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REGISTRATION NO. 333-35905
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FIRST CHARTER CORPORATION
(Exact name of registrant as specified in its charter)
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NORTH CAROLINA 6022 56-1355866
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
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22 UNION STREET, NORTH
CONCORD, NORTH CAROLINA 28025
(704) 786-3300
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
LAWRENCE M. KIMBROUGH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
FIRST CHARTER CORPORATION
22 UNION STREET, NORTH
CONCORD, NORTH CAROLINA 28025
(704) 786-3300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPY TO:
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J. RICHARD HAZLETT ALFRED P. CARLTON, JR.
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ANNE TEAM KELLY RONALD D. RAXTER
SMITH HELMS MULLISS & MOORE, L.L.P. THE SANFORD HOLSHOUSER LAW FIRM
214 NORTH CHURCH STREET 234 FAYETTEVILLE STREET
CHARLOTTE, NORTH CAROLINA 28202 SUITE 100
(704) 343-2000 POST OFFICE BOX 2447
RALEIGH, NORTH CAROLINA 27602
(919) 755-1800
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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FIRST CHARTER CORPORATION
CROSS REFERENCE SHEET PURSUANT TO REGULATION S-K, ITEM 501(B)
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FORM S-4 ITEM JOINT PROXY STATEMENT-PROSPECTUS HEADING
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INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus.................. Facing Page of Registration Statement; Cross Reference Sheet;
Outside Front Cover Page of Joint Proxy Statement-Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus...................................... TABLE OF CONTENTS; AVAILABLE INFORMATION; INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information........................... SUMMARY
4. Terms of the Transaction........................ SUMMARY; THE MERGER; COMPARISON OF FIRST CHARTER COMMON STOCK AND
CSB COMMON STOCK
5. Pro Forma Financial Information................. SUMMARY; PRO FORMA CONDENSED FINANCIAL INFORMATION
6. Material Contacts with the Company Being
Acquired........................................ THE MERGER -- Background of and Reasons for the Merger
7. Additional Information Required for Reoffering
by Persons and Parties Deemed to be
Underwriters.................................... *
8. Interests of Named Experts and Counsel.......... LEGAL OPINIONS; EXPERTS
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities.. *
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INFORMATION ABOUT THE REGISTRANT
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10. Information with Respect to S-3 Registrants..... INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE; SUMMARY; RECENT
DEVELOPMENTS; INFORMATION ABOUT FIRST CHARTER
11. Incorporation of Certain Information by
Reference....................................... INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
12. Information with Respect to S-2 or S-3
Registrants..................................... *
13. Incorporation of Certain Information............ *
14. Information with Respect to Registrants other
than S-2 or S-3 Registrants..................... *
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INFORMATION ABOUT THE COMPANY BEING ACQUIRED
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15. Information with Respect to S-3 Companies....... *
16. Information with Respect to S-2 or S-3
Companies....................................... INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE; SUMMARY; RECENT
DEVELOPMENTS; INFORMATION ABOUT CSB
17. Information with Respect to Companies other than
S-2 or S-3 Companies............................ *
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VOTING AND MANAGEMENT INFORMATION
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18. Information if Proxies, Consents or Authori-
zations are to be Solicited..................... INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE; SUMMARY; THE
SPECIAL MEETINGS; THE MERGER -- Dissenters' Rights of Appraisal;
THE MERGER -- Interests of Certain Persons in the Merger;
INFORMATION ABOUT FIRST CHARTER -- Management and Additional
Information; INFORMATION ABOUT CSB -- Management and Additional
Information; SHAREHOLDER PROPOSALS
19. Information if Proxies, Consents or Authori-
zations are not to be Solicited or in an
Exchange Offer.................................. *
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* Item is omitted because answer is negative or item is inapplicable.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PRELIMINARY COPY SUBJECT TO COMPLETION, DATED OCTOBER 24, 1997
JOINT PROXY STATEMENT
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FIRST CHARTER CORPORATION CAROLINA STATE BANK
SPECIAL MEETING OF SHAREHOLDERS SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 10, 1997 TO BE HELD ON DECEMBER 10, 1997
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PROSPECTUS
FIRST CHARTER CORPORATION
COMMON STOCK
This Prospectus of First Charter Corporation ("First Charter") relates to
up to 1,760,370 shares of common stock, $5 par value per share (the "First
Charter Common Stock"), of First Charter offered hereby to the shareholders of
Carolina State Bank ("CSB") upon consummation of a proposed merger (the
"Merger") of CSB with and into First Charter National Bank, a national banking
association and wholly owned subsidiary of First Charter ("FCNB"), pursuant to
an Agreement and Plan of Merger between First Charter and CSB, dated as of
August 15, 1997 (the "Agreement"). Upon completion of the Merger, each share of
CSB common stock, $4.50 par value per share ("CSB Common Stock"), will be
converted into the right to receive 1.023 shares of First Charter Common Stock
(the "Exchange Ratio"). Any options to purchase CSB Common Stock remaining
unexercised upon consummation of the Merger will become options to purchase a
number of shares of First Charter Common Stock computed according to the
Exchange Ratio. Each holder of CSB Common Stock who would otherwise be entitled
to receive a fraction of a share of First Charter Common Stock (after taking
into account all of a shareholder's certificates) will receive, in lieu thereof,
the equivalent cash value of such fractional share, without interest.
Consummation of the Merger is subject to several conditions, including, among
others, the approval of the shareholders of each of First Charter and CSB and
the approval of appropriate regulatory authorities. See "THE MERGER."
This Prospectus also serves as the Joint Proxy Statement of First Charter
and of CSB in connection with the solicitation of proxies to be used at their
respective Special Meeting of Shareholders, each to be held on December 10,
1997. This Joint Proxy Statement-Prospectus is first being mailed to
shareholders of First Charter and shareholders of CSB on or about October .
See "THE SPECIAL MEETINGS."
First Charter Common Stock is reported on The Nasdaq Stock Market as a
Nasdaq National Market security under the trading symbol "FCTR." The average of
the bid and asked prices of First Charter Common Stock as reported by The Nasdaq
Stock Market on October , 1997 was $ per share and on June 27, 1997,
the last trading day preceding public announcement of the proposed Merger, was
$23.00 per share. CSB Common Stock is traded in the over-the-counter market and
is listed in the National Daily Quotation Service "Pink Sheets." The average of
the bid and asked prices of CSB Common Stock on October , 1997 was $ per
share and on June 27, 1997 was $13.25 per share. See "PRICE RANGE OF COMMON
STOCK AND DIVIDENDS."
ANY SHAREHOLDER OF CSB WHO DESIRES TO DISSENT FROM THE MERGER HAS THE RIGHT
TO DISSENT UNDER APPLICABLE PROVISIONS OF FEDERAL AND NORTH CAROLINA LAW AND,
UPON COMPLIANCE WITH APPLICABLE STATUTORY PROCEDURES, TO RECEIVE PAYMENT OF THE
VALUE OF HIS OR HER SHARES OF CSB COMMON STOCK. A CSB SHAREHOLDER WHO WISHES TO
DISSENT FROM THE MERGER MUST NOT VOTE ANY SHARES IN FAVOR OF THE AGREEMENT. SEE
"THE MERGER -- DISSENTERS' RIGHTS OF APPRAISAL."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR THE FEDERAL
DEPOSIT INSURANCE CORPORATION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION, ANY STATE SECURITIES COMMISSION OR THE FEDERAL
DEPOSIT INSURANCE CORPORATION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS JOINT PROXY
STATEMENT-PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE SHARES OF FIRST CHARTER COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS
OR BANK DEPOSITS, ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANKING
OR NON-BANKING AFFILIATE OF FIRST CHARTER, ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY AND INVOLVE INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
The date of this Joint Proxy Statement-Prospectus is October , 1997.
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
OTHER THAN THOSE CONTAINED OR INCORPORATED IN THIS JOINT PROXY
STATEMENT-PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY FIRST CHARTER OR CSB.
THIS JOINT PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO EXCHANGE
OR SELL, OR A SOLICITATION OF AN OFFER TO EXCHANGE OR PURCHASE, THE FIRST
CHARTER COMMON STOCK OFFERED BY THIS JOINT PROXY STATEMENT-PROSPECTUS, NOR DOES
IT CONSTITUTE THE SOLICITATION OF A PROXY, IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR TO OR FROM ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS JOINT
PROXY STATEMENT-PROSPECTUS NOR ANY DISTRIBUTION OF FIRST CHARTER COMMON STOCK
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF FIRST CHARTER OR CSB SINCE THE DATE HEREOF
OR THAT INFORMATION IN THIS JOINT PROXY STATEMENT-PROSPECTUS OR IN THE DOCUMENTS
INCORPORATED HEREIN BY REFERENCE IS CORRECT AS OF ANYTIME SUBSEQUENT TO THE DATE
HEREOF OR THE DATES THEREOF. THE INFORMATION CONTAINED IN THIS JOINT PROXY
STATEMENT-PROSPECTUS SPEAKS AS OF THE DATE HEREOF UNLESS OTHERWISE SPECIFICALLY
INDICATED. INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT-PROSPECTUS
REGARDING FIRST CHARTER HAS BEEN FURNISHED BY FIRST CHARTER, AND INFORMATION
HEREIN REGARDING CSB HAS BEEN FURNISHED BY CSB.
TABLE OF CONTENTS
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AVAILABLE INFORMATION................................ 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...... 3
SUMMARY.............................................. 5
RECENT DEVELOPMENTS.................................. 15
THE SPECIAL MEETINGS................................. 17
General............................................ 17
Date, Place and Time............................... 17
Proxies............................................ 17
Solicitation of Proxies............................ 18
Record Date and Voting Rights...................... 18
Recommendation of the Boards of Directors.......... 19
THE MERGER........................................... 20
Description of the Merger.......................... 20
Effective Time of the Merger....................... 20
Exchange of Certificates........................... 20
Background of and Reasons
for the Merger.................................. 21
Opinions of Financial Advisors..................... 24
Effect on Employee Stock Options................... 31
Conditions to the Merger........................... 32
Conduct of Business Prior to the Merger............ 33
Modification, Waiver and Termination............... 34
Certain Federal Income Tax Consequences............ 34
Management and Operations After the Merger......... 35
Interests of Certain Persons in the Merger......... 35
Stock Option Agreement Between First Charter and
CSB............................................. 37
Dissenters' Rights of Appraisal.................... 38
Accounting Treatment............................... 39
Bank Regulatory Matters............................ 39
Restrictions on Resales by Affiliates.............. 40
Dividend Reinvestment Plan......................... 41
PRICE RANGE OF COMMON STOCK AND DIVIDENDS............ 42
Market Prices...................................... 42
Dividends.......................................... 43
PRO FORMA CONDENSED FINANCIAL INFORMATION............ 43
INFORMATION ABOUT FIRST CHARTER...................... 47
General............................................ 47
Management and Additional Information.............. 47
Supervision and Regulation......................... 47
INFORMATION ABOUT CSB................................ 50
General............................................ 50
Voting Securities and Beneficial Ownership
Thereof......................................... 50
Reports of Changes in Beneficial Ownership......... 51
Management and Additional Information.............. 51
Supervision and Regulation......................... 51
COMPARISON OF FIRST CHARTER COMMON STOCK AND CSB
COMMON STOCK....................................... 52
First Charter Common Stock......................... 52
CSB Common Stock................................... 53
Comparison of Voting and Other Rights.............. 55
APPROVAL OF AMENDED AND RESTATED ARTICLES OF
INCORPORATION OF FIRST CHARTER..................... 57
Increase in First Charter's Authorized Common
Stock........................................... 57
Certain Effects of Amendment....................... 57
Recommendation of Board of Directors............... 58
LEGAL OPINIONS....................................... 58
EXPERTS.............................................. 58
SHAREHOLDER PROPOSALS................................ 59
INDEPENDENT PUBLIC ACCOUNTANTS....................... 59
OTHER MATTERS........................................ 59
APPENDIX A -- Agreement and Plan
of Merger.......................... A-1
APPENDIX B -- Fairness Opinion of Interstate/Johnson
Lane Corporation....................... B-1
APPENDIX C -- Fairness Opinion of Carson Medlin
Company................................ C-1
APPENDIX D -- Provisions of Applicable Law Relating
to Dissenters' Appraisal Rights........ D-1
APPENDIX E -- Amended and Restated Articles of
Incorporation of First Charter
Corporation............................ E-1
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AVAILABLE INFORMATION
First Charter has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 under the Securities Act of
1933, as amended (the "Securities Act"), relating to the shares of First Charter
Common Stock to be issued in connection with the Merger (the "Registration
Statement"). For further information pertaining to the shares of First Charter
Common Stock to which this Joint Proxy Statement-Prospectus relates, reference
is made to such Registration Statement, including the exhibits and schedules
filed as a part thereof. As permitted by the rules and regulations of the
Commission, certain information included in the Registration Statement is
omitted from this Joint Proxy Statement-Prospectus. In addition, First Charter
is subject to certain of the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files certain reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference room of the Commission, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and copies of such materials
can be obtained by mail from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
also maintains an Internet website that contains reports, proxy and information
statements and other information regarding issuers who file electronically with
the Commission. The address of that site is http://www.sec.gov. In addition,
copies of such materials are available for inspection and reproduction at the
public reference facilities of the Commission at its Northeast Regional Office,
7 World Trade Center, Suite 1300, New York, New York 10048; and at its Midwest
Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Requests for information may also be made through the
Commission's electronic mailbox: [email protected].
CSB is also subject to certain of the informational requirements of the
Exchange Act and, in accordance therewith, files certain reports, proxy
statements and other information with the Federal Deposit Insurance Corporation
(the "FDIC"). Such reports, proxy statements and other information can be
inspected and copied at the Registration and Disclosure Section, Division of
Supervision, FDIC, at 550 17th Street N.W., Washington, D.C. 20549, at
prescribed rates.
Copies of CSB's 1996 Annual Report to Shareholders and its Quarterly Report
on Form F-4 for the quarter ended June 30, 1997, as amended, are delivered with
this Joint Proxy Statement-Prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, or portions of documents, as applicable,
previously filed by First Charter with the Commission are hereby incorporated by
reference in this Joint Proxy Statement-Prospectus: (a) its Annual Report on
Form 10-K for the year ended December 31, 1996; (b) its Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1997 and June 30, 1997; (c) its
Current Reports on Form 8-K filed July 2, 1997 and August 18, 1997; and (d) the
description of First Charter Common Stock contained in its registration
statement filed pursuant to Section 12 of the Exchange Act and any amendment or
report filed for the purpose of updating such description, including its Current
Report on Form 8-K filed November 9, 1995.
The following documents, or portions of documents, as applicable,
previously filed by CSB with the FDIC are included as exhibits to the
Registration Statement and are hereby incorporated by reference in this Joint
Proxy Statement-Prospectus: (a) its Annual Report on Form F-2 for the year ended
December 31, 1996; (b) its Quarterly Report on Form F-4 for the quarter ended
March 31, 1997 and its Quarterly Report on Form F-4 for the quarter ended June
30, 1997, as amended by Amendment No. 1 to Form F-4; (c) its Current Reports on
Form F-3 filed June 4, 1997, July 17, 1997 and September 10, 1997; and (d) the
following portions of its 1996 Annual Report to Shareholders: page 2 under
"Financial Highlights"; and pages 25 through 38 under "Management's Discussion
and Analysis."
All documents filed by First Charter pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date hereof and prior to the
Special Meetings (hereinafter defined) will be deemed to be incorporated herein
by reference and to be a part hereof from the date of such filing. Any statement
contained herein or in a document incorporated or deemed to be incorporated
herein by reference will be deemed to be modified or superseded for purposes
hereof to the extent that a statement contained herein or in any other
subsequently filed document which also is, or is deemed to be, incorporated
herein by reference modifies or supersedes such statement. Any such statement so
modified or superseded will not be deemed to constitute a part hereof, except as
so modified or superseded.
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THIS JOINT PROXY STATEMENT-PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THE DOCUMENTS
RELATING TO FIRST CHARTER (OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH EXHIBITS
ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS) ARE AVAILABLE
WITHOUT CHARGE UPON REQUEST FROM ROBERT O. BRATTON, EXECUTIVE VICE PRESIDENT,
FIRST CHARTER CORPORATION, POST OFFICE BOX 228, CONCORD, NORTH CAROLINA
28026-0228, TELEPHONE (704) 786-3300. THE DOCUMENTS RELATING TO CSB (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS WHICH EXHIBITS ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE IN SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE UPON REQUEST FROM
ROBERT J. JUREK, SENIOR VICE PRESIDENT, CAROLINA STATE BANK, 316 SOUTH LAFAYETTE
STREET, SHELBY, NORTH CAROLINA 28150, TELEPHONE (704) 480-4442. To ensure timely
delivery of the documents, any request should be made by December 3, 1997.
persons requesting copies of exhibits to such documents that are not
specifically incorporated by reference in such documents will be charged the
costs of reproduction and mailing.
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SUMMARY
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN INFORMATION SET FORTH ELSEWHERE
IN THIS JOINT PROXY STATEMENT-PROSPECTUS AND IS NOT INTENDED TO BE COMPLETE. IT
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO MORE DETAILED INFORMATION CONTAINED
ELSEWHERE IN THIS JOINT PROXY STATEMENT-PROSPECTUS, THE ACCOMPANYING APPENDICES
AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE.
THE COMPANIES
FIRST CHARTER. First Charter, a bank holding company registered under the
Bank Holding Company Act of 1956, as amended (the "BHCA"), was organized under
the laws of the State of North Carolina in 1983 and has as its principal assets
the stock of its banking subsidiaries, First Charter National Bank, a national
banking association, and Bank of Union, a state-chartered commercial bank
("Union," and together with FCNB, the "Banks"). The Banks account for over 98%
of First Charter's consolidated assets and consolidated revenues. At June 30,
1997, First Charter had total assets of approximately $565 million and total
deposits of approximately $471 million. The principal executive offices of First
Charter are located at 22 Union Street, North, Concord, North Carolina 28025,
and its telephone number is (704) 786-3300. All references herein to First
Charter refer to First Charter Corporation and its consolidated subsidiaries,
unless the context otherwise requires.
FCNB is a full service bank and trust company with twelve branch offices,
two limited service facilities and eighteen ATMs (automated teller machines)
located in Cabarrus, Rowan and northern Mecklenburg Counties, North Carolina.
The ATMs are part of the Honor network. Union provides general banking services
through a network of five branch offices and four ATMs located in Union and
southern Mecklenburg Counties, North Carolina.
For additional information regarding First Charter and the combined company
that would result from the Merger, see "RECENT DEVELOPMENTS," "THE MERGER,"
"PRO FORMA CONDENSED FINANCIAL INFORMATION" and "INFORMATION ABOUT FIRST
CHARTER."
CSB. CSB is a state-chartered commercial bank organized under the laws of
North Carolina in 1991. CSB provides traditional commercial and consumer banking
services through a network of four branch offices located in the cities of
Boiling Springs, Forest City, Kings Mountain and Shelby, North Carolina. Through
its subsidiary, CSB Financial, Inc. ("CSB Financial"), CSB also offers insurance
and annuity sales. At June 30, 1997, CSB had total assets of approximately
$141.5 million and total deposits of approximately $120.6 million. The principal
executive offices of CSB are located at 316 South Lafayette Street, Shelby,
North Carolina 28150, and its telephone number is (704) 480-4444.
For additional information regarding CSB, see "RECENT DEVELOPMENTS," "THE
MERGER" and "INFORMATION ABOUT CSB."
THE MERGER
The Agreement provides for the merger of CSB with and into FCNB, with FCNB
to be the surviving entity. Except as hereinafter described, upon consummation
of the Merger, each outstanding share of CSB Common Stock (other than shares as
to which dissenters' rights of appraisal have been perfected) will be converted
into the right to receive 1.023 shares of First Charter Common Stock. Any shares
of CSB Common Stock owned by First Charter, FCNB or CSB (other than shares held
in a fiduciary capacity or as a result of debts previously contracted)
immediately prior to the Effective Time (as hereinafter defined) will be
canceled. Each share of First Charter Common Stock and each share of FCNB stock
outstanding immediately prior to the Effective Time will remain outstanding
thereafter. Holders of CSB Common Stock will receive cash (without interest) in
lieu of any fractional shares of First Charter Common Stock that would otherwise
be issuable. As of the record date for the Special Meeting of CSB's
shareholders, there were shares of CSB Common Stock outstanding. In
addition, there were outstanding options to purchase an aggregate of
shares of CSB Common Stock.
If the Merger is consummated, a total of up to 1,760,370 shares of First
Charter Common Stock would be issued in the Merger to CSB shareholders (assuming
that all options are exercised prior to the Effective Time), representing
approximately % of the shares of First Charter Common Stock to be outstanding
immediately after the Effective Time, based on the number of shares of First
Charter Common Stock outstanding on June 30, 1997.
The Merger is subject to the satisfaction of certain conditions, including
among others, the approvals of the respective shareholders of First Charter and
CSB, the effectiveness under the Securities Act of a Registration Statement for
shares of First Charter Common Stock to be issued in the Merger, and the
approval of the Office of the Comptroller of the Currency (the "OCC").
For additional information relating to the Merger, see "THE MERGER."
5
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THE SPECIAL MEETINGS
FIRST CHARTER. The Special Meeting of First Charter's shareholders (the
"First Charter Special Meeting") to consider and vote on (i) the Agreement and
the transactions contemplated thereby, including the issuance of First Charter
Common Stock upon consummation of the Merger, and (ii) First Charter's proposed
Amended and Restated Articles of Incorporation, including an increase to the
number of shares of First Charter Common Stock that First Charter is authorized
to issue from 10,000,000 to 25,000,000, will be held on December 10, 1997 at
9:00 a.m., local time, at its corporate and operations center located at 22
Union Street, North in Concord, North Carolina. Only holders of record of First
Charter Common Stock at the close of business on October 24, 1997 will be
entitled to vote at the First Charter Special Meeting. At such date, there were
outstanding and entitled to vote shares of First Charter Common Stock.
Each share of First Charter Common Stock is entitled to one vote.
CSB. The Special Meeting of CSB's shareholders (the "CSB Special Meeting,"
and together with the First Charter Special Meeting, the "Special Meetings") to
consider and vote on the Agreement and the transactions contemplated thereby
will be held on December 10, 1997 at 6:00 p.m., local time, at the main office
of CSB, located at 316 South Lafayette Street, in Shelby, North Carolina. Only
holders of record of CSB Common Stock at the close of business on October 24,
1997 will be entitled to vote at the CSB Special Meeting. At such date, there
were outstanding and entitled to vote shares of CSB Common Stock. Each
share of CSB Common Stock is entitled to one vote.
For additional information relating to the Special Meetings, see "THE
SPECIAL MEETINGS."
VOTES REQUIRED
FIRST CHARTER. Approval of each of the matters to be considered by the
shareholders of First Charter requires the affirmative vote of a majority of the
votes cast by holders of First Charter Common Stock. As of the record date for
the First Charter Special Meeting, First Charter's directors and executive
officers and their affiliates held approximately % of the outstanding First
Charter Common Stock entitled to vote at the First Charter Special Meeting.
CSB. Under federal and North Carolina banking law, approval of the
Agreement and the transactions contemplated thereby by the shareholders of CSB
requires the affirmative vote of the holders of two-thirds of the outstanding
shares of CSB Common Stock. As of the record date for the CSB Special Meeting,
CSB's directors and executive officers and their affiliates held approximately
% of the outstanding CSB Common Stock entitled to vote at the CSB Special
Meeting. Each of the directors of CSB has agreed to vote in favor of the
Agreement. See "THE MERGER -- Interests of Certain Persons in the Merger."
BECAUSE OF THE TWO-THIRDS VOTE REQUIREMENT, FAILURE TO VOTE WILL HAVE THE SAME
EFFECT AS A NEGATIVE VOTE. See "THE MERGER -- Record Date and Voting
Rights -- CSB."
For additional information relating to voting rights and the Special
Meetings, see "THE SPECIAL MEETINGS -- Record Date and Voting Rights."
PROXIES
FIRST CHARTER. The copies of this Joint Proxy Statement-Prospectus that are
being mailed to shareholders of First Charter are accompanied by a form of proxy
solicited by the Board of Directors of First Charter for use at the First
Charter Special Meeting. A shareholder of First Charter may revoke any proxy
given pursuant to this solicitation by delivering to the Secretary of First
Charter, prior to or at the First Charter Special Meeting, a written notice
revoking the proxy or a duly executed proxy relating to the same shares bearing
a later date, or by voting in person at the First Charter Special Meeting. See
"THE SPECIAL MEETINGS -- Proxies."
CSB. The copies of this Joint Proxy Statement-Prospectus that are being
mailed to the shareholders of CSB are accompanied by a form of proxy solicited
by the Board of Directors of CSB for use at the CSB Special Meeting. A
shareholder of CSB may revoke any proxy given pursuant to this solicitation by
delivering to the Secretary of CSB, prior to or at the CSB Special Meeting, a
written notice revoking the proxy or a duly executed proxy relating to the same
shares bearing a later date, or by voting in person at the CSB Special Meeting.
See "THE SPECIAL MEETINGS -- Proxies."
RECOMMENDATION OF BOARDS OF DIRECTORS
The Board of Directors of First Charter and the Board of Directors of CSB
each has approved the Agreement and the transactions contemplated thereby. Each
Board of Directors believes that the Merger is fair to and in the best interests
of its respective shareholders and recommends a vote "FOR" the matters to be
voted upon by such shareholders in connection with the Merger. For a discussion
of the factors considered by the respective Boards of Directors in reaching
their conclusions, see
6
<PAGE>
"THE MERGER -- Background of and Reasons for the Merger." Certain directors of
CSB may have interests in the Merger which arise from proposed membership on the
Board of Directors of First Charter and receipt of certain other benefits as
continuing employees of FCNB. See "THE MERGER -- Management and Operations After
the Merger" and " -- Interests of Certain Persons in the Merger."
OPINIONS OF FINANCIAL ADVISORS
First Charter's financial advisor, Interstate/Johnson Lane Corporation
("IJL"), has rendered its written opinion to the Board of Directors of First
Charter that the Exchange Ratio is fair to the shareholders of First Charter
from a financial point of view. A copy of such opinion, updated to October 24,
1997, is set forth as Appendix B to this Joint Proxy Statement-Prospectus and
should be read in its entirety with respect to the assumptions made, other
matters considered and limitations on the reviews undertaken. CSB's financial
advisor, Carson Medlin Company ("Carson Medlin"), has rendered its written
opinion to the Board of Directors of CSB that the Exchange Ratio is fair to the
shareholders of CSB from a financial point of view. A copy of such opinion,
updated to October 24, 1997, is set forth as Appendix C to this Joint Proxy
Statement-Prospectus and should be read in its entirety with respect to the
assumptions made, other matters considered and limitations on the review
undertaken. See "THE MERGER -- Opinions of Financial Advisors."
EFFECTIVE TIME OF THE MERGER
The Merger will become effective at the date and time specified in
connection with the approval of the OCC (the "Effective Time"). Unless otherwise
agreed by First Charter and CSB, the Effective Time will occur on or promptly
after the first business day following the last to occur of (i) the expiration
of the required waiting period following the date of the order of the OCC
approving the Merger pursuant to the Bank Merger Act; (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 for consummation of the Merger; and
(iv) the date on which the CSB shareholders and the First Charter shareholders
approve the Agreement. If approved by the First Charter and CSB shareholders and
applicable regulatory authorities, the parties currently expect that the
Effective Time will occur by December 31, 1997 or as soon as practicable
thereafter, although there can be no assurance as to whether or when the Merger
will occur. See "THE MERGER -- Effective Time of the Merger" and " -- Conditions
to the Merger."
CONDITIONS TO THE MERGER
The respective obligations of First Charter and CSB to consummate the
Merger are subject to certain conditions, including (i) the receipt of all
regulatory approvals and expiration of all waiting periods; (ii) the approval by
the respective shareholders of First Charter and CSB of the Agreement and the
transactions contemplated thereby by the vote required under applicable law at
the Special Meetings; (iii) the receipt of an opinion of counsel to First
Charter to the effect that the Merger will constitute a reorganization within
the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code"), and that no gain or loss will be recognized by the shareholders of CSB
to the extent that they receive solely First Charter Common Stock in exchange
for their shares of CSB Common Stock in the Merger; and (iv) the satisfaction of
certain other conditions customary in transactions of this nature, including the
condition to each party's obligation that, at the Effective Time, the other
party is not in material violation of its respective representations and
warranties under the Agreement. In addition, the obligation of First Charter to
consummate the Merger is further subject to certain customary conditions
(including the receipt by First Charter of an opinion of KPMG Peat Marwick LLP,
independent accountants for First Charter, that the Merger qualifies for
pooling-of-interests accounting treatment and the receipt by First Charter and
KPMG Peat Marwick LLP of a letter from Coopers & Lybrand L.L.P., independent
accountants for CSB, to the effect that it is not aware of any matters relating
to CSB which would preclude CSB from participating in a business combination to
be accounted for as a pooling of interests), and the obligation of CSB to
consummate the Merger is further subject to certain customary conditions. See
"THE MERGER -- Conditions to the Merger."
MODIFICATION, WAIVER AND TERMINATION
The Agreement provides that with the prior consent of CSB (which shall not
be unreasonably withheld), First Charter may at any time change the method of
effecting its acquisition of CSB (including without limitation the provisions
set forth in the Agreement with respect to conversion of CSB Common Stock) if
and to the extent that it deems such a change desirable. In no case, however,
may any such change (i) alter or change the amount or kind of consideration to
be received by
7
<PAGE>
CSB shareholders under the Agreement; (ii) prevent the acquisition from
constituting a reorganization within the meaning of Section 368 of the Code (in
the opinion of First Charter's tax counsel); or (iii) take the form of an asset
purchase agreement.
The Agreement also provides that each party may waive any of the conditions
precedent to its obligations under the Agreement, to the extent legally
permitted. The Agreement further provides that it may be terminated and the
Merger abandoned at any time prior to the Effective Time (i) by mutual consent
of the Boards of Directors of First Charter and CSB; (ii) by the respective
Board of Directors of First Charter or CSB (if the terminating party is not then
in breach under the Agreement) pursuant to notice in the event of a breach or
failure by the other party of any representation, warranty, covenant or
agreement contained therein which is material in the context of the transactions
contemplated by the Agreement and which has not been, or cannot be, cured within
30 days after written notice of such breach is given; (iii) by the respective
Board of Directors of either First Charter or CSB if any of such terminating
party's conditions precedent set forth in the Agreement has not been satisfied
as of the Effective Time or if satisfaction of such a condition generally is or
becomes impossible and such terminating party has not waived such condition at
or before the Effective Time; (iv) by the respective Board of Directors of First
Charter or CSB if the Effective Time has not occurred by March 31, 1998 (if the
failure to consummate the Merger is not caused by a breach of or the failure to
perform obligations under the Agreement by the terminating party); (v) by the
Board of Directors of CSB if the average price of First Charter Common Stock for
the twenty trading days ending the date that is four business days prior to the
Effective Time is less than $20.00 per share; (vi) by the Board of Directors of
First Charter if First Charter determines that the shareholders' equity of CSB
generally is less than as reported in CSB's consolidated balance sheet as of
March 31, 1997; or (vii) by the Board of Directors of First Charter if First
Charter determines that CSB has established an allowance for loan losses that is
unsatisfactory to First Charter. See "THE MERGER -- Modification, Waiver and
Termination."
