TAXES
Income tax expense of the Bank was less than the amount computed by applying
the statutory federal income tax rate to income before income taxes because of
the following:
<TABLE>
<CAPTION>
1994 1993 1992
AMOUNT PERCENTAGE Amount Percentage Amount Percentage
<S> <C> <C> <C> <C> <C> <C>
Income tax expense at
federal rate $ 636,301 34.0% 494,142 34.0% 379,120 34.0%
State taxes, net of
federal benefit 30,406 1.6 28,964 2.0 8,226 .7
Tax-exempt interest (142,229) (7.6) (109,931) (7.6) (103,559) (9.3)
Other 36,922 2.0 24,822 1.7 8,905 .8
Total $ 561,400 30.0% 437,997 30.1% 292,692 26.2%
</TABLE>
Income tax expense (benefits) for 1994, 1993, and 1992 consists of the
following:
1994 1993 1992
Current $546,736 465,471 406,692
Deferred 14,664 (27,474) (114,000)
Total $561,400 437,997 292,692
For periods prior to the adoption of SFAS 109, deferred income taxes
(benefits) result from timing differences in the recognition of income and
expense for income tax and financial statement purposes. The sources of the
differences and the tax effects for 1992 are as follows:
<TABLE>
<CAPTION>
1992
<S> <C>
Provision for loan losses in excess of allowable tax
deduction $ (139,771)
Conversion to accrual from cash basis for tax purposes 44,111
Net loan fees, taxed when received for tax purposes (10,236)
Tax amortization of deposit acquisition costs in excess of
book amortization 10,951
Other, net (19,055)
Total $ (114,000)
</TABLE>
Significant components of deferred income tax assets (liabilities) at
December 31 are as follows:
1994 1993
Depreciation $(77,863) (67,539)
Provision for loan losses 406,520 447,600
FASB 115 adoption 127,611 -
Other, net (10,662) (47,402)
Gross deferred tax assets, net 445,606 332,659
Deferred tax assets valuation allowance (32,659) (32,659)
Net deferred tax asset $412,947 300,000
The valuation allowance for deferred tax assets as of January 1, 1993 was
$28,590. The net change in the total valuation allowance for the year ended
December 31, 1993 was an increase of $4,069. During 1994, the Bank adopted SFAS
115 which recorded a deferred tax asset on the writedown of investments. This
adoption increased the deferred tax asset by $127,611.
Management has determined that realization of the net deferred tax asset is
more likely than not. This determination is based upon the ability to offset
net deductible temporary differences against taxable income in prior years and
conservative projections of estimated future taxable income.
17
<PAGE>
(9) COMMON STOCK AND CAPITAL
The Bank has stock option agreements in which options are periodically
granted to executive officers and other employees at a price equal to the fair
market value of the shares at the date of grant. The options become exercisable
in five equal annual installments after one year of continuous employment from
the date of the grant. Options outstanding, options exercised, and exercise
prices have been adjusted for the stock dividends described in Note 10.
A maximum of 145,860 shares of the Bank's common stock may be issued in
connection with options granted under the Stock Option Plan. At December 31,
1994, there were 7,897 options exercisable at $4.30 per share.
<TABLE>
<CAPTION>
Shares Subject Exercise
to Outstanding Price Per
Options Share
<S> <C> <C>
Options outstanding at December 31, 1993 8,503 $ 4.30
Options granted during 1994 626 5.72
Options exercised during 1994 (606) 4.30
Options outstanding at December 31, 1994 8,523 $4.30-5.72
</TABLE>
The Bank, as a North Carolina banking corporation, may pay dividends only
out of undivided profits as determined pursuant to North Carolina General
Statutes Section 53-87. However, regulatory authorities may limit payment of
dividends by any bank when it is determined that such a limitation is in the
public interest and is necessary to ensure financial soundness of the bank.
Current Federal regulations require that the Bank maintain a minimum ratio
of total capital to risk weighted assets of 8% with at least 4% being in the
form of Tier 1 capital, as defined in the regulations. As of December 31, 1994,
the Bank exceeded the current capital requirements. The Bank expects to
continue to exceed these minimums without altering current operations or
strategy.
(10) STOCK DIVIDEND
On November 3, 1994, the Board of Directors of the Bank declared a 5% stock
dividend to be issued on December 16, 1994, in shares of the Bank's common stock
to holders of record on November 11, 1994. Also, on October 20, 1993, the Board
of Directors of the Bank declared a 5% stock dividend to be issued on December
15, 1993, in shares of the Bank's common stock to holders of record on November
1, 1993. As a result of these dividends, amounts were transferred from retained
earnings to common stock and additional paid-in capital at the fair market
values of the Bank's stock at the dates of issuance.
18
<PAGE>
BANK OF UNION DIRECTORS AND OFFICERS
BOARD OF DIRECTORS
FRANK H. HAWFIELD, JR.
Owner, Firestone Home & Auto
Supply Dealerships, Monroe, NC
and Other Cities
JOHN A. CROOK, JR.
Retired, Utility Executive,
Monroe, NC
J. EARL CULBRETH
Retired, Insurance Broker,
Matthews, NC
D.A. DAVIS
President, D.A. Davis
Construction Co., Monroe, NC
WILLIAM C. DESKINS, M.D.
Physician, Monroe Family Medical
Center, P.A., Monroe, NC
JAMES B. FINCHER
Owner, Mineral Springs Feed &
Fertilizer Co., Mineral Springs,
NC
H. CLARK GOODWIN
President & CEO, Bank of Union,
Monroe, NC
EARL J. HAIGLER
Farmer, Monroe, NC
CHARLES E. HULSEY
President, Matthews Building
Supply Co., Inc., Matthews, NC
CALLIE F. KING
Retired, U.S. Government,
Mineral Springs, NC
JOSEPH L. LITTLE
Retired, Daycare Owner
Indian Trail, NC
FRED C. LONG
President, Long Wiring Co., Inc.,
Monroe, NC
JERRY E. MCGEE, PH.D.
President, Wingate College,
Wingate, NC
DAVID C. MCGUIRT
Executive Vice President,
Bank of Union, Monroe, NC
LANE D. VICKERY
Vice President, Scott Wholesale
Co., Indian Trail, NC
OFFICERS
H. CLARK GOODWIN
President & Chief
Executive Officer
DAVID C. MCGUIRT
Executive Vice President,
Chief Administrative Officer
& Secretary
WILLIAM E. DAVIS
Senior Vice President
DON E. LEWIS
Senior Vice President
JAMES T. MATHEWS, JR.
Senior Vice President
A. RAY SINGLETON, JR.
Senior Vice President
WILLIAM R. ADCOCK
Vice President
CHARLIE E. EFIRD, JR.
Vice President
ALICE K. HOLMES
Vice President
& Assistant Secretary
CHARLA L. KURTZ
Vice President
& Controller
W. FARRELL RICHARDSON
Vice President
KAREN F. HODGE
Assistant Vice President
PATRICIA C. JAMISON
Assistant Vice President
& Assistant Secretary
TERRI L. MILLS
Assistant Vice President
TERRY M. RICHARDSON
Assistant Vice President
PAMELA P. SANDERS
Assistant Vice President
& Assistant Secretary
LINDA D. THOMAS
Assistant Vice President
ANN K. WILLIAMS
Assistant Vice President
WENDY T. BARNHARDT
Assistant Cashier
BARBARA J. CHERRY
Assistant Cashier
LISA MOORE
Assistant Cashier
ANGELA S. HELMS
Assistant Secretary
MARY MARGARET NANCE
Assistant Secretary
LISA T. BURNS
Internal Auditor
BANK OF UNION ADVISORY BOARDS
ADVISORY BOARD-INDIAN TRAIL
RICHARD E. BAKER
Engineer CPR, Alltel Corp.,
Matthews, NC
BOBBY R. CARROLL
President, A & B Coffee Co.,
Indian Trail, NC
RALPH N. COCHRANE
Vice President, Cochrane Steel Co.,
Matthews, NC
WALTER P. GARMON
Retired, Poultry Executive,
Matthews, NC
RANDALL R. GOODING
President, Hornet's Nest
Electrical Supply, Inc.,
Charlotte and Matthews, NC
RAYMOND L. HARTIS
Salesman, North Carolina
Equipment Co.,
Indian Trail, NC
LARRY S. HELMS
Mayor of Indian Trail
Indian Trail, NC
WALTON C. JOHNSON
Vice President, Trail Realty Co.
Indian Trail, NC
JAMES R. MCCLAIN
President, Carolina Concrete
Co., Inc.
Indian Trail, NC
GARY B. MILLS
President, Mills Propane Gas &
Oil, Co., Inc.
Indian Trail, NC
JACK REGANS
President, Regans Electric Co.,
Matthews, NC
ADVISORY BOARD-WAXHAW
JAMES H. AGNOR
Chief Financial Officer, JAARS,
Waxhaw, NC
KEN ASHLEY
Photographer,
Waxhaw, NC
PERRY BROWN
Owner, Furniture Factory
Outlet World,
Waxhaw, NC
LARRY DEVENNEY
Sales Manager, KMS Distributors,
Rock Hill, SC
BOBBY EGGLESTON
Owner, Waxhaw Hardware Co.,
Waxhaw, NC
JEANETTE HAYNES
Mayor of Waxhaw,
Waxhaw, NC
CHARLES MCGEE
Retired, Corporate Executive
Monroe, NC
HOMER TYSON
Retired, Gas Company Executive,
Waxhaw, NC
DAN WARREN
President, J.A. Warren Co., Inc.,
Charlotte, NC
FRANK WATSON
Retired, North American Van
Lines,
Waxhaw, NC
JOHN YARBROUGH
Surveyor,
Waxhaw, NC
19
<PAGE>
SHAREHOLDER INFORMATION
ANNUAL MEETING
The annual meeting of the shareholders of Bank of Union will be held at
Rolling Hills Country Club, Roosevelt Blvd., Monroe, North Carolina on Tuesday,
April 18, 1995 at 4:00 p.m. All shareholders are cordially invited to attend.
STOCK TRANSFER AGENT
American Stock Transfer
and Trust Company
40 Wall Street
New York, NY 10005
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
NationsBank Corporate Center
100 North Tryon, Suite 3400
Charlotte, NC 28202
MAIN OFFICE
201 N. Charlotte Avenue
P.O. Box 1459
Monroe, NC 28111-1459
(704) 289-9555
SUBSIDIARY
B.O.U. Financial, Inc.
Insurance and Financial Planning Services
2610-A W. Roosevelt Blvd.
Monroe, NC 28110
Harvey F. Whitley
Executive Director
LEGAL COUNSEL
Clark, Griffin & McCollum
Attorneys
P.O. Box 308
Monroe, NC 28110
Ward and Smith, P.A.
P.O. Box 867
New Bern, NC 28560
BRANCH OFFICES
4240 Old Monroe Road
P.O. Box 358
Indian Trail, NC 28079-0358
(704) 821-7063
1100 N. Broome Street
Old Hickory Shopping Center
Waxhaw, NC 28173
(704) 843-3875
1401 Skyway Drive
P.O. Box 1459
Monroe, NC 28111-1459
(704) 289-1235
217 N. Trade Street
P.O. Box 747
Matthews, NC 28106
(704) 841-2202
MEMBER
Federal Deposit Insurance
Corporation
American Bankers Association
Community Bankers Association
of North Carolina
Community Investment Corporation
of North Carolina
MORTGAGE LOAN OFFICE
2610-A W. Roosevelt Blvd.,
Monroe, NC 28110
Todd C. Bennington
Executive Director
FORM F-2
A copy of Bank of Union's Form F-2 Annual Report to the Federal Deposit
Insurance Corporation for 1994 will be furnished, without charge, upon written
request to: Charla Kurtz, Vice President and Controller, Bank of Union, P.O. Box
1459, Monroe, NC 28111-1459.
MARKET FOR BANK'S COMMON STOCK
The Bank's common stock is traded in the over-the-counter market, and is
listed in the National Daily Quotation Service "Pink Sheets". Interstate/Johnson
Lane, Inc., Charlotte and Winston-Salem, NC (Tel: 1 800 929-0747) and Legg,
Mason, Wood, Walker, Inc., Charlotte, NC (Tel: 1 800 628-5770) are market makers
for Bank of Union's common stock.
As of March 3, 1995, the Bank's common stock was held by 1,272 shareholders
of record. On December 16, 1994, the Bank issued a 5% stock dividend on its
common stock.
20
<PAGE>
FEDERAL DEPOSIT INSURANCE CORPORATION
Washington, D.C.
AMENDMENT NO. 1
TO
FORM F-2
ANNUAL REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
FDIC Certificate No. 26400-8
BANK OF UNION
(Exact name of bank as specified in its charter)
NORTH CAROLINA 56-1423761
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
201 North Charlotte Avenue
Post Office Box 1459
Monroe, North Carolina 28112
(Address of principal office) (Zip Code)
Bank's telephone number, including area code (704) 289-9555
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.25 Par Value
(Title of Class)
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 10 is not contained herein, and will not be
contained, to the best of the Bank's knowledge, in definitive
proxy or information statements incorporated by reference in
Part III of this Form F-2 or any amendment of this Form F-2. [ ]
Indicate by check mark whether the Bank (1) has filed all
reports required to be filed by Section 13 of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Bank was required to file such reports),
and (2) has been subject to such filing requirements for the past
90 days. YES X NO ___
Based on the $7.38 bid price of the Bank's common stock on
March 15, 1995, the aggregate value of the common stock held by
nonaffiliates as of that date was $13,628,137.
