SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
September 13, 1995
FIRST CHARTER CORPORATION
(Exact name of registrant as specified in its charter)
North Carolina 0-15829 56-1355866
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
22 Union Street, North, Concord, North Carolina 28026-0228
(Addresses, including zip codes, of principal executive offices)
(704)786-3300
(Registrant's telephone number, including area code)
<PAGE>
Item 5 Other Events.
On September 13, 1995, First Charter Corporation ("FCC") and
Bank of Union ("Union") entered into an Agreement and Plan of
Merger dated September 13, 1995 (the "Merger Agreement"),
pursuant to which Union will become a wholly owned subsidiary of
FCC (the "Merger").
Pursuant to the terms of the Merger Agreement, a newly formed
subsidiary of FCC will merge with and into Union, with Union as
the surviving corporation. At the effective time of the Merger
(the "Effective Time"), each share (other than shares as to which
dissenters' rights have been perfected and shares owned by FCC
directly or indirectly for its own account) of Union common
stock, $1.25 par value per share (the "Union Common Stock"),
shall be converted into .75 shares of common stock, $5.00 par
value per share (the "FCC Common Stock"), of FCC (the "Exchange
Ratio"), with cash (without interest) to be paid in lieu of the
issuance of fractional shares. As of September 13, 1995, Union
had issued and outstanding 2,192,270 shares of Union Common
Stock.
Under the provisions of North Carolina law, holders of Union
Common Stock will be entitled to dissenters' rights 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. 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 Merger Agreement.
The transaction is structured to qualify as a tax-free
reorganization and is anticipated to be accounted for as a
pooling of interests.
Consummation of the Merger is subject to certain conditions,
including but not limited to (i) the approval of the shareholders
of FCC and Union; (ii) the approvals of the Board of Governors of
the Federal Reserve System, the Federal Deposit Insurance
Corporation, the North Carolina Banking Commission and other
applicable federal and state regulatory authorities; (iii) the
receipt of fairness opinions, opinions of counsel and accountants;
and (iv) the continued effectiveness of a registration statement
related to the FCC Common Stock to be issued in the Merger.
Immediately following the execution of the Merger Agreement,
FCC and Union entered into a Stock Option Agreement dated
September 13, 1995, pursuant to which Union granted FCC an
irrevocable option to purchase up to 436,261 shares (19.9% of the
Union Common Stock outstanding, before giving effective to the
exercise of the option) of Union Common Stock at a price of $9.00
per share (the "Union Option"). The number of shares of Union
Common Stock subject to the Union Option will be increased to the
extent that Union issues additional shares of Union Common Stock
(otherwise than pursuant to an exercise of the Union Option) such
that the number of Union Option Shares continues to equal 19.9%
of the Union Common Stock then issued and outstanding, without
giving effect to the issuance of shares pursuant to an exercise
of the Union Option. The Union Option was granted by Union as a
condition of and in consideration for FCC's entering into the
Merger Agreement. The Union 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. The Union Option also
allows the holder thereof to require that Union repurchase (at a price
determined as specified in the Stock Option Agreement) the
Union Option or the shares of Union Common Stock acquired pursuant
to the exercise of the Union Option if certain conditions are met.
The descriptions of the Merger Agreement and the Stock
Option Agreement are qualified in their entirety to the copies of
such agreements included as Exhibits 99.1 and 99.2, respectively,
and which are incorporated herein by reference.
Union is a North Carolina state-chartered commercial bank
with five banking offices in Union and Mecklenburg Counties,
North Carolina. As of June 30, 1995, Union had total assets of
approximately $134 million, total deposits of approximately $117
million and shareholders equity of approximately $11.1 million.
<PAGE>
Item 7 Financial Statements and Exhibits.
(c) The following exhibits are filed herewith:
Exhibit No. Description
99.1 Agreement and Plan of Merger between First Charter
Corporation and Bank of Union, dated September 13,
1995
99.2 Stock Option Agreement between First Charter
Corporation, as grantee, and Bank of Union, as
issuer, dated September 13, 1995
99.3 Joint news release disseminated on September 13,
1995 by First Charter Corporation and Bank of
Union
<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
By: /s/ LAWRENCE M. KIMBROUGH
Lawrence M. Kimbrough
President and Chief Executive
Officer
Dated: September 21, 1995
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
99.1 Agreement and Plan of Merger between First Charter
Corporation and Bank of Union, dated September 13,
1995
99.2 Stock Option Agreement between First Charter
Corporation, as grantee, and Bank of Union, as
issuer, dated September 13, 1995
99.3 Joint news release disseminated on September 13,
1995 by First Charter Corporation and Bank of
Union
<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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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).
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<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.
(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: /s/ LAWRENCE M. KIMBROUGH
President and Chief Executive
Officer
BANK OF UNION
By: /s/ H. CLARK GOODWIN
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".