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Following the Merger, it is expected that the Board of Directors of First
Charter will be comprised of 15 persons, consisting of all the current members
of the Board of Directors of First Charter plus John J. Godbold, Jr., currently
President, Chief Executive Officer and a Director of CSB, Charles F. Harry III,
currently Chairman of the Board of CSB, and T. Carl Dedmon, currently a Director
of CSB. Also following the Merger, it is expected that the Board of Directors of
FCNB will continue to be comprised of 11 persons, consisting of all the current
members of the Board of Directors of FCNB. See "THE MERGER -- Management and
Operations After the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of CSB's Board of Directors and management may have
interests in the Merger in addition to their interests, if any, as shareholders
of CSB generally. These arise from, among other things, proposed membership for
certain CSB directors on the Board of Directors of First Charter, the
acceleration of the exercisability of certain employee stock options and the
possible receipt of certain employee benefits by certain executive officers of
CSB following the Merger. First Charter also has agreed to indemnify present and
former directors, officers, employees and agents of CSB with respect to actions
or omissions occurring prior to the Effective Time for three years after the
Effective Time, subject to certain limitations. See "THE MERGER -- Management
and Operations After the Merger" and " -- Interests of Certain Persons in the
Merger."
STOCK OPTION AGREEMENT BETWEEN FIRST CHARTER AND CSB
On June 30, 1997, following the execution of a letter of intent with
respect to the Merger (the "Letter of Intent"), First Charter and CSB entered
into a Stock Option Agreement (the "Stock Option Agreement") whereby CSB granted
First Charter an irrevocable option (the "Option") to purchase up to 330,776
shares of CSB Common Stock (the "Option Shares"), subject to certain
adjustments, at an exercise price of $13.25 per share. The Option Shares, if
issued, would represent approximately 19.9% of the CSB Common Stock issued and
outstanding, without giving effect to the issuance of any Option Shares pursuant
to an exercise of the Option. The number of Option Shares subject to the Option
will be increased to the extent that CSB issues additional shares of CSB Common
Stock (otherwise than pursuant to an exercise of the Option), such that the
number of Option Shares continues to equal 19.9% of the CSB Common Stock then
issued and outstanding, without giving effect to the issuance of Option Shares
pursuant to an exercise of the Option. The Option is exercisable only upon the
occurrence of certain events generally related to a change in control of or a
material business combination by CSB otherwise than with First Charter or FCNB,
none of which events has occurred as of the date hereof. The Option also allows
the holder thereof to require that CSB repurchase (at a price determined as
specified in the Stock Option Agreement) the Option, or the Option Shares
acquired pursuant to the exercise of the Option, if certain conditions are met.
CSB granted the Option as a
8
<PAGE>
condition of and in consideration for First Charter's entering into the Letter
of Intent. See "THE MERGER -- Stock Option Agreement Between First Charter and
CSB."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a reorganization under Section 368(a)
of the Code. Smith Helms Mulliss & Moore, L.L.P., counsel to First Charter, has
delivered an opinion to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code and that no gain or
loss will be recognized by the CSB shareholders as a result of the Merger to the
extent that they receive solely shares of First Charter Common Stock in exchange
for their shares of CSB Common Stock. For a more complete description of the
federal income tax consequences, see "THE MERGER -- Certain Federal Income Tax
Consequences."
DISSENTERS' RIGHTS OF APPRAISAL
Under the provisions of federal and North Carolina law, holders of CSB
Common Stock will be entitled to dissenters' rights of appraisal with respect to
payment for their shares of CSB Common Stock provided that the Merger is
consummated and such shareholders comply with the required statutory procedures.
Failure to take any necessary step in connection with the exercise of such
rights may result in termination or waiver of dissenters' rights. A CSB
shareholder who wishes to dissent from the Merger must either vote its shares of
CSB Common Stock against the approval of the Agreement and the transactions
contemplated thereby or provide written notice to CSB, at or prior to the CBS
Special Meeting, of its intent to dissent. A copy of the provisions of
applicable law is attached hereto as Appendix D. Under North Carolina law,
holders of First Charter Common Stock will not be entitled to dissenters' rights
of appraisal with respect to their shares of First Charter Common Stock. For a
more complete description of dissenters' rights of appraisal, see "THE MERGER --
Dissenters' Rights of Appraisal."
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for as a pooling of
interests under generally accepted accounting principles. It is a condition to
First Charter's obligation to consummate the Merger that First Charter receive
an opinion from KPMG Peat Marwick LLP, independent accountants of First Charter,
that the Merger will be accounted for as a pooling of interests, and that First
Charter and KPMG Peat Marwick LLP receive a letter from Coopers & Lybrand
L.L.P., independent accountants of CSB, to the effect that it is not aware of
any matters relating to CSB that would preclude CSB from participating in a
business combination accounted for as a pooling of interests. See "THE
MERGER -- Accounting Treatment."
BANK REGULATORY MATTERS
The Merger is subject to the approval of the OCC, and the Merger may not be
consummated until expiration of any applicable waiting period following such
approval. FCNB has filed the required application for regulatory review and
approval with the OCC. There can be no assurance that such approval will be
obtained or as to the date of any such approval. See "THE MERGER -- Conditions
to the Merger" and " -- Bank Regulatory Matters."
RESALES BY AFFILIATES
Affiliates of CSB have entered into agreements that they will not transfer
any shares of First Charter Common Stock received by them as a result of the
Merger, except in compliance with the applicable provisions of the Securities
Act. See "THE MERGER -- Restrictions on Resales by Affiliates."
CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS
First Charter is a corporation organized under the laws of North Carolina,
and, accordingly, the rights of shareholders and other corporate matters
relating to First Charter Common Stock are controlled by the North Carolina
Business Corporation Act (the "NCBCA"). CSB is a banking corporation organized
under the laws of North Carolina, with the rights of its shareholders and other
corporate matters relating to CSB Common Stock controlled by the NCBCA and the
North Carolina banking statutes. Shareholders of CSB, whose rights are governed
by CSB's Articles of Incorporation and Bylaws and the relevant provisions of
North Carolina law, will become shareholders of First Charter upon consummation
of the Merger. As shareholders of First Charter, their rights will be governed
by First Charter's Restated Charter, its Bylaws and the provisions of the NCBCA.
The rights of shareholders of CSB are different in some respects from the rights
of shareholders of First Charter. See "COMPARISON OF FIRST CHARTER COMMON STOCK
AND CSB COMMON STOCK."
9
<PAGE>
SHARE INFORMATION AND MARKET PRICES
The First Charter Common Stock is reported on The Nasdaq Stock Market as a
Nasdaq National Market security under the symbol "FCTR." The CSB Common Stock is
traded in the over-the-counter market and is listed in the National Daily
Quotation Service "Pink Sheets."
The following table sets forth the average of the bid and asked prices
reported on The Nasdaq Stock Market for shares of First Charter Common Stock on
June 27, 1997, the last trading day preceding public announcement of the
proposed Merger, and on October , 1997. It also sets forth the average of the
bid and asked prices for shares of CSB Common Stock on June 27, 1997 and on
October , 1997. The CSB Equivalent represents the consideration per share of
CSB Common Stock to be received by a holder of CSB Common Stock in the Merger,
computed by multiplying the average of the bid and asked prices of First Charter
Common Stock on such date by the Exchange Ratio.
<TABLE>
<CAPTION>
CSB FIRST CHARTER CSB EQUIVALENT
<S> <C> <C> <C>
June 27, 1997........................................................................ $13.25 $ 23.00 $ 23.53
October , 1997.....................................................................
</TABLE>
For additional information regarding the market prices of the First Charter
Common Stock and CSB Common Stock during the previous two years, see "PRICE
RANGE OF COMMON STOCK AND DIVIDENDS -- Market Prices."
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth selected comparative unaudited per share
data for (a) First Charter on a historical basis and on a pro forma basis
assuming the Merger had been effective for the periods presented and (b) CSB on
a historical and pro forma equivalent basis. The unaudited pro forma information
has been prepared giving effect to the Merger as a pooling of interests. For a
description of the effect of pooling-of-interests accounting on the Merger and
the historical financial statements of First Charter, see "THE
MERGER -- Accounting Treatment." The CSB pro forma equivalent amounts are
presented with respect to each set of pro forma information.
The comparative per share data presented are based on and derived from, and
should be read in conjunction with, the historical consolidated financial
statements and the related notes thereto of each of First Charter and CSB
incorporated by reference herein and on the PRO FORMA CONDENSED FINANCIAL
INFORMATION included elsewhere herein. Results of each of First Charter and CSB
for the six months ended June 30, 1997 are not necessarily indicative of results
expected for the entire year, nor are pro forma amounts necessarily indicative
of results of operations or combined financial position that would have resulted
had the Merger been consummated at the beginning of the period indicated. All
adjustments necessary for a fair statement of results of interim periods have
been included.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1997 1996 1995 1994
<S> <C> <C> <C> <C>
FIRST CHARTER:
Income per common share (primary)
Historical (1)...................................................................... $0.64 $1.17 $0.93 $0.88
Pro forma combined.................................................................. 0.59 1.09 0.94 0.80
Cash dividends declared per common share
Historical (1)...................................................................... 0.25 0.50 0.43 0.34
Pro forma combined (2).............................................................. 0.25 0.50 0.43 0.34
Shareholders' equity per common share (period end)
Historical (1)...................................................................... 8.28 7.86 7.14 6.32
Pro forma combined.................................................................. 8.21 7.80 7.08 6.18
CSB:
Income per common share (primary)
Historical (3)...................................................................... 0.39 0.76 1.02 0.41
Pro forma equivalent (4)............................................................ 0.61 1.12 0.96 0.82
Cash dividends declared per common share
Historical (3)...................................................................... -- -- -- --
Pro forma equivalent (4)............................................................ 0.26 0.51 0.44 0.35
Shareholders' equity per common share (period end)
Historical (3)...................................................................... 8.06 7.70 6.97 5.56
Pro forma equivalent (4)............................................................ 8.40 7.98 7.24 6.33
</TABLE>
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<PAGE>
(1) First Charter per share data has been adjusted to reflect a 6-for-5 stock
split declared in the second quarter of 1997 and a stock split effected in
the form of a 33 1/3% stock dividend declared in the fourth quarter of 1994.
(2) Pro forma combined dividends per share represent historical dividends per
share paid by First Charter. CSB has not paid cash dividends.
(3) CSB per share data has been adjusted to reflect a 3-for-2 stock split
declared in the second quarter of 1997.
(4) CSB pro forma equivalent amounts are calculated by multiplying the pro forma
combined amounts by the Exchange Ratio.
SELECTED FINANCIAL DATA
The following tables set forth certain summary selected financial data for
each of First Charter and CSB on a historical basis and certain summary
unaudited pro forma selected financial data giving effect to the Merger as a
pooling of interests. For a description of the effect of pooling-of-interests
accounting on the Merger and the historical financial statements of First
Charter, see "THE MERGER -- Accounting Treatment."
The summary selected financial data are based on and derived from, and
should be read in conjunction with, the historical consolidated financial
statements and the related notes thereto of each of First Charter and CSB
incorporated by reference herein and on the PRO FORMA CONDENSED FINANCIAL
INFORMATION included elsewhere herein. Certain of the historical financial
statements of CSB are being delivered with this Joint Proxy
Statement-Prospectus. See "AVAILABLE INFORMATION."
Results of each of First Charter and CSB for the six months ended June 30,
1997 are not necessarily indicative of results expected for the entire year, nor
are pro forma amounts necessarily indicative of results of operations or
combined financial position that would have resulted had the Merger been
consummated at the beginning of the period indicated. All adjustments necessary
for a fair statement of results of interim periods have been included.
11
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF FIRST CHARTER CORPORATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1997 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
INCOME STATEMENT DATA:
Interest income....................... $ 21,059 $ 19,943 $ 40,569 $ 37,194 $ 29,983 $ 26,021 $ 25,791
Interest expense...................... 8,740 8,556 17,256 15,210 10,548 9,358 10,799
Net interest income................ 12,319 11,387 23,313 21,984 19,435 16,663 14,992
Provision for loan losses............. 685 620 920 1,465 839 835 942
Net interest income after provision
for loan losses.................. 11,634 10,767 22,393 20,519 18,596 15,828 14,050
Noninterest income.................... 3,909 3,068 6,271 5,392 4,758 5,007 4,495
Noninterest expense................... 8,618 7,571 16,074 15,688 14,131 13,823 13,218
Income before income taxes......... 6,925 6,264 12,590 10,223 9,223 7,012 5,327
Income taxes.......................... 2,049 1,912 3,737 3,220 2,653 1,828 1,212
Net income before cumulative effect
of change in accounting
principle........................ 4,876 4,352 8,853 7,003 6,570 5,184 4,115
Cumulative effect of change in
accounting principle............... -- -- -- -- -- 300 --
Net income......................... $ 4,876 $ 4,352 $ 8,853 $ 7,003 $ 6,570 $ 5,484 $ 4,115
PER SHARE DATA: (1)
Net income before cumulative effect of
accounting change (primary and
fully diluted)..................... $ 0.64 $ 0.57 $ 1.17 $ 0.93 $ 0.88 $ 0.68 $ 0.54
Net income (primary and fully
diluted)........................... 0.64 0.57 1.17 0.93 0.88 0.73 0.54
Cash dividends declared............... 0.25 0.25 0.50 0.43 0.34 0.26 0.21
Period-end book value................. 8.28 7.28 7.86 7.14 6.32 5.89 5.28
BALANCE SHEET DATA
(AT PERIOD END):
Total assets.......................... $565,157 $523,430 $546,856 $509,395 $447,099 $391,594 $371,062
Loans, net............................ 386,233 344,745 355,353 327,887 283,531 245,294 227,695
Allowance for loan losses............. 5,510 5,099 5,128 4,856 4,131 3,900 3,958
Deposits.............................. 470,744 438,477 455,215 415,056 372,821 336,270 314,605
Total shareholders' equity............ 62,618 54,930 59,409 53,424 47,176 44,196 40,046
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
PERFORMANCE RATIOS:
Net income to average shareholders'
equity............................. 16.04%(2) 15.82%(2) 15.71% 13.93% 14.34% 13.10% 10.66%
Net income to average total assets.... 1.82(2) 1.70(2) 1.69 1.50 1.59 1.48 1.19
CAPITAL RATIOS:
Tier 1 risk-based capital............. 14.46% 14.22% 14.91% 14.25% 15.06% 15.72% 14.71%
Total risk-based capital.............. 15.71 15.47 16.16 15.50 16.31 16.97 15.68
Leverage.............................. 11.24 10.38 11.06 11.12 10.46 11.05 10.72
ASSET QUALITY RATIOS:
Allowance for loan losses as a
percentage of gross loans.......... 1.41% 1.46% 1.42% 1.46% 1.44% 1.57% 1.71%
Net loans charged off to average
loans.............................. 0.16(2) 0.22(2) 0.19 0.25 0.23 0.39 0.07
Problem assets as a percentage of
total assets....................... 0.59 0.44 0.50 0.57 1.33 1.43 2.28
</TABLE>
(1) All per share data has been adjusted to reflect a 6-for-5 stock split
declared in the second quarter of 1997, a stock split effected in the form
of a 33 1/3% stock dividend declared in the fourth quarter of 1994 and a 20%
stock dividend declared in the fourth quarter of 1992.
(2) Annualized.
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<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF CSB
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1997 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
INCOME STATEMENT DATA:
Interest income........................... $ 5,736 $ 4,984 $ 10,338 $ 8,741 $ 5,841 $ 4,207 $ 2,472
Interest expense.......................... 3,110 2,659 5,541 4,626 2,717 2,049 1,351
Net interest income.................... 2,626 2,325 4,797 4,115 3,124 2,158 1,121
Provision for loan losses................. 331 256 620 526 266 299 346
Net interest income after provision for
loan losses.......................... 2,295 2,069 4,177 3,589 2,858 1,859 775
Noninterest income........................ 562 518 1,000 886 802 387 267
Noninterest expense....................... 1,883 1,596 3,280 3,493 3,152 2,244 1,841
Income (loss) before income taxes...... 974 991 1,897 982 508 2 (799)
Income taxes (benefit).................... 350 356 681 (319) -- -- --
Net income (loss) before cumulative
effect of change in accounting
principle............................ 624 635 1,216 1,301 508 2 (799)
Cumulative effect of change in accounting
principle.............................. -- -- -- -- -- -- --
Net income (loss)...................... $ 624 $ 635 $ 1,216 $ 1,301 $ 508 $ 2 $ (799)
PER SHARE DATA: (1)
Net income (loss) before cumulative effect
of accounting change (primary and fully
diluted)............................... $ 0.39 $ 0.40 $ 0.76 $ 1.02 $ 0.41 $ -- $ (0.84)
Net income (loss) (primary and fully
diluted)............................... 0.39 0.40 0.76 1.02 0.41 -- (0.84)
Cash dividends declared................... -- -- -- -- -- -- --
Period-end book value..................... 8.06 7.33 7.70 6.97 5.56 5.12 5.11
BALANCE SHEET DATA
(AT PERIOD END):
Total assets.............................. $141,488 $125,026 $133,401 $117,095 $89,083 $62,875 $44,759
Loans, net................................ 101,203 89,139 94,636 80,874 62,881 44,192 28,930
Allowance for loan losses................. 1,485 1,277 1,400 1,200 925 705 404
Deposits.................................. 120,648 105,813 114,641 100,378 78,165 57,128 39,549
Total shareholders' equity................ 13,398 11,721 12,312 11,147 6,916 4,851 4,845
PERFORMANCE RATIOS:
Net income (loss) to average shareholders'
equity................................. 9.89%(2) 11.07%(2) 10.31% 15.92% 7.55% 0.00% (6.40)%
Net income (loss) to average total
assets................................. 0.91(2) 1.05(2) 0.97 1.19 0.65 0.00 (1.21)
CAPITAL RATIOS:
Tier 1 risk-based capital................. 13.07% 12.59% 12.50% 13.70% 10.04% 8.79% 15.46%
Total risk-based capital.................. 14.34 13.84 13.90 14.90 11.30 9.72 16.79
Leverage.................................. 9.63 8.86 9.00 9.70 7.72 8.51 13.35
ASSET QUALITY RATIOS:
Allowance for loan losses as a percentage
of gross loans......................... 1.45% 1.41% 1.46% 1.46% 1.45% 1.57% 1.38%
Net loans charged off (recovered)
to average loans....................... 0.51(2) 0.41(2) 0.47 0.34 0.22 (0.01) 0.46
Problem assets as a percentage of total
assets................................. 0.36 0.26 0.26 0.28 0.38 0.57 0.22
</TABLE>
(1) All per share data has been adjusted to reflect a 3-for-2 stock split
declared in the second quarter of 1997.
(2) Annualized.
13
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1997 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
INCOME STATEMENT DATA:
Interest income....................... $ 26,795 $ 24,927 $ 50,907 $ 45,935 $ 35,824 $ 30,228 $ 28,263
Interest expense...................... 11,850 11,215 22,797 19,836 13,265 11,407 12,150
Net interest income................ 14,945 13,712 28,110 26,099 22,559 18,821 16,113
Provision for loan losses............. 1,016 876 1,540 1,991 1,105 1,134 1,288
Net interest income after provision
for loan losses.................. 13,929 12,836 26,570 24,108 21,454 17,687 14,825
Noninterest income.................... 4,471 3,586 7,271 6,278 5,560 5,394 4,762
Noninterest expense................... 10,501 9,167 19,354 19,181 17,283 16,067 15,059
Income before income taxes......... 7,899 7,255 14,487 11,205 9,731 7,014 4,528
Income taxes.......................... 2,399 2,268 4,418 2,901 2,653 1,828 1,212
Net income before cumulative effect
of change in accounting
principle........................ 5,500 4,987 10,069 8,304 7,078 5,186 3,316
Cumulative effect of change in
accounting principle............... -- -- -- -- -- 300 --
Net income......................... $ 5,500 $ 4,987 $ 10,069 $ 8,304 $ 7,078 $ 5,486 $ 3,316
PER SHARE DATA: (1)
Net income before cumulative effect of
accounting change (primary and
fully diluted)..................... $ 0.59 $ 0.54 $ 1.09 $ 0.94 $ 0.80 $ 0.61 $ 0.39
Net income (primary and fully
diluted)........................... 0.59 0.54 1.09 0.94 0.80 0.64 0.39
Cash dividends declared (2)........... 0.25 0.25 0.50 0.43 0.34 0.26 0.21
Period-end book value................. 8.21 7.26 7.80 7.08 6.18 5.79 5.25
BALANCE SHEET DATA
(AT PERIOD END):
Total assets.......................... $706,645 $648,456 $680,257 $626,490 $536,182 $454,469 $415,821
Loans, net............................ 487,436 433,884 449,989 408,761 346,412 289,486 256,625
Allowance for loan losses............. 6,995 6,376 6,528 6,056 5,056 4,605 4,362
Deposits.............................. 591,392 544,290 569,856 515,434 450,986 393,398 354,154
Total shareholders' equity............ 76,016 66,651 71,721 64,571 54,092 49,047 44,891
PERFORMANCE RATIOS:
Net income to average shareholders'
equity............................. 15.01%(3) 15.05%(3) 14.77% 14.28% 13.48% 11.76% 7.57%
Net income to average total assets.... 1.63(3) 1.58(3) 1.55 1.45 1.44 1.29 0.87
CAPITAL RATIOS:
Tier 1 risk-based capital............. 14.20% 13.92% 14.47% 14.15% 14.25% 14.55% 14.79%
Total risk-based capital.............. 15.45 15.17 15.73 15.40 15.50 15.77 15.79
Leverage.............................. 10.92 10.09 10.65 10.86 10.05 10.74 10.95
ASSET QUALITY RATIOS:
Allowance for loan losses as a
percentage of gross loans.......... 1.41% 1.45% 1.43% 1.46% 1.44% 1.57% 1.67%
Net loans charged off to average
loans.............................. 0.12(3) 0.13(3) 0.24 0.26 0.23 0.33 0.10
Problem assets as a percentage of
total assets....................... 0.55 0.40 0.45 0.51 1.17 1.31 2.05
</TABLE>
(1) All per share data has been adjusted to reflect a 6-for-5 stock split
declared by First Charter in the second quarter of 1997, a stock split
effected in the form of a 33 1/3% stock dividend declared by First Charter
in the fourth quarter of 1994, a 20% stock dividend declared by First
Charter in the fourth quarter of 1992 and a 3-for-2 stock split declared by
CSB in the second quarter of 1997.
(2) Pro forma combined dividends per share represent historical dividends per
share declared by First Charter. CSB has not paid cash dividends.
(3) Annualized.
14
<PAGE>
RECENT DEVELOPMENTS
FIRST CHARTER
First Charter's income for the three month period ended September 30, 1997
was $2,525,000, or $0.33 per share, versus $2,188,000, or $0.29 per share, for
the comparable period in 1996, representing a 15.4% increase. Net income for the
nine month period ended September 30, 1997 was $7,401,000, or $0.97 per share,
versus $6,540,000, or $0.87 per share, for the comparable period in 1996,
representing a 13.2% increase. The increases for the three and nine month
periods ending September 30, 1997 are primarily attributable to increases in net
interest income and noninterest income, which are partially offset by increases
in noninterest expenses. On an annualized basis, First Charter's year-to-date
results represent a return on average assets of 1.79% versus 1.68% and a return
on average equity of 15.92% versus 15.67%, for the nine month periods ended
September 30, 1997 and 1996, respectively.
For the three and nine month periods ended September 30, 1997, net interest
income before provision for loan losses increased $735,000 and $1,667,000,
respectively, over the comparable periods in 1996. The increases are
attributable to an increase in the level of interest earning assets, as well as
an improvement in the net interest margin. The average interest-bearing
liabilities increased, and the average rate paid on interest-bearing liabilities
decreased slightly.
Total assets at September 30, 1997 were $585,944,000, compared to
$546,856,000 at December 31, 1996. Asset growth is primarily attributable to
increases in loan balances. Loan demand was strong during the first nine months
of 1997. As a result, gross loans increased 10.3% to $397,863,000 from
$360,623,000 at December 31, 1996. Total deposits increased 7.0% to $486,928,000
from $455,215,000 at December 31, 1996. Securities available for sale totalled
$135,440,000 at September 30, 1997, representing an increase of approximately
$3,319,000 from December 31, 1996.
The following table sets forth certain selected consolidated financial
information for First Charter on a historical basis. This financial information
is based on First Charter's interim unaudited financial results, and the results
of operations are not necessarily indicative of operations that may be expected
in the future. In the opinion of management of First Charter, all adjustments
necessary for a fair presentation of results of interim periods (none of which
were other than normal accruals) have been included.
FIRST CHARTER CORPORATION
SUMMARY OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER ENDED SEPTEMBER
30, 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
INCOME STATEMENT DATA:
Interest income................................................................. $11,396 $10,194 $32,455 $30,138
Interest expense................................................................ 4,824 4,357 13,564 12,914
Net interest income............................................................. 6,572 5,837 18,891 17,224
Provision for loan losses....................................................... 200 200 885 820
Net interest income after provision for loan losses............................. 6,372 5,637 18,006 16,404
Noninterest income.............................................................. 1,816 1,505 5,725 4,573
Noninterest expense............................................................. 4,609 4,117 13,227 11,688
Income before income taxes...................................................... 3,579 3,025 10,504 9,289
Income taxes.................................................................... 1,054 837 3,103 2,749
Net income...................................................................... $ 2,525 $ 2,188 $ 7,401 $ 6,540
PER SHARE DATA:(1)
Net income (primary and fully diluted).......................................... $ 0.33 $ 0.29 $ 0.97 $ 0.87
Cash dividends declared......................................................... 0.14 0.125 0.39 0.375
Period-end book value........................................................... 8.58 7.53 8.58 7.53
</TABLE>
(1) All per share data has been retroactively adjusted to reflect a 6-for-5
stock split declared in the second quarter of 1997.
15
<PAGE>
CSB
CSB's income for the three month period ended September 30, 1997 was
$93,000, or $0.06 per share, versus $326,000, or $0.20 per share, for the
comparable period in 1996, representing a 71.5% decrease. Net income for the
nine month period ended September 30, 1997 was $717,000, or $0.44 per share,
versus $961,000, or $0.60 per share, for the comparable period in 1996,
representing a 25.4% decrease. The decreases are primarily attributable to an
increased provision for loan losses during the third quarter of 1997. The third
quarter provision was necessary to reflect an increase in the loan portfolio, as
well as a general decline in loan quality. For 1997 year-to-date, net loan
charge-offs increased to $427,000 or 0.54% of average loans versus $223,000 or
0.34% of average loans for the same period in 1996. Furthermore, nonaccruals to
gross loans increased to 0.40% at September 30, 1997 from 0.31% at September 30,
1996 and 0.30% at December 31, 1996. The result of this additional provision
increased the allowance for loan losses to gross loans to 1.81% at September 30,
1997 from 1.44% at September 30, 1996.
On an annualized basis, CSB's year-to-date results represent a return on
average assets of 0.68% versus 1.04% and a return on average equity of 7.38%
versus 11.00% for the nine month periods ended September 30, 1997 and 1996,
respectively.
For the three and nine month periods ended September 30, 1997, net interest
income before provision for loan losses increased $147,000 and $447,000,
respectively, over the comparable periods in 1996. The increases are
attributable to an increase in the level of interest earning assets, partially
offset by a decline in the net interest margin. The average interest-bearing
liabilities increased, and the average rate paid on interest-bearing liabilities
increased.
Total assets at September 30, 1997 were $142,923,000, compared to
$133,401,000 at December 31, 1996. Asset growth is primarily attributable to
increases in the loan portfolio and the securities portfolio. Loan demand was
strong during the first nine months of 1997. As a result, gross loans increased
9.0% to $104,682,000 from $96,036,000 at December 31, 1996. Total deposits
increased 6.9% to $122,547,000 from $114,641,000 at December 31, 1996.
Securities available for sale totalled $14,058,000 at September 30, 1997,
representing an increase of approximately $2,514,000 from December 31, 1996.
The following table sets forth certain selected consolidated financial
information for CSB on a historical basis. This financial information is based
on CSB's interim unaudited financial results, and the results of operations are
not necessarily indicative of operations that may be expected in the future. In
the opinion of management of CSB, all adjustments necessary for a fair
presentation of results of interim periods (none of which were other than normal
accruals) have been included.
CAROLINA STATE BANK
SUMMARY OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER ENDED SEPTEMBER
30, 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
INCOME STATEMENT DATA:
Interest income............................................................. $3,062 $2,712 $8,798 $7,697
Interest expense............................................................ 1,619 1,416 4,729 4,075
Net interest income......................................................... 1,443 1,296 4,069 3,622
Provision for loan losses................................................... 596 141 927 397
Net interest income after provision for loan losses......................... 847 1,155 3,142 3,225
Noninterest income.......................................................... 302 265 864 762
Noninterest expense......................................................... 1,008 910 2,891 2,485
Income before income taxes.................................................. 141 510 1,115 1,502
Income taxes................................................................ 48 184 398 541
Net income.................................................................. $ 93 $ 326 $ 717 $ 961
PER SHARE DATA: (1)
Net income (primary and fully diluted)...................................... $ 0.06 $ 0.20 $ 0.44 $ 0.60
Cash dividends declared..................................................... -- -- -- --
Period-end book value....................................................... 8.12 7.54 8.12 7.54
</TABLE>
(1) All per share data has been retroactively adjusted to reflect a 3-for-2
stock split declared in the second quarter of 1997.
16
<PAGE>
THE SPECIAL MEETINGS
GENERAL
This Joint Proxy Statement-Prospectus is being furnished to holders of
First Charter Common Stock in connection with the solicitation of proxies by the
Board of Directors of First Charter for use at the First Charter Special Meeting
(i) to consider and vote upon the approval of the Agreement and the transactions
contemplated thereby, including the issuance of First Charter Common Stock upon
consummation of the Merger, (ii) to consider and vote upon the approval of First
Charter's proposed Amended and Restated Articles of Incorporation, including an
increase to the number of shares of First Charter Common Stock that First
Charter is authorized to issue from 10,000,000 to 25,000,000, and (iii) to
transact such other business as may properly come before the First Charter
Special Meeting or any adjournments or postponements thereof. For information
regarding the consideration of First Charter's proposed Amended and Restated
Articles of Incorporation, see "APPROVAL OF AMENDED AND RESTATED ARTICLES OF
INCORPORATION OF FIRST CHARTER."
In addition, this Joint Proxy Statement-Prospectus is being furnished to
holders of CSB Common Stock in connection with the solicitation of proxies by
the Board of Directors of CSB for use at the CSB Special Meeting (i) to consider
and vote upon the approval of the Agreement and the transactions contemplated
thereby, and (ii) to transact such other business as may properly come before
the CSB Special Meeting or any adjournments or postponements thereof. Each copy
of this Joint Proxy Statement-Prospectus mailed to holders of First Charter
Common Stock is accompanied by a form of proxy for use at the First Charter
Special Meeting, and each copy of this Joint Proxy Statement-Prospectus mailed
to holders of CSB Common Stock is accompanied by a form of proxy for use at the
CSB Special Meeting. This Joint Proxy Statement-Prospectus is also being
furnished by First Charter to CSB shareholders as a prospectus in connection
with the issuance by First Charter of the shares of First Charter Common Stock
upon consummation of the Merger.
This Joint Proxy Statement-Prospectus is first being mailed to the holders
of First Charter Common Stock and the holders of CSB Common Stock on or about
October , 1997.