As of March 15, 1995 the Registrant had 2,187,409 shares of
common stock issued and outstanding.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Bank's 1994 Annual Report to Shareholders
are incorporated by reference into Parts II and IV.
2. Portions of the Bank's definitive Proxy Statement dated
March 20, 1995, are incorporated by reference into Parts I
and III.
PART I
Item 1 - Business
General. Bank of Union (the "Bank"), Monroe, North
Carolina, was incorporated under the laws of the State of North
Carolina on February 22, 1985, and commenced operations as an
insured, state-chartered bank on October 14, 1985.
The Bank 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. The Bank 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. The Bank'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, the Bank makes
residential mortgage loans to its customers which the Bank then
sells to another mortgage lender. The Bank 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. The Bank also issues
VISA debit cards which allow customers to use a credit card to
access their checking accounts. The Bank does not provide trust
services except through a correspondent bank.
Branch Offices. The Bank 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.
Market and Competition. The Bank's primary geographic
market is Union County, North Carolina. Consistent with its
philosophy as a community bank, the Bank's deposits are derived
primarily from and it has concentrated the majority of its assets
in loans within Union County, although it also has certain loan
and deposit customers in surrounding areas. Commercial banking
in Union County and in North Carolina as a whole is extremely
competitive with
2
<PAGE>
state laws permitting state-wide branching. The Bank
competes directly for deposits in Union County with other
commercial banks, credit unions, agencies issuing United
States government securities and all other
organizations and institutions engaged in money market
transactions. In its lending activities, the Bank
competes with all other financial institutions as well as
consumer finance companies, mortgage companies and other
lenders engaged in the business of extending credit. In
Union County, six commercial banks presently operate a total
of 23 banking offices. The Bank's predominant
competitors in Union County are NationsBank and Wachovia Bank
of North Carolina, N.A. (two of the three largest
financial institutions in North Carolina), and United
Carolina Bank which has the largest market share in the
county.
Interest rates, both on loans and deposits, and prices of
services are significant competitive factors among financial
institutions generally. Office location, office hours, customer
service, community reputation and continuity of personnel are
also important competitive factors. The Bank's predominant
competitors have greater resources, broader geographic markets
and higher lending limits, and can offer more products and better
afford and make more effective use of media advertising, support
services and electronic technology than the Bank. The Bank
depends on its reputation as a community bank in its local
market, direct customer contact, its ability to make credit and
other business decisions locally, and personalized service to
counter these competitive disadvantages.
During September 1994, Congress approved legislation that,
effective one year after enactment, permits adequately
capitalized and managed bank holding companies to acquire control
of a bank in any state (the "Interstate Banking Law"), subject to
anti-trust provisions. The North Carolina Reciprocal Interstate
Banking Act currently permits a bank or bank holding company in
another state to acquire a North Carolina bank or bank holding
company if the laws of the other state permit North Carolina bank
holding companies to acquire banks and bank holding companies in
that state. Under the Interstate Banking Law, beginning on June
1, 1977, banks also will be permitted to merge with one another
across state lines, subject to concentration, capital and
Community Reinvestment Act requirements and regulatory approval.
A state can authorize mergers earlier than June 1, 1997, or it
can opt out of interstate branching by enacting legislation prior
to June 1, 1997. Effective with the date of enactment, the
Interstate Banking Law also lets a state choose to permit out-of-
state banks to open new branches within its borders. If a state
chooses to allow interstate acquisitions of branches, then an
out-of-state bank also may acquire branches by merger. The North
Carolina Interstate Branch Banking Act currently permits a bank
in another state to establish a branch in North Carolina (by de
novo entry, the purchase of an existing branch, or the purchase
of assets of or merger with a North Carolina bank) if the laws of
the other state permit North Carolina banks to establish branches
in that state.
Subsidiary. The Bank's wholly-owned subsidiary, B.O.U.
Financial, Inc. ("BOU"), offers limited securities services to
its customers, including discount brokerage services and mutual
funds
3
<PAGE>
pursuant through a marketing agreement with Royal Alliance
Associates, Inc. In addition, BOU offers certain life
insurance and annuity products to customers of the Bank.
Employees. As of March 15, 1995, the Bank employed 63 full-
time employees and ten part-time employees. The Bank is not a
party to a collective bargaining agreement, and considers its
relations with employees to be good.
Miscellaneous. In the opinion of management of the Bank, no
material part of the business of the Bank is dependent upon a
single customer or very few customers the loss of which would
have a material adverse affect on the Bank. Since the Bank
commenced operations, no significant amount of funds have been
expended on research activities relating to the development of
new services, and no new line of business requiring the
investment of a material amount of total assets has been
introduced to the public or is currently planned. The Bank does
not consider its business or a material portion thereof to be
seasonal.
Item 2 - Properties
The Bank's Main Office is located at 201 North Charlotte
Avenue, Monroe, North Carolina in a two-story building containing
approximately 6,850 square feet which was constructed by the Bank
in 1985 and which the Bank owns in fee simple. The Bank owns a
vacant lot adjacent to its Main Office which it holds for
possible future expansion.
The Bank's Indian Trail Branch containing approximately
2,400 square feet was constructed by the Bank during 1986 and the
building and land are leased from a third party under an
agreement providing for an original term of fifteen years which
expires on October 31, 2001. The Bank has options to renew the
lease for up to three consecutive, additional terms of five years
each. Lease payments under the agreement are $2,685 per month
The Bank's Skyway Drive Branch containing approximately
2,200 square feet was constructed by the Bank during 1988 on land
leased from a third party under an agreement which provides for
an original term of fifteen years which expires on February 1,
2003. The Bank has options to renew the lease for up to five
consecutive, additional terms of five years each. Lease payments
under the Agreement are $1,450 per month, and the Bank has an
option to purchase the property at the end of ten years at a
price of $200,000.
The Bank's Waxhaw Branch opened during 1989 is located in a
newly constructed building containing approximately 2,520 square
feet which is owned by the Bank in fee simple.
The Bank's Matthews Branch opened during 1992 is located in
a building containing approximately 2,775 square feet. This
facility is leased from a third party under an agreement which
provided for an original term of one year which expired on
March 31, 1993. The Bank has options to renew the lease for up
to three consecutive additional terms of one year each. The Bank
has exercised its
4
<PAGE>
option to renew, such renewal period to expire on March 31,
1996. Lease payments under the agreement currently are $3,000
per month.
All of the Bank's existing offices are freestanding, fully
equipped and in good condition, and have adequate parking and
drive-up banking facilities.
The Bank owns substantially all of its office furnishings
and banking and data processing equipment.
The Bank's operations and data processing departments are
located in an approximately 4,673 square foot portion of a
building leased from a third party under an agreement providing
for an original term of five years which expired on April 30,
1993. The Bank has options to renew the lease for up to two
consecutive, additional terms of five years each. The Bank has
exercised its option to renew with such renewal period to expire
on April 30, 1998. Lease payments under the agreement currently
are $3,831 per month.
The Bank's mortgage loan department and BOU are located in a
building containing approximately 2,000 square feet which is
leased from a third party under an agreement providing for an
original term of three years which expires on February 28, 1997.
The Bank has options to renew the lease for up to four
consecutive, additional terms of three years each. Lease payments
under the Agreement currently are $1,750 per month.
Item 3 - Legal Proceedings
There are no material pending legal proceedings, other than
ordinary routine litigation incidental to the business of the
Bank, to which it or its subsidiary is a party or to which its
property is subject.
Item 4 - Security Ownership of Certain Beneficial Owners and
Management
The information required by Item 4 is incorporated herein by
reference from pages 2 and 3 under the caption "Voting Securities
and Beneficial Ownership Thereof" of the Bank's definitive proxy
statement dated March 20, 1995.
PART II
Item 5 - Market for the Bank's Common Stock and Related Security
Holder Matters
The information required by Item 5 is incorporated herein by
reference from page 20 of the Bank's 1994 Annual Report to
Shareholders under the caption "Market For Bank's Common Stock".
The Bank's common stock is traded in the over-the-counter market,
and is listed in the National Daily Quotation Service "Pink
Sheets." Shares of the Bank's common stock are thinly traded.
5
<PAGE>
Item 6 - Selected Financial Data
The information required by Item 6 is incorporated herein by
reference from page 1 of the Bank's 1994 Annual Report to
Shareholders under the caption "Selected Financial Data".
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
The information contained on pages 3 through 5 of the Bank's
1994 Annual Report to Shareholders under the caption
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" is incorporated herein by reference. The
tables appearing on the following pages contain certain
additional statistical information about the Bank for the periods
and on the dates indicated therein.
6
<PAGE>
BANK OF UNION AND SUBSIDIARY
SCHEDULE I
Average Balances and Interest Yields/Rates
<TABLE>
<CAPTION>
1994 1993
Income/ Average Average Income/ Average Average
Expense Balance Yield/Rate Expense Balance Yield/Rate
<S> <C> <C> <C> <C> <C> <C>
(In thousands)
Interest-earning assets:
Interest-bearing bank deposits $ 131 $ 3,017 4.34% $ 49 $ 1,497 3.27%
Investment securities - taxable 944 17,368 5.44 714 12,530 5.70
Investment securities - nontaxable 406 6,595 6.16 356 5,455 6.53
Loans, net 6,553 75,823 8.64 5,623 67,992 8.27
Federal funds sold 69 1,615 4.27 70 2,399 2.92
Total interest - earning assets 8,103 104,418 7.76 6,812 89,873 7.58
Cash and due from Bank 5,253 4,615
Other assets 3,525 3,297
Total assets $113,196 $97,785
Interest-bearing liabilities:
Demand deposits (NOW) $ 216 $ 11,310 1.91% $ 200 $10,104 1.98%
Savings 143 6,495 2.20 116 4,861 2.39
Insured money market 333 14,596 2.28 308 13,596 2.27
Time deposits 2,279 52,611 4.33 2,067 48,002 4.31
Short-term borrowings 96 2,586 3.71 30 1,308 2.29
Other borrowings 121 1,865 6.49 5 82 6.10
Total interest-bearing liabilities 3,188 89,463 3.56 2,726 77,953 3.50
Demand deposits 13,472 10,649
Other liabilities 720 704
Stockholders' equity 9,541 8,479
Total liabilities and stockholders'
equity $113,196 $97,785
Net interest - income and spread $4,915 4.20% $4,086 4.08%
Net yield on earning assets 4.71% 4.55%
</TABLE>
7
<PAGE>
BANK OF UNION AND SUBSIDIARY
SCHEDULE I, (Continued)
Volume and Rate Variance Analysis
<TABLE>
<CAPTION>
From December 31, 1993 to December 31, 1994
Increase (Decrease) Due to Change In*
(In thousands) Rate Volume Total Change
<S> <C> <C> <C>
Interest income:
Interest-bearing bank deposits $ 24 $ 58 $ 82
Investment securities - taxable (39) 269 230
Investment securities - nontaxable (22) 72 50
Loans, net 267 663 930
Federal funds sold 27 (28) (1)
Total interest income 257 1,034 1,291
Interest expense:
Demand deposits (NOW) (7) 23 16
Savings (11) 38 27
Insured money market 2 23 25
Time deposits 11 201 212
Short-term borrowings 28 38 66
Other borrowings 4 112 116
Total interest expense 27 435 462
Net interest income $230 $ 599 $ 829
</TABLE>
<TABLE>
<CAPTION>
From December 31, 1992 to December 31, 1993
Increase (Decrease) Due to Change In*
(In thousands) Rate Volume Total Change
<S> <C> <C> <C>
Interest income:
Interest-bearing bank deposits $ (23) $ 68 $ 45
Investment securities - taxable (171) (177) (348)
Investment securities - nontaxable - 14 14
Loans, net (362) 367 5
Federal funds sold (7) 23 16
Total interest income (563) 295 (268)
Interest expense:
Demand deposits (NOW) (65) 31 (34)
Savings (17) 37 20
Insured money market (87) 15 (72)
Time deposits (417) (137) (554)
Short-term borrowings (9) 37 28
Other borrowings 1 4 5
Total interest expense (594) (13) (607)
Net interest income $ 31 $ 308 $ 339
</TABLE>
*Changes attributable to rate/volume are allocated to both rate
and volume on an equal basis.