DATE, PLACE AND TIME
FIRST CHARTER. The First Charter Special Meeting will be held at First
Charter's corporate and operations center located at 22 Union Street, North in
Concord, North Carolina on Wednesday, December 10, 1997 at 9:00 a.m. local time.
CSB. The CSB Special Meeting will be held at the main office of CSB,
located at 316 South Lafayette Street in Shelby, North Carolina on Wednesday,
December 10, 1997 at 6:00 p.m. local time.
PROXIES
FIRST CHARTER. A shareholder of First Charter may use the accompanying
proxy if such shareholder is unable to attend the First Charter Special Meeting
in person or wishes to have his or her shares voted by proxy even if such
shareholder does attend the meeting. A shareholder of First Charter may revoke
any proxy given pursuant to this solicitation by delivering to the Secretary of
First Charter, prior to or at the First Charter Special Meeting, a written
notice revoking the proxy or a duly executed proxy relating to the same shares
bearing a later date, or by voting in person at the First Charter Special
Meeting. All written notices of revocation and other communications with respect
to the revocation of First Charter proxies should be addressed to First Charter
Corporation, Post Office Box 228, Concord, North Carolina 28026-0228, Attention:
Secretary. For such notice of revocation or later proxy to be valid, however, it
must actually be received by First Charter prior to the vote of the First
Charter shareholders. All shares represented by valid proxies received pursuant
to this solicitation, and not revoked before they are exercised, will be voted
in the manner specified therein. IF NO SPECIFICATION IS MADE, THE PROXIES WILL
BE VOTED IN FAVOR OF (I) APPROVAL OF THE AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE ISSUANCE OF THE FIRST CHARTER COMMON STOCK
UPON CONSUMMATION OF THE MERGER, AND (II) APPROVAL OF FIRST CHARTER'S AMENDED
AND RESTATED ARTICLES OF INCORPORATION. The Board of Directors of First Charter
is unaware of any other matters that may be presented for action at the First
Charter Special Meeting. If other matters do properly come before the First
Charter Special Meeting, however, it is intended that shares represented by
proxies in the accompanying form will be voted or not voted by the persons named
in the proxies in their discretion.
CSB. A shareholder of CSB may use the accompanying proxy if such
shareholder is unable to attend the CSB Special Meeting in person or wishes to
have his or her shares voted by proxy even if such shareholder does attend the
meeting. A shareholder of CSB may revoke any proxy given pursuant to this
solicitation by delivering to the Secretary of CSB, prior to or at the CSB
Special Meeting, a written notice revoking the proxy or a duly executed proxy
relating to the same shares
17
<PAGE>
bearing a later date, or by voting in person at the CSB Special Meeting. All
written notices of revocation and other communications with respect to the
revocation of CSB proxies should be addressed to Carolina State Bank, Post
Office Box 340, Shelby, North Carolina 28151-0340, Attention: Secretary. For
such notice of revocation or later proxy to be valid, however, it must actually
be received by CSB prior to the vote of the shareholders. All shares represented
by valid proxies received pursuant to this solicitation, and not revoked before
they are exercised, will be voted in the manner specified therein. IF NO
SPECIFICATION IS MADE, THE PROXIES WILL BE VOTED IN FAVOR OF APPROVAL OF THE
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. The Board of Directors of
CSB is unaware of any other matters that may be presented for action at the CSB
Special Meeting. If other matters do properly come before the CSB Special
Meeting, however, it is intended that shares represented by proxies in the
accompanying form will be voted or not voted by the persons named in the proxies
in their discretion.
SOLICITATION OF PROXIES
Solicitation of proxies may be made in person, by mail, telephone or
facsimile, or by directors, officers and employees of First Charter or CSB, who
will not be specially compensated for such solicitation. Nominees, fiduciaries
and other custodians will be requested to forward solicitation materials to
beneficial owners and secure their voting instructions, if necessary, and will
be reimbursed for the expenses incurred in sending proxy materials to beneficial
owners. First Charter and CSB will each bear its own expenses in connection with
the solicitation of proxies for its Special Meeting, except that each will pay
one-half of the costs incurred in printing and mailing this Joint Proxy
Statement-Prospectus, the forms of proxy and other proxy materials.
RECORD DATE AND VOTING RIGHTS
FIRST CHARTER. The Board of Directors of First Charter has fixed October
24, 1997 as the record date for the determination of shareholders of First
Charter entitled to receive notice of and to vote at the First Charter Special
Meeting. At the close of business on such record date, there were outstanding
shares of First Charter Common Stock held of record by approximately
holders of record. Each share of First Charter Common Stock outstanding
on such record date is entitled to one vote as to (i) the approval of the
Agreement and the transactions contemplated thereby, including the issuance of
First Charter Common Stock upon consummation of the Merger, (ii) the approval of
First Charter's proposed Amended and Restated Articles of Incorporation, and
(iii) any other proposal that may properly come before the First Charter Special
Meeting. Approval by the shareholders of First Charter of the Agreement and the
transactions contemplated thereby, including the Merger, is not required under
North Carolina law or First Charter's Restated Charter or Bylaws. Pursuant to
the requirements of The Nasdaq Stock Market, however, approval of the issuance
of First Charter Common Stock in the Merger will require the affirmative vote of
a majority of the votes cast by the holders of the First Charter Common Stock.
Furthermore, pursuant to the requirements of the NCBCA, approval of First
Charter's proposed Amended and Restated Articles of Incorporation will also
require the affirmative vote of a majority of the votes cast by the holders of
the First Charter Common Stock. In accordance with North Carolina law,
abstentions from voting with respect to a matter will count as shares present
for purposes of establishing a quorum at the First Charter Special Meeting.
Neither abstentions nor broker non-votes, if any, however, will have the effect
of a negative vote with respect to any such matter.
As of the record date for the First Charter Special Meeting, the directors
and executive officers of First Charter and their affiliates beneficially owned
an aggregate of shares, or %, of First Charter Common Stock. Directors
and executive officers of First Charter have indicated their intention to vote
their shares of First Charter Common Stock in favor of the Agreement and the
transactions contemplated thereby, including the issuance of First Charter
Common Stock upon consummation of the Merger.
As of the record date for the First Charter Special Meeting, the trust
department of FCNB had sole or shared voting power with respect to shares
of First Charter Common Stock held for various accounts. Of these, shares
of First Charter Common Stock were held under arrangements that provide for
exercise of voting power by co-fiduciaries, settlors, beneficiaries or others;
as a matter of policy, FCNB votes such shares only in accordance with the
instructions of such other persons. Shares of First Charter Common Stock
otherwise held by the trust department of FCNB may be voted in its discretion.
THE BOARD OF DIRECTORS OF FIRST CHARTER URGES ITS SHAREHOLDERS TO COMPLETE,
DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED,
POSTAGE-PAID ENVELOPE.
18
<PAGE>
CSB. The Board of Directors of CSB has fixed October 24, 1997 as the record
date for the determination of shareholders of CSB entitled to receive notice of
and to vote at the CSB Special Meeting. At the close of business on such record
date, there were outstanding shares of CSB Common Stock held of record by
approximately holders of record. Each share of CSB Common Stock
outstanding on such record date is entitled to one vote as to (i) the approval
of the Agreement and the transactions contemplated thereby and (ii) any other
proposal that may properly come before the CSB Special Meeting. Under the
provisions of the federal and North Carolina banking laws, approval of the
Agreement and the transactions contemplated thereby by the CSB shareholders will
require the affirmative vote of the holders of two-thirds of the outstanding
shares of CSB Common Stock. In accordance with applicable law, abstentions from
voting with respect to the Agreement and the transactions contemplated thereby
will count as shares present for purposes of establishing a quorum at the CSB
Special Meeting. Furthermore, because approval of such matter requires the
affirmative vote of the holders of two-thirds of the CSB Common Stock
outstanding, such abstentions, as well as broker non-votes, if any, will have
the effect of a negative vote with respect to the Agreement and the transactions
contemplated thereby. Furthermore, because of the two-thirds vote requirement,
failure to vote will have the same effect as a negative vote.
As of the record date for the CSB Special Meeting, the directors and
executive officers of CSB and their affiliates beneficially owned an aggregate
of shares, or %, of CSB Common Stock. Directors of CSB have indicated
their intention to vote their shares of CSB Common Stock in favor of the
Agreement and the transactions contemplated thereby. See "THE
MERGER -- Interests of Certain Persons in the Merger." In addition, as of the
record date for the CSB Special Meeting, directors and executive officers of
First Charter beneficially owned shares, or %, of the CSB Common
Stock. It is expected that these shares will be voted in favor of the proposal
to approve the Agreement and the transactions contemplated thereby.
BECAUSE APPROVAL OF THE AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF THE
HOLDERS OF TWO-THIRDS OF THE OUTSTANDING SHARES OF CSB COMMON STOCK, THE BOARD
OF DIRECTORS OF CSB URGES ITS SHAREHOLDERS TO COMPLETE, DATE AND SIGN THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID
ENVELOPE.
RECOMMENDATION OF THE BOARDS OF DIRECTORS
The Board of Directors of First Charter and the Board of Directors of CSB
each has approved the Agreement and the transactions contemplated thereby. Each
Board of Directors believes that the Merger is fair to and in the best interests
of its respective shareholders and recommends a vote "FOR" the matters to be
voted upon by such shareholders in connection with the Merger. See "THE
MERGER -- Background of and Reasons for the Merger."
19
<PAGE>
THE MERGER
THE FOLLOWING SUMMARY OF CERTAIN TERMS AND PROVISIONS OF THE AGREEMENT IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE AGREEMENT, WHICH IS INCORPORATED
HEREIN BY REFERENCE AND, WITH THE EXCEPTION OF THE SCHEDULES THERETO, IS
INCLUDED AS APPENDIX A TO THIS JOINT PROXY STATEMENT-PROSPECTUS. ALL
SHAREHOLDERS ARE ENCOURAGED TO READ THE AGREEMENT, AS WELL AS THE OTHER
APPENDICES, IN THEIR ENTIRETY.
DESCRIPTION OF THE MERGER
At the Effective Time, CSB will be merged with and into FCNB, and FCNB will
be the surviving entity and will continue to operate as a banking subsidiary of
First Charter. The Articles of Association and Bylaws of FCNB in effect at the
Effective Time will continue to govern FCNB until amended or repealed in
accordance with applicable law. The Merger is subject to the approval of the
OCC. See "THE MERGER -- Bank Regulatory Matters." There will be no change in
First Charter's Restated Charter or Bylaws as a result of the Merger.
At the Effective Time, except as hereinafter described, each share of CSB
Common Stock outstanding immediately prior to the Effective Time (other than
shares as to which dissenters' rights have been perfected) will be converted
automatically into the right to receive 1.023 shares of First Charter Common
Stock. Shares of CSB Common Stock held by First Charter, FCNB or CSB (other than
shares held in a fiduciary capacity or as a result of debts previously
contracted) immediately prior to the Merger will be cancelled. The shares of
First Charter Common Stock, as well as the shares of FCNB stock, outstanding
immediately prior to the Merger will continue to be outstanding after the
Effective Time.
No fractional shares of First Charter Common Stock will be issued in the
Merger. Instead, each holder of shares of CSB Common Stock who would otherwise
have been entitled to receive a fraction of a share of First Charter Common
Stock (after taking into account all certificates delivered by such holder) will
receive, in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a share of First Charter Common Stock multiplied by the Fair
Market Value (as defined below) of one share of First Charter Common Stock at
the Effective Time. The Fair Market Value of one share of First Charter Common
Stock at the Effective Time is defined by the Agreement generally as the closing
price per share as reported by The Nasdaq Stock Market on the last business day
preceding the Effective Time. No such holder will be entitled to dividends,
voting rights or any other rights as a shareholder in respect of any fractional
share. See "THE MERGER -- Exchange of Certificates."
EFFECTIVE TIME OF THE MERGER
The Merger will become effective at the date and time specified in
connection with the approval by the OCC. Unless otherwise agreed by First
Charter and CSB, the Effective Time will occur on or promptly after the first
business day following the last to occur of (i) the expiration of the required
waiting period following the date of the order of the OCC approving the Merger
pursuant to the Bank Merger Act; (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 for consummation of the Merger; and (iv) the date on which
the CSB shareholders and the First Charter shareholders approve the Agreement.
If approved by the First Charter and CSB shareholders and applicable regulatory
authorities, the parties currently expect that the Effective Time will occur by
December 31, 1997 or as soon as possible thereafter, although there can be no
assurance as to whether or when the Merger will occur. See "THE
MERGER -- Conditions to the Merger."
EXCHANGE OF CERTIFICATES
Before or as soon as practicable after the Effective Time, First Charter
National Bank, in its capacity as Exchange Agent (the "Exchange Agent"), will
mail to each holder of CSB Common Stock of record as of the Effective Time a
letter of transmittal and related forms (the "Letter of Transmittal") for use in
forwarding stock certificates previously representing CSB Common Stock for
surrender and exchange for certificates representing First Charter Common Stock.
CSB SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE
THE LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT.
Upon surrender to the Exchange Agent of one or more certificates for shares
of CSB Common Stock, duly endorsed as required by the Exchange Agent and
accompanied by a properly completed and executed Letter of Transmittal, there
will be issued and mailed to the holder thereof a certificate or certificates
representing the aggregate number of whole shares of First Charter Common Stock
to which such holder is entitled, together with all undelivered dividends or
distributions in respect of
20
<PAGE>
such shares following the Effective Time and, where applicable, a check for the
amount (without interest) representing the value of any fractional share. A
certificate for shares of First Charter Common Stock, or any check representing
cash in lieu of fractional shares or undelivered dividends or distributions, may
be issued in a name other than the name in which the surrendered certificate for
CSB Common Stock is registered only if (i) the certificate surrendered is
properly endorsed, accompanied by a guaranteed signature if required by the
Letter of Transmittal and otherwise in proper form for transfer, and (ii) the
person requesting the issuance of such certificate either (A) pays to the
Exchange Agent any transfer or other taxes required by reason of the issuance of
a certificate for shares of FCC Common Stock or a check in a name other than
that of the registered holder of the certificate surrendered or (B) establishes
to the satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. The Exchange Agent will issue stock certificates evidencing First
Charter Common Stock in exchange for lost, stolen, mutilated or destroyed
certificates of CSB Common Stock only upon receipt of a lost stock affidavit and
a bond indemnifying First Charter against any claim arising out of the allegedly
lost, stolen, mutilated or destroyed certificate. In no event will the Exchange
Agent, First Charter or CSB be liable to any persons for any First Charter
Common Stock or dividends thereon or cash delivered in good faith to a public
official pursuant to any applicable abandoned property, escheat or similar law.
First Charter is not obligated to deliver any shares of First Charter
Common Stock to which any former holder of CSB Common Stock is entitled as a
result of the Merger until such holder surrenders his or her certificate or
certificates representing CSB Common Stock as described above. On and after the
Effective Time and until such surrender of certificates to the Exchange Agent,
each certificate that represented outstanding CSB Common Stock immediately prior
to the Effective Time (except for shares held by FCC, FCNB or CSB other than in
a fiduciary capacity or as a result of debts previously contracted, which shall
be cancelled as described herein, and shares as to which dissenters' rights of
appraisal have been perfected, as described in "THE MERGER -- Dissenters' Rights
of Appraisal") will be deemed to evidence ownership of the number of whole
shares of First Charter Common Stock into which such shares have been converted,
and the holders thereof shall be entitled to vote at any meeting of First
Charter shareholders to the extent permitted by law. No shareholder will,
however, receive dividends or other distributions, if any, on such First Charter
Common Stock following the Effective Time until the certificates representing
CSB Common Stock are so surrendered. Upon surrender of CSB Common Stock
certificates, CSB shareholders will be paid any dividends or other distributions
on First Charter Common Stock that are payable to holders as of any record date
on or following the Effective Time. No interest will be payable with respect to
withheld dividends or other distributions.
BACKGROUND OF AND REASONS FOR THE MERGER
FIRST CHARTER. The strategy of the Board of Directors of First Charter has
been to increase long-term value for shareholders while at the same time
remaining an independent financial institution. In this regard, the Board of
Directors of First Charter has maintained a philosophy of controlled growth and
has opened DE NOVO branches in its market area. It has also continually
evaluated potential mergers with or acquisitions of stable financial
institutions located in markets compatible with that of First Charter. In
identifying any such financial institutions, First Charter has focused on
institutions that, like it, have encouraged earnings growth for the purpose of
building long-term shareholder value and have maintained similar philosophies
regarding cost controls and development of new services as a means of generating
additional fee income. First Charter has also considered acquisitions of
recently-formed banking institutions that are located in strong markets and that
have exhibited sound growth in both assets and earnings. The Board of Directors
of First Charter believes that CSB meets these criteria as a recently-formed
bank.
The amount of merger and acquisition activity of banks and other financial
institutions during recent years and the increase in the market price of First
Charter Common Stock during such time has provided First Charter with the
opportunity to pursue consideration of possible acquisition candidates. At the
same time, such increased merger activity has resulted in an increasing scarcity
of attractive candidates and has raised the level of competition significantly.
Orr Management Company ("Orr Management"), as financial advisor to CSB,
approached First Charter in June 1997 regarding First Charter's interest in
acquiring CSB. First Charter was advised by Orr Management that it also was
approaching additional financial institutions regarding the sale of CSB. After
First Charter indicated its interest in pursuing an acquisition of CSB, Orr
Management distributed to First Charter an information package detailing certain
information regarding CSB and requested an acquisition proposal from First
Charter by June 27, 1997.
Following this contact, First Charter began its own internal discussions
and analyses regarding a possible acquisition of CSB. First Charter's senior
management discussed potential prices and structures for the proposed
transaction. In analyzing various exchange ratios, senior management considered
such typical factors as earnings, cost savings and impact on the book value of
First Charter. In addition, senior management evaluated the CSB market area and
its potential for growth, as well as
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the anticipated nature of that growth. A primary factor in the evaluation of CSB
was the perceived opportunity to increase revenues in CSB. Finally, senior
management of First Charter evaluated competition among potential bidders for
CSB and the relative strength of First Charter's stock value compared to such
institutions. Orr Management served as a resource for any specific questions
about CSB raised by senior management.
At a special meeting held on June 26, 1997, following a presentation by
senior management as to the factors described above, the Board of Directors of
First Charter authorized senior management to submit an acquisition proposal to
the Board of Directors of CSB through Orr Management. Thereafter, on June 27,
1997 First Charter delivered to Orr Management the Letter of Intent addressed to
the Board of Directors of CSB and outlining the general terms of its acquisition
proposal, including the Exchange Ratio. The Letter of Intent was accepted and
agreed to by CSB on June 30, 1997. In addition, as a condition of First
Charter's entering into the Letter of Intent, the parties also entered into the
Stock Option Agreement dated June 30, 1997, which contains provisions that are
usual and customary in bank mergers, pursuant to which CSB has granted the
Option to First Charter.
During the next four weeks, First Charter and CSB proceeded to conduct due
diligence with respect to each other. At the same time, the entities negotiated
the Agreement providing for the Exchange Ratio and the proposed structure. In
general, these negotiations proceeded in a usual and customary manner and
resulted in the Agreement which consists primarily of standard terms, tailored
where applicable to the specific parties. In addition, during this period the
Board of Directors of First Charter engaged IJL to render to the Board IJL's
opinion as to the fairness of the Agreement and the Merger, from a financial
point of view, to the shareholders of First Charter.
Following this initial due diligence period, the Board of Directors of each
of First Charter and CSB met separately on August 1, 1997 to consider the
Agreement and the Merger. At the First Charter meeting, IJL presented the Board
of Directors of First Charter with its written opinion that the Exchange Ratio
was fair, from a financial point of view, to the shareholders of First Charter.
The Board of Directors of First Charter approved the Agreement and the Merger at
this meeting and authorized the President and Chief Executive Officer of First
Charter to execute and deliver the Agreement on behalf of First Charter, subject
to completion of additional due diligence. On August 15, 1997, First Charter and
CSB entered into the Agreement.
The Board of Directors of First Charter considered several factors in
arriving at its decision to approve the Agreement. It did not assign any
relative or specific weights to the factors considered. The Board of Directors
of First Charter believes that the potential for the CSB market area is strong
as the greater Charlotte area continues to grow. Also, the CSB market area is
strategically located in proximity to the Greenville/Spartanburg area of South
Carolina, as well as the Catawba Valley and Asheville areas of North Carolina.
FCNB currently does not have any branches in CSB's market, and the Board of
Directors of First Charter believes that the location of CSB's branches should
provide First Charter with the opportunity to benefit from continued growth in
this market. The Board of Directors of First Charter also believes that entry
into this market will enable First Charter to strategically align itself along
an important corridor lying to the west of Mecklenburg County. First Charter's
Board of Directors believes this western presence will allow for future
expansion and will complement First Charter's existing presence in northern and
southern Mecklenburg County. The Board of Directors of First Charter considered
CSB's current deposit market share and concluded that an acquisition of CSB
provides First Charter with a preferable means of entering the market on the
western side of Mecklenburg County as opposed to DE NOVO expansion.
The Board of Directors of First Charter also considered that the combined
resources of First Charter and CSB should (i) provide opportunity to achieve
economies of scale, primarily with respect to the elimination of duplicative
back-office staff functions as well as enhanced ability to achieve better human
and technological resources, which economies of scale should improve the
efficiency and profitability of the combined entity; (ii) improve the ability of
CSB, following its merger into and with FCNB, to compete with the many financial
institutions doing business in CSB's market area and the surrounding counties;
(iii) provide a source for increases in revenues for the combined entity through
the addition of trust and other services such as investment and insurance sales,
corporate cash management and higher lending limits not currently offered by or
available to CSB; and (iv) generally result in an institution better able to
respond to the needs of its customers in the community.
The Board of Directors of First Charter also believes that the banking
philosophies of First Charter and CSB are similar and will mix well together. In
addition, the Board of Directors considered the book value of CSB and the
financial information related to comparable financial institutions and
acquisitions provided by IJL. Based upon these considerations, among others, the
Board of Directors of First Charter concluded that the combination of the market
areas, products and services made the Merger attractive for both First Charter
and CSB.
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CSB. CSB is a community bank and its community-oriented banking philosophy
has allowed it to compete effectively with the other financial institutions in
its market area and to operate profitably. Historically, CSB did not have any
securities firms creating a market in its shares, and the Board of Directors of
CSB became concerned in late 1995 that the limited trading of CSB's common stock
did not reflect the true value of the bank. In January 1996, CSB engaged Carson
Medlin to prepare a strategic analysis of alternatives the bank could employ to
enhance shareholder value.
During the late Spring of 1996, totally unrelated to the engagement of
Carson Medlin, CSB received an unsolicited request by another community bank,
the Bank of Granite, Granite Falls, North Carolina, to consider a combination of
the two companies. In June 1996, CSB engaged Carson Medlin to advise the CSB
Board regarding a possible transaction with the Bank of Granite. During the
remainder of June and early July 1996, the representatives of CSB and the Bank
of Granite held discussions regarding a possible acquisition of CSB as a
separate subsidiary of the Bank of Granite's holding company, Bank of Granite
Corporation ("Granite"). A non-binding letter of intent was executed on July 24,
1996 (the "Granite Letter of Intent") and the parties began negotiations
regarding the terms of a definitive agreement. The parties tentatively agreed in
the Granite Letter of Intent to a stock exchange ratio of 1.11 shares of Granite
common stock for each share of CSB Common Stock, which represented, on the date
of the Granite Letter of Intent, a price of approximately $31.1 million for CSB
based on the value of Granite's stock. However, the exchange ratio was subject
to adjustment in the event of changes in the price of Granite common stock. The
market price of Granite common stock continued to rise throughout August 1996
and negotiations regarding the terms of the adjustment mechanism for the
exchange ratio in the definitive agreement were unsuccessful. The parties
terminated all discussions in September 1996, and management of CSB returned to
concentrating on operation of the bank as an independent entity.
In the late Spring of 1997, the Board of Directors of CSB concluded that it
should study the strategic alternatives for the future of CSB, including whether
a sale of CSB would benefit the long term interest of its shareholders. The
Board of Directors authorized the engagement of the consulting firm of Orr
Management Company, Winston-Salem, North Carolina ("Orr Management") which has
experience in advising banking companies in strategic evaluations. In connection
with this engagement, CSB has paid or agreed to pay Orr Management aggregate
compensation of $311,500. Orr Management's recommendation was that CSB conduct a
solicitation of proposals from various banking organizations to establish a
value for the shareholders of a sale of CSB. On June 17, 1997, the Board of
Directors agreed to this recommendation and the solicitation was undertaken by
Orr Management. In connection with its engagement, Orr Management (i) performed
extensive due diligence on CSB, (ii) prepared a confidential memorandum
regarding CSB (the "Memorandum"), and (iii) contacted a number of banking
institutions with operations in North Carolina (some with main offices in other
southeastern states) whom Orr Management, based on its expertise and experience,
believed would be interested in receiving the Memorandum and submitting a
proposal. Thereafter, Orr Management received executed confidentiality
agreements from, and distributed the Memorandum to, twelve companies and
ultimately received bids from four companies.
The management and Board of Directors of CSB evaluated the four proposals
received from this solicitation, and at a meeting on June 30, 1997, the Board of
Directors of CSB reviewed each of the four bids. The bid of First Charter of
1.023 shares of First Charter Common Stock for each share of CSB Common Stock
represented the highest value of CSB, approximately $38 million based on the
value of the First Charter Common Stock as of that date. The next highest offer
constituted a bid range that was approximately $500,000 lower, at the upper end
of the range, than the First Charter offer, subject to adjustment based on the
results of due diligence. Furthermore, First Charter did not request an
adjustment of the Exchange Ratio if the value of the First Charter Common Stock
increased, but was willing to provide CSB the option to terminate the
transaction if the average price of the First Charter Common Stock fell below
$20 per share for the 20 consecutive days prior to the closing of the
transaction.
The Board of Directors also considered that First Charter had an excellent
dividend payment history and good historical earnings, and Orr Management
recommended that the Board of Directors accept the bid offer from First Charter.
The Board of Directors authorized the execution of the Letter of Intent with
First Charter, the conducting of due diligence on First Charter, the negotiation
of a definitive agreement and the engagement of Carson Medlin to prepare a
fairness opinion regarding the proposed consideration.
Following a due diligence review of First Charter and extensive
negotiations regarding the language of the Agreement, on August 1, 1997, the
Board of Directors of CSB was given a draft of the Agreement for consideration.
The Board of Directors also received the report of Carson Medlin that the
consideration to be received from First Charter was fair, from a financial point
of view, to CSB shareholders. After discussion of certain items that were still
under discussion between the parties, the Board of Directors approved execution
of the Agreement. The Board of Directors further authorized the President
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of CSB to negotiate the several other matters. Upon conclusion of those
discussions, the Agreement was executed as of August 15, 1997.
In evaluating the Merger and determining whether to approve the Agreement,
the Board of Directors of CSB consulted with financial, legal, accounting and
other advisors as well as CSB's management, and considered a number of factors.
In addition to those discussed above, and without assigning any relative or
specific weight to any factors, the Board of Directors of CSB considered the
following:
(a) The assessment of First Charter's business, operations, earnings,
prospects and financial condition, and enhanced opportunities for
growth, operating efficiencies and expanded customer services
expected to result from the Merger;
(b) The opinion of CSB's financial advisor, Carson Medlin, that the
Merger is fair, from a financial point of view, to the
shareholders of CSB;
(c) A variety of factors affecting and relating to the overall
strategic focus of CSB and First Charter, including similarities
in business outlook, approach and corporate culture;
(d) The expectation that the Merger will be a tax-free transaction to
CSB and its shareholders;
(e) The larger average trading volume and potential for greater
liquidity offered by the First Charter Common Stock to be
received by CSB's shareholders in the Merger;
(f) By affiliation with First Charter on the terms proposed in the
Agreement, the dividends, earnings and book value per share of
CSB Stock will be increased; and
(g) The current and prospective economic and competitive environment
facing financial institutions, including CSB, and the likelihood
of a continuing trend of consolidation in the financial services
industry.
OPINIONS OF FINANCIAL ADVISORS
FIRST CHARTER. The Board of Directors of First Charter has retained IJL to
render a written opinion with respect to the fairness, from a financial point of
view, to the holders of First Charter Common Stock of the consideration to be
paid by First Charter in the Merger. IJL is a regional investment banking firm
and, as part of its investment banking activities, is regularly engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. The Board of Directors of
First Charter selected IJL to render its opinion in connection with the Merger
on the basis of IJL's experience and expertise in merger transactions and its
reputation in the banking and investment communities.
In connection with its engagement, on August 1, 1997, IJL delivered a
written opinion to the Board of Directors of First Charter to the effect that,
as of such date and based upon and subject to certain matters, the consideration
to be paid by First Charter in the Merger to the shareholders of CSB is fair to
the shareholders of First Charter from a financial point of view. IJL has
confirmed its initial opinion by delivery to the Board of Directors of First
Charter of a written opinion dated as of October 24, 1997.
THE FULL TEXT OF IJL'S WRITTEN OPINION DATED AS OF OCTOBER 24, 1997, WHICH
SETS FORTH CERTAIN ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN BY IJL, IS ATTACHED AS APPENDIX B TO THIS JOINT PROXY
STATEMENT-PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE AND SHOULD BE READ
IN ITS ENTIRETY. THE SUMMARY OF THE OPINION OF IJL SET FORTH HEREIN IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE OPINION. IJL'S OPINION IS DIRECTED ONLY TO
THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, TO THE HOLDERS OF FIRST CHARTER
COMMON STOCK OF THE CONSIDERATION TO BE PAID BY FIRST CHARTER IN THE MERGER. THE
OPINION DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER OR ANY RELATED
TRANSACTIONS AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER OF
FIRST CHARTER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE WITH RESPECT TO THE
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AT THE FIRST CHARTER SPECIAL
MEETING.
In connection with its opinion, IJL, among other things: (i) reviewed
certain publicly available financial and other data with respect to First
Charter and CSB, including the respective consolidated financial statements of
First Charter and CSB for recent fiscal years and interim periods to June 30,
1997, and certain other relevant financial and operating data relating to First
Charter and CSB made available to IJL from published sources and from the
internal records of First Charter and CSB; (ii) reviewed the Agreement and
certain related documents provided to IJL by First Charter; (iii) reviewed the
Current
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Reports on Form 8-K filed by First Charter and the Current Reports on Form F-3
filed by CSB, respectively, with respect to the Merger; (iv) reviewed a draft of
this Joint Proxy Statement-Prospectus; (v) reviewed certain historical market
prices and trading volumes of First Charter and CSB as reported by The Nasdaq
Stock Market; (vi) compared CSB from a financial point of view with certain
other public companies which IJL deemed to be relevant; (vii) considered the
financial terms, to the extent publicly available, of selected business
combinations in the banking industry; (viii) reviewed and discussed with
representatives of management of each of First Charter and CSB certain
information regarding the business and financial issues of the Merger, including
financial forecasts relating to cost savings and other potential synergies
anticipated to result from the Merger and related assumptions; (ix) made
inquiries regarding and discussed the due diligence review of CSB conducted by
First Charter with senior executives of CSB; (x) made inquiries regarding and
discussed the Merger, the Agreement and other matters related thereto with First
Charter's counsel; and (xi) performed such other analyses and examinations as
IJL deemed appropriate.
In connection with its review, IJL did not assume any obligation to verify
any of the foregoing information and relied on all such information being
complete and accurate in all material respects. With respect to the financial
forecasts for First Charter and CSB prepared by their respective management
teams, IJL assumed, with First Charter's consent, for purposes of its opinion
that such forecasts were reasonably prepared on bases reflecting at the time of
preparation the best available estimates and judgments of their respective
management teams, as to the cost savings, revenue enhancements and other
potential synergies (including the timing, amount and achievability thereof)
anticipated to result from the Merger, and that such forecasts provided a
reasonable basis upon which IJL could form its opinion. IJL also assumed, with
First Charter's consent, that there were no material changes in First Charter's
or CSB's respective assets, financial condition, results of operations, business
or prospects since the respective dates of their last financial statements
reviewed by IJL, and that off-balance-sheet activities of First Charter and CSB
will not materially and adversely affect the future financial position or
results of operations of First Charter or CSB. IJL further assumed, with First
Charter's consent, that (i) in the course of obtaining the necessary regulatory
and third party consents for the Merger, no restriction will be imposed that
will have a material adverse effect on the contemplated benefits of the Merger
or the transactions contemplated thereby, and (ii) the Merger will be
consummated in accordance with the terms and provisions of the Agreement,
without any amendments to, and without any waiver by First Charter of, any of
the material conditions to its obligations thereunder. IJL noted that it is not
an expert in the evaluation of loan portfolios for purposes of assessing the
adequacy of the allowances for losses with respect thereto and IJL assumed, with
First Charter's consent, that such allowances for each of First Charter and CSB
are in the aggregate adequate to cover such losses. In addition, IJL did not
assume responsibility for reviewing any individual credit files or making an
independent evaluation, appraisal or physical inspection of the assets or
individual properties of First Charter or CSB, nor was IJL furnished with any
such evaluation or appraisals. Finally, IJL's opinion was based on economic,
monetary, market and other conditions as in effect on, and the information made
available to IJL as of, the date thereof. Although IJL evaluated the
consideration to be paid by First Charter in the Merger to the holders of the
CSB Common Stock from a financial point of view, IJL was not requested to, and
did not, recommend the specific consideration payable in the proposed Merger. No
other limitations were imposed by First Charter on IJL with respect to the
investigations made or procedures followed by IJL in rendering its opinion.
Set forth below is a summary of the material analyses performed by IJL in
connection with its opinion delivered to the Board of Directors of First Charter
on August 1, 1997. In connection with its updated opinion as of October 24,
1997, IJL updated certain of its analyses, as necessary, and reviewed the
assumptions on which such analyses were based and the factors considered in
connection therewith.
(a) PRO FORMA DILUTION ANALYSIS. IJL compared estimated earnings per
share ("EPS") for First Charter on a stand-alone basis to the estimated EPS
for First Charter on a pro forma combined basis for calendar years 1997 and
1998, based on IJL's EPS estimates for First Charter of $1.32 in 1997 and
$1.45 in 1998 and for CSB of $0.81 in 1997 and $1.07 in 1998, and also
based on estimates of management of First Charter as to the cost savings
and other potential synergies anticipated to result from the Merger. IJL
noted that, based upon estimates of management of First Charter as to
anticipated cost savings, revenue enhancements and operating synergies, and
after giving effect to certain assumptions as to, among other things, the
number of shares outstanding in each respective period, the Merger can be
expected to be dilutive to First Charter's EPS in calendar year 1997 by
approximately 4.3%, and to be dilutive to First Charter's EPS in calendar
year 1998 by approximately 2.9%.
(b) COMPARABLE COMPANY ANALYSIS. Based on publicly available
information and earnings estimates, IJL reviewed and compared actual and
estimated selected financial, operating and stock market information and
financial ratios of CSB, First Charter and a group of nine banks consisting
of Bank of Granite Corporation; Carolina First Bancshares,
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Inc.; First Bancorp; FNB Corp.; FNB Financial Services Corporation; LSB
Bancshares, Inc.; Peoples Bank; The First National Bank of Shelby; and
Yadkin Valley Bank and Trust Company (the "Comparable Banks").
IJL noted that, among other things: (i) CSB had a common equity to
total assets ratio of 9.5% at June 30, 1997, as compared to the average for
the Comparable Banks of 11.5%; (ii) CSB had a return on average assets and
a return on average equity for the quarter ended June 30, 1997 of 0.9% and
9.9%, respectively, as compared to the average for the Comparable Banks of
1.8% and 15.5%, respectively; (iii) CSB had an efficiency ratio (defined as
noninterest expense divided by net interest income plus noninterest income,
before taking into account any goodwill amortization) of 55.8% for the
quarter ended June 30, 1997, as compared to the average for the Comparable
Banks of 49.4%; (iv) CSB had a price to book value ratio of 2.79x as of
July 31, 1997 (based on the balance sheet at June 30, 1997), as compared to
the average for the Comparable Banks of 2.70x; and (v) CSB had a price to
earnings ratio of 29.0x at July 31, 1997 (based on its EPS for the latest
twelve months ended June 30, 1997), as compared to the average for the
Comparable Banks of 18.72x.
(c) ANALYSIS OF SELECTED COMPARABLE BANK MERGER TRANSACTIONS. IJL
reviewed the consideration paid in transactions in North Carolina announced
from September 13, 1995 through June 30, 1997 and in which the transaction
value is less than $500 million. These transactions are as follows
(Acquiror/Target): Triangle Bancorp, Inc./Bank of Mecklenburg; LSB
Bancshares, Inc./Old North State Bank; FCFT, Inc./Blue Ridge Bank; CCB
Financial Corporation/Salem Trust Bank; Centura Banks, Inc./FirstSouth
Bank; Centura Banks, Inc./First Community Bank; Centura Banks, Inc./First
Commercial Holding Corporation; United Carolina Bancshares
Corporation/Triad Bank; and First Charter Corporation/Bank of Union (for
purposes of this discussion, collectively, the "Comparable Transactions").
For each company merged or to be merged in such transactions, IJL compiled
figures illustrating, among other things, transaction price to latest 12
months' EPS, transaction price to book value, transaction price to tangible
book value, and the ratio of premium over tangible book value to core
deposits.
The ratios for the Comparable Transactions are as follows: (i) a
median ratio of transaction price to latest 12 months' earnings per share
of 21.40x; (ii) a median ratio of transaction price to book value of 2.49x;
(iii) a median ratio of transaction price to tangible book value of 2.49x;
and (iv) a median ratio of premium over tangible book value to core
deposits of 20.32%. Based on a closing price of $24.00 per share for First
Charter Common Stock as of July 31, 1997, the consideration to be paid to
the holders of CSB represented a ratio of transaction price to latest 12
months adjusted earnings per share of 35.07x, a ratio of transaction price
to book value of 3.15x, a ratio of transaction price to tangible book value
of 3.33x and a ratio of tangible premium to core deposits of 29.2%.
No company or transaction used in the analysis set forth in paragraphs
(b) and (c) above as a comparison is identical to First Charter, CSB or the
proposed Merger, as the case may be. Accordingly, an analysis of the
results of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and
operating characteristics of the companies and other factors that could
affect the acquisition or public trading multiples of the companies to
which First Charter, CSB and the proposed Merger are being compared.
(d) OTHER ANALYSES. IJL also reviewed selected investment research
reports on CSB and First Charter. In addition, IJL prepared an overview of
the historical financial performance of CSB and analyzed its deposits, its
loan portfolio and a break-down by industry classification of its
commercial lending, as well as a history of its non-performing assets.
The foregoing is a summary of the material analyses performed by IJL in
connection with its opinion delivered to the Board of Directors of First Charter
on August 1, 1997. The summary set forth above does not purport to be a complete
description of the analyses performed by IJL. The preparation of a fairness
opinion is not necessarily susceptible to partial analysis or summary
description. IJL believes that its analyses and the summary set forth above must
be considered as a whole and that selecting portions of its analyses and of the
factors considered, without considering all analyses and factors, would create
an incomplete view of the process underlying the analyses. In addition, IJL may
have given various analyses more or less weight than other analyses, and may
have deemed various assumptions more or less probable than other assumptions, so
that the ranges of valuations resulting from any particular analysis described
above should not be taken to be IJL's view of the actual values of First
Charter, CSB or the combined company. The fact that any specific analysis has
been referred to in the summary above is not meant to indicate that such
analysis was given greater weight than any other analysis.
In performing its analyses, IJL made numerous assumptions with respect to
industry performance, regulatory, general business and economic conditions and
other matters, many of which are beyond the control of First Charter or CSB. The
analyses performed by IJL are not necessarily indicative of actual values or
actual future results, which may be significantly more or less favorable than
those suggested by such analyses. Such analyses were prepared solely as part of
IJL's analysis of
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the fairness of the consideration to be paid by First Charter from a financial
point of view in connection with the delivery of IJL's opinion. The analyses do
not purport to be appraisals or to reflect the prices at which a company might
actually be sold or the prices at which any securities may trade at the present
time or at any time in the future. IJL used in its analyses estimates of IJL for
First Charter, estimates of management of CSB for CSB and projections prepared
by management of First Charter as to the cost savings and other potential
synergies anticipated to result from the Merger. Such projections and estimates
are based on numerous variables and assumptions which are inherently
unpredictable. Accordingly, actual results could vary significantly from those
set forth in such projections.
Pursuant to the terms of IJL's engagement, First Charter has agreed to pay
IJL a fee equal to $100,000. First Charter also has agreed to reimburse IJL for
its reasonable out-of-pocket expenses, including the fees and expenses of IJL's
legal counsel, not to exceed $5,000. First Charter has further agreed to
indemnify IJL, its affiliates, and their respective partners, directors,
officers, agents, consultants, employees and controlling persons against certain
liabilities, including liabilities under the federal securities laws.
IJL has performed various financial advisory and investment banking
services for First Charter in the past, for which IJL has received compensation,
and may provide such services to First Charter in the future. In addition, in
the ordinary course of its business, IJL trades the equity securities of First
Charter and CSB for its own account and for the accounts of its customers and,
accordingly, may at any time hold a long or short position in such securities.
CSB. The Board of Directors of CSB retained Carson Medlin to render a
written opinion with respect to the fairness, from a financial point of view, of
the consideration to be received by the unaffiliated shareholders of CSB in the
Merger. Carson Medlin is a National Association of Securities Dealers, Inc.
member investment banking firm which specializes in the securities of
southeastern United States financial institutions. As part of its investment
banking activities, Carson Medlin is regularly engaged in the valuation of
southeastern United States financial institutions and transactions relating to
their securities, including mergers and acquisitions. CSB selected Carson Medlin
on the basis of Carson Medlin's historical relationship with CSB as well as such
firm's experience and expertise in transactions similar to the Merger.
In connection with its engagement, on August 1, 1997, Carson Medlin
delivered to the Board of Directors of CSB its written opinion that the
consideration to be received by the unaffiliated shareholders of CSB from First
Charter in the Merger is fair, from a financial point of view. Carson Medlin has
confirmed its initial opinion by delivery to the Board of Directors of CSB of a
written opinion dated as of October 24, 1997 to the effect that, as of such
date, the consideration to be received by the unaffiliated shareholders of CSB
from First Charter in the Merger is fair, from a financial point of view. An
unaffiliated shareholder of CSB generally is a shareholder who, directly or
indirectly through one or more intermediaries, does not control, and is not
controlled by, and is not under common control with, CSB.
THE FULL TEXT OF CARSON MEDLIN'S WRITTEN OPINION DATED AS OF OCTOBER 24,
1997 IS ATTACHED AS APPENDIX C TO THIS JOINT PROXY STATEMENT-PROSPECTUS AND IS
INCORPORATED HEREIN BY REFERENCE AND SHOULD BE READ IN ITS ENTIRETY WITH RESPECT
TO THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND
QUALIFICATIONS OF AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY CARSON MEDLIN IN
CONNECTION THEREWITH. THE SUMMARY OF THE OPINION OF CARSON MEDLIN SET FORTH
HEREIN AS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE OPINION. CARSON MEDLIN'S
OPINION IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE
CONSIDERATION TO BE RECEIVED BY THE UNAFFILIATED SHAREHOLDERS OF CSB FROM FIRST
CHARTER IN THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
SHAREHOLDER OF CSB AS TO HOW SUCH SHAREHOLDER SHOULD VOTE WITH RESPECT TO THE
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AT THE CSB SPECIAL MEETING.
In connection with its opinion, Carson Medlin reviewed: (i) the Letter of
Intent; (ii) a draft of the Agreement; (iii) the final Agreement executed August
15, 1997; (iv) the annual reports to shareholders of First Charter, including
audited financial statements, for the five years ended December 31, 1996; (v)
the annual reports to shareholders of CSB, including audited financial
statements, for the five years ended December 31, 1996; (vi) the proxy statement
of CSB prepared for its annual meeting of the shareholders held on April 15,
1997; (vii) the proxy statement of First Charter dated March 5, 1997 for its
annual meeting of the shareholders held on April 29, 1997; (viii) the unaudited
interim financial statements of each of CSB and First Charter for the six months
ended June 30, 1997; (ix) a draft of this Joint Proxy Statement-Prospectus; and
(x) certain other financial and operating information with respect to the
business, operations and prospects of CSB and First Charter.
Carson Medlin also (i) held discussions with members of the senior
management of CSB and First Charter regarding their respective historical and
current business operations, financial conditions and future prospects; (ii)
reviewed the historical market prices and trading activity for the common stocks
of CSB and First Charter and compared them with those of
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certain publicly traded companies which it deemed to be relevant; (iii) compared
the results of operations of CSB and First Charter with those of certain
publicly traded companies which it deemed to be relevant; (iv) compared the
proposed financial terms of the Merger with the financial terms, to the extent
publicly available, of certain other recent business combinations of common
banking organizations; (v) analyzed the pro forma financial impact of the Merger
on First Charter; and (vi) conducted such other studies, analyses, inquiries and
examinations as Carson Medlin deemed appropriate.
Carson Medlin has relied upon, without independent verification, the
accuracy and completeness of the information reviewed by it for the purposes of
rendering its opinion. Carson Medlin did not undertake any independent
evaluation or appraisal of the assets and liabilities of CSB or First Charter,
nor was it furnished with any such appraisals. Carson Medlin assumed that the
financial forecasts reviewed by it have been reasonably prepared on a basis
reflecting the best currently available judgments and estimates of the
managements of CSB and First Charter, and that such projected financial results
will be realized in the amounts and at the times contemplated thereby. Carson
Medlin is not expert in the evaluation of loan portfolios, underperforming or
nonperforming assets, net charge-offs of such assets or the adequacy of
allowances for losses with respect thereto, and it has not reviewed any
individual credit files and has assumed that the loan loss allowances for each
of CSB and First Charter are in the aggregate adequate to cover such losses.
Carson Medlin assumed that the Merger will be recorded as a pooling of interests
under generally accepted accounting principles. Carson Medlin's opinion is
necessarily based on economic, market and other conditions as in effect on the
date of its analysis, and on information made available to it dated as of
various earlier dates.
The consideration to be received by shareholders of CSB in the Merger is
the result of negotiations between CSB and First Charter. Carson Medlin was not
a party to such negotiations. Carson Medlin was not requested to, and did not,
recommend the specific consideration payable in the Merger. No other limitations
were imposed by CSB on Carson Medlin with respect to the investigations made or
procedures followed by Carson Medlin in rendering its opinion.
Set forth below is a summary of the principal analyses performed by Carson
Medlin in connection with its opinion delivered to the Board of Directors of CSB
on August 1, 1997. In connection with its updated opinion as of October 24,
1997, Carson Medlin confirmed the appropriateness of its reliance on the
analyses used to render its August 1, 1997 opinion by performing procedures to
update certain of such analyses and by reviewing the assumptions on which those
analyses were based and the factors considered in connection therewith.
(a) SUMMARY OF TRANSACTION CONSIDERATION. Carson Medlin reviewed the
terms of the proposed transaction, including the Exchange Ratio and the
aggregate transaction value. Carson Medlin reviewed the implied value of
the consideration offered based upon the $22.00 per share closing price of
First Charter Common Stock on July 24, 1997, which showed that the implied
value of the proposed transaction was approximately $22.51 per share of CSB
Common Stock, representing an 88% premium to the last reported trade of CSB
Common Stock prior to the public announcement of the Merger (June 13,
1997), or a total transaction value of approximately $38.7 million. Carson
Medlin calculated that as of July 24, 1997 the aggregate transaction value
represented 280% of CSB's stated book value at June 30, 1997, adjusted pro
forma for the conversion of stock options, and 32.1x CSB's June 30, 1997
trailing twelve months earnings, a 25.1% premium on CSB's June 30, 1997
core deposits (defined as the aggregate transaction value minus stated book
value, as a percentage of core deposits) and 27.4% of the total assets of
CSB at June 30, 1997.
(b) COMPARABLE TRANSACTION ANALYSIS. Carson Medlin reviewed certain
information relating to twenty selected southeastern bank mergers announced
between September 1993 and February 1997 in which the acquired banks had
total assets of from $36 million to $1.4 billion (for purposes of this
discussion, the "Comparable Transactions"). The Comparable Transactions are
(Acquiree/Acquiror): Salem Trust Bank/CCB Financial Corporation; Security
Capital Bancorp/CCB Financial Corporation; American Federal Bank, FSB/CCB
Financial Corporation; First Charlotte Financial Corporation/Centura Banks,
Inc.; First Commercial Holding Corporation/Centura Banks, Inc.; First
Community Bank/Centura Banks, Inc.; FirstSouth Bank/Centura Banks, Inc.;
Atlantic Community Bancorp, Inc./Triangle Bancorp, Inc.; Standard Bank &
Trust Company/Triangle Bancorp, Inc.; Columbus National Bank/Triangle
Bancorp, Inc.; The Village Bank/Triangle Bancorp, Inc.; Granville United
Bank/Triangle Bancorp, Inc.; Bank of Mecklenburg/Triangle Bancorp, Inc.;
Central State Bank/First Bancorp; Bank of Iredell/United Carolina
Bancshares Corporation; RHNB Corporation/NationsBank Corporation; Bank of
Union/First Charter Corporation; Triad Bank/United Carolina Bancshares
Corporation; Blue Ridge Bank/FCFT Inc.; and Old North State Bank/LSB
Bancshares, Inc. Carson Medlin considered, among other factors, the
earnings, capital level, asset size and quality of assets of the acquired
financial institutions. Carson Medlin compared the transaction prices to
the then recently reported annual earnings, stated book values, total
assets and core deposits.
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On the basis of the Comparable Transactions, Carson Medlin calculated
a range of purchase prices as a percentage of stated book value for the
Comparable Transactions from a low of 166.8% to a high of 305.7%, with a
mean of 235.0%. These transactions indicated a range of values for CSB from
$13.44 per share to $24.64 per share, with a mean of $18.94 per share
(based on CSB's book value of $8.06 per share, adjusted for the pro forma
exercise of stock options, at June 30, 1997). The aggregate consideration
implied by the terms of the Merger is approximately $22.51 per share or
280% of adjusted book value, which is at the high end of the range for the
Comparable Transactions.
Carson Medlin also calculated a range of purchase prices as a multiple
of earnings for the Comparable Transactions from a low of 13.8x to a high
of 29.8x, with a mean of 20.9x. These transactions indicated a range of
values for CSB from $9.66 to $20.87 per share, with a mean of $14.64 per
share (based on CSB's trailing twelve months earnings of $1,205,000). The
aggregate consideration implied by the terms of the Merger is approximately
$22.51 per share or 32.1x trailing twelve months earnings, which is above
the high end of the range for the Comparable Transactions.
Carson Medlin calculated the core deposit premiums for the Comparable
Transactions and found a range of values from a low of 9.3% to a high of
28.9%, with a mean of 17.7%. The premium on CSB's core deposits implied by
the terms of the Agreement is 25.1%, which is near the high end of the
range for the Comparable Transactions.
Finally, Carson Medlin calculated a range of purchase prices as a
percentage of total assets for the Comparable Transactions from a low of
12.2% to a high of 31.0%, with a mean of 21.6%. The aggregate consideration
as a percentage of total assets implied by the terms of the Merger is
approximately 27.4%, which is above the mean for the Comparable
Transactions.
(c) INDUSTRY COMPARATIVE ANALYSIS. Carson Medlin compared selected
operating results of CSB to those of First Charter, as well as those of 51
publicly-traded community commercial banks in Alabama, Florida, Georgia,
North Carolina, South Carolina, Virginia and West Virginia (the "SIBR
Banks") as contained in the SOUTHEASTERN INDEPENDENT BANK REVIEW(tm), a
proprietary research publication prepared by Carson Medlin quarterly since
1991. The SIBR Banks range in asset size from approximately $98 million to
$2.3 billion and in shareholders' equity from approximately $8.8 million to
$232.6 million. Carson Medlin considers this group of financial
institutions more comparable to CSB and First Charter than larger, more
widely traded regional financial institutions. Carson Medlin compared,
among other factors, the profitability, capitalization and asset quality of
CSB and First Charter to those of the SIBR Banks. Carson Medlin noted that
for the three months ended March 31, 1997: (i) CSB had a return on average
assets (ROA) of 0.77% compared to 1.85% for First Charter and 1.22% on
average for the SIBR Banks; (ii) CSB had a return on average equity (ROE)
of 8.5% compared to 16.1% for First Charter and 12.6% on average for the
SIBR Banks; (iii) CSB had common equity to total assets of 9.03% compared
to 11.25% for First Charter and 9.54% on average for the SIBR Banks; and
(iv) CSB's non-performing assets ratio (defined as loans 90 days past due,
nonaccrual loans and other real estate to total loans net of unearned
income and other real estate) was 0.39% compared to 0.87% for First Charter
and 1.03% on average for the SIBR Banks. Carson Medlin also noted that for
the year ended December 31, 1996: (A) CSB's ROA was 0.97% compared to 1.69%
for First Charger and 1.23% on average for the SIBR Banks; (B) CSB's ROE
was 10.3% compared to 15.7% for First Charter and 12.6% on average for the
SIBR Banks; (C) CSB had common equity to total assets of 9.23% compared to
10.86% for First Charter and 9.62% on average for the SIBR Banks; and (D)
CSB's non-performing assets ratio was 0.37 compared to 0.76% for First
Charter and 1.02% on average for the SIBR Banks. This comparison indicated
that CSB's financial performance was generally below this peer group while
First Charter's financial performance was generally above the peer group.
No company or transaction used in the analyses set forth in paragraphs
(b) and (c) above is identical to CSB, First Charter or the proposed
Merger, as the case may be. Accordingly, evaluating the results of these
analyses necessarily involves complex considerations and judgments
concerning differences in financial and operating characteristics of CSB,
First Charter and other factors that could affect the value of the
companies to which they are being compared. Mathematical analysis (such as
determining the average or median) is not, in itself, a meaningful method
of using comparable industry or transaction data.
(d) CONTRIBUTION ANALYSIS. Carson Medlin reviewed the relative
contributions in terms of various balance sheet items, net income and
market capitalization to be made by CSB and First Charter to the combined
institution based on (i) balance sheet data at June 30, 1997, and (ii)
income statement data for the six months ended June 30, 1997. The income
statement and balance sheet components analyzed included total assets,
total loans, total deposits, shareholders' equity and net income. This
analysis showed that, while CSB shareholders would own approximately 18.4%
of the aggregate outstanding shares and options of First Charter following
the Merger, based on the Exchange Ratio, CSB is contributing 20.0% of total
assets, 20.8% of total loans (net), 20.4% of total deposits, 17.6% of
shareholders' equity and
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11.4% of annual net income of First Charter after the Merger. For some of
the financial components, CSB is contributing more than CSB shareholders
and optionholders are receiving in the Merger; for other components, CSB is
contributing less than its shareholders and optionholders are receiving.
(e) PRESENT VALUE ANALYSIS. Carson Medlin calculated the present value
of the CSB Common Stock assuming that CSB remains an independent bank. For
purposes of this analysis, Carson Medlin utilized certain projections of
CSB's future earnings through the year 2001. The analysis assumes that CSB
would pay a dividend in 1998 and each year thereafter equal to 20% of
projected net income and would be acquired at the end of 2001 at a purchase
price of 260% of projected book value. The present value of the annual
dividends plus the merger consideration at the end of 2001 was then
calculated using discount rates of 13% through 15% per annum. These rates
were selected to reflect the rates that investors in securities such as the
CSB Common Stock would require in order to be competitive with alternative
investments with similar characteristics. On the basis of these
assumptions, Carson Medlin calculated that the present value of CSB Common
Stock assuming CSB remained as an independent bank ranged from $17.17 per
share to $18.58 per share. The aggregate consideration implied by the terms
of the Agreement is approximately $22.51 per share, which falls above the
high end of the range of the calculated present value were CSB to remain
independent through 2001. Carson Medlin noted that the present value
analysis was included because it is a widely used valuation methodology,
but noted that the results of such methodology are highly dependent upon
the numerous assumptions that must be made, including earnings growth
rates, dividend payout rates, terminal values and discount rates.
(f) STOCK TRADING HISTORY. Carson Medlin reviewed and analyzed the
historical trading prices and volumes for First Charter Common Stock from
August 1992 to August 1997. Carson Medlin also compared price performance
of First Charter Common Stock during this period to the SIBR Banks, the Dow
Jones Southeastern U.S. Banks Index and the Dow Jones Equity Market Index.
This analysis showed that for the five-year period ending August 22, 1997,
the total return (annualized) for First Charter Common Stock (all cash
distributions and dividends reinvested on the ex-dividend date) was 40.82%
compared to 27.51% for the Dow Jones Southeastern U.S. Banks Index and
20.68% for the Dow Jones Equity Market Index.
During the four quarters ending June 30, 1997, the ratio of stock
price to trailing 12 months earnings per share for the SIBR Banks was: a
low of 14.2x, a high of 15.7x and a mean of 15.0x. For the same periods,
First Charter's price to earnings ratio ranged from a low of 15.2x to a
high of 18.6x with a mean of 16.9x. The First Charter Common Stock has
traded on average at a higher price to earnings ratio than the SIBR Banks.
During the four quarters ending June 30, 1997, the stock price as a
percentage of book value for the SIBR Banks was: a low of 175%, a high of
214% and a mean of 192%. For the same periods, First Charter's price to
book ratio ranged from a low of 209% to a high of 273% with a mean of 240%.
The First Charter Common Stock has traded on average at a higher price to
book value basis compared to the SIBR Banks.
Carson Medlin also examined the recent trading volume in First Charter
Common Stock, which trades on The Nasdaq National Market, with that of the
SIBR Banks. Carson Medlin considers the First Charter Common Stock to be
liquid and marketable. Carson Medlin also examined recent trading prices
and volumes of CSB Common Stock, to the extent available. CSB Common Stock
is traded in the over-the-counter market and listed in the National Daily
Quotation Service "Pink Sheets." The CSB Common Stock trades infrequently,
and while the information obtained is believed to be reliable, actual trade
prices and volume could not be confirmed. Carson Medlin placed little
weight on the market price of CSB Common Stock in its analysis.
(g) SHAREHOLDER CLAIMS ANALYSIS. Carson Medlin compared the ownership
of one share of CSB Common Stock to the ownership of 1.023 shares of First
Charter Common Stock (as implied by the terms of the Merger Agreement) from
the perspective of claims on various balance sheet and income statement
variables. Carson Medlin found that CSB shareholders would have had a claim
to $1.11 per share of CSB Common Stock of estimated pro forma 1996 earnings
after consummation of the Merger, versus $0.76 without the Merger, and
$1.20 per share of CSB Common Stock of estimated pro forma 1997 earnings
versus $0.80 without. CSB shareholders would have had a claim to $78.04 per
share of CSB Common Stock in June 30, 1997 total assets compared to $85.12
without the Merger. CSB shareholders would have had a claim to $8.40 in
June 30, 1997 pro forma book value per share of CSB Common Stock compared
to $8.06 without the Merger. At a price of $22.00 per share for First
Charter Common Stock, the implied value of the proposed transaction is
$22.51 per share of CSB Common Stock compared to a reported $12.00 before
the Merger. Furthermore, CSB's shareholders would be expected, assuming
continuation of First Charter's recent dividend rate, to receive cash
dividends at the annual rate of $0.53 per share of CSB Common Stock after
the Merger versus $0.00 per share of CSB Common Stock prior to the Merger.
In view of this generally favorable shareholder claims comparison, Carson
Medlin
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concluded that 1.023 shares of First Charter Common Stock is likely to be
worth more than one share of CSB Common Stock at the date of consummation
of the Merger.
(h) OTHER ANALYSES. Carson Medlin also reviewed selected investment
research reports on and earnings estimates for First Charter. In addition,
Carson Medlin performed a dilution analysis and such other analyses and
comparisons that it deemed appropriate.
The foregoing is a summary of the principal analyses performed by Carson
Medlin in connection with its opinion delivered to the Board of Directors of
CSB. The preparation of a financial fairness opinion of this nature involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances and, therefore, is not readily susceptible to partial analysis or
summary description. Carson Medlin believes that its analyses must be considered
together as a whole and that selecting portions of such analyses and the facts
considered therein, without considering all other factors and analyses, could
create an incomplete view of the analyses and the process underlying Carson
Medlin's opinion. In its analyses, Carson Medlin made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of CSB and First Charter and which
may not be realized. Any estimates contained in Carson Medlin's analyses are not
necessarily predictive of future results or values, which may be significantly
more or less favorable than such estimates. Estimates of values of companies do
not purport to be appraisals or necessarily reflect the prices at which such
companies or their securities may actually be sold. None of the analyses
performed by Carson Medlin was assigned a greater significance by Carson Medlin
than any other.
The opinion expressed by Carson Medlin was based upon market, economic and
other relevant considerations as they existed and were evaluated as of the date
of the opinion. Events occurring after the date of issuance of the opinion,
including but not limited to, changes affecting the securities markets, the
results of operations or material changes in the assets or liabilities of CSB or
First Charter could materially affect the assumptions used in preparing the
opinion.
CSB has agreed to pay Carson Medlin $32,500 as compensation for Carson
Medlin's rendering of its fairness opinion. CSB also has agreed to indemnify
Carson Medlin against certain liabilities, including certain liabilities under
federal securities laws. Carson Medlin is not affiliated with either First
Charter or CSB. It has, however, performed various financial advisory and
investment banking services for CSB in the past, for which Carson Medlin has
received during the past two years, or expects to receive, compensation in the
aggregate amount of $40,000.
EFFECT ON EMPLOYEE STOCK OPTIONS
Options to purchase an aggregate of shares of CSB Common Stock
(the "CSB Employee Options") were outstanding as of the record date for the CSB
Special Meeting. To the extent that shares of CSB Common Stock are issued
pursuant to the exercise of such options in accordance with their terms prior to
the Effective Time, they will be converted into shares of First Charter Common
Stock in the same manner as other shares of CSB Common Stock. Pursuant to the
Agreement, at the Effective Time, each option to purchase shares of CSB Common
Stock that has not expired and remains outstanding at the Effective Time shall
be converted into and become rights with respect to First Charter Common Stock,
and First Charter shall assume each such option in accordance with the terms of
the stock option plan under which it was issued and the stock option agreement
by which it is evidenced. From and after the Effective Time, (i) each option to
purchase CSB Common Stock assumed by First Charter may be exercised solely for
shares of First Charter Common Stock; (ii) the number of shares of First Charter
Common Stock subject to each such option will be equal to the number of shares
of CSB Common Stock subject to such option immediately prior to the Effective
Time multiplied by the Exchange Ratio (with cash to be paid in lieu of any
resulting fraction of a share of First Charter Common Stock at the time of
exercise); and (iii) the per share exercise price under each such option will be
adjusted by dividing the per share exercise price by the Exchange Ratio and
rounding down to the nearest cent.