8
<PAGE>
BANK OF UNION AND SUBSIDIARY
SCHEDULE II
Investment Portfolio
<TABLE>
<CAPTION>
1994 1993
Book Market Book Market
Value Value Value Value
<S> <C> <C> <C> <C>
(In thousands)
U.S. Treasury held to maturity $ 5,968 $ 5,734 $ - $ -
U.S. Treasury available for sale 2,010 1,958 6,230 6,367
U.S. Government Agency Obligations
held to maturity 7,928 7,779 - -
U.S. Government Agency Obligations
available for sale 5,116 4,793 7,044 7,067
States and political subdivisions
(nontaxable) held to maturity 7,180 7,166 5,666 6,291
$28,202 $27,430 $18,940 $19,725
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
After One Year After Five Years
Due Within but Within but within After
One Year Five Years Ten Years Ten Years
Amount Yield* Amount Yield* Amount Yield* Amount Yield*
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(In thousands)
U.S. Treasury held to maturity $ 992 5.28% $ 4,976 5.97% $ - - % $ - - %
U.S. Treasury available for
sale - - 2,010 6.85 - - - -
U.S. Government Agency Obliga-
tions held to maturity 3,480 6.18 4,246 7.20 - - 202 5.44
U.S. Government Agency Obliga-
tions available for sale - - 3,467 5.74 955 6.34 694 5.86
States and political subsdivi-
sions (nontaxable) held to
maturity 3,756 10.27 1,587 9.98 1,837 9.38
Total $4,472 5.98% $18,455 5.36% $2,542 6.23% $2,733 6.71%
</TABLE>
9
<PAGE>
BANK OF UNION AND SUBSIDIARY
SCHEDULE III
Loan Portfolio
<TABLE>
<CAPTION>
1994 1993
Percent Percent
of of
Amount Total Amount Total
<S> <C> <C> <C> <C>
(In thousands)
Commercial and agriculture $53,039 63.20% $48,151 65.52%
Real estate, construction 4,962 5.91 4,635 6.31
Real estate, mortgage 9,162 10.92 4,649 6.33
Installment 15,951 19.00 14,606 19.87
Mortgage loans held for sale 813 0.97 1,448 1.97
Total $83,927 100.00% $73,489 100.00%
</TABLE>
Maturity and Sensitivity to Change in Interest Rates
<TABLE>
<CAPTION>
December 31, 1994
After One
Year
One through After
Year Five Five
or Less Years Years Total
<S> <C> <C> <C> <C>
(In thousands)
Commercial and agriculture $39,549 $13,490 $ - $53,039
Real estate, construction 3,372 1,590 - 4,962
Total $42,921 $15,080 $ - $58,001
</TABLE>
December 31,
1994
Predetermined interest rate $40,942
Floating or adjustable interest rate 42,985
Total $83,927
December 31,
Nonaccrual Loans* 1994 1993
(In thousands)
Principal balance outstanding 488 411
Interest income that would have been recorded
if the loans had been current and accruing 36 68
*Loans greater than ninety days past due as to principal or
interest payments and still accruing are $22 and $3 at
December 31, 1994 and 1993.
Restructured Loans
As of December 31, 1994, the balance of restructured loans was
$625,000. As of December 31, 1993, restructured loans amounted
to $795,000.
10
<PAGE>
BANK OF UNION AND SUBSIDIARY
SCHEDULE IV
Statement of Loan Loss
December 31,
Allowance for loan losses: 1994 1993
(In thousands)
Beginning balance $1,298 $1,208
Provision for loan losses 264 550
Loan charge-offs:
Commercial and agriculture (290) (415)
Real estate, mortgage - -
Installment (21) (65)
Recoveries of loans previously charged-off:
Commercial and agriculture 59 18
Real estate, mortgage - -
Installment 5 2
Ending balance $1,315 $1,298
Net charge offs to average loans .33% .68%
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
Percentage Percentage
of Loans in of Loans in
Allowance Category to Allowance Category to
Amount Total Loans Amount Total Loans
<S> <C> <C> <C> <C>
(In thousands)
Type of loan:
Commercial and agricultural $ 831 63.20% $ 850 65.52%
Real estate, construction 78 5.91 82 6.31
Real estate, mortgage 143 10.92 82 6.33
Installment 250 19.00 258 19.87
Mortgage loans held for sale 13 0.97 26 1.97
Total $1,315 100.00% $1,298 100.00%
</TABLE>
The provision for loan losses is based upon management's estimate
of the amount needed to maintain the allowance for loan losses at
an adequate level to cover known and inherent risk of loss in the
loan portfolio. Management's evaluation of the adequacy of the
allowance is based on a review of individual loans, recent loss
experience, current economic conditions, the risk characteristics
of the various classifications of loans, the fair value of
underlying collateral and other factors.
11
<PAGE>
BANK OF UNION AND SUBSIDIARY
SCHEDULE V
Deposits
<TABLE>
<CAPTION>
1994 1993
Average Average
Average Interest Rate Average Interest Rate
Balance Expense Paid Balance Expense Paid
<S> <C> <C> <C> <C> <C> <C>
(In thousands)
Interest-bearing demand
deposits $11,310 $ 216 1.91% $10,104 $ 200 1.98%
Savings 6,495 143 2.20 4,861 116 2.39
Insured money markets 14,596 333 2.28 13,596 308 2.27
Time deposits 52,611 2,279 4.33 48,002 2,067 4.31
Total $85,012 $2,971 3.49% $76,563 $2,691 3.51%
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
Three Over Three Over Six Over
Months through through Twelve
or Less Six Months Twelve Months Months Total
<S> <C> <C> <C> <C> <C>
(In thousands)
Time, $100,000 or more $ 8,428 $ 2,046 $1,273 $ 3,244 $14,991
Other time 11,627 8,215 6,674 16,658 43,174
Total $20,055 $10,261 $7,947 $19,902 $58,165
</TABLE>
12
<PAGE>
BANK OF UNION AND SUBSIDIARY
SCHEDULE VI
Return on Equity and Assets
December 31,
1994 1993
Net income $ 1,310 $ 1,015
Average shareholders' equity 9,541 8,479
Average total assets 113,196 97,785
Dividends declared - -
Dividends per share - -
Primary income per share .60 .47
Income per share assuming full dilution .60 .47
Return on average assets 1.16% 1.04%
Return on average equity 13.73% 11.97%
Dividend payout ratio - -
Average equity to average asset ratio 8.43% 8.67%
NOTE: Dollars in thousands except per share amounts
13
<PAGE>
BANK OF UNION AND SUBSIDIARY
SCHEDULE VII
Other Borrowings
<TABLE>
<CAPTION>
Interest
Balance as of Rate as of Average
December 31, December 31, Average Interest Maximum
1994 1994 Balance Rate Outstanding
<S> <C> <C> <C> <C> <C>
(In thousands)
Federal funds purchased
and securities sold under
agreements to repurchase $ - - % $ 38 3.93% $ 1,250
Customer repurchase
agreements 1,807 5.24 2,548 3.66 6,081
Other borrowings 2,900 6.89 1,865 6.50 2,950
Total other borrowings $4,707 6.26% $4,451 4.85% $10,281
</TABLE>
<TABLE>
<CAPTION>
Interest
Balance as of Rate as of Average
December 31, December 31, Average Interest Maximum
1993 1993 Balance Rate Outstanding
<S> <C> <C> <C> <C> <C>
(In thousands)
Federal funds purchased
and securities sold under
agreements to repurchase $ - - % $ 4 3.28% $ 700
Customer repurchase
agreements 2,011 2.15 1,304 2.30 5,331
Other borrowings 1,000 5.91 82 5.81 1,000
Total other borrowings $3,011 3.40% $1,390 2.51% $7,031
</TABLE>
14
<PAGE>
Item 8 - Financial Statements and Supplementary Data
The financial statements required by Item 8 are incorporated
herein by reference from pages 7 through 18 of the Bank's 1994
Annual Report to Shareholders.
PART III
Item 9 - Directors and Executive Officers of the Bank
The information required by Item 9 is incorporated herein by
reference from pages 3 through 6 under the captions "Proposal 1:
Election of Directors", "Incumbent Directors", and "Executive
Officers" of the Bank's definitive proxy statement dated
March 20, 1995.
Item 10 - Management Remuneration and Transactions
The information required by Item 10 is incorporated herein
by reference from page 3, and pages 6 through 11 under the
captions "Director Compensation", "Executive Compensation",
"Incentive Compensation Plan", "401(k) Savings Plan", "Corporate
Executive Stock Plan", and "Indebtedness of Management" of the
Bank's definitive proxy statement dated March 20, 1995.
PART IV
Item 11 - Exhibits, Financial Statement Schedules, and Reports on
Form F-3
(a) (1) Financial Statements.
The following financial statements of the Bank are
incorporated herein by reference from the
indicated pages of the Bank's 1994 Annual Report
to Shareholders:
Independent Auditor's Report - page 6
Consolidated Balance Sheets - December 31, 1994
and 1993 - page 7
Consolidated Statements of Income - Years ended
December 31, 1994, 1993 and 1992 - page 8
Consolidated Statements of Changes in
Stockholders' Equity - Years ended December 31,
1994, 1993 and 1992 - page 9
Consolidated Statements of Cash Flows - Years
ended December 31, 1994, 1993 and 1992 - page 10
Notes to Consolidated Financial Statements - Years
ended December 31, 1994, 1993 and 1992 - pages 11
through 18
15
<PAGE>
(2) Financial Statement Schedules.
The following financial statement schedule is
included herewith:
(i) Reissued Report of Predecessor Accountant
All other financial statement schedules are
omitted as the information required to be included
therein is substantially included in the
consolidated financial statements listed above
which are incorporated herein by reference from
the Bank's 1994 Annual Report to Shareholders or
is not applicable.
(b) Reports on Form F-3.
The Bank did not file a Current Report on Form F-3
during the three months ended December 31, 1994.
(c) Exhibits.
The following exhibits are filed herewith or
incorporated herein by reference.
Exhibit No. Description of Exhibit
1(a) Articles of Incorporation of the Bank, as
amended and currently in effect, are
incorporated herein by reference from
exhibits to the Bank's 1988 Annual Report on
Form F-2.
1(b) Bylaws of the Bank are incorporated herein by
reference from exhibits to the Bank's
Registration Statement on Form F-1. An
amendment to the Bank's Bylaws is
incorporated herein by reference from
exhibits to the Bank's 1987 Annual Report on
Form F-2.
2 Specimen of the Bank's Common Stock
certificate is incorporated herein by
reference from exhibits to the Bank's Current
Report on Form F-3 dated March 2, 1988.
3(a) Lease dated March 1, 1994, with George R.
Medlin and Hope L. Medlin.*
3(b) Lease dated September 5, 1986, with Rushing
Construction Company is incorporated herein
by reference from exhibits to the Bank's 1987
Annual Report on Form F-2.
3(c) Lease dated February 3, 1988, with Edward G.
and Elizabeth Belle Faulkner is incorporated
herein by reference from exhibits to the
Bank's 1987 Annual Report on Form F-2.
16
<PAGE>
3(d) Lease dated May 16, 1988, with Dickerson
Realty Corporation is incorporated herein by
reference from exhibits to the Bank's 1988
Annual Report on Form F-2.
3(e) Amendment to lease dated January 26, 1990,
with Dickerson Realty Corporation is
incorporated herein by reference from
exhibits to the Bank's 1991 Annual Report on
Form F-2.
3(f) Lease dated March 23, 1992 with The Family
Partnership is incorporated herein by
reference from exhibits to the Bank's 1991
Annual Report on Form F-2.
3(g) Employment Agreement dated June 1, 1991
between the Bank and its President and Chief
Executive Officer is incorporated herein by
reference from exhibits to the Bank's 1991
Annual Report on Form F-2.
3(h) Employment Agreement dated June 1, 1991
between the Bank and its Executive Vice
President and Chief Administrative Officer is
incorporated herein by reference from
exhibits to the Bank's 1991 Annual Report on
Form F-2.
3(i) Employment Agreement dated June 1, 1991
between the Bank and its Senior Vice
President and Senior Consumer Loan Officer is
incorporated herein by reference from
exhibits to the Bank's 1991 Annual Report on
Form F-2.
3(j) Corporate Executive Stock Plan is
incorporated herein by reference from
exhibits to the Bank's 1987 Annual Report on
Form F-2.
6 Annual Report to Shareholders of the Bank for
the year ended December 31, 1994.*
________________________
* Previously filed
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities
Exchange Act of 1934, the Bank has duly caused this Amendment
No. 1 to be signed on its behalf by the undersigned, thereunto
duly authorized.
BANK OF UNION
(Bank)
May 17, 1995 By: /s/ H. Clark Goodwin
H. Clark Goodwin, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this Amendment No. 1 has been signed below by the
following persons on behalf of the Bank and in the capacities and
on the dates indicated.
/s/ Charla L. Kurtz May 17, 1995
Charla L. Kurtz, Controller (principal
financial and accounting officer)
/s/ John A. Crook, Jr. May 17, 1995
John A. Crook, Jr., Director
/s/ J. Earl Culbreth May 17, 1995
J. Earl Culbreth, Director
/s/ Dennison A. Davis May 17, 1995
Dennison A. Davis, Director
/s/ Dr. William C. Deskins May 17, 1995
Dr. William C. Deskins, Director
/s/ James B. Fincher May 17, 1995
James B. Fincher, Director
/s/ H. Clark Goodwin May 17, 1995
H. Clark Goodwin, President, Chief
Executive Officer and Director
(principal executive officer)
18
<PAGE>
/s/ Earl J. Haigler May 17, 1995
Earl J. Haigler, Director
/s/ Frank H. Hawfield, Jr. May 17, 1995
Frank H. Hawfield, Jr., Chairman
May __, 1995
Charles E. Hulsey, Director
/s/ Callie F. King May 17, 1995
Callie F. King, Director
/s/ Joseph L. Little May 17, 1995
Joseph L. Little, Director
/s/ Fred C. Long May 17, 1995
Fred C. Long, Director
/s/ Dr. Jerry E. McGee May 17, 1995
Dr. Jerry E. McGee, Director
/s/ David C. McGuirt May 17, 1995
David C. McGuirt, Director
/s/ Lane D. Vickery May 17, 1995
Lane D. Vickery, Director
19
<PAGE>
FINANCIAL STATEMENT SCHEDULE
KPMG Peat Marwick LLP
Suite 2800
Two First Union
Charlotte, NC 28282-8290
The Board of Directors
Bank of Union
We have audited the accompanying consolidated balance sheet of Bank of Union
and subsidiary as of December 31, 1993, and the related consolidated statements
of income, changes in stockholders' equity, and cash flows for each of the
years in the two-year period ended December 31, 1993. These consolidated
financial statements are the responsibility of Bank of Union's management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining on a test basis,
evidence supporting the amount and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Bank of
Union and subsidiary at December 31, 1993 and the results of their operations
and their cash flows for each of the years in the two-year period ended
December 31, 1993, in conformity with generally accepted accounting
principles.