The CSB Employee Options were issued pursuant to the CSB 1991 Incentive
Stock Option Plan, Amended November 19, 1996 (the "Stock Option Plan"). Pursuant
to the provisions of the Stock Option Plan, in its original and amended forms,
immediately prior to the Effective Time of the Merger, all CSB Employee Options
outstanding at that time become exercisable in full, without regard to any
restrictions on exercise that would otherwise apply. The amendment to the Stock
Option Plan effected in November 1996 allows participants to pay for the
exercise price with shares of CSB Common Stock already owned and provides the
optionholders the right, immediately prior to the Effective Time, to surrender
their CSB Employee Options and to receive in exchange therefor cash equal to the
difference between the fair market value of the CSB Common Stock immediately
prior to the Effective Time less the exercise price of such CSB Employee Options
(the "Cash Surrender
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Right"). Each holder of CSB Employee Options has agreed in writing to waive such
Cash Surrender Right in connection with the Merger and subsequent thereto.
CONDITIONS TO THE MERGER
The Merger will occur only if the Agreement and the transactions
contemplated thereby are approved by the requisite votes of the shareholders of
First Charter and the shareholders of CSB. Consummation of the Merger is further
subject to the satisfaction of certain other conditions, unless waived, to the
extent legally permitted. Such conditions include (i) the receipt of the
approvals of each of First Charter's and CSB's shareholders; (ii) the receipt of
all required governmental approvals and expiration of all required waiting
periods, provided that such approvals shall not be subject to any condition or
restriction that in the judgment of First Charter would restrict it or its
subsidiaries or any of its affiliates in their respective spheres of operations
and business activities after the Effective Time; (iii) the continuing
effectiveness under the Securities Act of the Registration Statement for the
First Charter Common Stock issuable to holders of CSB Common Stock upon
consummation of the Merger, the absence of any stop order or threatened stop
order and the receipt of all necessary consents, waivers or approvals required
under applicable state securities laws; (iv) the absence of any active
litigation which seeks any order, decree or injunction of a court or agency of
competent jurisdiction to enjoin or prohibit the consummation of the Merger; (v)
the receipt of an opinion of counsel to First Charter to the effect that the
Merger will constitute a reorganization within the meaning of Section 368 of the
Code, and that no gain or loss will be recognized by the shareholders of CSB to
the extent they receive solely First Charter Common Stock in exchange for their
shares of CSB Common Stock in the Merger; and (vi) the receipt by each of First
Charter and CSB of opinions from their respective investment banking or
appraisal firm to the effect that the Exchange Ratio is fair from a financial
point of view to their respective shareholders. First Charter's obligation to
consummate the Merger is further conditioned upon (i) the accuracy as of the
date of the Agreement and as of the Effective Time of the representations and
warranties of CSB in the Agreement; (ii) the material performance by CSB of its
obligations under the Agreement; (iii) the receipt by First Charter of letters
from all affiliates of CSB restricting the transfer of First Charter Common
Stock as contemplated by the Agreement; (iv) the receipt by First Charter of an
opinion of KPMG Peat Marwick LLP, independent accountants for First Charter,
that the Merger qualifies for pooling-of-interests accounting treatment and the
receipt by First Charter and KPMG Peat Marwick LLP of a letter from Coopers &
Lybrand L.L.P. to the effect that it is not aware of any matters relating to CSB
and its subsidiaries that would preclude CSB from participating in a business
combination to be accounted for as a pooling of interests; and (v) the absence
of any claim by a holder of any CSB option to receive cash upon surrender or
exercise of options in conjunction with the consummation of the Merger or
otherwise. Similarly, CSB's obligation to consummate the Merger is further
conditioned upon (i) the accuracy as of the date of the Agreement and as of the
Effective Time of the representations and warranties of First Charter in the
Agreement; and (ii) the material performance by First Charter of its obligations
under the Agreement. In addition, unless waived, each party's obligation to
effect the Merger is subject to the receipt of certain closing certificates and
documents from the other party. No assurances can be provided as to when or if
all of the conditions precedent to the Merger can or will be satisfied or waived
by the party permitted to do so. See "THE MERGER -- Modification, Waiver and
Termination," " -- Certain Federal Income Tax Consequences," " -- Accounting
Treatment" and " -- Bank Regulatory Matters."
In the Agreement, CSB provided representations and warranties with respect
to, among other matters, the following: (i) due organization, good standing and
corporate authority; (ii) authorized capital stock and related commitments to
issue capital stock; (iii) existence of subsidiaries; (iv) due authorization of
the Merger and related transactions and enforceability of the Agreement; (v)
completeness and accuracy of securities reporting documents and financial
statements; (vi) the absence of undisclosed liabilities; (vii) certain tax
matters relating to CSB generally; (viii) the allowance for loan losses; (ix)
certain accounting, tax and regulatory matters relating to the Merger; (x) title
to properties; (xi) compliance with laws; (xii) employee benefit plans; (xiii)
existence of commitments and contracts; (xiv) any material contract defaults;
(xv) any legal proceedings; (xvi) the absence of certain material changes or
events; (xvii) the completeness and accuracy of regulatory reports; (xviii) the
truth and accuracy of certain statements; (xix) existence of appropriate
insurance; (xx) any labor matters; (xxi) the material interests of certain
persons; (xxii) any registration obligations for securities; (xxiii) any brokers
and finders; (xxiv) the effect of state takeover laws; (xxv) certain
environmental matters; (xxvi) ownership of shares by CSB; and (xxvii) insurance
of deposits. In the Agreement, First Charter provided representations and
warranties with respect to, among other matters, the following: (i) due
organization, good standing and corporate authority; (ii) authorized capital
stock; (iii) due authorization of the Merger and related transactions and
enforceability of the Agreement; (iv) completeness and accuracy of financial
statements; (v) completeness and accuracy of SEC reports; (vi) the truth and
accuracy of certain statements; (vii) certain regulatory matters relating to the
Merger; (viii) absence of certain litigation; (ix) any brokers and finders; (x)
certain environmental matters; (xi) certain tax matters relating to First
Charter generally; and (xii) compliance with laws.
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CONDUCT OF BUSINESS PRIOR TO THE MERGER
In the Agreement, CSB has agreed that it shall, and shall cause its
subsidiaries to, conduct its business only in the usual, regular and ordinary
course consistent with past practice and 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. In
addition, CSB has agreed that it will not, and shall not permit any of its
subsidiaries to, without the prior written consent of First Charter:
(a) other than in the ordinary course of business consistent with past
practice, incur any indebtedness or other obligation 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 with respect to, or directly or
indirectly redeem, purchase, exchange 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 any right to acquire cash based upon the market
value of CSB Common 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 for the issuance of CSB Common Stock pursuant to the
exercise of CSB options outstanding as of August 15, 1997 or 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 (including
without limitation any shares of capital stock of any of its subsidiaries), or
cancel, release or assign any indebtedness to any such person or any claims held
by any such person;
(d) except for purchases of U.S. Treasury securities which have maturities
of three years or less, make any material investment either by purchase of stock
or securities, contributions to capital, property transfers, or purchase of any
property or assets of, or otherwise acquire direct or indirect control over, 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 or waive, release, compromise or
assign any material rights or claims;
(f) increase or modify in any manner the compensation or fringe benefits of
any of its employees or pay or accelerate the vesting of any pension or
retirement or severance allowance 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 other "employee benefit plan" within the meaning of
ERISA or any employment, severance, consulting or other similar agreement with
or for the benefit of any employee, or accelerate the vesting of any stock
options or other stock-based compensation, provided that, with the prior
approval of First Charter, CSB may accrue and pay bonuses and put in effect
regularly scheduled salary increases, which are in either case in the ordinary
course and consistent with past practices;
(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) commence any claim, action or proceeding other than in accordance with
past practice, 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, or involving
restrictions upon the operations of CSB or any of its subsidiaries;
(i) amend its Articles of Incorporation or its Bylaws or other governing
documents;
(j) fail to maintain its material licenses and permits or to file in a
timely fashion all Federal, state, local and foreign tax returns;
(k) fail to maintain, or enter into, any regulatory agreements;
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(l) make any capital expenditures of more than $10,000 individually or
$25,000 in the aggregate;
(m) fail to maintain its benefit plans or timely make all contributions or
accruals required thereunder in accordance with generally accepted accounting
principles applied on a consistent basis; or
(n) agree to, or make any commitment to, take any of the foregoing
prohibited actions.
MODIFICATION, WAIVER AND TERMINATION
The Agreement provides that with the prior consent of CSB (which shall not
be unreasonably withheld), First Charter may at any time change the method of
its acquisition of CSB (including without limitation the provisions set forth in
the Agreement with respect to conversion of CSB Common Stock) if and to the
extent that it deems such a change desirable. In no case, however, may any such
change (i) alter or change the amount or kind of consideration to be received by
CSB shareholders under the Agreement; (ii) prevent the acquisition from
constituting a reorganization within the meaning of Section 368 of the Code (in
the opinion of First Charter's tax counsel); or (iii) take the form of an asset
purchase agreement. See "THE MERGER -- Description of the Merger" and
" -- Certain Federal Income Tax Consequences."
The Agreement also provides that it may be amended by a subsequent writing
signed by each party. However, the provisions relating to the manner or basis in
which shares of CSB Common Stock will be exchanged in the Merger may not be
amended after the First Charter Special Meeting or the CSB Special Meeting
without any requisite approval of the holders of the issued and outstanding
shares of First Charter Common Stock or CSB Common Stock, as the case may be,
entitled to vote thereon.
The Agreement further provides that each party may waive any default in the
performance of any term of the Agreement by the other, waive or extend the time
for compliance or fulfillment by the other of any and all of the other's
obligations under the Agreement and waive any or all of the conditions precedent
to its obligations under the Agreement, to the extent legally permitted. Neither
of the parties intends, however, to waive any conditions of the Merger if such
waiver would, in the judgment of the waiving party, have a material adverse
effect on its shareholders.
The Agreement further provides that it may be terminated and the Merger
abandoned at any time prior to the Effective Time (i) by mutual written consent
of the Boards of Directors of First Charter and CSB; (ii) by the respective
Board of Directors of First Charter or CSB (if the terminating party is not then
in breach under the Agreement) pursuant to notice in the event of a breach or
failure by the other party of any representation, warranty, covenant or
agreement contained therein which is material in the context of the transactions
contemplated by the Agreement and which has not been, or cannot be, cured within
30 days after written notice of such breach is given; (iii) by the respective
Board of Directors of either First Charter or CSB if any of such terminating
party's conditions precedent set forth in the Agreement has not been satisfied
as of the Effective Time or if satisfaction of such a condition is or becomes
impossible (other than through such terminating party's failure to comply with
its obligations under the Agreement) and such terminating party has not waived
such condition at or before the Effective Time; (iv) by the respective Board of
Directors of either First Charter or CSB if the Effective Time has not occurred
by March 31, 1998 (if the failure to consummate the Merger on or before such
date is not caused by a breach of the Agreement by the terminating party or the
failure by such party to comply fully with its obligations under the Agreement);
(v) by the Board of Directors of CSB if the average of the daily closing price
of First Charter Common Stock as reported on the Nasdaq Stock Market for the
twenty consecutive trading days ending the date that is four business days prior
to the Effective Time shall be less than $20.00 (unless the change in such
average price is directly attributable to an increase, decrease or change in the
number of outstanding shares of First Charter Common Stock due to a
recapitalization, reclassification, stock dividend, stock split or reverse stock
split, all without consideration, in which case such threshold price of $20.00
shall be appropriately adjusted); (vi) by the Board of Directors of First
Charter if First Charter determines that the shareholders' equity of CSB is less
than reported in the consolidated balance sheet of CSB as of March 31,
1997(computed exclusive of the impact of any merger-related expenses as approved
by First Charter); or (vii) by the Board of Directors of First Charter if First
Charter determines that CSB has established an allowance for loan losses that is
unsatisfactory to First Charter.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Smith Helms Mulliss & Moore, L.L.P., counsel to First Charter, has
delivered to First Charter and CSB its opinion that, under Federal law as
currently in effect, (i) the proposed Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code; (ii) no gain or loss will be
recognized by the shareholders of CSB on the exchange of their shares of CSB
Common Stock for shares of First Charter Common Stock to the extent that they
receive solely shares of First Charter Common Stock in exchange for their shares
of CSB Common Stock pursuant to the terms of the Merger; (iii) the
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federal income tax basis of the First Charter Common Stock for which shares of
CSB Common Stock are exchanged pursuant to the Merger will be the same as the
basis of such shares of CSB Common Stock exchanged therefor (less any
proportionate part of such basis allocable to any fractional interest in any
share of First Charter Common Stock); (iv) the holding period of First Charter
Common Stock for which shares of CSB Common Stock are exchanged will include the
period that such shares of CSB Common Stock were held by the holder, provided
such shares were capital assets of the holder; (v) the receipt of cash in lieu
of fractional shares will be treated as if the fractional shares were
distributed as part of the exchange and then redeemed by First Charter, and gain
or loss will be recognized in an amount equal to the difference between the cash
received and the basis of the CSB Common Stock surrendered, which gain or loss
will be capital gain or loss if the redemption is treated as an exchange under
Section 302(b) of the Code and the CSB Common Stock was a capital asset in the
hands of the shareholder, and otherwise will most likely be treated and taxed as
ordinary income; and (vi) cash received by shareholders of CSB upon the exercise
of dissenters' appraisal rights will be treated as having been received in
payment for such CSB Common Stock surrendered, and gain or loss will be
recognized in an amount equal to the difference between the cash received and
the basis of the CSB Common Stock surrendered, which gain or loss shall be
capital gain or loss if the CSB Common Stock was a capital asset in the hands of
a shareholder.
THE FOREGOING IS A SUMMARY OF CERTAIN ANTICIPATED FEDERAL INCOME TAX
CONSEQUENCES OF THE PROPOSED MERGER UNDER THE CODE AND IS FOR GENERAL
INFORMATION ONLY. IT DOES NOT INCLUDE CONSEQUENCES OF OTHER FEDERAL TAX LAWS OR
STATE, LOCAL OR OTHER TAX LAWS OR SPECIAL CONSEQUENCES TO PARTICULAR
SHAREHOLDERS HAVING SPECIAL SITUATIONS. SHAREHOLDERS OF CSB SHOULD CONSULT THEIR
OWN TAX ADVISORS REGARDING SPECIFIC TAX CONSEQUENCES OF THE MERGER TO THEM,
INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE AND LOCAL TAX LAWS AND
TAX CONSEQUENCES OF SUBSEQUENT SALES OF FIRST CHARTER COMMON STOCK.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Following the Merger, it is expected that the Board of Directors of First
Charter will be comprised of 15 persons, consisting of all the current members
of the Board of Directors of First Charter, plus John J. Godbold, Jr. (currently
President, Chief Executive Officer and a Director of CSB), Charles F. Harry III
(currently Chairman of the Board of CSB) and T. Carl Dedmon (currently a
Director of CSB). Additional information regarding the existing management of
First Charter, as well as the management of First Charter following the Merger,
is contained in the various documents incorporated herein by reference. See
"INFORMATION ABOUT FIRST CHARTER -- Management and Additional Information" and
"INFORMATION ABOUT CSB -- Management and Additional Information."
Also following the Merger, it is expected that the Board of Directors of
FCNB will continue to be comprised of 11 persons, consisting of all the current
members of the Board of Directors of FCNB.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As of the record date for the CSB Special Meeting, the directors and
executive officers of CSB and their affiliates beneficially owned an aggregate
of shares of CSB Common Stock, and based upon the Exchange Ratio such
persons are expected to beneficially own shares of First Charter
Common Stock outstanding immediately following the Effective Time. Based upon
the average stock prices of the First Charter Common Stock and the CSB Common
Stock as of such date, the aggregate increase in value to such persons resulting
from the conversion of such CSB Common Stock into First Charter Common Stock in
the Merger is approximately $ . The number of shares of CSB Common Stock
reported as beneficially owned by such persons does not include
shares subject to outstanding options held by Messrs. Robert J. Jurek, Earl H.
Lutz, Jr. and M. Jay Rhodes, Jr. For information relating to the treatment in
the Merger of options to purchase CSB Common Stock, see "THE MERGER -- Effect on
Employee Stock Options." As discussed therein, all options to purchase CSB
Common Stock outstanding at the Effective Time will be converted into rights
with respect to First Charter Common Stock and otherwise will remain subject to
the terms of such options. Accordingly, the value realizable upon exercise or
conversion of such securities by the holders thereof will depend upon the price
of First Charter Common Stock at the time of such exercise or conversion. As a
result of the Merger, however, all outstanding options will become exercisable
in full immediately prior to the Effective Time.
Each of the directors of CSB has executed the Agreement and, by his
execution thereof, has agreed to vote all shares of CSB Common Stock
beneficially owned by him in favor of the Agreement and the transactions
contemplated thereby.
Pursuant to the Agreement, First Charter has agreed to indemnify present
and former directors, officers, employees and agents of CSB with respect to
actions or omissions occurring prior to the Effective Time, for a period of
three years after the Effective Time, subject to certain limitations.
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Three of the directors of CSB, Messrs. Godbold, Harry and Dedmon, will
become directors of First Charter following consummation of the Merger. See "THE
MERGER -- Management and Operations After the Merger."
CSB has in effect with four of its executive officers (Messrs. John J.
Godbold, Jr., Robert J. Jurek, Earl H. Lutz, Jr. and M. Jay Rhodes, Jr.)
employment agreements that provide for payments under certain circumstances
following a change in control of CSB, which agreements provide that they shall
be binding upon successors of CSB. Consummation of the Merger will constitute a
change in control for purposes of these agreements. Each of the employment
agreements provides that if there is a change in control of CSB, and the
employee in his sole discretion determines that he has not been assigned duties,
responsibilities and status commensurate with his duties prior to the change in
control, under terms satisfactory to him, then such employee may terminate his
employment (a "Change-in-Control Termination") and receive the payments
hereinafter described. Mr. Godbold's agreement further provides that any change
in control in which, among other things, CSB would become a wholly owned
subsidiary of another financial institution is deemed to constitute a demotion
and reduction in his duties, responsibilities, titles and status with CSB,
regardless of his position with the resulting entity, at which time he can
effect a Change-in-Control Termination and receive the payments hereinafter
described.
The employment agreements with Messrs. Jurek, Lutz and Rhodes provide that
upon a Change-in-Control Termination, CSB shall pay the employee an amount equal
to one year's salary and shall continue the health care benefits provided to the
employee under his employment agreement for the earlier of the remaining term of
the employment agreement or until the employee obtains equivalent benefits from
another source. Each such employee must effect his Change-in-Control Termination
within ninety (90) days from the date of the change in control. Mr. Godbold's
employment agreement provides that upon a Change-in-Control Termination, CSB
shall pay him (i) two years' salary, plus (ii) an amount equal to the annual
bonus received by him for the two previous years, if any, plus (iii) a tax
gross-up allowance to restore him to the same financial position after payment
of all taxes. The tax gross-up allowance is payable, at Mr. Godbold's request,
either by lump sum or in not more than three annual installments. Mr. Godbold's
employment agreement also provides for continuation of the health care benefits
provided to him under such agreement for the earlier of two years or until he
obtains equivalent benefits from another source.
If a Change-in-Control Termination had occurred on June 30, 1997 under the
respective employment agreements, the estimated amounts payable under these
employment agreements to Messrs. Godbold, Jurek, Lutz and Rhodes would have been
$550,279, $98,880, $92,944 and $87,248, respectively.
CSB also has in effect with each of Messrs. Godbold, Jurek, Lutz and Rhodes
salary continuation agreements that provide for benefits payable upon the normal
retirement date (defined in such agreements as retirement from service with CSB
which becomes effective on the first day of the calendar month following the
month in which the executive reaches his 65th birthday) of the employee in
certain circumstances. Each of the salary continuation agreements provides that
it shall be binding upon successors to CSB and that CSB expressly agrees that it
shall not merge into or with another corporation until such corporation
expressly agrees, in writing, to assume and discharge the duties and obligations
of CSB under such agreement.
Generally, the respective salary continuation agreements provide that if
the executive shall remain in the employment of CSB until a date specified in
such agreement (December 31, 1997 for Mr. Godbold; September 1, 2000 for Mr.
Jurek; October 1, 2003 for Mr. Lutz; and February 19, 2000 for Mr. Rhodes), then
in such event he shall have fully earned and be entitled to receive monthly from
CSB the amount specified in such agreement commencing on the first day of the
month following such "normal retirement date" and continuing for a period of 120
consecutive months. The respective salary continuation agreements further
provide that in the case of permanent disability prior to the date so specified
in such agreement, or in the event of a change in control of CSB, then the
deferred compensation benefit shall be deemed fully earned. The respective
salary continuation agreements also provide that should the executive
voluntarily resign from his employment or should he be discharged for "due
cause" (exclusive of disability), all of the executive's benefits under such
agreement shall be forfeited and the salary continuation agreement shall become
null and void. The monthly benefits payable under the respective Salary
Continuation Agreements commencing at normal retirement date, and the respective
normal retirement dates, for the executives are as follows: $8,333.33 and April
14, 2006 for Mr. Godbold; $2,500.00 and March 16, 2014 for Mr. Jurek; $2,500.00
and January 14, 2014 for Mr. Lutz; and $2,500.00 and April 13, 2014 for Mr.
Rhodes. The consummation of the Merger will constitute a change in control for
purposes of the salary continuation agreements.
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STOCK OPTION AGREEMENT BETWEEN FIRST CHARTER AND CSB
THE FOLLOWING DESCRIPTION OF THE OPTION AND THE STOCK OPTION AGREEMENT DOES
NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
STOCK OPTION AGREEMENT, WHICH IS ATTACHED AS AN EXHIBIT TO FIRST CHARTER'S
CURRENT REPORT ON FORM 8-K FILED JULY 2, 1997 AND IS INCORPORATED HEREIN BY
REFERENCE.
Following execution of the Letter of Intent, First Charter and CSB entered
into the Stock Option Agreement whereby CSB granted to First Charter the Option
to purchase up to 330,776 shares of CSB Common Stock, subject to certain
adjustments, at an exercise price of $13.25 per share. CSB granted First Charter
the Option as a condition of and in consideration of First Charter's entering
into the Letter of Intent. The terms of the Stock Option Agreement were integral
to the Agreement and served as an inducement to First Charter to enter into the
Agreement.
The Option Shares, if issued, would represent approximately 19.9% of the
CSB Common Stock issued and outstanding, without giving effect to the issuance
of any shares pursuant to an exercise of the Option. The number of Option Shares
subject to the Option will be increased to the extent that CSB issues additional
shares of CSB Common Stock (otherwise than pursuant to an exercise of the
Option), such that the number of Option Shares continues to equal 19.9% of the
CSB Common Stock then issued and outstanding, without giving effect to the
issuance of Option Shares pursuant to an exercise of the Option.
First Charter may exercise the Option, in whole or in part, subject to
regulatory approval, at any time after both an "Initial Triggering Event" and a
"Subsequent Triggering Event" that occurs prior to termination of the Option. An
"Initial Triggering Event" generally is defined as the occurrence of any of the
following events:
(i) CSB or any subsidiary of CSB, without having received First Charter's
prior written consent, shall have entered into an agreement to engage in an
Acquisition Transaction (hereinafter defined) with any person or group other
than First Charter or any of its subsidiaries, or CSB's Board of Directors shall
have recommended that its shareholders approve or accept any Acquisition
Transaction other than as contemplated by the Agreement or the Option Agreement.
"Acquisition Transaction" shall mean (x) a merger or consolidation, or any
similar transaction, involving CSB or any significant subsidiary of CSB, (y) a
purchase, lease or other acquisition of all or substantially all of the assets
or deposits of CSB or any significant subsidiary of CSB 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 CSB or
any significant subsidiary of CSB;
(ii) any person or group other than First Charter, any subsidiary of First
Charter or any subsidiary of CSB 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 CSB Common Stock;
(iii) the shareholders of CSB shall not have approved the transactions
contemplated by the Agreement at the CSB Special Meeting or any adjournment
thereof, or such meeting shall not have been held or shall have been canceled
prior to termination of the Agreement, in either case after CSB's Board of
Directors shall have withdrawn or modified (or publicly announced its intention
to withdraw or modify or its interest in withdrawing or modifying) its
recommendation that the shareholders of CSB approve the transactions
contemplated by the Agreement, or CSB or any of its subsidiaries, without having
received First Charter's prior written consent, shall have authorized,
recommended or proposed (or publicly announced its intention to authorize,
recommend or propose or its interest in authorizing, recommending or proposing)
an agreement to engage in an Acquisition Transaction, with any person other than
First Charter or any of its subsidiaries;
(iv) any person or group other than First Charter or any subsidiary of
First Charter shall have made a bona fide proposal to CSB or its shareholders to
engage in an Acquisition Transaction;
(v) CSB shall have willfully breached any covenant or obligation contained
in the Agreement in anticipation of engaging in an Acquisition Transaction, and
such breach would entitle First Charter to terminate the Agreement; or
(vi) any person or group other than First Charter or any subsidiary of
First Charter, other than in connection with a transaction to which First
Charter has given its prior written consent, shall have filed an application or
notice with the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), the FDIC or other federal or state bank regulatory authority,
which application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
"Subsequent Triggering Event" is defined as either (A) the acquisition by
any person or group of beneficial ownership of 25% or more of the then
outstanding CSB Common Stock; or (B) the occurrence of the Initial Triggering
Event described in clause (i) above, except that the percentage reference in
subclause (z) thereof shall be 25%.
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The Option terminates generally (i) at the Effective Time of the Merger;
(ii) upon termination of the Agreement in accordance with the provisions thereof
if the termination occurs prior to the occurrence of an Initial Triggering Event
or (iii) upon the passage of twelve months after termination of the Agreement if
the termination occurs following the occurrence of an Initial Triggering Event.
Such twelve-month period may be extended in certain circumstances involving
regulatory approvals or the necessity to avoid liability pursuant to Section
16(b) of the Exchange Act.
Following the occurrence of a Subsequent Triggering Event and prior to
termination of the Option, subject to regulatory approval, CSB is required, upon
request, to repurchase the Option and/or the Option Shares from the holder at a
specified price.
In the event that prior to termination of the Option, CSB enters into an
agreement (i) to consolidate with or merge into any entity other than First
Charter or one of its subsidiaries and is not the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any entity other
than First Charter or one of its subsidiaries to merge into CSB with CSB as the
continuing or surviving corporation, but in connection therewith the then
outstanding shares of CSB Common Stock are changed into or exchanged for
securities of any other person or cash or any other property, or the then
outstanding shares of CSB Common Stock after such merger represent less than 50%
of the outstanding shares and share equivalents of the merged company or (iii)
to sell or otherwise transfer all or substantially all of its assets or deposits
or the assets or deposits of any significant subsidiary to any person other than
First Charter or one of its subsidiaries, then the agreement governing such
transaction must make proper provision so that the Option shall, upon
consummation of such transaction, be converted into or exchanged for an option
(the "Substitute Option"), at the holder's election, of either the continuing or
surviving corporation of a merger or a consolidation or the transferee of all or
substantially all of CSB's assets, or of the person controlling such continuing
or surviving corporation or transferee. The number of shares subject to the
Substitute Option and the exercise price per share will be determined in
accordance with a formula set forth in the Stock Option Agreement. To the extent
possible, the Substitute Option will contain other terms and conditions that are
the same as those in the Option. Subject to regulatory approval, the issuer of
the Substitute Option will be required to repurchase such option at the request
of the holder thereof and to repurchase any shares of such issuer's common stock
issued upon exercise of the Substitute Option at the request of the owner
thereof, in each case at a specified price.
To the best of First Charter's and CSB's knowledge, no event giving rise to
the exercise of the Option has occurred as of the date of this Joint Proxy
Statement-Prospectus.
DISSENTERS' RIGHTS OF APPRAISAL
FIRST CHARTER. Pursuant to North Carolina law, holders of First Charter
Common Stock who object to the Merger will not be entitled to dissenters'
appraisal rights.
CSB. THE FOLLOWING IS A SUMMARY DISCUSSION OF THE DISSENTER'S RIGHTS OF
APPRAISAL OF CSB SHAREHOLDERS. IT IS NOT A COMPLETE STATEMENT OF THE LAW
RELATING TO SUCH DISSENTERS' RIGHTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE RELEVANT PROVISIONS OF THE UNITED STATES CODE AND THE GENERAL
STATUTES OF NORTH CAROLINA (THE "N.C.G.S.") WHICH ARE SET FORTH AS APPENDIX D TO
THIS JOINT PROXY STATEMENT-PROSPECTUS. THIS DISCUSSION AND THE PROVISIONS OF
FEDERAL AND NORTH CAROLINA LAW SHOULD BE REVIEWED CAREFULLY BY CSB SHAREHOLDERS
WHO MAY WISH TO ASSERT THEIR RIGHT TO DISSENT FROM THE PROPOSED TRANSACTION OR
WHO WISH TO PRESERVE THE RIGHT TO DO SO. THE PROVISIONS OF THE STATUTES ARE
TECHNICAL IN NATURE AND COMPLEX. IT IS SUGGESTED THAT ANY SHAREHOLDER WHO
DESIRES TO AVAIL HIMSELF OR HERSELF OF HIS OR HER RIGHT TO OBJECT TO THE
AGREEMENT CONSULT COUNSEL. FAILURE TO COMPLY WITH THE PROVISIONS OF THE STATUTE
MAY DEFEAT A SHAREHOLDER'S RIGHT TO DISSENT.
If the Agreement and the transactions contemplated thereby are consummated,
any shareholder of CSB who properly dissents from the proposed Merger in
connection with the CSB Special Meeting may be entitled to receive in cash the
fair value of his or her shares of CSB Common Stock so held by such shareholder
when such Merger shall be approved by the OCC. Any such payment may be higher or
lower than the value of the per share consideration paid in the Merger. FAILURE
TO COMPLY STRICTLY WITH THE PROCEDURES PRESCRIBED BY APPLICABLE LAW WILL RESULT
IN THE LOSS OF DISSENTERS' RIGHTS.
To preserve the right to dissent, according to the provisions of 12 U.S.C.
(section mark) 215a, a CSB shareholder must either (i) vote against the
Agreement at the CSB Special Meeting or (ii) give written notice at or prior to
such meeting to the presiding officer that such shareholder dissents from the
Agreement. A shareholder who wishes to object to the Merger must not vote any
shares in favor of the Agreement and the transactions contemplated thereby.
If the shareholders of CSB approve the Agreement and the transaction is
approved by the OCC, any shareholder who has properly perfected the right to
dissent, as described above, shall be entitled to receive the value of his or
her shares after
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the transaction has been consummated. Any dissenting shareholder who wishes to
receive the value of such shares must transmit a written request to FCNB, as the
surviving bank, for payment (a "Demand for Payment") and surrender his or her
certificate or certificates for shares of CSB Common Stock to FCNB within 30
days of the Effective Time. A VOTE AGAINST THE PROPOSAL TO APPROVE THE MERGER
WILL NOT SATISFY THE REQUIREMENT OF SUBMITTING A DEMAND FOR PAYMENT. Dissenting
shareholders, if any, will be mailed notice of the Effective Time, but not of
the date before which their dissenters' rights must be exercised, at their
addresses on CSB's shareholder records.
After the Effective Time, no current shareholder of CSB will have any
rights as a shareholder of CSB including, without limitation, any right to vote
or to receive dividends or liquidating distributions, other than the right to
receive First Charter Common Stock in consideration of the Merger; PROVIDED,
HOWEVER, that any shareholder of CSB who has perfected his or her right to
dissent shall be entitled to receive the value of his or her shares as described
herein and in Appendix D.
N.C.G.S. (section mark)53-16 provides that the value of the shares of any
dissenting shareholder shall be determined as of the date of the CSB Special
Meeting approving the Merger by three appraisers, one to be selected by the
owners of two-thirds of the dissenting shares involved, one by the board of
directors of FCNB and the third by the two so chosen. The valuation agreed upon
by any two appraisers shall govern. If the appraisal is not completed within 90
days after the Merger becomes effective, the OCC shall cause an appraisal to be
made. The expenses of the OCC shall be paid by FCNB.
The value of the shares ascertained shall be promptly paid to the
dissenting shareholders by FCNB. The shares of First Charter Common Stock which
would have been delivered to such dissenting shareholders had they not requested
payment shall be sold at an advertised public auction. If the shares are sold at
public auction at a price greater than the amount paid to the dissenting
shareholders, the excess in such sale price shall be paid to such dissenting
shareholders.
Any objections to the Merger should be mailed to Carolina State Bank, 316
South Lafayette Street, Shelby, North Carolina 28150, Attention: Secretary. Any
Demands for Payment should be mailed to First Charter National Bank, Post Office
Box 228, Concord, North Carolina 28026-0228, Attention: Controller. All proper
objections or Demands for Payment must be received by CSB or FCNB, as
applicable, on or prior to the date on which they are required to be delivered.
Except as may be required by law or ordered by a court of proper
jurisdiction, neither First Charter nor FCNB will pay fees of counsel or other
expenses incurred by objecting shareholders.
ACCOUNTING TREATMENT
First Charter's obligation to consummate the Merger is conditioned upon the
receipt by First Charter of an opinion from KPMG Peat Marwick LLP, First
Charter's independent public accountants, to the effect that the Merger
qualifies for pooling-of-interests accounting treatment if consummated in
accordance with the Agreement and upon the receipt by First Charter and KPMG
Peat Marwick LLP from Coopers & Lybrand L.L.P., CSB's independent public
accountants, to the effect that such firm is not aware of any matters relating
to CSB and its subsidiaries that would preclude CSB from participating in a
business combination to be accounted for as a pooling-of-interests. First
Charter and CSB have agreed to use their best efforts to cause the Merger to
qualify for pooling-of-interests treatment by First Charter.
Under the pooling-of-interests method of accounting, the historical basis
of the assets and liabilities of First Charter and CSB will be combined at the
Effective Time and carried forward at their previously recorded amounts, and the
shareholders' equity accounts of CSB and First Charter will be combined on First
Charter's consolidated balance sheet and no goodwill or other intangible assets
will be created. Financial statements of First Charter issued after the Merger
will be restated retroactively to reflect the consolidated operations of First
Charter and CSB as if the Merger had taken place prior to the periods covered by
such financial statements.
The unaudited pro forma financial information contained in this Joint Proxy
Statement-Prospectus has been prepared using the pooling-of-interests accounting
method to account for the Merger. See "SUMMARY -- Comparative Unaudited Per
Share Information" and " -- Selected Financial Information" and "PRO FORMA
CONDENSED FINANCIAL INFORMATION."
BANK REGULATORY MATTERS
OFFICE OF THE COMPTROLLER OF THE CURRENCY. The Merger is subject to prior
approval by the OCC under the Bank Merger Act. When approving a transaction such
as the Merger, the OCC will consider the financial and managerial resources
(including the competence, experience and integrity of the officers, directors
and principal shareholders) and future prospects of the existing and proposed
institutions and the convenience and needs of the communities to be served.
Furthermore, the OCC will not approve a merger if it would result in a monopoly
or would be in furtherance of any combination or conspiracy to
39
<PAGE>
monopolize or to attempt to monopolize the business of banking in any part of
the United States, or if its effect in any section of the United States may be
substantially to lessen competition or to tend to create a monopoly, or if it
would be in any other manner in restraint of trade, unless the OCC finds that
the anti-competitive effects of the merger are clearly outweighed in the public
interest by the probable effect of the transaction in meeting the convenience
and needs of the communities to be served. In addition, under the Community
Reinvestment Act of 1977, as amended (the "CRA"), the OCC will consider the
performance of the existing institutions in meeting the credit needs of the
relevant communities, including low- and moderate-income neighborhoods, served
by such institutions.
Applicable federal law provides for the publication of notice and public
comment on the application and authorizes the OCC to permit interested parties
to intervene in the proceedings. If an interested party is permitted to
intervene, such intervention could delay the regulatory approvals required for
consummation of the Merger.
The Merger generally may not be consummated until the 30th day following
the date of approval by the OCC (or in certain circumstances the 15th day),
during which time the United States Department of Justice (the "Department of
Justice") may challenge the Merger on antitrust grounds. The commencement of an
antitrust action would stay the effectiveness of the OCC's approval unless a
court specifically ordered otherwise. First Charter and CSB believe that the
Merger does not raise substantial antitrust concerns.
STATUS OF REGULATORY APPROVALS AND OTHER INFORMATION. First Charter and CSB
have filed all applications and notices and have taken (or will take) other
appropriate action with respect to any requisite approvals or other action of
any governmental authority. The Agreement provides that the receipt of all
requisite regulatory approvals, including the approval of the OCC, is a
condition to the consummation of the Merger. There can be no assurance that any
governmental agency will approve or take any other required action with respect
to the Merger, and, if approvals are received or action is taken, there can be
no assurance as to the date of such approvals or action, that such approvals or
action will not be conditioned upon matters that would cause the parties to
abandon the Merger or that no action will be brought challenging such approvals
or action, including a challenge by the Department of Justice or, if such a
challenge is made, the result thereof.
First Charter and CSB are not aware of any governmental approvals or
actions that may be required for consummation of the Merger other than as
described above. Should any other approval or action be required, First Charter
and CSB currently contemplate that such approval or action would be sought.
There can be no assurance, however, that any such approval or action, if needed,
could be obtained and would not be conditioned in a manner that would cause the
parties to abandon the Merger.
See "THE MERGER -- Effective Time of the Merger," " -- Conditions to the
Merger" and " -- Modification, Waiver and Termination."
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of First Charter Common Stock to be issued to shareholders of
CSB in the Merger have been registered under the Securities Act. Such shares may
be traded freely and without restriction by those shareholders not deemed to be
"affiliates" of CSB as that term is defined under the Securities Act. Any
subsequent transfer of such shares, however, by any person who is an affiliate
of CSB at the time this Joint Proxy Statement-Prospectus is first distributed to
the shareholders of CSB will, under existing law, require either (i) the further
registration under the Securities Act of the shares of First Charter Common
Stock to be transferred, (ii) compliance with Rule 145 promulgated under the
Securities Act (permitting limited sales under certain circumstances) or (iii)
the availability of another exemption from registration. An "affiliate" of CSB,
as defined by the rules promulgated pursuant to the Securities Act, is a person
who directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with CSB. The foregoing restrictions
are expected to apply to the directors, executive officers and the holders of
10% or more of the CSB Common Stock (and to certain relatives or the spouse of
any such person and any trusts, estates, corporations or other entities in which
such persons have a 10% or greater beneficial or equity interest). Stop transfer
instructions will be given by First Charter to the transfer agent with respect
to the First Charter Common Stock to be received by persons subject to the
restrictions described above, and the certificates for such stock will be
appropriately legended. Those individuals identified by CSB as affiliates of CSB
have entered into agreements that they will not make any further sales of shares
of First Charter Common Stock received upon consummation of the Merger, except
in compliance with the applicable provisions of the Securities Act.
40
<PAGE>
DIVIDEND REINVESTMENT PLAN
First Charter has a dividend reinvestment plan that provides, for those
shareholders who elect to participate, that dividends on First Charter Common
Stock will be used to purchase on a quarterly basis either original issue shares
or shares in the open market at the market value of First Charter Common Stock.
The plan also permits participants to invest in additional shares of First
Charter Common Stock on a quarterly basis, through optional cash payments not to
exceed $2,500 per quarter, at the then-current market price of such stock at the
time of purchase. Only shareholders of record are entitled to participate in the
dividend reinvestment plan; accordingly, shares held in "street name" generally
may not be included in the dividend reinvestment plan. It is anticipated that
First Charter will continue its dividend reinvestment plan and that shareholders
of CSB who receive shares of First Charter Common Stock in the Merger will have
the right to participate therein.
41
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
MARKET PRICES
First Charter Common Stock is reported on The Nasdaq Stock Market as a
Nasdaq National Market security under the trading symbol "FCTR." As of the
record date for the First Charter Special Meeting, First Charter Common Stock
was held of record by approximately persons. The following table sets forth
the high and low sales prices of the First Charter Common Stock as reported on
The Nasdaq Stock Market for the periods indicated. The prices for First Charter
Common Stock have been adjusted to reflect a 6-for-5 stock split declared in the
second quarter of 1997.
Since July 1996, CSB Common Stock has been traded in the over-the-counter
market and listed in the National Daily Quotation Service "Pink Sheets." Prior
to that time, there was no established trading market for the CSB Common Stock.
As of the record date for the CSB Special Meeting, CSB Common Stock was held of
record by approximately persons. The following table sets forth the high
and low bid prices for CSB Common Stock for the indicated periods during which
the CSB Common Stock has been traded in the over-the-counter market, based on
information obtained by CSB from financial newspapers. The prices for CSB Common
Stock have been adjusted to reflect a 3-for-2 stock split declared in the second
quarter of 1997. Such prices may reflect interdealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions. Management of CSB is aware of approximately 50 arms' length sales
of CSB Common Stock from January 1, 1995 to July 1996, at prices ranging from
$5.00 per share to $6.67 per share (as adjusted to reflect the 3-for-2 stock
split declared in the second quarter of 1997).
<TABLE>
<CAPTION>
FIRST CHARTER CSB BID
SALES PRICES PRICES
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
Year Ended December 31, 1995:
First Quarter......................................................................... $12.71 $12.08 $ N/A $ N/A
Second Quarter........................................................................ 16.04 12.08 N/A N/A
Third Quarter......................................................................... 17.71 15.42 N/A N/A
Fourth Quarter........................................................................ 18.75 17.08 N/A N/A
Year Ended December 31, 1996:
First Quarter......................................................................... 18.03 16.25 N/A N/A
Second Quarter........................................................................ 17.08 14.79 N/A N/A
Third Quarter......................................................................... 16.04 15.21 6.67 6.13
Fourth Quarter........................................................................ 18.75 15.21 6.67 6.55
Year Ending December 31, 1997:
First Quarter......................................................................... 18.54 17.71 8.00 6.60
Second Quarter........................................................................ 24.25 18.13 14.00 7.55
Third Quarter......................................................................... 24.25 21.00 17.00 17.00
Fourth Quarter (through October )...................................................
</TABLE>
42
<PAGE>
DIVIDENDS
The following table sets forth dividends declared per share of First
Charter Common Stock for the periods indicated. Such amounts have been adjusted
to reflect a 6-for-5 stock split declared in the second quarter of 1997. CSB has
not paid any cash dividends during the periods indicated. The ability of either
First Charter or CSB to pay dividends to its shareholders is subject to certain
restrictions. See "INFORMATION ABOUT FIRST CHARTER -- Supervision and
Regulation" and "INFORMATION ABOUT CSB -- Supervision and Regulation."
<TABLE>
<CAPTION>
FIRST CHARTER
DIVIDENDS
<S> <C>
Year Ended December 31, 1995:
First Quarter......................................................................... $ 0.108
Second Quarter........................................................................ 0.108
Third Quarter......................................................................... 0.108
Fourth Quarter........................................................................ 0.108
Year Ended December 31, 1996:
First Quarter......................................................................... 0.125
Second Quarter........................................................................ 0.125
Third Quarter......................................................................... 0.125
Fourth Quarter........................................................................ 0.125
Year Ending December 31, 1997:
First Quarter......................................................................... 0.125
Second Quarter........................................................................ 0.125
Third Quarter......................................................................... 0.140
Fourth Quarter (through October )................................................... 0.140
</TABLE>
PRO FORMA CONDENSED FINANCIAL INFORMATION
(UNAUDITED)
The following unaudited Pro Forma Condensed Financial Information and
explanatory notes are presented to show the impact on the historical financial
position and results of operations of First Charter of the proposed Merger. The
Merger is reflected in the Pro Forma Condensed Financial Information under the
pooling-of-interests method of accounting. See "THE MERGER -- Accounting
Treatment."
The Pro Forma Condensed Balance Sheet is based on the assumption that the
Merger was consummated on June 30, 1997, and the Pro Forma Condensed Statements
of Income are based on the assumption that the Merger was consummated as of
January 1, 1994.
The unaudited Pro Forma Condensed Financial Information should be read in
conjunction with the historical financial statements and notes thereto of First
Charter and of CSB incorporated by reference herein. Certain of the historical
financial statements of CSB are being delivered with this Joint Proxy
Statement-Prospectus. See "AVAILABLE INFORMATION." The pro forma information is
not necessarily indicative of the results of operations or combined financial
position that would have resulted had the Merger been consummated at the
beginning of the periods indicated, nor is it necessarily indicative of the
results of operations of future periods or future combined financial position.
The following information contains forward-looking statements regarding
First Charter's proposed Merger-related expenses in connection with the Merger.
The proposed expenses are subject to certain risks and uncertainties that could
cause actual expenses to differ materially from those indicated, such as the
inability to consummate the Merger by the end of fiscal year 1997 or the
inability of First Charter to consolidate the operations of CSB with First
Charter or to achieve technological efficiencies as soon as anticipated. Readers
are cautioned not to place undue reliance on this information, which reflects
management's judgment only as of the date hereof. First Charter undertakes no
obligation to publicly revise this information to reflect events and
circumstances that arise after the date hereof.
43
<PAGE>
PRO FORMA CONDENSED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
AT JUNE 30, 1997
PRO FORMA
FIRST CHARTER
FIRST PRO FORMA AND CSB
CHARTER CSB ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
ASSETS
Cash and due from banks.................................................. $ 28,316 $ 3,912 $ $ 32,228
Interest-bearing bank deposits........................................... 3,244 32 3,276
Securities available for sale:
U.S. Government obligations............................................ 25,316 13,988 39,304
U.S. Government agency obligations..................................... 9,725 0 9,725
Mortgage-backed securities............................................. 13,103 0 13,103
State and municipal obligations, nontaxable............................ 72,041 0 72,041
Other.................................................................. 9,102 547 9,649
Total securities available for sale................................. 129,287 14,535 0 143,822
Investment securities:
U.S. Government obligations............................................ 0 13,960 13,960
U.S. Government agency obligations..................................... 0 0 0
Mortgage-backed securities............................................. 0 0 0
State and municipal obligations, nontaxable............................ 0 1,812 1,812
Total investment securities......................................... 0 15,772 0 15,772
Loans.................................................................... 392,017 102,688 494,705
Less: Unearned income.................................................. (274) 0 (274)
Allowance for loan losses........................................ (5,510) (1,485) (6,995)
Loans, net.......................................................... 386,233 101,203 0 487,436
Premises and equipment, net.............................................. 12,131 2,617 14,748
Other assets............................................................. 5,946 3,417 9,363
Total assets........................................................ $565,157 $141,488 $ 0 $ 706,645
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits, domestic:
Noninterest-bearing.................................................... $ 79,270 $ 8,000 $ $ 87,270
Interest-bearing
NOW accounts........................................................ 73,497 25,392 98,889
Time................................................................ 260,951 67,706 328,657
Certificates of deposit greater than $100,000....................... 57,026 19,550 76,576
Total deposits...................................................... 470,744 120,648 0 591,392
Other borrowings....................................................... 27,921 6,381 34,302
Other liabilities...................................................... 3,874 1,061 4,935
Total liabilities................................................... 502,539 128,090 0 630,629
SHAREHOLDERS' EQUITY
First Charter Common Stock -- $5 par value; authorized, 10,000,000
shares; issued and outstanding, 7,560,524 shares....................... 37,803 0 8,502(1) 46,305
CSB Common Stock -- $4.50 par value; authorized, 10,000,000 shares;
issued and outstanding, 1,662,192 shares............................... 0 7,480 (7,480)(1) 0
Additional paid-in capital............................................... 0 4,004 (1,022)(1) 2,982
Unrealized gain on securities available for sale, net of taxes........... 1,989 13 2,002
Retained earnings........................................................ 22,826 1,901 0 24,727
Total shareholders' equity.......................................... 62,618 13,398 0 76,016
Total liabilities and shareholders' equity.......................... $565,157 $141,488 $ 0 $ 706,645
</TABLE>
See Notes to Pro Forma Condensed Financial Information.
44
<PAGE>
PRO FORMA CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEARS
ENDED JUNE 30, ENDED DECEMBER 31,
1997 1996 1996 1995 1994
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Interest and fees on loans............................. $ 22,179 $ 20,069 $ 41,169 $ 36,619 $ 27,820
Interest on investments and securities................. 4,456 4,547 9,011 8,240 7,578
Other interest......................................... 160 311 727 1,076 426
Total interest income................................ 26,795 24,927 50,907 45,935 35,824
Interest on deposits................................... 10,909 10,431 21,143 18,481 12,556
Interest on borrowings................................. 941 784 1,654 1,355 709
Total interest expense............................... 11,850 11,215 22,797 19,836 13,265
Net interest income.................................. 14,945 13,712 28,110 26,099 22,559
Provision for loan losses.............................. 1,016 876 1,540 1,991 1,105
Net interest income after provision for
loan losses....................................... 13,929 12,836 26,570 24,108 21,454
Noninterest income..................................... 4,471 3,586 7,271 6,278 5,560
Noninterest expense.................................... 10,501 9,167 19,354 19,181 17,283
Income before income taxes........................... 7,899 7,255 14,487 11,205 9,731
Income taxes........................................... 2,399 2,268 4,418 2,901 2,653
Net income........................................... $ 5,500 $ 4,987 $ 10,069 $ 8,304 $ 7,078
PRIMARY INCOME PER SHARE:
Net income
First Charter -- historical....................... $ 0.64 $ 0.57 $ 1.17 $ 0.93 $ 0.88
CSB -- historical................................. 0.39 0.40 0.76 1.02 0.41
First Charter/CSB -- pro forma combined........... 0.59 0.54 1.09 0.94 0.80
Average common equivalent shares
First Charter -- historical....................... 7,621,636 7,578,893 7,592,690 7,540,710 7,536,862
CSB -- historical................................. 1,599,520 1,598,733 1,598,756 1,276,290 1,248,275
First Charter/CSB -- pro forma combined........... 9,257,945 9,214,397 9,228,217 8,846,355 8,813,847
INCOME PER SHARE ASSUMING FULL DILUTION:
Net income
First Charter -- historical....................... $ 0.64 $ 0.57 $ 1.17 $ 0.93 $ 0.88
CSB -- historical................................. 0.39 0.40 0.76 1.02 0.41
First Charter/CSB -- pro forma combined........... 0.59 0.54 1.09 0.94 0.80
Average common equivalent shares
First Charter -- historical....................... 7,647,055 7,578,893 7,601,737 7,555,166 7,537,222
CSB -- historical................................. 1,615,779 1,600,756 1,598,756 1,276,290 1,248,275
First Charter/CSB -- pro forma combined........... 9,299,997 9,216,466 9,237,264 8,860,811 8,814,207
</TABLE>
See Notes to Pro Forma Condensed Financial Information.
45
<PAGE>
NOTES TO THE UNAUDITED JUNE 30, 1997
PRO FORMA CONDENSED FINANCIAL INFORMATION
The unaudited First Charter and CSB Pro Forma Condensed Financial
Information is based upon the following adjustments, reflecting the consummation
of the Merger using the pooling-of-interests method of accounting. Actual
amounts may differ from those reflected in the unaudited Pro Forma Condensed
Financial Information.
NOTE 1
First Charter will exchange 1.023 shares of First Charter Common Stock for
each share of CSB Common Stock outstanding immediately prior to the Effective
Time (except for shares of CSB Common Stock held by FCC, FCNB or CSB other than
in a fiduciary capacity or as a result of debts previously contracted, which
shall be cancelled, and shares as to which dissenters' rights of appraisal have
been perfected). The pro forma issued number of shares of First Charter Common
Stock does not reflect the exercise of options to acquire shares of CSB Common
Stock. Options to acquire 58,600 shares of CSB Common Stock were outstanding at
June 30, 1997.
<TABLE>
<S> <C>
Shares of CSB Common Stock.............................................................. 1,662,192
Exchange Ratio.......................................................................... 1.023
Shares of First Charter Common Stock issued............................................. 1,700,422
</TABLE>
NOTE 2
The unaudited Pro Forma Condensed Financial Information does not include
any expenses or charges related to the Merger. First Charter anticipates
one-time merger and related charges of $2.0 million to $2.9 million ($1.6
million to $2.2 million, net of tax effects) in connection with the Merger.
Professional fees associated with the transaction (including fixed financial
advisor fees as well as attorneys' and accountants' fees) are expected to
represent the largest portion of the expenses and charges, as well as estimated
expenses associated with various severance-related obligations.
46
<PAGE>
INFORMATION ABOUT FIRST CHARTER
GENERAL
First Charter is a multi-bank holding company established as a North
Carolina corporation in 1983 and is registered under the BHCA. Its principal
assets are the stock of its banking subsidiaries, First Charter National Bank
and Bank of Union. The Banks account for over 98% of First Charter's
consolidated assets and consolidated revenues. At June 30, 1997, First Charter
had total assets of approximately $565 million and total deposits of
approximately $471 million. See "RECENT DEVELOPMENTS." The principal executive
offices of First Charter are located at 22 Union Street, North, Concord, North
Carolina 28025, and its telephone number is (704) 786-3300.
FCNB, a national banking association, is the successor entity to The
Concord National Bank, which was established in 1888 and acquired by First
Charter in 1983. FCNB is a full service bank and trust company with twelve
branch offices, two limited service facilities and eighteen ATMs located in
Cabarrus, Rowan and northern Mecklenburg Counties, North Carolina. The ATMs are
part of the HONOR network.
Union is a state-chartered commercial bank organized under the laws of
North Carolina in 1985. It was acquired by First Charter effective December 21,
1995 and provides general banking services through a network of five branch
offices and four ATMs located in Union and southern Mecklenburg Counties, North
Carolina.
Through their branch locations, the Banks provide a wide range of banking
products, including checking accounts; NOW accounts; "Money Market Rate"
accounts; certificates of deposit; individual retirement accounts; overdraft
protection; commercial, consumer, agriculture, real estate, residential mortgage
and home equity loans; personal and corporate trust services; safe deposit
boxes; and automated banking. In addition, through BOU Financial, First Charter
also offers discount brokerage services, insurance and annuity sales and
financial planning services pursuant to a third party arrangement with UVEST
Investment Services.
First Charter regularly evaluates the potential acquisition of or merger
with, and holds discussions with, various financial institutions. In addition,
First Charter periodically enters new markets and engages in new activities in
which it competes with established financial institutions. There can be no
assurance as to the success of any such new office or activity. Furthermore, as
the result of such expansions, First Charter may from time to time incur
start-up costs that could affect its financial results.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to the executive compensation, various benefit
plans, voting securities and the principal holders thereof, certain
relationships and related transactions and other related matters as to First
Charter is incorporated by reference or set forth in First Charter's Annual
Report on Form 10-K for the year ended December 31, 1996, incorporated herein by
reference. Shareholders desiring copies of such documents may contact First
Charter at its address or phone number indicated under "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
SUPERVISION AND REGULATION
GENERAL. As a registered bank holding company, First Charter is subject to
the supervision of, and to regular inspection by, the Federal Reserve Board.
FCNB is organized as a national banking association and is subject to
regulation, supervision and examination by the OCC and to regulation by the
FDIC. Union is a North Carolina state-chartered commercial bank and is subject
to regulation, supervision and examination by the Commissioner of Banks of the
State of North Carolina (the "Banking Commissioner"). As a federally insured,
non-member bank, Union also is subject to regulation, supervision and
examination by the FDIC.
In addition to banking laws, regulations and regulatory agencies, First
Charter and the Banks are subject to various other laws and regulations and
supervision and examination by other regulatory agencies, all of which directly
or indirectly affect First Charter's operations, management and ability to make
distributions.
RESTRICTIONS ON BANK HOLDING COMPANIES. The Federal Reserve Board is
authorized to adopt regulations affecting various aspects of bank holding
companies. Under the BHCA, the activities of First Charter, and those of
companies which it controls or in which it holds more than 5% of the voting
stock, are limited to banking or managing or controlling banks or furnishing
services to or performing services for its subsidiaries, or any other activity
which the Federal Reserve Board determines to be so closely related to banking
or managing or controlling banks as to be a proper incident thereto. In making
such determinations, the Federal Reserve Board is required to consider whether
the performance of such activities by a bank holding company or its subsidiaries
can reasonably be expected to produce benefits to the public such as greater
convenience, increased competition or gains in efficiency that outweigh possible
adverse effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest or unsound banking practices.
47
<PAGE>
Generally, bank holding companies are required to obtain prior approval of
the Federal Reserve Board to engage in any new activity not previously approved
by the Federal Reserve Board or to acquire more than 5% of any class of voting
stock of any company. Bank holding companies are also required to obtain the
prior approval of the Federal Reserve Board before acquiring more than 5% of any
class of voting stock of any bank which is not already majority-owned by the
bank holding company.
First Charter also is subject to the North Carolina Bank Holding Company
Act of 1984. As required by this state legislation, First Charter, by virtue of
its ownership of the Banks, has registered as a bank holding company with the
Banking Commissioner. The North Carolina Bank Holding Company Act also prohibits
First Charter from acquiring or controlling certain non-bank institutions which
have offices in North Carolina.
INTERSTATE BANKING AND BRANCHING LEGISLATION. Pursuant to the Reigle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Banking
and Branching Act"), which became effective September 29, 1995, a bank holding
company now may acquire banks in states other than its home state, without
regard to the permissibility of such acquisition under state law, but subject to
any state requirement that the bank has been organized and operating for a
minimum period of time, not to exceed five years, and the requirement that the
bank holding company, prior to, or following the proposed acquisition, controls
no more than 10% of the total amount of deposits of insured depository
institutions in the United States and no more than 30% of such deposits in any
state (or such lesser or greater amount set by state law).
The Interstate Banking and Branching Act also authorizes banks to merge
across state lines, therefore creating interstate branches, beginning June 1,
1997. Under such legislation, each state had the opportunity to "opt out" of
this provision, thereby prohibiting interstate branching in such states, or to
"opt in" at an earlier time, thereby allowing interstate branching within that
state prior to June 1, 1997. The State of North Carolina elected to "opt in" to
such legislation, effective June 22, 1995. Furthermore, pursuant to such Act, a
bank is now able to open new branches in a state in which it does not already
have banking operations, if the laws of such state permit such DE NOVO
branching.
CAPITAL AND OPERATIONAL REQUIREMENTS. The Federal Reserve Board, the OCC
and the FDIC have issued substantially similar risk-based and leverage capital
guidelines applicable to United States and state-chartered banking
organizations. The risk-based guidelines define a two-tier capital framework
under which First Charter and each of the Banks is required to maintain a
minimum ratio of Tier 1 Capital (as defined) to total risk-weighted assets of
4.00% and a minimum ratio of Total Capital (as defined) to risk-weighted assets
of 8.00%. With respect to First Charter, Tier 1 Capital generally consists of
total shareholders' equity calculated in accordance with generally accepted
accounting principles less certain intangibles, and Total Capital generally
consists of Tier 1 Capital plus certain adjustments, the largest of which for
First Charter is the general allowance for loan losses (up to 1.25% of
risk-weighted assets). Tier 1 Capital must consist of at least 50% of Total
Capital. Risk-weighted assets refer to the on- and off-balance sheet exposures
of First Charter, as adjusted for one of four categories of risk weights
established in applicable federal regulations, based primarily on relative
credit risk. First Charter's Tier 1 and total risk-based capital ratios under
these guidelines at June 30, 1997 were 14.46% and 15.71%, respectively.
The leverage ratio is determined by dividing Tier 1 Capital by adjusted
total assets. Although the stated minimum ratio is 3 percent, most banking
organizations are required to maintain ratios of at least 100 to 200 basis
points above 3 percent. First Charter's leverage ratio at June 30, 1997 was
11.24%. Management believes that First Charter meets its leverage ratio
requirement.
The federal regulatory agencies may from time to time require that a
banking organization maintain capital above the minimal levels whether because
of its financial condition or actual or anticipated growth.
PROMPT CORRECTIVE ACTION UNDER FDICIA. The Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), among other things, identifies
five capital categories for insured depository institutions (well capitalized,
adequately capitalized, undercapitalized, significantly undercapitalized and
critically undercapitalized) and requires the respective federal regulatory
agencies to implement systems for "prompt corrective action" for insured
depository institutions that do not meet minimum capital requirements within
such categories. FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions, depending on the category in
which an institution is classified. Failure to meet the capital guidelines could
also subject a banking institution to capital raising requirements. An
"undercapitalized" bank must develop a capital restoration plan and its parent
holding company must guarantee that bank's compliance with the plan. The
liability of the parent holding company under any such guarantee is limited to
the lesser of 5% of the bank's assets at the time it became "undercapitalized"
or the amount needed to comply with the plan. Furthermore, in the event of the
bankruptcy of the parent holding company, such guarantee would take priority
over the parent's general unsecured creditors. In addition, FDICIA requires the
various regulatory agencies to prescribe certain non-capital standards for
safety and soundness relating generally to operations and management, asset
quality and executive compensation and permits regulatory action against a
financial institution that does not meet such standards.
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The various regulatory agencies have adopted substantially similar
regulations that define the five capital categories identified by FDICIA, using
the total risk-based capital, Tier 1 risk-based capital and leverage capital
ratios as the relevant capital measures. Such regulations establish various
degrees of corrective action to be taken when an institution is considered
undercapitalized. Under the regulations, a "well capitalized" institution must
have a Tier 1 capital ratio of at least 6%, a total capital ratio of at least
10% and a leverage ratio of at least 5% and not be subject to a capital
directive order. An "adequately capitalized" institution must have a Tier 1
capital ratio of at least 4%, a total capital ratio of at least 8% and a
leverage ratio of at least 4%, or 3% in some cases. Under these guidelines, each
of the Banks is considered well capitalized.
Banking agencies have also adopted final regulations which mandate that
regulators take into consideration concentrations of credit risk and risks from
non-traditional activities, as well as an institution's ability to manage those
risks, when determining the adequacy of an institution's capital. This
evaluation will be made as a part of the institution's regular safety and
soundness examination. Banking agencies also have recently adopted final
regulations requiring regulators to consider interest rate risk (when the
interest rate sensitivity of an institution's assets does not match the
sensitivity of its liabilities or its off-balance-sheet position) in the
evaluation of a bank's capital adequacy. Concurrently, banking agencies have
proposed a methodology for evaluating interest rate risk. After gaining
experience with the proposed measurement process, those banking agencies intend
to propose further regulations to establish an explicit risk-based capital
charge for interest rate risk.
DISTRIBUTIONS. The primary source of funds for cash distributions paid by
First Charter to its shareholders is dividends received from the Banks. The
amount of dividends that FCNB may pay is subject to regulation by the OCC. Under
current regulations, the amount that FCNB may declare in any calendar year
without approval of the OCC is the sum of its net profits (as defined by
statute) for that year and its net retained profits (as defined) for the
preceding two years. In 1997, FCNB can initiate dividend payments without prior
regulatory approval of up to approximately $11 million plus an additional amount
equal to its net profits for 1997 up to the date of any such dividend
declaration.