(Signature of KPMG Peat Marwick LLP)
Charlotte, North Carolina
February 11, 1994
<PAGE>
FORM F-4
QUARTERLY REPORT UNDER SECTION 13
OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR QUARTER ENDED
MARCH 31, 1995
F.D.I.C. CERTIFICATE NO. 26400-8
BANK OF UNION
201 N. CHARLOTTE AVENUE
P.O. BOX 1459
MONROE, NORTH CAROLINA 28111-1459
I.R.S. EMPLOYER IDENTIFICATION NO. 56-1423761
TELEPHONE: (704) 289-9555
Indicate by check mark whether the bank (1) has filed
all reports required to be filed by Section 13 of
the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that
the bank was required to file such reports), and (2)
has been subject to such filing requirements for the
past 90 days
YES__X__ No_____
Common Stock
(PAR VALUE $1.25 PER SHARE)
2,187,409 SHARES OUTSTANDING
AS OF MARCH 31, 1995
<PAGE>
BANK OF UNION AND SUBSIDIARY
INDEX
Item 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets - March 31, 1995 (Unaudited)
and December 31, 1994............................................. 3
Consolidated Statements of Income and Retained Earnings - Three
Months Ended March 31, 1995 and 1994 (Unaudited).................. 4
Consolidated Statements of Cash Flows - Three Months Ended
March 31, 1995 and 1994 (Unaudited)............................... 5
Notes to Consolidated Financial Statements (Unaudited)............ 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS......................................... 7
2
<PAGE>
Bank of Union and Subsidiary
Consolidated Balance Sheet
March 31, 1995 and December 31, 1994
<TABLE>
<CAPTION>
March 31, 1995 December 31,
(Unaudited) 1994
______________ ____________
<S> <C> <C>
ASSETS
Cash and due from banks $ 5,893,309 5,245,250
Interest-bearing due from banks 4,151,825 2,537,451
Federal funds sold 1,625,000 625,000
Interest-bearing bank time deposits - 1,000,000
Securities available for sale 6,277,700 6,751,456
Securities held to maturity (estimated market value of
$20,822,453 and $20,678,808 at March 31, 1995 and
December 31, 1994, respectively) 21,295,016 21,076,347
Loans 84,811,197 83,927,205
Less allowance for loan losses (1,451,669) (1,314,606)
______________ ____________
Loans, net 83,359,528 82,612,599
Premises and equipment, net 1,596,749 1,596,493
Other assets 1,939,471 1,968,535
______________ ____________
Total assets $ 126,138,598 123,413,131
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand 17,004,408 15,663,116
Interest-bearing demand 24,679,852 26,037,405
Savings 6,453,556 6,602,084
Time, $100,000 or more 13,753,456 14,991,410
Other time 47,205,886 43,173,831
______________ ____________
Total deposits 109,097,158 106,467,846
Other borrowings 5,041,440 4,707,259
Drafts outstanding 706,950 1,413,398
Other liabilities 742,616 749,887
______________ ____________
Total liabilities 115,588,164 113,338,390
______________ ____________
Stockholders' equity:
Common stock - $1.25 par value. Authorized - 6,000,000
shares. Issued and outstanding - 2,187,409 shares at
March 31, 1995 and 2,184,979 at December 31, 1994 2,734,261 2,731,224
Additional paid-in capital 5,046,612 5,039,149
Retained earnings 2,910,824 2,552,085
Net unrealized holding losses on securities available
for sale (141,263) (247,717)
______________ ____________
Total stockholders' equity 10,550,434 10,074,741
______________ ____________
Total liabilities and stockholders' equity $ 126,138,598 123,413,131
============== ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
Bank of Union and Subsidiary
Consolidated Statements of Income and Retained Earnings
for the Three Months Ended March 31, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Interest income: ____________ ____________
Interest and fees on loans $ 1,929,115 1,440,749
Interest on Federal funds sold 15,140 9,375
Interest on bank time deposits 6,546 9,588
Interest on interest-bearing due from banks 56,155 10,360
Interest on investment securities:
U.S. Government and agency obligations 292,824 174,245
State, county and municipal obligations 110,336 96,651
Interest on other 6,554 3,992
____________ ____________
Total interest income 2,416,670 1,744,960
Interest expense:
Interest on deposits:
Demand 141,179 126,094
Savings 35,710 32,298
Time, $100,000 or more 172,700 104,989
Other time 601,516 385,636
Interest on Federal funds purchased - 506
Interest on other borrowings 76,937 28,596
____________ ____________
Total interest expense 1,028,042 678,119
____________ ____________
Net interest income 1,388,628 1,066,841
Provision for loan losses 140,000 62,000
____________ ____________
Net interest income after provision for loan
losses 1,248,628 1,004,841
Other operating income:
Service charges on deposit accounts 216,034 218,330
Insurance commissions and other income 102,368 170,907
Gain/(loss) on sale of securities 2,717 17,188
Credit card income 411,626 83,109
____________ ____________
Total other operating income 732,745 489,534
Other operating expenses:
Compensation 572,793 526,996
Occupancy 91,028 85,415
Equipment 85,827 93,880
Advertising 10,454 14,994
Professional services 28,581 24,752
Postage 22,930 15,865
Printing and supplies 29,058 27,598
FDIC insurance premium 58,665 51,251
Credit card expense 406,659 82,646
Other expenses 165,539 142,186
____________ ____________
Total other operating expenses 1,471,534 1,065,583
____________ ____________
Income before income taxes 509,839 428,792
Less: Income tax expense 151,100 128,200
____________ ____________
Net income $ 358,739 300,592
Retained earnings - beginning of period 2,552,085 1,970,202
Retained earnings - end of period $ 2,910,824 2,270,794
============ ============
Net income per share (note 2) $ 0.16 0.14
==== ====
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
Bank of Union and Subsidiary
Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1994 1993
____________ ____________
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 358,739 300,592
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Provision for loan losses 140,000 62,000
Depreciation and amortization 62,515 61,620
Amortization (accretion) on investment securities (25,128) 16,579
Gain on sale of securities available for sale (2,717) (17,188)
Increase in other assets (37,868) (546,333)
Increase (decrease) in other liabilities (7,271) 86,136
Gain on sale of premises and equipment - (4,962)
____________ ____________
Net cash provided by (used in) operating activities 488,270 (41,556)
____________ ____________
Cash flows from investing activities:
Proceeds from maturities of interest-bearing bank time deposits 1,000,000 1,500,000
Proceeds from sales of securities available for sale 502,344 517,754
Proceeds from maturities of securities available for sale - 1,000,000
Proceeds from maturities of securities held to maturity 3,000,000 -
Purchases of securities available for sale - -
Purchases of securities held to maturity (3,205,443) (3,525,383)
Principal collected on mortgage-backed securities 147,324 347,494
Net increase in loans made to customers (886,929) (482,441)
Purchases of premises and equipment (50,678) (50,842)
Proceeds from sales of premises and equipment - 13,000
____________ ____________
Net cash provided by investing activities 506,618 (680,418)
____________ ____________
Cash flows from financing activities:
Net decrease in demand deposits and savings accounts (164,789) (596,379)
Net increase in time deposits 2,794,101 3,011,647
Net decrease in drafts outstanding (706,448) (254,392)
Net increase in securities sold under agreements to repurchase 477,038 163,050
Principal repayments of long-term borrowings (142,857) -
Proceeds from issuance of common stock 10,500 -
____________ ____________
Net cash provided by financing activities 2,267,545 2,323,926
____________ ____________
Net increase in cash and cash equivalents 3,262,433 1,601,952
Cash and cash equivalents at beginning of period 8,407,701 10,035,362
____________ ____________
Cash and cash equivalents at end of period $ 11,670,134 11,637,314
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for :
Interest $ 1,095,965 684,098
Income Taxes 21,000 -
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
Bank of Union and Subsidiary
Notes to Consolidated Financial Statements
March 31, 1995 and December 31, 1994
(1) The interim consolidated financial statements are unaudited. In the
opinion of management, these accompanying unaudited financial statements
contain all adjustments (consisting of only normal, recurring adjustments,)
necessary to present fairly the financial position as of March 31, 1995, the
results of operations for the three months ended March 31, 1995 and 1994,
and the cash flows for the three months ended March 31, 1995 and 1994.
(2) Income per share, based on the weighted average number of shares
outstanding during the period, excludes common stock equivalent shares
assuming the exercise of outstanding stock options because their effect on
income per share is not material. Weighted average shares outstanding were
2,186,572 and 2,184,373 for the three months ended March 31, 1995 and 1994,
respectively.
(3) In the normal course of business there are outstanding commitments for the
extension of credit which are not reflected in the financial statements. No
material losses are anticipated as a result of these transactions. Unused
commitments to fund loans were approximately $16,421,000 at March 31, 1995.
Commitments under standby letters of credit were approximately $474,000 at
March 31, 1995.
(4) A description of other significant accounting policies is presented in the
December 31, 1994 annual report.
6
<PAGE>
<PAGE>
Bank of Union and Subsidiary
Management's Discussion and Analysis of Financial Condition at
March 31, 1995, compared with December 31, 1994, and the Results
of Operations for the Three Months Ended March 31, 1995 and 1994
________________________________________________________________
Liquidity and Capital Resources
_______________________________
The Bank's consolidated assets increased by $2,725,467 to
$126,138,598 at March 31, 1995. Total assets at December 31,
1994 were $123,413,131.
Net loans outstanding rose to $83,359,528 at March 31, 1995 from
$82,612,599 at December 31, 1994, an increase of $746,929 or .9%.
The allowance for loan losses increased 10.4% to $1,451,669 or
1.71% of gross loans.
Securities held to maturity and securities available for sale
decreased by $255,087 to $27,572,716 at March 31, 1995. Federal
funds sold increased by $1,000,000. Deposits increased
$2,629,312 to $109,097,158 at March 31, 1995 from the December
31, 1994 level of $106,467,846. Other borrowings include
$2,757,143 in Federal Home Loan Bank advances as of March 31,
1995.
Stockholders' equity at March 31, 1995 increased by $475,693 from
net income, exercise of stock options, and a net decrease in
unrealized holding loss on securities available for sale.
Stockholders' equity as a percent of total assets was 8.3% and
8.5% at March 31, 1995 and December 31, 1994 respectively.
Results of Operations - Three Months Ended March 31, 1995 and
1994
_____________________________________________________________
Net interest income for the three months ended March 31, 1995 was
$1,388,627 compared to $1,066,841 for the three months ended
March 31, 1994. The increase is primarily due to the increase in
yield on earning assets, resulting in an improved net interest
margin.
Other operating income increased $243,211 or 49.7% from the prior
year due to growth in the Bank's merchant credit card program
offset by decreased commissions earned by B.O.U. Financial, Inc.
and decreased fees earned from mortgage loan originations.
Other operating expenses increased by $405,951 or 38.1% from the
prior year. Although all expenses have increased to support the
overall growth of the bank, a large portion of the increase is
due to the merchant credit card program.
7
<PAGE>
BANK OF UNION
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934, the Bank has
duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized:
BANK OF UNION
5-4-95 (Signature of H. Clark Goodwin)
Date: _________________________ By: _____________________________
H. Clark Goodwin
President and Chief Executive
Officer
5-4-95 (Signature of Charla L. Kurtz)
Date: _________________________ By: _____________________________
Charla L. Kurtz
Vice President and Controller
8
<PAGE>
FORM F-4
QUARTERLY REPORT UNDER SECTION 13
OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR QUARTER ENDED
JUNE 30, 1995
F.D.I.C. CERTIFICATE NO. 26400-8
BANK OF UNION
201 N. CHARLOTTE AVENUE
P.O. BOX 1459
MONROE, NORTH CAROLINA 28111-1459
I.R.S. EMPLOYER IDENTIFICATION NO. 56-1423761
TELEPHONE: (704) 289-9555
Indicate by check mark whether the bank (1) has filed
all reports required to be filed by Section 13 of
the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that
the bank was required to file such reports), and (2)
has been subject to such filing requirements for the
past 90 days
YES__X__ No_____
Common Stock
(PAR VALUE $1.25 PER SHARE)
2,192,270 SHARES OUTSTANDING
AS OF JUNE 30, 1995
1
<PAGE>
BANK OF UNION AND SUBSIDIARY
INDEX
Item 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets - June 30, 1995 (Unaudited)
and December 31, 1994............................................. 3
Consolidated Statements of Income and Retained Earnings -
Three Months Ended June 30, 1995 and 1994 (Unaudited)............. 4
Consolidated Statements of Income and Retained Earnings -
Six Months Ended June 30, 1995 and 1994 (Unaudited)............... 5
Consolidated Statements of Cash Flows - Six Months Ended
June 30, 1995 and 1994 (Unaudited)................................ 6
Notes to Consolidated Financial Statements (Unaudited)............ 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS......................................... 8
2
<PAGE>
Bank of Union and Subsidiary
Consolidated Balance Sheet
June 30, 1995 and December 31, 1994
<TABLE>
<CAPTION>
June 30, 1995 December 31,
(Unaudited) 1994
______________ ____________
<S> <C> <C>
ASSETS
Cash and due from banks $ 6,185,500 5,245,250
Interest-bearing due from banks 2,477,138 2,537,451
Federal funds sold 2,565,000 625,000
Interest-bearing bank time deposits 2,000,000 1,000,000
Securities available for sale 6,033,632 6,751,456
Securities held to maturity (estimated market value of
$26,717,318 and $20,678,808 at June 30, 1995 and
December 31, 1994, respectively) 26,058,013 21,076,347
Loans 86,353,974 83,927,205
Less allowance for loan losses (1,546,705) (1,314,606)
______________ ____________
Loans, net 84,807,269 82,612,599
Premises and equipment, net 1,570,868 1,596,493
Other assets 1,889,928 1,968,535
______________ ____________
Total assets $ 133,587,348 123,413,131
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand 19,452,359 15,663,116
Interest-bearing demand 24,080,965 26,037,405
Savings 6,983,047 6,602,084
Time, $100,000 or more 14,463,887 14,991,410
Other time 51,877,349 43,173,831
______________ ____________
Total deposits 116,857,607 106,467,846
Other borrowings 4,574,370 4,707,259
Drafts outstanding 484,811 1,413,398
Other liabilities 577,974 749,887
______________ ____________
Total liabilities 122,494,762 113,338,390
______________ ____________
Stockholders' equity:
Common stock - $1.25 par value. Authorized - 6,000,000
shares. Issued and outstanding - 2,192,270 shares at
June 30, 1995 and 2,184,979 at December 31, 1994 2,740,337 2,731,224
Additional paid-in capital 5,061,579 5,039,149
Retained earnings 3,328,289 2,552,085
Net unrealized holding losses on securities available
for sale (37,619) (247,717)
______________ ____________
Total stockholders' equity 11,092,586 10,074,741
______________ ____________
Total liabilities and stockholders' equity $ 133,587,348 123,413,131
============== ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
Bank of Union and Subsidiary
Consolidated Statements of Income and Retained Earnings
for the Three Months Ended June 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Interest income: ____________ ____________
Interest and fees on loans $ 2,015,733 1,555,028
Interest on Federal funds sold 36,682 16,694
Interest on bank time deposits 20,712 4,499
Interest on interest-bearing due from banks 69,250 13,362
Interest on investment securities:
U.S. Government and agency obligations 338,267 234,851
State, county and municipal obligations 110,182 100,992
Interest on other 7,259 4,799
____________ ____________
Total interest income 2,598,085 1,930,225
Interest expense:
Interest on deposits:
Demand 142,815 130,532
Savings 36,570 36,736
Time, $100,000 or more 239,083 113,582
Other time 689,347 400,191
Interest on Federal funds purchased - 488
Interest on other borrowings 73,396 34,151
____________ ____________
Total interest expense 1,181,211 715,680
____________ ____________
Net interest income 1,416,874 1,214,545
Provision for loan losses 115,000 70,000
____________ ____________
Net interest income after provision for loan
losses 1,301,874 1,144,545
Other operating income:
Service charges on deposit accounts 220,719 219,921
Insurance commissions and other income 159,361 90,427
Gain/(loss) on sale of securities (14,538) 1,625
Credit card income 562,093 218,084
____________ ____________
Total other operating income 927,635 530,057
Other operating expenses:
Compensation 556,939 513,173
Occupancy 90,084 89,646
Equipment 94,502 88,539
Advertising 31,207 16,088
Professional services 34,335 29,945
Postage 26,057 21,042
Printing and supplies 40,729 40,179
FDIC insurance premium 58,666 51,251
Credit card expense 551,680 167,965
Other expenses 155,945 201,234
____________ ____________
Total other operating expenses 1,640,144 1,219,062
____________ ____________
Income before income taxes 589,365 455,540
Less: Income tax expense 171,900 136,600
____________ ____________
Net income $ 417,465 318,940
Retained earnings - beginning of period 2,910,824 2,270,794
Retained earnings - end of period $ 3,328,289 2,589,734
============ ============
Net income per share (note 2) $ 0.19 0.15
==== ====
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
Bank of Union and Subsidiary
Consolidated Statements of Income and Retained Earnings
for the Six Months Ended June 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
____________ ____________
<S> <C> <C>
Interest income:
Interest and fees on loans $ 3,944,849 2,995,778
Interest on Federal funds sold 51,822 26,069
Interest on bank time deposits 27,258 14,087
Interest on interest-bearing due from banks 125,405 23,722
Interest on investment securities:
U.S. Government and agency obligations 631,092 409,095
State, county and municipal obligations 220,518 197,643
Interest on other 13,812 8,791
____________ ____________
Total interest income 5,014,756 3,675,185
Interest expense:
Interest on deposits:
Demand 283,994 256,626
Savings 72,280 69,034
Time, $100,000 or more 411,783 218,571
Other time 1,290,864 785,827
Interest on Federal funds purchased - 994
Interest on other borrowings 150,333 62,747
____________ ____________
Total interest expense 2,209,254 1,393,799
____________ ____________
Net interest income 2,805,502 2,281,386
Provision for loan losses 255,000 132,000
____________ ____________
Net interest income after provision for loan losses 2,550,502 2,149,386
Other operating income:
Service charges on deposit accounts 436,753 438,250
Insurance commissions and other income 261,730 261,362
Gain/(loss) on sale of securities (11,821) 18,813
Credit card income 973,719 301,164
____________ ____________
Total other operating income 1,660,381 1,019,589
Other operating expenses:
Compensation 1,129,732 1,040,168
Occupancy 181,112 175,061
Equipment 180,329 182,419
Advertising 41,662 31,082
Professional services 62,916 54,698
Postage 48,987 36,906
Printing and supplies 69,786 67,777
FDIC insurance premium 117,331 102,501
Credit card expense 958,339 250,611
Other expenses 321,485 343,420
____________ ____________
Total other operating expenses 3,111,679 2,284,643
____________ ____________
Income before income taxes $ 1,099,204 884,332
Less: Income tax expense 323,000 264,800
____________ ____________
Net income 776,204 619,532
Retained earnings - beginning of period 2,552,085 1,970,202
Retained earnings - end of period $ 3,328,289 2,589,734
============ ============
Net income per share (note 2) $ 0.35 0.28
==== ====
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
Bank of Union and Subsidiary
Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
____________ ____________
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 776,204 619,532
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 255,000 132,000
Depreciation and amortization 127,318 98,360
Amortization (accretion) on investment securities (62,761) 23,590
(Gain) loss on sale of securities available for sale 11,821 (18,813)
Increase in other assets (53,810) (71,874)
Increase (decrease) in other liabilities (171,914) 101,115
(Gain) loss on sale of premises and equipment 1,267 (4,962)
____________ ____________
Net cash provided by operating activities 883,125 878,948
____________ ____________
Cash flows from investing activities:
Proceeds from maturities of interest-bearing bank time deposits 1,000,000 1,500,000
Purchases of interest-bearing bank time deposits (2,000,000) -
Proceeds from sales of securities available for sale 1,768,148 1,019,629
Proceeds from maturities of securities available for sale - 1,500,000
Proceeds from maturities of securities held to maturity 4,500,000 -
Purchases of securities available for sale (978,594) (629,142)
Purchases of securities held to maturity (9,455,542) (8,763,629)
Principal collected on mortgage-backed securities 271,415 535,401
Net increase in loans made to customers (2,449,670) (3,333,680)
Purchases of premises and equipment (78,773) (70,217)
Proceeds from sales of premises and equipment - 13,300
____________ ____________
Net cash used in investing activities (7,423,016) (8,228,338)
____________ ____________
Cash flows from financing activities:
Net increase (decrease) in demand deposits and savings accounts 2,213,766 (520,155)
Net increase in time deposits 8,175,995 2,959,103
Net decrease in drafts outstanding (928,587) (247,057)
Net increase (decrease) in securities sold under
agreements to repurchase 59,968 (245,945)
Principal repayments of long-term borrowings (192,857) (50,000)
Proceeds from issuance of common stock 31,543 -
____________ ____________
Net cash provided by financing activities 9,359,828 1,895,946
____________ ____________
Net increase (decrease) in cash and cash equivalents 2,819,937 (5,453,444)
Cash and cash equivalents at beginning of period 8,407,701 10,035,362
____________ ____________
Cash and cash equivalents at end of period $ 11,227,638 4,581,918
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for :
Interest $ 2,203,093 1,408,370
Income Taxes 398,000 143,400
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
Bank of Union and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1995 and December 31, 1994
(1) The interim consolidated financial statements are unaudited. In the
opinion of management, these accompanying unaudited financial statements
contain all adjustments (consisting of only normal, recurring adjustments,)
necessary to present fairly the financial position as of June 30, 1995, the
results of operations for the three and six months ended June 30, 1995 and
1994, and the cash flows for the six months ended June 30, 1995 and 1994.
(2) Income per share, based on the weighted average number of shares
outstanding during the period, excludes common stock equivalent shares
assuming the exercise of outstanding stock options because their effect on
income per share is not material. Weighted average shares outstanding were
2,188,524 and 2,184,373 for the six months ended June 30, 1995 and 1994,
respectively.
(3) In the normal course of business there are outstanding commitments for the
extension of credit which are not reflected in the financial statements. No
material losses are anticipated as a result of these transactions. Unused
commitments to fund loans were approximately $19,858,000 at June 30, 1995.
Commitments under standby letters of credit were approximately $833,000 at
June 30, 1995.
(4) A description of other significant accounting policies is presented in the
December 31, 1994 annual report.
7
<PAGE>
Bank of Union and Subsidiary
Management's Discussion and Analysis of Financial Condition at June 30, 1995,
Compared with December 31, 1994, and the Results of Operations for the Three
Months and Six Months Ended June 30, 1995 and 1994
_____________________________________________________________________________
Liquidity and Capital Resources
_______________________________
The Bank's consolidated assets increased by $10,174,217 to $133,587,348
at June 30, 1995. Total assets at December 31, 1994 were $123,413,131.
Net loans outstanding rose to $84,807,269 at June 30, 1995 from $82,612,599
at December 31, 1994, an increase of $2,194,670 or 2.7%. The allowance for
loan losses increased 17.7% to $1,546,705 or 1.8% of gross loans.
Securities held to maturity and securities available for sale increased by
$4,263,842 to $32,091,645 at June 30, 1995. Federal funds sold increased by
$1,940,000. Deposits increased $10,389,761 to $109,097,158 at June 30, 1995
from the December 31, 1994 level of $106,467,846. Other borrowings include
$2,707,143 in Federal Home Loan Bank advances as of June 30, 1995.
Stockholders' equity at June 30, 1995 increased by $1,017,845 from net
income, exercise of stock options, and a net decrease in unrealized holding
loss on securities available for sale. Stockholders' equity as a percent
of total assets was 8.3% and 8.5% at June 30, 1995 and December 31, 1994
respectively.
Results of Operations - Six Months Ended June 30, 1995 and 1994
_______________________________________________________________________________
Net interest income for the six months ended June 30, 1995 was $2,805,502
compared to $2,281,386 for the six months ended June 30, 1994. The
increase is primarily due to the increase in yield on earning assets,
resulting in an improved net interest margin.
Other operating income increased $640,792 or 62.8% from the prior year
due to growth in the Bank's merchant credit card program.
Other operating expenses increased by $827,036 or 36.2% from the prior year.
Although all expenses have increased to support the overall growth of the
bank, a large portion of the increase is due to the merchant credit card
program.
Results of Operations - Three Months Ended June 30, 1995 and 1994
_______________________________________________________________________________
Net interest income for the three months ended June 30, 1995 was $1,416,874
compared to $1,214,545 for the three months ended June 30, 1994. The
increase is primarily due to the increase in yield on earning assets,
resulting in an improved net interest margin.
Other operating income increased $397,578 or 75.0% from the prior year due
to growth in the Bank's merchant credit card program.
Other operating expenses increased by $421,082 or 34.5% from the prior year.
Although all expenses have increased to support the overall growth of the
bank, a large portion of the increase is due to the merchant credit card
program.
8
<PAGE>
BANK OF UNION
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934, the Bank has
duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized:
BANK OF UNION
Date: 8-9-95 By: (Signature of H. Clark Goodwin)
H. Clark Goodwin
President and Chief Executive
Officer
Date: August 9, 1995 By: (Signature of Charla L. Kurtz)
Charla L. Kurtz
Vice President and Controller
<PAGE>
FEDERAL DEPOSIT
INSURANCE CORPORATION
Washington, D.C. 20429
FORM F-3
CURRENT REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the month of April 1995
FDIC Certificate No. 26400-8
BANK OF UNION
(Exact name of bank as specified in its charter)
NORTH CAROLINA 56-1423761
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
201 North Charlotte Avenue
Monroe, North Carolina 28112
(Address of principal office) (Zip Code)
Bank's telephone number, including area code (704) 289-9555
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.25 Par Value
(Title of Class)
<PAGE>
Item 9 - Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the Bank was held on
April 18, 1995. The following matters were submitted to a vote of
shareholders at the Annual Meeting:
(1) Proposal to elect five members of the Board of
Directors.
The five management's nominees were elected. Votes cast
with respect to each nominee in the election of
directors were as follows:
FOR WITHHELD
James B. Fincher 1,589,289 9,535
Frank H. Hawfield, Jr. 1,584,539 14,285
Joseph L. Little 1,588,923 9,901
Dr. Jerry E. McGee 1,588,317 10,507
David C. McGuirt 1,590,381 8,443
(2) Proposal to approve the Bank's Employee Stock Option
Plan.
The proposal was adopted. Votes cast on the proposal
were as follows:
FOR 1,509,511
AGAINST 47,984
ABSTAIN 17,537
BROKER NONVOTES 19,193
(3) Proposal to approve the Bank's Director Stock Option
Plan.
The proposal was not adopted. Votes cast on the
proposal were as follows:
FOR 1,277,795
AGAINST 88,867
ABSTAIN 19,115
BROKER NONVOTES 208,448
(4) Proposal to ratify the appointment of the Bank's
independent public accountants for 1995.