The payment of dividends by Union is subject to restrictions of North
Carolina law applicable to the declaration of distributions by a commercial
bank. In general, Union may declare dividends in an amount that does not exceed
its undivided profits (determined as set forth in Chapter 53 of the North
Carolina General Statutes), as long as the surplus of Union equals at least 50%
of Union's paid-in capital stock. In 1997, Union can initiate dividend payments
without the approval of the Banking Commissioner of up to approximately $7
million plus an additional amount equal to its net profits for 1997 up to the
date of any such dividend declaration.
In addition to the foregoing, the ability of First Charter and the Banks to
pay dividends may be affected by the various minimum capital requirements and
the capital and non-capital standards established under FDICIA as described
above. Furthermore, if, in the opinion of the federal regulatory agencies, a
bank under its jurisdiction is engaged in or is about to engage in an unsafe or
unsound practice (which, depending on the financial condition of the bank, could
include the payment of dividends), such authority may require, after notice and
hearing, that such bank cease and desist from such practice. The right of First
Charter, its shareholders and its creditors to participate in any distribution
of the assets or earnings of its subsidiaries is further subject to the prior
claims of creditors of the respective subsidiaries.
DEPOSIT INSURANCE. The deposits of the Banks are insured up to applicable
limits by the FDIC. Accordingly, the Banks are subject to deposit premium
assessments of the Bank Insurance Fund ("BIF") of the FDIC. As mandated by
FDICIA, the FDIC has adopted regulations for a risk-based insurance assessment
system. Under this system, the assessment rates for an insured depository
institution vary according to the level of risk incurred in its activities. To
arrive at a risk assessment for a bank, the FDIC places it in one of nine risk
categories using a process based on capital ratios and on other relevant
information from supervisory evaluations of the bank by the bank's primary
federal regulator (the OCC for FCNB and the FDIC for Union), statistical
analyses of financial statements and other relevant information. Under the
FDIC's risk-based insurance system, assessments currently can range from no
assessment to 0.27% of the bank's average deposits base, with the exact
assessment determined by the bank's capital and the applicable regulatory
agency's opinion of the bank's operations. The range of deposit insurance
assessment rates can change from time to time, in the discretion of the FDIC,
subject to certain limits.
SOURCE OF STRENGTH. According to Federal Reserve Board policy, bank holding
companies are expected to act as a source of financial strength to each
subsidiary bank and to commit resources to support each such subsidiary. This
support may be required at times when a bank holding company may not be able to
provide such support. In the event of a loss suffered or anticipated by the
FDIC -- either as a result of default of a banking or thrift subsidiary of First
Charter or related to FDIC assistance provided to a subsidiary in danger of
default -- the other banking subsidiaries of First Charter may be assessed for
the FDIC's loss, subject to certain exceptions.
FUTURE LEGISLATION. Proposals to change the laws and regulations governing
the banking industry are frequently introduced in Congress, in the state
legislatures and before the various bank regulatory agencies. The likelihood and
timing of any such proposals or bills being enacted and the impact they might
have on First Charter and its subsidiaries cannot be determined at this time.
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INFORMATION ABOUT CSB
GENERAL
CSB is a North Carolina state-chartered commercial bank that operates under
the supervision of the Banking Commissioner and the FDIC. CSB was incorporated
on November 13, 1990 and commenced operations on April 5, 1991. At June 30,
1997, CSB had total assets of approximately $141.5 million and total deposits of
approximately $120.6 million. See "RECENT DEVELOPMENTS". CSB's main office is
located at 316 South Lafayette Street, Shelby, North Carolina 28150, and its
telephone number is (704) 480-4444.
CSB serves the banking needs of individuals and businesses in Cleveland and
Rutherford Counties, North Carolina. CSB offers most traditional commercial and
consumer banking services including checking accounts; NOW accounts; money
market accounts; certificates of deposit; individual retirement accounts;
overdraft protection; commercial, and consumer installment, real estate,
residential mortgage, and home equity loans; safe deposit boxes; and other
associated services. CSB's wholly owned subsidiary, CSB Financial, offers
brokerage services pursuant to a third party arrangement with AAG Securities,
Inc. and also offers insurance and annuity services.
In addition to its main office in Shelby, CSB operates three full-service
branch offices at 128 North Main Street, Boiling Springs, North Carolina, at 152
West Main Street in Forest City, North Carolina, and at 114 East Gold Street,
Kings Mountain, North Carolina.
VOTING SECURITIES AND BENEFICIAL OWNERSHIP THEREOF
The following table sets forth the beneficial ownership, as of June 30,
1997, of the CSB Common Stock of all persons believed by CSB to beneficially own
more than 5% of the CSB Common Stock:
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF CSB COMMON STOCK
NAME AND ADDRESS BENEFICIAL OWNERSHIP OWNED (1)
<S> <C> <C>
T. Carl Dedmon 130,116 (2) 7.83%
N/S Carolina Storage
Post Office Box 1146
Shelby, NC 28151
</TABLE>
(1) The ownership percentage was calculated based on the total of 1,662,192
shares of CSB Common Stock outstanding.
(2) Amount includes 78,439 shares of CSB Common Stock with respect to which Mr.
Dedmon has shared voting and investment power.
The following table sets forth the beneficial ownership, as of June 30,
1997, of the CSB Common Stock of each director and the chief executive officer
of CSB and of all directors and principal officers of CSB as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP (1) OF CLASS (2)
<S> <C> <C>
Dennis A. Beam, Jr. 41,550 2.50%
T. Carl Dedmon 130,116 7.83%
Dr. B. Thomas Ellis 50,137 3.02%
Joe B. Godfrey, M.D. 3,580 0.22%
Larry D. Hamrick, Sr. 17,406 1.05%
Charles F. Harry, III 67,515 4.06%
Charles F. Mauney 19,500 1.17%
Charles W. Rhoden, Jr. 37,723 2.27%
James M. Rose, Sr. 50,505 3.04%
Millie Keeter-Spangler 9,833 0.59%
John J. Godbold, Jr. 83,761 4.93%
All Directors and Principal Officers
as a Group (14 persons) 548,507 32.29%
</TABLE>
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<PAGE>
(1) To CSB's knowledge, each person has sole voting and investment power over
the securities shown as beneficially owned by such person, except for the
following shares of CSB Common Stock which the individual indicates that he
or she shares voting and/or investment power: Mr. Beam -- 675 shares; Mr.
Dedmon -- 78,439 shares; Mr. Ellis -- 5,250 shares; Mr. Hamrick -- 1,274
shares; Mr. Harry -- 15,525 shares; Mr. Mauney -- 1,500 shares; Mr.
Rhoden -- 17,666 shares; Mr. Rose -- 3,126 shares; Ms.
Keeter-Spangler -- 6,419 shares; and directors and executive officers as a
group -- 160,643 shares. This column includes options to purchase the shares
of CSB Common Stock which the individual indicates are immediately
exercisable: Mr. Godbold -- 36,700 shares; all executive officers and
directors as a group -- 36,700.
(2) The ownership percentages were calculated based on the total of 1,662,192
shares of CSB Common Stock outstanding plus the number of shares capable of
being issued to that individual (if any) and to the group as a whole upon
the exercise of stock options held by each (if any) and by the group as a
whole, respectively.
REPORTS OF CHANGES IN BENEFICIAL OWNERSHIP
Directors and executive officers of CSB are required by federal law to file
reports with the FDIC regarding the amount of and changes in their beneficial
ownership of CSB Common Stock. Since January 1, 1997, Drs. B. Thomas Ellis and
Joe B. Godfrey, current directors, each made a purchase of shares for which the
required report was not timely filed and John J. Godbold, Jr., an officer and
director, and Robert J. Jurek, an officer, each made an exercise of options to
purchase shares for which the required report was not timely filed. The required
reports have been filed to include those shares in the respective persons'
reports.
MANAGEMENT AND ADDITIONAL INFORMATION
Copies of CSB's 1996 Annual Report to Shareholders and its Quarterly Report
on Form F-4 for the quarter ended June 30, 1997, as amended, accompany this
Joint Proxy Statement-Prospectus. Certain additional information relating to the
executive compensation, various benefit plans (including the Stock Option Plan),
certain relationships and related transactions and other related matters as to
CSB is incorporated by reference or set forth in CSB's Annual Report on Form F-2
for the year ended December 31, 1996, incorporated herein by reference.
Shareholders desiring copies of such documents may contact CSB at its address or
phone number indicated under "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
SUPERVISION AND REGULATION
GENERAL. CSB is chartered by the State of North Carolina and its deposits
are insured by the FDIC (up to the applicable limits). It is not a member of the
Federal Reserve System. The following is a general discussion of certain
statutory and regulatory provisions that are applicable to CSB. This discussion
is only a summary and is qualified in its entirety by reference to the
particular statutory and regulatory provisions.
BANKING COMMISSIONER. CSB is subject to extensive supervision and
regulation by the Banking Commissioner. The Banking Commissioner enforces state
laws that set specific requirements for bank capital, the payment of dividends,
loans to officers and directors, record keeping, and types and amounts of loans
and investments made by commercial banks. The Banking Commissioner performs
periodic examinations of North Carolina-chartered commercial banks to assure
compliance with state banking statutes and regulations, and CSB is required to
make regular reports to the Banking Commissioner describing in detail the
resources, assets, liabilities and financial condition of CSB. The Banking
Commissioner has a broad range of enforcement powers to take disciplinary action
to protect the safety and soundness of commercial banks, including the issuance
of cease and desist orders and the removal of officers and directors. Among
other things, the approval of the Banking Commissioner is generally required
before a North Carolina-chartered commercial bank may establish branch offices
or merge or consolidate with or purchase substantially all of the assets of
another depository institution.
Under North Carolina banking law, the Banking Commissioner has the
authority to order CSB to require its shareholders to invest additional capital
in the event CSB's capital shall have become impaired by losses or otherwise.
Failure to pay such an assessment may result in a forced sale of a shareholder's
CSB Common Stock.
FDIC. CSB is subject to equally extensive supervision and regulation by the
FDIC, which is intended primarily for the protection of depositors. CSB is
subject to examination by the FDIC, and the FDIC monitors CSB's compliance with
several federal statutes such as the CRA. The FDIC has broad enforcement
authority to prevent the continuance or development of unsound and unsafe
banking practices, including the issuance of cease and desist orders and the
removal of officers and directors. The FDIC must approve the establishment of
branch offices, conversions, mergers, assumption of deposit liabilities
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<PAGE>
between insured banks and uninsured banks or institutions, and the acquisition
or establishment of certain subsidiary corporations. The FDIC can prevent
capital or surplus diminution in such transactions where the deposit accounts of
the resulting, continuing or assumed bank are insured by the FDIC.
CSB is subject to the FDIC's risk-based capital requirements, leverage
ratio capital requirements and a five-category definition of capital adequacy,
as described above. See "INFORMATION ABOUT FIRST CHARTER -- Supervision and
Regulation -- Capital and Operational Requirements" and " -- Prompt Corrective
Action under FDICIA." At June 30, 1997, CSB had Tier I and total risk-based
capital ratios of 13.07% and 12.59%, respectively, and a leverage ratio of
9.63%.
CSB also is subject to the FDIC's limits on activities. Generally, CSB is
not permitted to engage in any activity not permitted for a national bank unless
(i) it is in compliance with its capital requirements and (ii) the FDIC
determines that the activity would not pose a risk to the deposit insurance
fund. With certain exceptions, CSB is not permitted to acquire equity
investments of a type, or in an amount, not permitted for a national bank.
CSB is required to pay deposit insurance assessments set by the FDIC. Under
the current assessment rate schedule, CSB's assessment could range from no
assessment to 0.27% of CSB's average deposits base, with the exact assessment
determined by CSB's capital and the FDIC's supervisory opinion of CSB's
operations. Only the strongest banks are not required to pay an assessment. The
insurance assessment rate may change periodically in the discretion of the FDIC,
subject to certain limits.
DISTRIBUTIONS. The payment of dividends by CSB is subject to restrictions
of North Carolina law applicable to the declaration of distributions by a
commercial bank. In general, a commercial bank may declare dividends in an
amount that does not exceed its undivided profits (determined as set forth in
Chapter 53 of the North Carolina General Statutes), so long as the surplus of
the commercial bank equals at least 50% of its paid-in capital stock. CSB
historically has not paid dividends.
MONETARY POLICY. The earnings of CSB are affected significantly by the
policies of the Federal Reserve Board, which regulates the money supply in order
to mitigate recessionary and inflationary pressures. Among the techniques used
to implement these objectives are open market transactions in United States
government securities, changes in the rate paid by banks on bank borrowings and
changes in reserve requirements against bank deposits. These techniques are used
in varying combinations to influence overall growth and distribution of bank
loans, investments, and deposits, and their use may also affect interest rates
charged on loans or paid for deposits. The monetary policies of the Federal
Reserve Board have had a significant effect on the operating results of
commercial banks in the past and are expected to continue to do so in the
future.
INTERSTATE BANKING AND BRANCHING. CSB also may be affected by the
Interstate Banking and Branching Act previously described. See "INFORMATION
ABOUT FIRST CHARTER -- Supervision and Regulation -- Interstate Banking and
Branching Legislation."
COMPARISON OF FIRST CHARTER COMMON STOCK AND CSB COMMON STOCK
FIRST CHARTER COMMON STOCK
GENERAL. First Charter is authorized to issue 10,000,000 shares of First
Charter Common Stock, of which 7,566,096 shares were outstanding as of October
15, 1997. If the proposed Amended and Restated Articles of Incorporation are
approved by First Charter's shareholders, the number of authorized shares of
First Charter Common Stock which First Charter will be authorized to issue will
be increased from 10,000,000 to 25,000,000 shares. See "APPROVAL OF AMENDED AND
RESTATED ARTICLES OF INCORPORATION OF FIRST CHARTER." First Charter Common Stock
is reported on The Nasdaq Stock Market as a Nasdaq National Market security
under the symbol "FCTR." As of October 15, 1997, 529,244 shares of First Charter
Common Stock were reserved for issuance under various employee and director
benefit plans of First Charter, 61,303 shares were reserved for issuance under
First Charter's Dividend Reinvestment Plan, and up to 1,760,370 shares were
reserved for issuance in connection with the Merger. After taking into account
the shares reserved as described above, the number of authorized shares of First
Charter Common Stock available for other corporate purposes as of Oct. 15, 1997
was 82,987.
VOTING AND OTHER RIGHTS. The holders of First Charter Common Stock are
entitled to one vote per share on each matter voted at a shareholders' meeting.
A majority of the shares entitled to vote, represented at a meeting in person or
by proxy, constitutes a quorum, and, in general, a majority of votes cast with
respect to a matter is sufficient to authorize action upon routine matters.
Directors are elected by a plurality of the votes cast, and each shareholder
entitled to vote in such election is entitled to vote each share of stock for as
many persons as there are directors to be elected. In elections for directors,
such shareholders do not have the right to cumulate their votes, so long as
First Charter has a class of shares registered under
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<PAGE>
Section 12 of the Exchange Act (unless action is taken to provide otherwise by
charter amendment, which action management does not currently intend to
propose). In general, (i) amendments to First Charter's articles of
incorporation must be approved by each voting group entitled to vote separately
thereon by a majority of the votes cast by that voting group, unless the
amendment creates dissenters' rights for a particular voting group, in which
case such amendment must be approved by a majority of the votes entitled to be
cast by such voting group; and (ii) the dissolution of First Charter must be
approved by a majority of all votes entitled to be cast thereon.
The Restated Charter of First Charter provides that a plan for First
Charter to consolidate with, or merge with or into, any other corporation or
convey to any corporation or other person or otherwise dispose of all or
substantially all of its assets or to dispose of by any means all or
substantially all the stock or assets of any major subsidiary will not be
submitted to the shareholders for approval unless such plan is approved by the
affirmative vote of 75% of the directors. The Restated Charter further provides
that the Board of Directors, in its evaluation of such a plan, shall consider
all relevant factors, including the social and economic effects on employees,
customers, communities and others. If submitted to the shareholders, such plan
may be approved only by (A) the affirmative vote of not less than 75% of the
aggregate voting power of the outstanding stock entitled to vote thereon and (B)
the affirmative vote of at least 50% of the voting power of the outstanding
stock of shareholders entitled to vote thereon other than controlling
shareholders, if (x) any shareholder entitled to vote thereon is a person who,
including affiliates of such person, is the beneficial owner of more than 20% of
the voting power of First Charter (a "controlling shareholder"), provided that
shares held, voted or otherwise controlled by a person as a trustee, plan
administrator, officer of First Charter or otherwise pursuant to an employee
benefit plan of First Charter or of an affiliate of First Charter shall not be
deemed to be beneficially owned by a person for the purpose of determining
whether such person is a controlling shareholder, and (y) prior to the
acquisition of 20% of the voting power of First Charter by a shareholder, the
Board of Directors has not unanimously approved such transaction. This provision
of the Restated Charter can be amended only by the vote required to approve such
a transaction, if there is a controlling shareholder.
In the event of liquidation, holders of First Charter Common Stock would be
entitled to receive pro rata any assets legally available for distribution to
shareholders with respect to shares held by them. First Charter Common Stock
does not have any preemptive rights, redemption privileges, sinking fund
privileges or conversion rights. All the outstanding shares of First Charter
Common Stock are, and upon issuance the shares of First Charter Common Stock to
be issued to shareholders of CSB will be, validly issued, fully paid and
nonassessable.
First Charter National Bank acts as transfer agent and registrar for First
Charter Common Stock.
DISTRIBUTIONS. The holders of First Charter Common Stock are entitled to
receive such dividends or distributions as the Board of Directors of First
Charter may declare out of funds legally available for such payments. The
payment of distributions by First Charter is subject to the restrictions of
North Carolina law applicable to the declaration of distributions by a business
corporation. A corporation generally may not authorize and make distributions
if, after giving effect thereto, it would be unable to meet its debts as they
become due in the usual course of business or if the corporation's total assets
would be less than the sum of its total liabilities plus the amount that would
be needed, if it were to be dissolved at the time of distribution, to satisfy
claims of shareholders who have preferential rights superior to the rights of
the holders receiving the distribution. Share dividends, if any are declared,
may be paid from First Charter's authorized but unissued shares.
The ability of First Charter to pay distributions is affected by the
ability of the Banks to pay dividends. The ability of FCNB, as well as of the
Banks, to pay dividends in the future currently is, and could be further,
influenced by bank regulatory requirements and capital guidelines. See
"INFORMATION ABOUT FIRST CHARTER -- Supervision and Regulation --
Distributions."
CSB COMMON STOCK
GENERAL. CSB is authorized to issue 10,000,000 shares of CSB Common Stock,
of which 1,662,792 shares were outstanding as of October 15, 1997. The market
prices of the CSB Common Stock are listed in the National Daily Quotation
Service "Pink Sheets." As of October 15, 1997, a total of 388,776 additional
shares were reserved for issuance in connection with various employee stock
option plans of CSB and in connection with the Stock Option Agreement.
VOTING AND OTHER RIGHTS. The holders of CSB Common Stock are entitled to
one vote per share on each matter voted at a shareholders' meeting. A majority
of the shares entitled to vote, represented at a meeting in person or by proxy,
constitutes a quorum, and, in general, a majority of votes cast with respect to
a matter is sufficient to authorize action upon routine matters. Directors are
elected by a plurality of the votes cast. In elections for directors, each
shareholder of CSB has the right to cast a number of votes equal to the number
of directors to be elected times the number of shares held of record by the
shareholder
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<PAGE>
and to cumulate such vote by giving one candidate as many votes as the
shareholder has or by distributing such votes among any number of directors
("Cumulative Voting"). The right of Cumulative Voting may be exercised only if a
shareholder announces in open meeting, prior to any vote on directors, the
intent to exercise such right.
The Articles of Incorporation of CSB provide that the affirmative vote or
consent of the holders of not less than 80% of the outstanding shares of CSB
Common Stock entitled to vote on a particular matter shall be required (i) to
adopt any agreement for, or to approve, the merger or consolidation of CSB or
any affiliate with or into any other person, (ii) to authorize any sale,
transfer or exchange to any other person of all or substantially all of the
assets of CSB or any affiliate or (iii) to authorize the issuance or transfer by
CSB or any affiliate of any voting securities of CSB or any affiliate in
exchange or payment for the securities or assets of any other person, if such
authorization is otherwise required by law or by agreement between CSB and any
national securities exchange or by any other agreement to which CSB or any
affiliate is a party; PROVIDED, HOWEVER, the foregoing shall not apply and the
provisions of North Carolina law otherwise applicable shall apply to (x) any
such transaction if the Board of Directors by resolution shall have approved by
two-thirds vote of all directors a memorandum of understanding with such other
person setting forth the principal terms of such transaction and such
transaction is substantially similar therewith or (y) any such transaction if
such other person is a corporation of which a majority of the outstanding shares
of all classes of stock entitled to vote in elections of directors is owned of
record or beneficially by CSB or its affiliates. The Articles of Incorporation
further provide that the Board of Directors, in its evaluation of such a plan,
shall consider all relevant factors, including the social and economic effects
on employees, depositors, customers, suppliers, communities and others. In
general, amendments to CSB's Articles of Incorporation must be approved by a
majority of the outstanding shares of CSB Common Stock. Unless an amendment to
CSB's Articles of Incorporation relating to the transactions discussed in (i)
through (iii) above is recommended to the shareholders by the affirmative vote
of two-thirds of CSB's Board of Directors, such provision of the Articles of
Incorporation can be amended only by the affirmative vote of not less than 80%
of the outstanding shares of CSB Common Stock.
Under North Carolina banking law, the voluntary liquidation of CSB must be
approved by a vote of two-thirds of all outstanding shares of CSB Common Stock.
In the event of liquidation, holders of CSB Common Stock would be entitled to
receive pro rata any assets legally available for distribution to shareholders
with respect to shares held by them. CSB Common Stock does not have any
preemptive rights, redemption privileges, sinking fund privileges or conversion
rights. However, pursuant to Chapter 53 of the North Carolina General Statutes,
shares of CSB Common Stock may be assessable to the extent necessary to prevent
the impairment of capital.
First Citizens Bank acts as transfer agent and registrar for CSB Common
Stock.
NORTH CAROLINA SHAREHOLDER PROTECTION ACT. CSB is subject to the provisions
of the North Carolina Shareholder Protection Act (the "Shareholder Protection
Act"), the provisions of which are set forth in N.C.G.S.
(section mark)(section mark) 55-9-01 ET SEQ. The Shareholder Protection Act
generally requires that, unless certain "fair price" and procedural requirements
are satisfied, the affirmative vote of 95% of a corporation's voting shares is
required to approve certain business combination transactions with another
entity that is the beneficial owner, directly or indirectly, of more than 20% of
the corporation's voting shares or which is an affiliate of the corporation and
previously has been a 20% beneficial holder of such shares.
CONTROL SHARE ACQUISITION ACT. CSB also is subject to provisions of the
North Carolina Control Share Acquisition Act (the "Control Share Act"), the
provisions of which are set forth in N.C.G.S. (section mark)(section mark)
55-9A-01 ET SEQ. The Control Share Act generally provides that, except as
provided below, "Control Shares" will not have any voting rights. Control Shares
are shares acquired by a person under certain circumstances which, when added to
other shares owned, would give such person effective control over one-fifth,
one-third or a majority of all voting power in the election of the corporation's
directors. However, voting rights will be restored to Control Shares by
resolution approved by the affirmative vote of the holders of a majority of the
corporation's voting stock (other than shares held by the owner of the Control
Shares, officers of the corporation, and directors employed by the corporation).
If voting rights are granted to Control Shares which give the holder a majority
of all voting power in the election of the corporation's directors, then the
corporation's other shareholders may require the corporation to redeem their
shares at their fair value.
DISTRIBUTIONS. The holders of CSB Common Stock are entitled to receive such
dividends and distributions as the Board of Directors of CSB may declare out of
funds legally available for such payments. The payment of dividends by CSB is
subject to restrictions of North Carolina law applicable to the declaration of
distributions by a commercial bank. In general, a North Carolina bank may
declare dividends in an amount that does not exceed its undivided profits
(determined as set forth in Chapter 53 of the North Carolina General Statutes),
as long as the surplus of such bank equals at least 50% of the bank's paid-in
capital stock. Furthermore, a North Carolina commercial bank may pay stock
dividends out of the bank's surplus, as long as the payment of such stock
dividend does not reduce such surplus below 50% of the bank's paid-in capital.
54
<PAGE>
The ability of CSB to pay dividends in the future currently is, and could
be further, influenced by bank regulatory requirements and capital guidelines.
See "INFORMATION ABOUT CSB -- Supervision and Regulation."
COMPARISON OF VOTING AND OTHER RIGHTS
First Charter is a North Carolina corporation subject to the provisions of
the NCBCA. CSB is a North Carolina state-chartered commercial bank regulated
primarily by the Banking Commissioner and the FDIC. Furthermore, CSB is a North
Carolina corporation subject to the provisions of the NCBCA, to the extent that
the North Carolina banking statutes are not inconsistent with the NCBCA.
Shareholders of CSB (other than those who perfect dissenters' rights of
appraisal), whose rights are governed by CSB's Articles of Incorporation and
Bylaws, by the NCBCA and by the North Carolina banking statutes, will upon
consummation of the Merger, become shareholders of First Charter. As
shareholders of First Charter, their rights will then be governed by the
Restated Charter and the Bylaws of First Charter and by the NCBCA. Except as set
forth below, there are no material differences between the rights of CSB
shareholders under CSB's Articles of Incorporation and Bylaws and under the
NCBCA and the North Carolina banking statutes, on the one hand, and the rights
of First Charter's shareholders under First Charter's Restated Charter, its
Bylaws and the NCBCA, on the other hand. This summary does not purport to be a
complete discussion of, and is qualified in its entirety by reference to, the
governing law and governing corporate documents of each corporation. First
Charter's Restated Charter is proposed to be amended and restated. See "APPROVAL
OF AMENDED AND RESTATED ARTICLES OF INCORPORATION OF FIRST CHARTER."
ELECTION OF DIRECTORS. Generally, a First Charter shareholder has the right
to vote each share of First Charter Common Stock for as many directors as there
are to be elected, but may cast only one vote per such director. So long as
First Charter is a public corporation, its shareholders do not have cumulative
voting rights. This may make it more difficult for a shareholder or group of
shareholders holding a minority of First Charter Common Stock to effect a change
in the composition of the Board of Directors of First Charter. In contrast, each
shareholder of CSB has the right to cast a number of votes equal to the number
of directors to be elected times the number of shares held of record by the
shareholder AND, until such time as the CSB Common Stock is listed on a national
securities exchange or held of record by more than 2,000 persons, to cumulate
such vote by giving one candidate as many votes as the shareholder has or by
distributing such votes among any number of directors. This right of Cumulative
Voting may be exercised only if a shareholder announces in open meeting, prior
to any vote on directors, the intent to exercise such right. In elections at
both First Charter and CSB, directors are elected by a plurality of the votes
cast.
MEETINGS OF SHAREHOLDERS. A special meeting of First Charter shareholders
may be called for any purpose by the First Charter Board of Directors, by First
Charter's Chief Executive Officer or by First Charter's Secretary acting under
instructions of the Chief Executive Officer. So long as First Charter is a
public corporation (that is, has a class of stock registered under the Exchange
Act), however, shareholders of First Charter are not entitled to call a special
meeting. A special meeting of CSB shareholders may be called for any purpose by
CSB's President, by the Board of Directors of CSB or, until such time as the CSB
Common Stock is listed on a national securities exchange or held of record by
more than 2,000 persons, by the holders of not less than 10% of all of the
outstanding shares of CSB entitled to vote at the meeting.
REQUIRED VOTE FOR AUTHORIZATION OF CERTAIN ACTIONS. In general, any merger,
consolidation or disposition of all or substantially all of the assets of First
Charter or the stock or assets of any of its major subsidiaries may be submitted
to the shareholders of First Charter only if approved by at least 75% of the
directors of First Charter. If submitted to the shareholders, such action
generally must be approved by (i) the holders of at least 75% of aggregate
voting power of First Charter and (ii) the holders of at least 50% of the
aggregate voting power entitled to vote thereon other than controlling
shareholders. In contrast, the Articles of Incorporation of CSB provide that
unless the Board of Directors of CSB by a two-thirds vote adopts a resolution
approving a memorandum of understanding setting forth the principal terms of a
proposed merger, consolidation or disposition of all or substantially all of the
assets of CSB and such transaction is substantially similar therewith, then the
action must be approved by at least 80% of the outstanding shares of CSB Common
Stock. North Carolina banking law requires that a merger or consolidation of CSB
with another bank or the transfer of all of its assets must be approved by two-
thirds of the outstanding shares of CSB Common Stock and, except in the case of
a merger with a national bank, by the Banking Commissioner.
AMENDMENTS TO ARTICLES OF INCORPORATION. Generally, substantive amendments
to either First Charter's Restated Charter or CSB's Articles of Incorporation
must be approved by each voting group entitled to vote separately thereon by a
majority of the votes cast by that voting group, unless the amendment creates
dissenters' rights for a particular voting group, in which case such amendment
must be approved by a majority of the votes entitled to be cast by such voting
group. An amendment,
55
<PAGE>
however, to the provision of First Charter's Restated Charter setting forth the
voting requirements for mergers or consolidations involving First Charter and
for the disposition of all or substantially all of First Charter's assets or the
stock or assets of one of its major subsidiaries, as described above, must be
approved by the vote required to effect such merger, consolidation or transfer
of assets. Similarly, an amendment to the provision of CSB's Articles of
Incorporation setting forth the voting requirements for a merger or
consolidation or sale of all or substantially all of CSB's assets, as described
above, must be approved by 80% of CSB's shareholders, unless two-thirds of the
directors of CSB vote to recommend the amendment to the shareholders, in which
case the provisions of North Carolina law otherwise applicable to the amendment
of CSB's Articles of Incorporation shall apply.
DISTRIBUTIONS. The payment of distributions to holders of First Charter
Common Stock is subject to the provisions of the NCBCA and the ability of FCNB,
Union and any other subsidiary of First Charter to pay dividends to First
Charter, as restricted by various bank regulatory agencies. See "INFORMATION
ABOUT FIRST CHARTER -- Supervision and Regulation -- Distributions." The payment
of distributions to holders of CSB Common Stock is subject to the provisions of
Chapter 53 of the North Carolina General Statutes. See "COMPARISON OF FIRST
CHARTER COMMON STOCK AND CSB COMMON STOCK -- CSB Common Stock -- Distributions."
SIZE, CLASSIFICATION AND CONSTITUENCY OF THE BOARD OF DIRECTORS. The size
of the First Charter Board of Directors may be established by the shareholders
or by at least 75% of the directors of First Charter, provided that the
directors of First Charter cannot set the number of directors at less than five
nor more than twenty-five, and only the shareholders have the right to change
this range. The Board of Directors of First Charter is divided into three
classes, and directors are elected to serve three-year terms. Directors of First
Charter need not be residents of the State of North Carolina or shareholders of
First Charter. The number of directors of CSB is set by a vote of the
shareholders between nine and 30, and the shareholders may increase the number
by no more than two at any shareholders' meeting. The directors are divided into
three classes, and each director serves a three year term. Directors of CSB must
be shareholders holding at least $1,000 in par value of CSB Common Stock, and
75% of CSB's Board of Directors must be residents of the State of North
Carolina.