The proposal was adopted. Votes cast on the proposal
were as follows:
FOR 1,581,078
AGAINST 9,344
ABSTAIN 8,402
BROKER NONVOTES -0-
2
<PAGE>
Item 13 - Financial Statement and Exhibits
(a) Financial Statements.
None
(b) Exhibits.
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Bank has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BANK OF UNION
(Bank)
Date: May 3, 1995 By: /s/ H. Clark Goodwin
H. Clark Goodwin, President and
Chief Executive Officer
3
<PAGE>
FEDERAL DEPOSIT INSURANCE CORPORATION
Washington, D.C. 20429
FORM F-3
CURRENT REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the month of September, 1995
FDIC Certificate No. 26400-8
BANK OF UNION
(Exact name of bank as specified in its charter)
NORTH CAROLINA 56-1423761
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
201 N. Charlotte Ave., Monroe, NC 28110
(Address of principal office) (Zip Code)
Bank's telephone number, including area code (704) 289-9555
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.25 Par Value
(Title of Class)
<PAGE>
Item 12 - Other Materially Important Events
On September 13, 1995, Bank of Union entered into an Agreement
and Plan of Merger with First Charter Corporation, Concord, North
Carolina whereby the shares of common stock of Bank of Union
would be exchanged for shares of common stock of First Charter
Corporation resulting in the Bank of Union becoming a wholly
owned subsidiary of First Charter Corporation. First Charter
Corporation is the parent bank holding company for First Charter
National Bank, N.A. Shareholders of the Bank of Union will
receive 3/4 of a share of First Charter Corporation common stock
for each share of Bank of Union. The transaction is subject to
approval of the shareholders of both Bank of Union and First
Charter Corporation and appropriate federal and state regulatory
authorities. Both groups of shareholders will be called to vote
on the transaction at special meetings to be held before year
end, 1995. It is anticipated the transaction will close
immediately thereafter or as soon as all regulatory approvals
have been obtained.
As an inducement to enter into the Agreement and Plan of Merger
with First Charter Corporation, Bank of Union entered into a
Stock Option Agreement dated September 13, 1995 whereby Bank of
Union granted options on its $1.25 par value common stock in an
amount equal to 19.9% of the issued and outstanding shares of
Bank of Union. The option is exercisable by First Charter
Corporation should certain events occur as set forth in the
Option Agreement. The options expire upon certain events
including consummation of the transaction as contemplated by the
Agreement and Plan of Merger.
Item 13 - Financial Statements and Exhibits
(a) Financial Statements.
N/A
(b) Exhibits.
Agreement and Plan of Merger with First Charter
Corporation dated September 13, 1995.
Stock Option Agreement with First Charter Corporation
dated September 13, 1995.
Joint Press Release dated September 13, 1995.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
BANK OF UNION
(Bank)
Date: September 21, 1995 /s/ H. Clark Goodwin
H. Clark Goodwin,
President and Chief Executive
Officer
3
<PAGE>
EXHIBIT INDEX
Description Exhibit Number
Agreement and Plan of Merger
with First Charter Corporation
dated September 13, 1995. 1
Stock Option Agreement with
First Charter Corporation 2
dated September 13, 1995.
Joint Press Release dated
September 13, 1995. 3
4
<PAGE>
AGREEMENT AND PLAN OF MERGER
BETWEEN
FIRST CHARTER CORPORATION
AND
BANK OF UNION
September 13, 1995
TABLE OF CONTENTS
PAGE
ARTICLE I
CERTAIN DEFINITIONS. . . . . . . . . . 1
1.01 Certain Definitions. . . . . . . . . . . . . . . . . . . 1
ARTICLE II
THE MERGER AND RELATED TRANSACTIONS. . . . . . 7
2.01 Merger. . . . . . . . . . . . . . . . . . . . . . . . . 7
2.02 Time and Place of Closing . . . . . . . . . . . . . . . 8
2.03 Effective Time. . . . . . . . . . . . . . . . . . . . . 8
2.04 Reservation of Right to Revise Transaction; Further
Actions. . . . . . . . . . . . . . . . . . . . . . . . . 8
2.05 Execution of Stock Option Agreement . . . . . . . . . . 9
ARTICLE III
MANNER OF CONVERTING SHARES. . . . . . . . 10
3.01 Conversion. . . . . . . . . . . . . . . . . . . . . . . 10
3.02 Anti-Dilution Provisions. . . . . . . . . . . . . . . . 11
ARTICLE IV
EXCHANGE OF SHARES . . . . . . . . . . 12
4.01 Exchange Procedures . . . . . . . . . . . . . . . . . . 12
4.02 Voting and Dividends. . . . . . . . . . . . . . . . . . 12
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF UNION. . . . . 14
5.01 Organization, Standing, and Authority . . . . . . . . . 14
5.02 Union Capital Stock . . . . . . . . . . . . . . . . . . 14
5.03 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . 15
5.04 Authorization of Merger and Related Transactions. . . . 16
5.05 Securities Reporting Documents and Financial
Statements . . . . . . . . . . . . . . . . . . . . . . . 17
5.06 Absence of Undisclosed Liabilities. . . . . . . . . . . 17
5.07 Tax Matters . . . . . . . . . . . . . . . . . . . . . . 18
5.08 Allowance for Loan Losses . . . . . . . . . . . . . . . 18
5.09 Other Tax and Regulatory Matters. . . . . . . . . . . . 19
5.10 Properties. . . . . . . . . . . . . . . . . . . . . . . 19
5.11 Compliance with Laws. . . . . . . . . . . . . . . . . . 19
5.12 Employee Benefit Plans. . . . . . . . . . . . . . . . . 20
5.13 Commitments and Contracts . . . . . . . . . . . . . . . 22
5.14 Material Contract Defaults. . . . . . . . . . . . . . . 22
5.15 Legal Proceedings . . . . . . . . . . . . . . . . . . . 23
5.16 Absence of Certain Changes or Events. . . . . . . . . . 23
5.17 Regulatory Reports. . . . . . . . . . . . . . . . . . . 23
5.18 Statements True and Correct . . . . . . . . . . . . . . 23
5.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . 24
5.20 Labor . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.21 Material Interests of Certain Persons . . . . . . . . . 24
5.22 Registration Obligations. . . . . . . . . . . . . . . . 25
5.23 Brokers and Finders . . . . . . . . . . . . . . . . . . 25
5.24 State Takeover Laws . . . . . . . . . . . . . . . . . . 25
5.25 Environmental Matters . . . . . . . . . . . . . . . . . 25
5.26 Ownership of Shares.. . . . . . . . . . . . . . . . . . 26
5.27 Insurance of Deposits.. . . . . . . . . . . . . . . . . 26
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF FIRST CHARTER. . . 27
6.01 Organization, Standing and Authority. . . . . . . . . . 27
6.02 First Charter Capital Stock.. . . . . . . . . . . . . . 27
6.03 Authorization of Merger and Related Transactions. . . . 27
6.04 Financial Statements. . . . . . . . . . . . . . . . . . 28
6.05 First Charter SEC Reports . . . . . . . . . . . . . . . 29
6.06 Statements True and Correct . . . . . . . . . . . . . . 29
6.07 Capital Stock . . . . . . . . . . . . . . . . . . . . . 29
6.08 Tax and Regulatory Matters. . . . . . . . . . . . . . . 29
6.09 Litigation. . . . . . . . . . . . . . . . . . . . . . . 30
6.10 Brokers and Finders . . . . . . . . . . . . . . . . . . 30
6.11 Environmental Matters . . . . . . . . . . . . . . . . . 30
ARTICLE VII
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME . . 31
7.01 Conduct of Business Prior to the Effective Time . . . . 31
7.02 Forbearances. . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VIII
ADDITIONAL AGREEMENTS . . . . . . . . . 34
8.01 Access and Information. . . . . . . . . . . . . . . . . 34
8.02 Registration Statement. . . . . . . . . . . . . . . . . 35
8.03 Shareholder Approvals . . . . . . . . . . . . . . . . . 35
8.04 Press Releases. . . . . . . . . . . . . . . . . . . . . 36
8.05 Notice of Defaults. . . . . . . . . . . . . . . . . . . 36
8.06 Miscellaneous Agreements and Consents; Affiliates
Agreements . . . . . . . . . . . . . . . . . . . . . . . 36
8.07 Conversion of Stock Options . . . . . . . . . . . . . . 37
8.08 Certain Change of Control Matters . . . . . . . . . . . 37
8.09 Certain Actions . . . . . . . . . . . . . . . . . . . . 38
8.10 Acquisition Proposals . . . . . . . . . . . . . . . . . 38
8.11 Pooling Opinion . . . . . . . . . . . . . . . . . . . . 38
8.12 Fairness Opinions . . . . . . . . . . . . . . . . . . . 38
8.13 Employment Arrangements.. . . . . . . . . . . . . . . . 39
8.14 Insurance Continuation. . . . . . . . . . . . . . . . . 39
ARTICLE IX
CONDITIONS . . . . . . . . . . . . 40
9.01 Conditions to Each Party's Obligation to Effect the
Merger . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.02 Conditions to Obligations of Union to Effect the
Merger . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.03 Conditions to Obligations of First Charter to Effect
the Merger . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE X
TERMINATION. . . . . . . . . . . . 43
10.01 Termination. . . . . . . . . . . . . . . . . . . . . . 43
10.02 Effect of Termination. . . . . . . . . . . . . . . . . 44
10.03 Non-Survival of Representations, Warranties and
Covenants Following the Effective Time . . . . . . . . . 44
ARTICLE XI
GENERAL PROVISIONS . . . . . . . . . . 45
11.01 Expenses . . . . . . . . . . . . . . . . . . . . . . . 45
11.02 Entire Agreement . . . . . . . . . . . . . . . . . . . 45
11.03 Amendments . . . . . . . . . . . . . . . . . . . . . . 45
11.04 Waivers. . . . . . . . . . . . . . . . . . . . . . . . 45
11.05 No Assignment. . . . . . . . . . . . . . . . . . . . . 45
11.06 Notices. . . . . . . . . . . . . . . . . . . . . . . . 46
11.07 Specific Performance . . . . . . . . . . . . . . . . . 46
11.08 Arbitration. . . . . . . . . . . . . . . . . . . . . . 46
11.09 Governing Law. . . . . . . . . . . . . . . . . . . . . 47
11.10 Counterparts . . . . . . . . . . . . . . . . . . . . . 47
11.11 Captions . . . . . . . . . . . . . . . . . . . . . . . 47
11.12 Severability.. . . . . . . . . . . . . . . . . . . . . 47
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.
W I T N E S S E T H:
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.
"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).
"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.
(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.
(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.
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).
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 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 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.
(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.
(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
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.
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 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.
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;
(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.
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 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.
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:
(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:
(c) 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.
(d) 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.
(e) 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.
(f) 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.
(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
(a) 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
(b) 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
(c) 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.
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:
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
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
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
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 H. 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
INTERIM BANK:_______________________
By:_________________________________
President
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.
(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.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated September 13, 1995, between
First CharterCorporation, a North Carolina corporation
("Grantee"), and Bank of Union, a NorthCarolina commercial bank
chartered under the laws of the State of North Carolina
("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement
and Plan of Merger of even date herewith (the "Merger Agreement")
providing for the acquisition by merger of all the outstanding
shares of Issuer in exchange for shares of Grantee, which
agreement has been exectued by the parties hereto prior to the
execution of this Agreement; and
WHEREAS, as a condition and inducement to Grantee's pursuit
of the transactions contemplated by the Merger Agreement and in
consideration therefor, Issuer has agreed to grant Grantee the
Option (as hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the
Merger Agreement, the parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the
terms hereof, up to 436,261 fully paid and, except as otherwise
provided in Chapter 53 of the North Carolina General Statutes,
nonassessable shares of the common stock, $1.25 par value, of
Issuer ("Common Stock"), at a price per share equal to $9.00 (as
adjusted as set forth herein, the "Option Price"); PROVIDED, that
in no event shall the number of shares for which this Option is
exercisable exceed 19.9% of the issued and outstanding shares of
Common Stock. The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option Price are
subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common
Stock are issued or otherwise become outstanding after the date
of this Agreement (other than pursuant to this Agreement), the
number of shares of Common Stock subject to the Option shall be
increased so that, after such issuance, it equals 19.9% of the
number of shares of Common Stock then issued and outstanding
without giving effect to any shares subject or issued pursuant to
the Option. Nothing contained in this Section l(b) or elsewhere
in this Agreement shall be deemed to authorize Issuer or Grantee
to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent
Triggering Event (as hereinafter defined) shall have occurred
prior to the occurrence of an Exercise Termination Event (as
hereinafter defined). Each of the following shall be an Exercise
Termination Event: (i) the Effective Time of the Merger; (ii)
termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the
occurrence of an Initial Triggering Event; or (iii) the passage
of 12 months (or such longer period as provided in Section 10)
after termination of the Merger Agreement if such termination
follows the occurrence of an Initial Triggering Event. The term
"Holder" shall mean the holder or holders of the Option. The
rights set forth in Sections 7 and 9 shall terminate when the
right to exercise the Option terminates (other than as a result
of a complete exercise of the Option) as set forth herein.
(b) The term "Initial Triggering Event" shall mean any of
the following events or transactions occurring after the date
hereof:
(i) Issuer or any of its Subsidiaries (as hereinafter
defined) (each an "Issuer Subsidiary"), without having
received Grantee's prior written consent, shall have
entered into an agreement to engage in an Acquisition
Transaction (as hereinafter defined) with any person (the
term "person" for purposes of this Agreement having the
meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of
the Securities Exchange Act of 1934 (the "1934 Act"), and
the rules and regulations thereunder) other than Grantee or
any of its Subsidiaries (each a "Grantee Subsidiary") or the
Board of Directors of Issuer shall have recommended that the
shareholders of Issuer approve or accept any Acquisition
Transaction other than as contemplated by the Merger
Agreement or this Agreement. For purposes of this
Agreement, (a) "Acquisition Transaction" shall mean (x) a
merger or consolidation, or any similar transaction,
involving Issuer or any Significant Subsidiary (as defined
in Rule 1-02 of Regulation S-X promulgated by the Securities
and Exchange Commission (the "SEC")) of Issuer, (y) a
purchase, lease or other acquisition of all or substantially
all of the assets or deposits of Issuer or any Significant
Subsidiary of Issuer, 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 Issuer or any Significant Subsidiary of
Issuer, and (b) "Subsidiary" shall have the meaning set
forth in Rule 12b-2 under the 1934 Act:
(ii) Any person other than Grantee, any Grantee
Subsidiary or any Issuer Subsidiary 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 Common Stock (the term "beneficial
ownership" for purposes of this Agreement having the meaning
assigned thereto in Section 13(d) of the 1934 Act, and the
rules and regulations thereunder);
(iii) The shareholders of the Issuer shall not have
approved the transactions contemplated by the Merger
Agreement at the meeting held for that purpose or any
adjustment thereof, or such meeting shall not have been held
or shall have been canceled prior to termination of the
Merger Agreement, in either case, after Issuer'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 Issuer approve the transactions contemplated
by the Merger Agreement, or Issuer or any Issuer Subsidiary,
without having received Grantee's prior written consent,
shall have authorized, recommended, 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 Grantee or a Grantee Subsidiary;
(iv) Any person other than Grantee or any Grantee
Subsidiary shall have made a bona fide proposal to Issuer or
its shareholders to engage in an Acquisition Transaction;
(v) Issuer shall have willfully breached any covenant
or obligation contained in the Merger Agreement in
anticipation of engaging in an Acquisition Transaction, and
such breach would entitle Grantee to terminate the Merger
Agreement; or
(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to
which Grantee 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.
(c) The term "Subsequent Triggering Event" shall mean any
of the following events or transactions occurring after the date
hereof:
(i) The acquisition by any person of beneficial
ownership of 25% or more of the then outstanding Common
Stock; or
(ii) The occurrence of the Initial Triggering Event
described in clause (i) of subsection (b) of this Section 2,
except that the percentage referred to in clause (z)
shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of
the occurrence of any Initial Triggering Event or Subsequent
Triggering Event (together, a "Triggering Event"), it being
understood that the giving of such notice by Issuer shall not be
a condition to the right of the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice
prior to an Exercise Termination Event (the date of which being
herein referred to as the "Notice Date") specifying (i) the total
number of shares it will purchase pursuant to such exercise and
(ii) a place and date not earlier than three business days nor
later than 10 business days from the Notice Date for the closing
of such purchase (the "Closing Date"); PROVIDED that if prior
notification to or approval of the Federal Reserve Board or any
other regulatory agency is required in connection with such
purchase, the Holder shall promptly file the required notice or
application for approval, shall promptly notify the Issuer of
such filing and shall expeditiously process the same, and the
period of time that otherwise would run pursuant to this sentence
shall run instead from the date on which any required
notification periods have expired or been terminated or such
approvals have been obtained and any requisite waiting period or
periods shall have passed. Any exercise of the Option shall be
deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this
Section 2, the Holder shall pay to Issuer the aggregate purchase
price for the shares of Common Stock purchased pursuant to the
exercise of the Option in immediately available funds by wire
transfer to a bank account designated by Issuer, PROVIDED that
failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this
Section 2, Issuer shall deliver to the Holder a certificate or
certificates representing the number of shares of Common Stock
purchased by the Holder and, if the Option should be exercised in
part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable
thereunder.
(h) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall
read substantially as follows:
"The transfer of the shares represented by this
certificate is subject to certain provisions of an
agreement between the registered holder hereof and
Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such
agreement is on file at the principal office of Issuer
and will be provided to the holder hereof without
charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the
resale restrictions of the Securities Act of 1933 (the "1933
Act") in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the
Holder shall have delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel, in form and
substance satisfactory to Issuer,to the effect that such legend
is not required for purposes of the 1933 Act; (ii) the reference
to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such
reference if the shares have been sold or transferred in
compliance with the provisions of this Agreement and under circumstances
that do not require the retention of such reference; and (iii) the
legend shall be removed in its entirety if the conditions in the
proceeding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the
written notice of exercise of the Option provided for under
subsection (e) of this Section 2 and the tender of the applicable
purchase price in immediately available funds, the Holder shall
be deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that
certificates representing such shares of Common Stock shall not
then be actually delivered to the Holder. Issuer shall pay all
expenses, and any and all United States federal, state and local
taxes and other charges that may be payable in connection with
the preparation, issue and delivery of stock certificates under
this Section 2 in the name of the Holder or its assignee,
transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain,
free from preemptive rights, sufficient authorized but unissued
or treasury shares of Common Stock so that the Option may be
exercised without additional authorization of Common Stock after
giving effect to all other options, warrants, convertible
securities and other rights to purchase Common Stock; (ii) that
it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions
to be observed or performed hereunder by Issuer; (iii) promptly
to take all action as may from time to time be required
(including (x) complying with all premerger notification,
reporting and waiting period requirements specified in 15 U.S.C.
Section 18a and regulations promulgated thereunder and (y) in the
event, under the BHCA, or any state or other federal banking law,
prior approval of or notice to the Federal Reserve Board or to
any state or other federal regulatory authority is necessary
before the Option may be exercised, cooperating fully with the
Holder in preparing such applications or notices and providing
such information to the Federal Reserve Board or such state or
other federal regulatory authority as they may require) in order
to permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and
(iv) promptly to take all action provided herein to protect the
rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal
office of Issuer, for other Agreements providing for Options of
different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set
forth herein, in the aggregate the same number of shares of
Common Stock purchasable hereunder. The terms "Agreement" and
"Option" as used herein include any Agreements and related
Options for which this Agreement (and the Option granted hereby)
may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated,
Issuer will execute and deliver a new Agreement of like tenor and
date.
5. The number of shares of Common Stock purchasable upon the
exercise of the Option shall be subject to adjustment from time
to time as provided in this Section 5.
(a) In the event of any change in Common Stock by reason
of stock dividends, split-ups, mergers, recapitalizations,
combinations, subdivisions, conversions, exchanges of shares or
the like, the type and number of shares of Common Stock
purchasable upon exercise hereof shall be appropriately adjusted
and proper provision shall be made so that, in the event that any
additional shares of Common Stock are to be issued or otherwise
become outstanding as a result of any such change (other than
pursuant to an exercise of the Option), the number of shares of
Common Stock that remain subject to the Option shall be increased
so that, after such issuance and together with shares of Common
Stock previously issued pursuant to the exercise of the Option
(as adjusted on account of any of the foregoing changes in the
Common Stock), it equals 19.9% of the number of shares of Common
Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock
purchasable upon exercise hereof is adjusted as provided in this
Section 5, the Option Price shall be adjusted by multiplying the
Option Price by a fraction, the numerator of which shall be equal
to the number of shares of Common Stock purchasable prior to the
adjustment and the denominator of which shall be equal to the
number of shares of Common Stock purchasable after the
adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, Issuer shall, at
the request of Grantee delivered prior to an Exercise Termination
Event (or such later period as provided in Section 10) (whether
on its own behalf or on behalf of any subsequent holder of this
Option (or part thereof) or any of the shares of Common Stock
issued pursuant hereto), promptly prepare, file and keep current
a registration statement under the 1933 Act covering any shares
issued and issuable pursuant to this Option and shall use its
best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other
disposition of any shares of Common Stock issued upon total or
partial exercise of this Option ("Option Shares") in accordance
with any plan of disposition requested by Grantee. Issuer will
use its best efforts to cause such registration statement first
to become effective and then to remain effective for such period
not in excess of 120 days from the day such registration
statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions.
Grantee shall have the right to demand two such registrations.
The Issuer shall bear the costs of such registrations (including,
but not limited to, attorneys' fees, printing costs and filing
fees). The foregoing notwithstanding, if, at the time of any
request by Grantee for registration of Option Shares as provided
above, Issuer is in registration with respect to an underwritten
public offering of shares of Common Stock, and if in the good
faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters,
of such offering the inclusion of the Option Shares would
interfere with the successful marketing of the shares of Common
Stock offered by Issuer, the number of Option Shares otherwise to
be covered in the registration statement contemplated hereby may
be reduced; PROVIDED, HOWEVER, that after any such required
reduction the number of Option Shares to be included in such
offering for the account of the Holder shall constitute at least
25% of the total number of shares to be sold by the Holder and
Issuer in the aggregate; and PROVIDED FURTHER, however, that if
such reduction occurs, then the Issuer shall file a registration
statement for the balance as promptly as practical thereafter as
to which no reduction pursuant to this Section 6 shall be
permitted or occur and the Holder shall thereafter be entitled to
one additional registration. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer
shall become a party to any underwriting agreement relating to
the sale of such shares, but only to the extent of obligating
itself in respect of representations, warranties, indemnities and
other agreements customarily included in such underwriting
agreements for Issuer. Upon receiving any request under this
Section 6 from any Holder, Issuer agrees to send a copy thereof
to any other person known to Issuer to be entitled to
registration rights under this Section 6, in each case by
promptly mailing the same, postage prepaid, to the address of
record of the persons entitled to receive such copies.
7. (a) Upon the occurrence of a Subsequent Triggering Event
that occurs prior to an Exercise Termination Event, (i) at the
request of the Holder, delivered prior to an Exercise Termination
Event (or such later period as provided in Section 10), Issuer
shall repurchase the Option from the Holder at a price (the
"Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option
Price, multiplied by the number of shares for which this Option
may then be exercised and (ii) at the request of the owner of
Option Shares from time to time (the "Owner"), delivered prior to
the occurrence of an Exercise Termination Event (or such later
period as provided in Section 10), Issuer shall repurchase such
number of the Option Shares from the Owner as the Owner shall
designate at a price (the "Option Share Repurchase Price") equal
to the higher of (A) the Purchase Price paid for the Option
Shares so designated and (B) the market/offer price multiplied by
the number of Option Shares so designated. The term
"market/offer price" shall mean the highest of (i) the price per
share of Common Stock at which a tender or exchange offer
therefor has been made, (ii) the price per share of Common Stock
to be paid by any third party pursuant to an agreement with
Issuer, (iii) the highest closing price for shares of Common
Stock within the three-month period immediately preceding the
date the Holder gives notice of the required repurchase of this
Option or the Owner gives notice of the required repurchase of
Option Shares, as the case may be, or (iv) in the event of a sale
of all or substantially all of Issuer's assets or deposits, the
sum of the net price paid in such sale for such assets or
deposits, and the current market value of the remaining net
assets of Issuer as determined by an investment banking firm
selected by the Holder or the Owner, as the case may be, divided
by the number of shares of Common Stock of Issuer outstanding at
the time of such sale. In determining the market/offer price,
the value of consideration other than cash shall be determined by
an investment banking firm selected by the Holder or Owner, as
the case may be.
(b) The Holder and the Owner, as the case may be, may
exercise its right to require Issuer to repurchase the Option and
any Option Shares pursuant to this Section 7 by surrendering for
such purpose to Issuer, at its principal office, a copy of this
Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the
Holder or the Owner, as the case may be, elects to require Issuer
to repurchase this Option and/or the Option Shares in accordance
with the provisions of this Section 7. As promptly as
practicable, and in any event within ten business days after the
surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating
thereto, Issuer shall deliver or cause to be delivered to the
Holder the Option Repurchase Price and/or to the Owner the Option
Share Repurchase Price therefor or the portion thereof that
Issuer is not then prohibited under applicable law and regulation
from so delivering.
(c) To the extent that Issuer is prohibited under
applicable law or regulation, or as a consequence of
administrative policy, from repurchasing the Option and/or the
Option Shares in part or in full, Issuer shall immediately so
notify the Holder and/or the Owner and thereafter deliver or
cause to be delivered, from time to time, to the Holder and/or
the Owner, as appropriate, the portion of the Option Repurchase
Price and the Option Share Repurchase Price, respectively, that
it is no longer prohibited from delivering, within ten business
days after the date on which Issuer is no longer so prohibited;
PROVIDED, HOWEVER, that if Issuer at any time after delivery of a
notice of repurchase pursuant to paragraph (b) of this Section 7
is prohibited under applicable law or regulation, or as a
consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase
Price and the Option Share Repurchase Price, respectively, in
full (and Issuer hereby undertakes to use its best efforts to
obtain all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to
accomplish such repurchase), the Holder or Owner may revoke its
notice of repurchase of the Option or the Option Shares either in
whole or to the extent of the prohibition, whereupon, in the
latter case, Issuer shall promptly (i) deliver to the Holder
and/or the Owner, as appropriate, that portion of the Option
Purchase Price or the Option Share Repurchase Price that Issuer
is not prohibited from delivering; and (ii) deliver, as
appropriate, either (A) to the Holder, a new Agreement evidencing
the right of the Holder to purchase that number of shares of
Common Stock obtained by multiplying the number of shares of
Common Stock for which the surrendered Agreement was exercisable
at the time of delivery of the notice of repurchase by a
fraction, the numerator of which is the Option Repurchase Price
less the portion thereof theretofore delivered to the Holder and
the denominator of which is the Option Repurchase Price, or (B)
to the Owner, a certificate for the Option Shares it is then so
prohibited from repurchasing.
8. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (i) to consolidate
with or merge into any person, other than Grantee or a Grantee
Subsidiary, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or a Grantee Subsidiary, to merge into
Issuer and Issuer shall be the continuing or surviving
corporation, but, in connection with such merger, the then
outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other person or
cash or any other property or the then outstanding shares of
Common Stock shall 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 or any Significant Subsidiary's assets
or deposits to any person, other than Grantee or a Grantee
Subsidiary, then, and in each such case, the agreement governing
such transaction shall make proper provision so that the Option
shall, upon the consummation of any such transaction and upon the
terms and conditions set forth herein, be converted into, or
exchanged for, an option (the "Substitute Option"), at the
election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the
Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (ii) Issuer in
a merger in which Issuer is the continuing or surviving
person and (iii) the transferee of all or substantially all
of Issuer's assets or deposits (or the assets or deposits of
a Significant Subsidiary of Issuer).
(ii) "Substitute Common Stock" shall mean the common
stock issued by the issuer of the Substitute Option upon
exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the market/offer
price, as defined in Section 7.
(iv) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the one
year immediately preceding the consolidation merger or sale
in question, but in no event higher than the closing price
of the shares of Substitute Common Stock on the day
preceding such consolidation merger or sale; PROVIDED that
if Issuer is the issuer of the Substitute Option the Average
Price shall be computed with respect to a share of common
stock issued by the person merging into Issuer or by any
company which controls or is controlled by such person as
the Holder may elect.
(c) The Substitute Option shall have the same terms as
the Option, provided, that if the terms of the Substitute Option
cannot for legal reasons, be the same as the Option such terms
shall be as similar as possible and in no event less advantageous
to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this
Agreement (after giving effect for such purpose to the provisions
of Section 9), which agreement shall be applicable to the
Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common Stock as is equal to the
Assigned Value multiplied by the number of shares of Common Stock
for which the Option is then exercisable, divided by the Average
Price. The exercise price of the Substitute Option per share of
Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the
number of shares of Common Stock for which the Option is then
exercisable and the denominator of which shall be the number of
shares of Substitute Common Stock for which the Substitute Option
is exercisable.
(e) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 19.9% of the shares of Substitute Common Stock outstanding
prior to exercise of the Substitute Option.
(f) Issuer shall not enter into any transaction described
in subsection (a) of this Section 8 unless the Acquiring
Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer
hereunder.
9. (a) At the request of the holder of the Substitute Option
(the "Substitute Option Holder"), the issuer of the Substitute
Option (the "Substitute Option Issuer") shall repurchase the
Substitute Option from the Substitute Option Holder at a price
(the "Substitute Option Repurchase Price") equal to the amount by
which (i) the highest Closing Price (as hereinafter defined)
exceeds (ii) the exercise price of the Substitute Option,
multiplied by the number of shares of Substitute Common Stock for
which the Substitute Option may then be exercised, and at the
request of the owner (the "Substitute Share Owner") of shares of
Substitute Common Stock (the "Substitute Shares"), the Substitute
Option Issuer shall repurchase the Substitute Shares at a price
(the "Substitute Share Repurchase Price") equal to the highest
Closing Price multiplied by the number of Substitute Shares so
designated. The term "Highest Closing Price" shall mean the
highest closing price for shares of Substitute Common Stock
within the three-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase
of the Substitute Option or the Substitute Share Owner gives
notice of the required repurchase of the Substitute Shares, as
applicable.
(b) The Substitute Option Holder and the Substitute Share
Owner, as the case may be, may exercise its respective right to
require the Substitute Option Issuer to repurchase the Substitute
Option and the Substitute Shares pursuant to this Section 9 by
surrendering for such purpose to the Substitute Option Issuer, at
its principal office, the agreement for such Substitute Option
(or, in the absence of such an agreement, a copy of this
Agreement) and certificates for Substitute Shares accompanied by
a written notice or notices stating that the Substitute Option
Holder or the Substitute Share Owner, as the case may be, elects
to require the Substitute Option Issuer to repurchase the
Substitute Option and/or the Substitute Shares in accordance with
the provisions of this Section 9. As promptly as practicable,
and in any event within ten business days after the surrender of
the Substitute Option and/or certificates representing Substitute
Shares and the receipt of such notice or notices relating
thereto, the Substitute Option Issuer shall deliver or cause to
be delivered to the Substitute Option Holder the Substitute
Option Repurchase Price and/or to the Substitute Share Owner the
Substitute Share Repurchase Price therefor or the portion thereof
which the Substitute Option Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation, or as a
consequence of administrative policy, from repurchasing the
Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner
and thereafter deliver or cause to be delivered, from time to
time, to the Substitute Option Holder and/or the Substitute Share
Owner, as appropriate, the portion of the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price,
respectively, that it is no longer prohibited from delivering,
within ten business days after the date on which the Substitute
Option Issuer is no longer so prohibited; PROVIDED, HOWEVER, that
if the Substitute Option Issuer is at any time after delivery of
a notice of repurchase pursuant to subsection (b) of this Section
9 prohibited under applicable law or regulation, or as a
consequence of administrative policy, from delivering to the
Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its best efforts to obtain all
required regulatory and legal approvals as promptly as
practicable in order to accomplish such repurchase), the
Substitute Option Holder or Substitute Share Owner may revoke its
notice of repurchase of the Substitute Option or the Substitute
Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall
promptly (i) deliver to the Substitute Option Holder and/or
Substitute Share Owner, as appropriate, that portion of the
Substitute Option Repurchase Price or the Substitute Share
Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Substitute Option Holder, a new Substitute
Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock
obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was
exercisable at the time of delivery of the notice of repurchase
by a fraction, the numerator of which is the Substitute Option
Repurchase Price less the portion thereof theretofore delivered
to the Substitute Option Holder and the denominator of which is
the Substitute Option Repurchase Price, or (B) to the Substitute
Share Owner, a certificate for the Substitute Option Shares it is
then so prohibited from repurchasing.
10. The periods for exercise of certain rights under Sections
2, 6, 7, 9 and 12 shall be extended: (i) to the extent necessary
to obtain all regulatory approvals for the exercise of such
rights (for so long as the Holder is using commercially
reasonable efforts to obtain such regulatory approvals), and for
the expiration of all statutory waiting periods; and (ii) to the
extent necessary to avoid liability under Section 16(b) of the
1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer, and no other corporate proceedings
on the part of Issuer are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by
Issuer and constitute a valid and binding agreement of Issuer,
enforceable in accordance with its terms.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times
from the date hereof through the termination of this Agreement in
accordance with its terms will have reserved for issuance upon
the exercise of the Option, that number of shares of Common Stock
equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares,
upon issuance pursuant thereto, will be duly authorized, validly
issued, fully paid, nonassessable (except as otherwise required
under Chapter 53 of the North Carolina General Statutes), and
will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any
preemptive rights.
12. Neither of the parties hereto may assign any of its
rights or obligations under this Agreement or the Option created
hereunder to any other person, without the express written
consent of the other party, except that in the event a Subsequent
Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions
hereof, may assign in whole or in part its rights and obligations
hereunder following such Subsequent Triggering Event; PROVIDED,
HOWEVER, that until the date 30 days following the date on which
the Federal Reserve Board or other applicable federal or state
regulatory authority has approved applications by Grantee to
acquire the shares of Common Stock subject to the Option, Grantee
may not assign its rights under the Option except in (i) a widely
dispersed public distribution, (ii) a private placement in which
no one party acquires the right to purchase in excess of 2% of
the voting shares of Issuer, (iii) an assignment to a single
party (i.e., a broker or investment banker) for the purpose of
conducting a widely disbursed public distribution on Grantee's
behalf, or (iv) any other manner approved by the Federal Reserve
Board.
13. Each of Grantee and Issuer will use its best efforts to
make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the
consummation of the transactions contemplated by this Agreement,
including without limitation applying to the Federal Reserve
Board under the BHCA for approval to acquire the shares issuable
hereunder, but Grantee shall not be obligated to apply to state
banking authorities for approval to acquire the shares of Common
Stock issuable hereunder until such time, if ever, as it deems
appropriate to do so.
14. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party
hereto and that the obligations of the parties hereto shall be
enforceable by either party hereto through injunctive or other
equitable relief.
15. If any term, provision, covenant or restriction contained
in this Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions and
covenants and restrictions contained in this Agreement shall
remain in full force and effect, and shall in no way be affected,
impaired or invalidated. If for any reason such court or
regulatory agency determines that the Holder is not permitted to
acquire, or Issuer is not permitted to repurchase pursuant to
Section 7, the full number of shares of Common Stock provided in
Section l(a) hereof (as adjusted pursuant to Section 5 hereof),
it is the express intention of Issuer to allow the Holder to
acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible, without any amendment or
modification hereof.
16. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given
when delivered in person, by fax, telecopy, or by registered or
certified mail (postage prepaid, return receipt requested) at the
respective address of the parties set forth in the Merger
Agreement.
17. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina,
regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
18. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement.
19. Except as otherwise expressly provided herein, each of
the parties hereto shallbear and pay all costs and expenses
incurred by it or on its behalf in connection with
thetransactions contemplated hereunder, including fees and
expenses of its own financialconsultants, investment bankers,
accountants and counsel.
20. Except as otherwise expressly provided herein or in the
Merger Agreement, thisAgreement contains the entire agreement
between the parties with respect to the transactionscontemplated
hereunder and supersedes all prior arrangements or understandings
with respectthereof, written or oral. The terms and conditions
of this Agreement shall inure to thebenefit of and be binding
upon the parties hereto and their respective successors
andpermitted assignees. Nothing in this Agreement, expressed or
implied, is intended to conferupon any party, other than the
parties hereto, and their respective successors except
asassignees, any rights, remedies, obligations or liabilities
under or by reason of thisAgreement, except as expressly provided
herein.
21. Capitalized terms used in this Agreement and not defined
herein shall have themeanings assigned thereto in the Merger
Agreement.
IN WITNESS WHEREOF, each of the parties had caused this
Agreement to beexecuted on its behalf by their officers thereunto
duly authorized, all as the date first abovewritten.
FIRST CHARTER CORPORATION
By:
President and Chief Executive Officer
BANK OF UNION
By:
President and Chief Executive Officer
LOGO LOGO
FOR IMMEDIATE RELEASE
FROM: First Charter Corporation Bank of Union
22 Union Street, North 201 North Charlotte Avenue
Concord, NC 28026-0228 Monroe, NC 28112
CONTACT: Lawrence M. Kimbrough H. Clark Goodwin
President and Chief President and Chief
Executive Officer Executive Officer
(704) 786-3300 (704) 289-9555
DATE: September 13, 1995
FIRST CHARTER CORPORATION AND BANK OF UNION
ANNOUNCE AGREEMENT TO MERGE
First Charter Corporation (FCTR) and Bank of Union jointly
announced today the signing of a definitive agreement to merge.
The transaction, which is expected to close in the first quarter
of 1996, will create the largest community banking company
serving the Greater Charlotte Metropolitan Area of North
Carolina with a combined $470 million in assets.
Bank of Union will add five full service banking offices in
Union and Mecklenburg Counties to First Charter's twelve offices
which serve Cabarrus, Mecklenburg and Rowan Counties. At June
30, 1995, Bank of Union had approximately $134 million in assets
and $117 million in deposits. Bank of Union earned returns on
assets and returns on equity of 1.29% and 15.43%, respectively,
for the second quarter ended June 30, 1995.
In the transaction, Bank of Union shareholders will receive
0.75 shares of the common stock of First Charter for each share
of Bank of Union common stock. Based on a First Charter stock
price of $20.50 as of September 13, 1995, the total transaction
value equals $33.7 million or $15.38 for each share of Bank of
Union common stock. No fractional shares of First Charter stock
will be issued and the transaction is structured to qualify as a
tax-free reorganization. The merger agreement, which is based on
a fixed exchange ratio, is anticipated to be accounted for as a
pooling of interests. Under the terms of the merger Bank of
Union will become a separate subsidiary of First Charter
Corporation. In addition, the Bank of Union has granted First
Charter the option to purchase up to 19.9 percent of its
outstanding common stock, under certain circumstances.
Lawrence M. Kimbrough, President and Chief Executive Officer of
First Charter Corporation, stated, "The merger with Bank of Union
continues our strategy of building the Greater Charlotte
Metropolitan Area's premier community bank. Union County, much
like First Charter's existing markets, is a dynamic banking
market with some of the best demographic trends in the State. We
believe that the combined operations will be able to better serve
the needs of the consumers and businesses in these markets."
Mr. Kimbrough furthered, "First Charter is committed to
being not only the premier community banking company in the
Greater Charlotte Metropolitan Area, but also one of the most
profitable banking companies in the nation. We anticipate that
the merger will enhance First Charter's earnings per share by the
end of 1996."
H. Clark Goodwin, President and Chief Executive Officer of
Bank of Union, noted, "We are pleased to be joining forces with
First Charter, a company with a history of serving its
communities, providing a challenging and rewarding environment
for its employees, delivering strong financial performance and
yielding solid shareholder returns. We look forward to teaming up
with First Charter and to continuing to serve the banking needs
of Union and Mecklenburg Counties."
Consummation of the proposed merger is subject to certain
conditions, among them, regulatory approval and approval by the
shareholders of First Charter and Bank of Union. First Charter
Corporation common stock is traded on the Nasdaq National Market
System under the quotation symbol "FCTR".