REMOVAL OF DIRECTORS; FILLING VACANCIES. Generally, directors of First
Charter may be removed by the shareholders with or without cause by the
affirmative vote of a majority of the votes cast, unless its Restated Charter is
amended to provide otherwise. Vacancies occurring on the First Charter Board of
Directors may be filled by the Board of Directors or the shareholders of First
Charter. The rights of a CSB shareholder are substantially similar except that a
director may not be removed if the number of votes cast against the removal
would be sufficient to elect the director under Cumulative Voting.
AMENDMENTS OF BYLAWS. Except as otherwise required in the NCBCA, the
Restated Charter of First Charter or a bylaw adopted by the shareholders of
First Charter, generally the Bylaws of First Charter may be amended or repealed
by a majority of the Board of Directors or by the shareholders of First Charter,
except that a bylaw adopted, amended or repealed by the shareholders of First
Charter may not be modified or repealed by the Board of Directors if neither the
articles of incorporation nor a bylaw adopted by the shareholders authorizes the
Board of Directors to so act. Generally, the rights of a CSB shareholder are
substantially similar except that the directors may not amend CSB's Bylaws to
(i) require more than a majority of the voting shares for a quorum at a meeting
of the shareholders or more than a majority vote to constitute action by the
shareholders unless a higher percentage is required by law; (ii) provide for the
management of CSB other than by the Board of Directors or its executive
committee; (iii) increase or decrease the number of directors; or (iv) classify
or stagger the election of directors. Also, an amendment to the provision of
CSB's bylaws setting forth the voting requirements for a merger or consolidation
or sale of all or substantially all of CSB's assets must be approved by 80% of
CSB's shareholders, unless two-thirds of the directors of CSB vote to recommend
the amendment to the shareholders.
ASSESSABLE COMMON STOCK. All issued and outstanding shares of First Charter
Common Stock are generally nonassessable. In contrast, issued and outstanding
shares of CSB Common Stock may be assessable by the Banking Commissioner to the
extent necessary to prevent impairment of capital.
APPLICABILITY OF CERTAIN LAWS. The provisions of the Shareholder Protection
Act and the Control Share Act are not applicable to First Charter. In contrast,
the provisions of such Acts are applicable to CSB. See "COMPARISON OF FIRST
CHARTER COMMON STOCK AND CSB COMMON STOCK -- CSB Common Stock -- North Carolina
Shareholder Protection Act" and " -- North Carolina Control Share Acquisition
Act."
MISCELLANEOUS. First Charter National Bank acts as transfer agent and
registrar for First Charter Common Stock. First Citizens Bank acts as transfer
agent for the CSB Common Stock. First Charter Common Stock is reported on The
Nasdaq Stock Market as a National Market Security. The CSB Common Stock is
traded in the over-the-counter market and is listed in the National Daily
Quotation Service "Pink Sheets."
56
<PAGE>
APPROVAL OF
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF FIRST CHARTER
The Board of Directors of First Charter has approved the amendment and
restatement of the Restated Charter of First Charter, as currently in effect. In
addition to the amendment described below, to reflect certain changes in the
NCBCA, the proposed Amended and Restated Articles of Incorporation (i) eliminate
the concept of par value in connection with the First Charter Common Stock, and
(ii) make certain technical changes to delete obsolete references to
incorporators, the initial Board of Directors, minimum consideration and
provisions inconsistent with North Carolina law.
THE TEXT OF THE PROPOSED AMENDED AND RESTATED ARTICLES OF INCORPORATION OF
FIRST CHARTER IS ATTACHED AS APPENDIX E TO THIS JOINT PROXY STATEMENT-PROSPECTUS
AND IS INCORPORATED HEREIN BY REFERENCE. THE FOLLOWING SUMMARY IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO APPENDIX E.
INCREASE IN FIRST CHARTER'S AUTHORIZED COMMON STOCK
In the Amended and Restated Articles of Incorporation, the number of
authorized shares of First Charter Common Stock would be increased from
10,000,000 to 25,000,000. First Charter currently is authorized to issue up to
10,000,000 shares of First Charter Common Stock, of which as of October 15,
1997, 7,566,096 shares were outstanding and 2,350,917 shares were reserved for
issuance, leaving only 82,987 shares available for issuance for other corporate
purposes as of such date. See "COMPARISON OF FIRST CHARTER COMMON STOCK AND CSB
COMMON STOCK -- First Charter Common Stock." The Board of Directors of First
Charter believes that the increase in the number of authorized shares of Common
Stock will provide First Charter with increased flexibility to meet various
corporate objectives and is in the best interests of First Charter and its
shareholders.
It is First Charter's intention to finance its operations through, among
other things, the issuance from time to time of various equity securities, to
consider the acquisition of financial service businesses (possibly using First
Charter Common Stock as consideration in some instances) and to consider the
issuance of additional shares of First Charter Common Stock through stock splits
and stock dividends in appropriate circumstances. Accordingly, the continued
availability of shares of First Charter Common Stock is necessary to provide
First Charter with the flexibility to take advantage of opportunities in such
situations. There are, at present, no plans, understandings, agreements or
arrangements concerning the issuance of additional shares of First Charter
Common Stock, except for (i) the shares to be issued pursuant to the Merger and
(ii) shares currently reserved for issuance under employee and director benefit
plans and First Charter's Dividend Reinvestment Plan. See "COMPARISON OF FIRST
CHARTER COMMON STOCK AND CSB COMMON STOCK -- First Charter Common Stock."
Pursuant to North Carolina law, authorized and unissued shares of First
Charter Common Stock (other than those shares reserved for certain purposes) are
available for issuance by First Charter to such persons and for such
consideration as First Charter's Board of Directors may determine from time to
time. Shareholders may not be given the opportunity to vote on such matters,
unless shareholder approval is required by applicable law or the rules and
policies of The Nasdaq National Market or unless the Board of Directors in its
judgment recommends shareholder approval. Shareholders generally will have no
preemptive rights to subscribe to newly issued shares.
CERTAIN EFFECTS OF AMENDMENT
If the shareholders of First Charter approve the Amended and Restated
Articles of Incorporation, the increase in the amount of authorized First
Charter Common Stock could have certain anti-takeover effects with respect to
First Charter. As noted above, First Charter will have the authority to issue
shares of authorized but unissued and unreserved shares of Common Stock in its
discretion, which could dilute the stock ownership of persons seeking to acquire
control of First Charter through the purchase of a large block of stock.
In addition, the Restated Charter of First Charter Corporation currently
contains, and the Amended and Restated Articles of Incorporation will continue
to contain, other provisions which may have anti-takeover effects. For example,
the Board of Directors of First Charter is composed of three classes with the
directors in each such class serving staggered terms. The staggered terms may
make it more difficult to obtain control of First Charter by changing the
composition of the Board of Directors of First Charter. The Restated Charter of
First Charter also imposes certain supermajority voting requirements in
connection with certain business combinations of First Charter or sales of all
or substantially all of its assets or the stock of its subsidiaries, and also
require the vote of 75% of First Charter's Board of Directors for the approval
of a plan of merger or plan of consolidation or similar plan of First Charter
with any other corporation or entity in which First Charter is the
57
<PAGE>
acquired corporation or for adopting a resolution recommending a sale, lease or
exchange of all or substantially all the property of First Charter. See
"COMPARISON OF FIRST CHARTER COMMON STOCK AND CSB COMMON STOCK -- First Charter
Common Stock -- Comparison of Voting and Other Rights."
All of the above-described provisions could have certain anti-takeover
effects with respect to First Charter. Such provisions could make First Charter
a less attractive target for a hostile takeover bid or render more difficult or
discourage a merger proposal, the assumption of control through the acquisition
of a large block of First Charter Common Stock or the removal of incumbent
management, even if the consummation of a given transaction might be favorable
to the shareholders of First Charter. In addition, such provisions may inhibit
or impede fluctuations in the market price of First Charter Common Stock that
might otherwise result from actual or potential takeover attempts.
First Charter is not aware of any pending or threatened effort to acquire
control of First Charter, and the proposal to increase the authorized First
Charter Common Stock is not in response to any indication that any other
company, person or group is interested in acquiring control of First Charter.
Furthermore, the existing provisions in First Charter's Restated Charter and in
the proposed Amended and Restated Articles of Incorporation are not a part of a
plan by management to adopt a series of provisions with an anti-takeover
purpose, and First Charter currently does not intend to propose other
anti-takeover measures in future proxy solicitations. Rather, the principal
purpose of the increase in authorized capital is to provide First Charter with
flexibility for considering stock splits and dividends and effecting
acquisitions and financings.
RECOMMENDATION OF BOARD OF DIRECTORS
First Charter's Board of Directors believes that the proposed Amended and
Restated Articles of Incorporation, including the increase in the number of
authorized shares of First Charter Common Stock, will provide flexibility needed
to meet corporate objectives and is in the best interests of First Charter and
its shareholders. The Amended and Restated Articles of Incorporation, including
the increase in the number of authorized shares of First Charter Common Stock,
will, if approved by the requisite vote of First Charter shareholders, be
adopted by First Charter regardless of whether the Merger is consummated.
Therefore, if the proposal is approved, officers of First Charter will promptly
make appropriate filings in the State of North Carolina and take any other
action necessary to implement the amendment.
THE FIRST CHARTER BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF FIRST CHARTER VOTE FOR THE PROPOSAL TO APPROVE THE AMENDED AND
RESTATED ARTICLES OF INCORPORATION OF FIRST CHARTER.
LEGAL OPINIONS
The legality of the First Charter Common Stock to be issued in connection
with the Merger and certain other legal matters in connection with the Merger,
including tax consequences of the Merger, will be passed upon by Smith Helms
Mulliss & Moore, L.L.P., Charlotte, North Carolina. In addition, certain other
legal matters in connection with the Merger will be passed upon for CSB by The
Sanford Holshouser Law Firm, Raleigh, North Carolina. As of the date of this
Joint Proxy Statement-Prospectus, certain members of Smith Helms Mulliss &
Moore, L.L.P., beneficially owned approximately shares of First Charter
Common Stock.
EXPERTS
The consolidated financial statements of First Charter as of December 31,
1996 and for each of the years in the three-year period ended December 31, 1996
have been incorporated by reference in this Joint Proxy Statement-Prospectus
from First Charter's Annual Report on Form 10-K for the year ended December 31,
1996, in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, and upon the authority of said firm as experts in
auditing and accounting.
The consolidated financial statements of CSB as of December 31, 1996 and
1995 and for each of the three years in the period ended December 31, 1996 have
been incorporated by reference into this Joint Proxy Statement-Prospectus from
the 1996 Annual Report on Form F-2 in reliance upon the report of Coopers &
Lybrand L.L.P., independent certified public accountants, given on the authority
of said firm as experts in auditing and accounting.
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<PAGE>
SHAREHOLDER PROPOSALS
FIRST CHARTER. Shareholders of First Charter may submit proposals to be
considered for shareholder action at the 1998 First Charter Annual Shareholder
Meeting if they do so in accordance with the applicable regulations of the
Commission. Any such proposals must be submitted to the Secretary of First
Charter no later than November 5, 1997 in order to be considered for inclusion
in First Charter's 1998 proxy materials.
CSB. CSB will hold a 1998 Annual Meeting of Shareholders only if the Merger
is not consummated before the time of such meeting. If a meeting is held, any
shareholder proposal intended for inclusion in the 1998 proxy must be received
by CSB no later than December 31, 1997.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of KPMG Peat Marwick LLP, independent accountants for First
Charter, are expected to be present at the First Charter Special Meeting, will
have the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions. Representatives of
Coopers & Lybrand L.L.P., independent accountants for CSB, are expected to be
present at the CSB Special Meeting, will have the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions.
OTHER MATTERS
As of the date of this Joint Proxy Statement-Prospectus, the respective
Boards of Directors of First Charter and of CSB know of no matters that will be
presented for consideration at their respective Special Meetings other than as
described in this Joint Proxy Statement-Prospectus. However, if any other
matters shall properly come before the First Charter Special Meeting or any
adjournments or postponements thereof and be voted upon, or the CSB Special
Meeting or any adjournments or postponements thereof and be voted upon, the
enclosed proxies shall be deemed to confer discretionary authority on the
individuals named as proxies therein to vote the shares represented by such
proxies as to any such matters. The persons named as proxies intend to vote or
not to vote in accordance with the recommendation of the respective managements
of First Charter and CSB.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
BETWEEN
FIRST CHARTER CORPORATION
AND
CAROLINA STATE BANK
August 15, 1997
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<C> <S> <C>
</TABLE>
ARTICLE I
CERTAIN DEFINITIONS
<TABLE>
<C> <S> <C>
1.01 Certain Definitions.......................................................................................... A-5
</TABLE>
ARTICLE II
THE MERGER AND RELATED TRANSACTIONS
<TABLE>
<C> <S> <C>
2.01 Merger....................................................................................................... A-8
2.02 Time and Place of Closing.................................................................................... A-8
2.03 Effective Time............................................................................................... A-8
2.04 Reservation of Right to Revise Transaction; Further Actions.................................................. A-8
</TABLE>
ARTICLE III
MANNER OF CONVERTING SHARES
<TABLE>
<C> <S> <C>
3.01 Conversion................................................................................................... A-9
3.02 Anti-Dilution Provisions..................................................................................... A-9
</TABLE>
ARTICLE IV
EXCHANGE OF SHARES
<TABLE>
<C> <S> <C>
4.01 Exchange Procedures.......................................................................................... A-10
4.02 Rights of CSB Shareholders................................................................................... A-10
</TABLE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CSB
<TABLE>
<C> <S> <C>
5.01 Organization, Standing, and Authority........................................................................ A-11
5.02 CSB Capital Stock............................................................................................ A-11
5.03 Subsidiaries................................................................................................. A-11
5.04 Authorization of Merger and Related Transactions............................................................. A-12
5.05 Securities Reporting Documents and Financial Statements...................................................... A-12
5.06 Absence of Undisclosed Liabilities........................................................................... A-13
5.07 Tax Matters.................................................................................................. A-13
5.08 Allowance for Loan Losses.................................................................................... A-13
5.09 Accounting, Tax and Regulatory Matters....................................................................... A-13
5.10 Properties................................................................................................... A-13
5.11 Compliance with Laws......................................................................................... A-14
5.12 Employee Benefit Plans....................................................................................... A-14
5.13 Commitments and Contracts.................................................................................... A-15
5.14 Material Contract Defaults................................................................................... A-16
5.15 Legal Proceedings............................................................................................ A-16
5.16 Absence of Certain Changes or Events......................................................................... A-16
5.17 Regulatory Reports........................................................................................... A-16
5.18 Statements True and Correct.................................................................................. A-17
5.19 Insurance.................................................................................................... A-17
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
PAGE
5.20 Labor........................................................................................................ A-17
<C> <S> <C>
5.21 Material Interests of Certain Persons........................................................................ A-17
5.22 Registration Obligations..................................................................................... A-17
5.23 Brokers and Finders.......................................................................................... A-17
5.24 State Takeover Laws.......................................................................................... A-17
5.25 Environmental Matters........................................................................................ A-18
5.26 Ownership of Shares.......................................................................................... A-18
5.27 Insurance of Deposits........................................................................................ A-18
</TABLE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF FIRST CHARTER
<TABLE>
<C> <S> <C>
6.01 Organization, Standing and Authority......................................................................... A-18
6.02 First Charter Capital Stock.................................................................................. A-18
6.03 Authorization of Merger and Related Transactions............................................................. A-18
6.04 Financial Statements......................................................................................... A-19
6.05 First Charter SEC Reports.................................................................................... A-19
6.06 Statements True and Correct.................................................................................. A-19
6.07 Capital Stock................................................................................................ A-19
6.08 Regulatory Matters........................................................................................... A-20
6.09 Litigation................................................................................................... A-20
6.10 Brokers and Finders.......................................................................................... A-20
6.11 Environmental Matters........................................................................................ A-20
6.12 Tax Matters.................................................................................................. A-20
6.13 Compliance with Laws......................................................................................... A-20
</TABLE>
ARTICLE VII
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
<TABLE>
<C> <S> <C>
7.01 Conduct of Business Prior to the Effective Time.............................................................. A-21
7.02 Forbearances................................................................................................. A-21
</TABLE>
ARTICLE VIII
ADDITIONAL AGREEMENTS
<TABLE>
<C> <S> <C>
8.01 Access and Information....................................................................................... A-22
8.02 Registration Statement....................................................................................... A-23
8.03 Shareholder Approvals........................................................................................ A-23
8.04 Press Releases............................................................................................... A-23
8.05 Notice of Defaults........................................................................................... A-23
8.06 Miscellaneous Agreements and Consents; Affiliates Agreements................................................. A-23
8.07 Conversion of Stock Options.................................................................................. A-24
8.08 Regulatory and Tax Matters................................................................................... A-24
8.09 Acquisition Proposals........................................................................................ A-24
8.10 Pooling Opinion.............................................................................................. A-25
8.11 Fairness Opinions............................................................................................ A-25
8.12 Employee Benefits............................................................................................ A-25
8.13 Indemnification.............................................................................................. A-25
8.14 Termination of Employment Agreements......................................................................... A-25
PAGE
</TABLE>
A-3
<PAGE>
ARTICLE IX
CONDITIONS
<TABLE>
<C> <S> <C>
9.01 Conditions to Each Party's Obligation to Effect the Merger................................................... A-25
9.02 Conditions to Obligations of CSB to Effect the Merger........................................................ A-26
9.03 Conditions to Obligations of First Charter to Effect the Merger.............................................. A-26
</TABLE>
ARTICLE X
TERMINATION
<TABLE>
<S> <C> <C>
10.01 Termination.................................................................................................. A-27
10.02 Effect of Termination........................................................................................ A-28
10.03 Non-Survival of Representations, Warranties and Covenants Following the Effective Time....................... A-28
</TABLE>
ARTICLE XI
GENERAL PROVISIONS
<TABLE>
<S> <C> <C>
11.01 Expenses..................................................................................................... A-28
11.02 Stock Option Agreement....................................................................................... A-28
11.03 Entire Agreement............................................................................................. A-28
11.04 Amendments................................................................................................... A-28
11.05 Waivers...................................................................................................... A-28
11.06 No Assignment................................................................................................ A-28
11.07 Notices...................................................................................................... A-28
11.08 Specific Performance......................................................................................... A-29
11.09 Arbitration.................................................................................................. A-29
11.10 Governing Law................................................................................................ A-30
11.11 Counterparts................................................................................................. A-30
11.12 Captions..................................................................................................... A-30
11.13 Severability................................................................................................. A-30
</TABLE>
<TABLE>
<S> <C>
EXHIBIT A............................................................................................................. A-32
</TABLE>
A-4
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of August
15, 1997, 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 CAROLINA STATE BANK, a North Carolina
state-chartered commercial bank ("CSB"). Capitalized terms not otherwise defined
herein shall have the meanings ascribed in Article I.
WITNESSETH:
WHEREAS, First Charter and CSB previously have entered into that certain
Letter of Intent dated as of June 30, 1997 providing for the acquisition by
First Charter of CSB and the negotiation of this Agreement; and
WHEREAS, as an inducement and a condition to First Charter's willingness to
enter into the Letter of Intent and to pursue the acquisition and the
negotiation of this Agreement, immediately following execution of the Letter of
Intent First Charter and CSB entered into that certain Stock Option Agreement
also dated June 30, 1997, pursuant to which CSB has granted to First Charter an
option to purchase shares of common stock of CSB (the "Stock Option Agreement");
and
WHEREAS, in accordance with the Letter of Intent, First Charter and CSB
have determined to enter into this Agreement, pursuant to which First Charter
will acquire CSB through the merger of CSB with and into First Charter National
Bank, a national banking association and the wholly-owned Subsidiary of First
Charter ("FCNB"), or by such other means as provided for herein (the "Merger");
and
WHEREAS, the respective Boards of Directors of First Charter and CSB 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 CSB desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated by this Agreement;
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
8.09.
"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,
approvals and waivers 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(e).
"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.
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"CONDITION" means the financial condition, results of operations or
business of a Person.
"CSB" shall have the meaning set forth in the introduction to this
Agreement.
"CSB BENEFIT PLAN" shall have the meaning set forth in Section
5.12(a).
"CSB COMMON STOCK" shall mean the common stock, par value $4.50 per
share, of CSB.
"CSB DISCLOSURE SCHEDULE" shall mean that document containing the
written detailed information prepared by CSB and delivered by CSB to First
Charter which appropriately cross-references each Section of this Agreement
to which that Section of the CSB Disclosure Schedule applies.
"CSB FINANCIAL STATEMENTS" shall have the meaning set forth in Section
5.05.
"CSB INCENTIVE STOCK OPTION PLAN" shall mean the Carolina State Bank
1991 Incentive Stock Option Plan, Amended November 19, 1996.
"CSB OPTIONS" shall have the meaning set forth in Section 5.12(a).
"CSB PENSION PLAN" shall have the meaning set forth in Section
5.12(a).
"CSB REGULATORY AGREEMENT" shall have the meaning set forth in Section
5.11(b).
"CSB SHAREHOLDERS' MEETING" shall have the meaning set forth in
Section 5.18.
"CSB STOCK PLAN" shall have the meaning set forth in Section 5.12(a).
"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 CSB 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(a).
"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 1.023 shares of First Charter Common Stock
for each share of CSB 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 REGULATORY AGREEMENT" shall have the meaning set forth
in Section 6.13(b).
"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.
"IRS" shall mean the Internal Revenue Service.
"JOINT PROXY STATEMENT" shall have the meaning set forth in Section
5.18.
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"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" shall mean 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, limited liability company, 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 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, fraudulent conveyance and other similar laws
affecting the rights of creditors and equitable principles that may limit
the right of specific enforcement of remedies.
"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 CSB,
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 a Person or any of
its Subsidiaries.
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ARTICLE II
THE MERGER AND RELATED TRANSACTIONS
2.01 MERGER.
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time of the Merger, CSB shall be merged with and into FCNB in
accordance with the provisions of the United States Code and the North
Carolina General Statutes and with the effect provided therein. The
separate corporate existence of CSB shall thereupon cease, and FCNB shall
be the surviving bank in the Merger (the "Surviving Bank") and shall
continue to be governed by the laws of the United States of America.
(b) The name of the Surviving Bank shall continue to be "First Charter
National Bank." The Articles of Association and Bylaws of the Surviving
Bank shall continue in effect until amended as provided by law.
(c) All assets of CSB 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.
(d) The business of the Surviving Bank after the Merger shall continue
to be that of a national banking association and shall continue to be
conducted at its main office located in Concord, North Carolina and at its
legally established branches.
(e) 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.
(f) Following the effectiveness of the Merger, the Board of Directors
of First Charter shall continue in office and the following three
individuals shall be elected to the membership of the Board of Directors of
First Charter:
T. Carl Dedmon
John J. Godbold, Jr.
Charles F. Harry, III
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 CSB.
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 OCC. 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 the required waiting period following
the date of the order of the OCC approving the Merger pursuant to the Bank
Merger Act, (ii) the effective date of the last Approval 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 CSB
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) With the prior consent of CSB, which consent shall not be
unreasonably withheld, First Charter may at any time change the method of
effecting the acquisition of CSB 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 CSB Common Stock as provided
for in this Agreement; (B) prevent the acquisition from constituting a
reorganization within the meaning of Section 368 of the Code (in the
opinion of First Charter's tax counsel); or (C) take the form of an asset
purchase agreement.
(b) To facilitate the Merger and the acquisition, each of the parties
agrees to execute such additional agreements and documents and take such
other actions as First Charter determines necessary or appropriate to
effectuate the Merger and the acquisition of CSB by First Charter and the
other transactions contemplated by this Agreement.
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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 First Charter Common Stock and each of
the shares of capital stock of FCNB issued and outstanding immediately
prior to the Effective Time shall remain outstanding and shall not be
changed;
(ii) Each of the shares of CSB Common Stock held by First Charter
or any of its wholly owned Subsidiaries or CSB or its wholly owned
Subsidiaries immediately prior to the Effective Time, other than shares
held by First Charter or CSB 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 CSB Common Stock issued and outstanding
immediately prior to the Effective Time (excluding shares held by
dissenting shareholders who perfect their statutory appraisal rights)
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 CSB 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 CSB Common Stock exchanged pursuant to
the Merger 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. 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 any shares of CSB Common Stock held by a shareholder who
shall have taken all 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 CSB shall be
closed as to holders of CSB Common Stock immediately prior to the Effective
Time and no transfer of CSB 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
and may be a bank Subsidiary of 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 CSB Common Stock represented thereby was converted in the Merger.
Notwithstanding any other provision of this Agreement, neither First
Charter, FCNB nor the Exchange Agent shall be liable to a holder of CSB
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 or effective date, as applicable, of such transaction occurs prior
to the Effective Time.
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ARTICLE IV
EXCHANGE OF SHARES
4.01 EXCHANGE PROCEDURES. Before or promptly after the Effective Time,
First Charter and CSB 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
CSB Common Stock shall pass, only upon proper delivery of such certificates to
the Exchange Agent) to the former shareholders of CSB. After the Effective Time,
each holder of shares of CSB 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 undelivered dividends or distributions in respect
of such shares following the Effective Time. The certificate or certificates for
CSB 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 CSB
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 CSB Common Stock is
entitled as a result of the Merger until such holder surrenders his or her
certificate or certificates representing shares of CSB Common Stock for exchange
as provided in this Article IV. In addition, certificates surrendered for
exchange by any person constituting an "affiliate" of CSB 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, and in any event First Charter shall be
entitled to place restrictive legends on any such certificate(s) referencing the
restrictions on transfer of the shares of First Charter Common Stock evidenced
thereby as contemplated by such agreements. If any certificate for shares of
First Charter Common Stock, or any check representing cash or undelivered
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 RIGHTS OF CSB SHAREHOLDERS. Until surrendered for exchange in
accordance with the provisions of Section 4.01, each certificate theretofore
representing shares of CSB Common Stock (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 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. Holders of
CSB Common Stock shall not be entitled to any dividends or other distributions
payable to holders of the First Charter Common Stock of record as of any date
prior to the Effective Time. Dividends or other distributions payable to the
holders of First Charter Common Stock of record as of the Effective Time or any
time thereafter shall be payable with respect to all shares of First Charter
Common Stock outstanding, including shares issuable pursuant to this Agreement;
provided, however, that no such dividends or other distributions shall be paid
to the holder of any certificate representing shares of CSB 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). To
the extent permitted by law, former shareholders of record of CSB 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 CSB Common Stock are converted, regardless of whether
such holders have exchanged their certificates representing CSB Common Stock for
certificates representing First Charter Common Stock in accordance with the
provisions of this Agreement.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CSB
CSB represents and warrants to First Charter, subject to such exceptions
and limitations as are set forth below or in the CSB Disclosure Schedule, as
follows:
5.01 ORGANIZATION, STANDING, AND AUTHORITY. CSB is a commercial banking
corporation duly organized, validly existing and in good standing under the laws
of the State of North Carolina. CSB 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,
individually or in the aggregate, a material adverse effect on the Condition of
CSB and its Subsidiaries on a consolidated basis or on the ability of CSB to
consummate the transactions contemplated hereby (a "Material Adverse Effect").
CSB 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. CSB has in effect all federal, state, local and foreign governmental,
regulatory and other authorizations, permits and licenses (collectively,
"Authorizations") necessary for it to own, lease or operate 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.
CSB does not operate a trust department or engage in any trust activities.
5.02 CSB CAPITAL STOCK.
(a) The authorized capital stock of CSB consists of 10,000,000 shares
of CSB Common Stock, and there are no other classes of authorized capital
stock. As of the date hereof, there are issued and outstanding 1,662,192
shares of CSB Common Stock, and not more than 1,720,792 shares of CSB
Common Stock will be issued and outstanding as of the Effective Time. At
June 30, 1997, CSB had stated capital of $7,479,864, additional paid-in
capital of $4,003,786 and retained earnings of $1,900,968. All of the
issued and outstanding shares of CSB 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 CSB Common Stock has been issued in violation of
any preemptive rights of current or past shareholders or any provision of
CSB's Articles of Incorporation. As of the date hereof, CSB has reserved
71,500 shares of CSB Common Stock for issuance under the CSB Incentive
Stock Option Plan and 330,776 shares of CSB Common Stock for issuance under
the Stock Option Agreement, 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 CSB Disclosure
Schedule, there are no shares of capital stock or other equity securities
of CSB 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 CSB or contracts, commitments, understandings or
arrangements by which CSB 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 CSB or any of its
Subsidiaries is or may be bound to transfer any shares of the capital stock
of any Subsidiary of CSB, and there are no agreements, understandings or
commitments relating to the right of CSB to vote or to dispose of such
shares.
(c) Except as set forth in Section 5.02(c) of the CSB Disclosure
Schedule, there are no securities required to be issued by CSB under any
CSB Stock Plan, dividend reinvestment or similar plan.
5.03 SUBSIDIARIES. Section 5.03 of the CSB Disclosure Schedule contains a
true and complete list of CSB's Subsidiaries and their respective jurisdictions
of incorporation. Except as set forth in Section 5.03 of the CSB Disclosure
Schedule, CSB owns no stock or other equity interest in any corporation,
partnership or other entity. All of the outstanding securities of each
Subsidiary of CSB are owned by CSB, and no equity securities of any such
Subsidiary are or may become required to be issued by reason of any options,
warrants, scrip, rights to subscribe to, calls or understandings or commitments
of any character whatsoever relating to, or securities or rights convertible
into or exchangeable for, shares of any Subsidiary of CSB, and there are no
contracts, commitments, understandings or arrangements by which any Subsidiary
of CSB 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. There are no contracts, agreements, arrangements or other understandings
of any kind relating to the rights of CSB to vote or dispose of any shares of
the capital stock of any of its Subsidiaries. All of the shares of capital stock
of each Subsidiary of CSB are fully paid and nonassessable and are owned by CSB
free and clear of any claim, lien, pledge or encumbrance of whatsoever kind
("Liens"). Each Subsidiary of CSB (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
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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, individually
or in the aggregate, a Material Adverse Effect, (iii) has all requisite
corporate power and authority to own, lease or operate 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, lease or operate its properties and
assets and to carry on its business as now conducted, the absence of which
Authorizations would have, individually or in the aggregate, a Material Adverse
Effect. Section 5.03 of the CSB Disclosure Schedule contains a true and accurate
description of the business activities of all Subsidiaries of CSB.
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 CSB, including approval of the Merger by its Board of Directors, subject
to the approval of the shareholders of CSB with respect to this Agreement
and the Merger to the extent required by applicable law. This Agreement,
subject to such requisite shareholder approval hereof with respect to the
Merger, represents a valid and legally binding obligation of CSB,
enforceable against CSB 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 CSB Disclosure
Schedule, neither the execution and delivery of this Agreement by CSB, nor
the consummation by CSB of the transactions contemplated hereby, nor
compliance by CSB with any of the provisions hereof, will (i) conflict with
or result in a breach of any provision of CSB'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 require any
consent, approval or waiver 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 CSB 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, in any such event, is reasonably likely to have,
individually or in the aggregate, 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 CSB 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) Approvals required
from the OCC, no notice to, filing with, authorization of, exemption by, or
consent or other Approval of any public body or authority is necessary for
the consummation by CSB of the Merger and the other transactions
contemplated in this Agreement.
5.05 SECURITIES REPORTING DOCUMENTS AND FINANCIAL STATEMENTS. CSB (i) has
delivered to First Charter true and complete copies of the consolidated balance
sheets and the related consolidated statements of operations, cash flows and
changes in shareholders' equity (including related notes and schedules) of CSB
and its consolidated Subsidiaries as of and for the periods ended March 31, 1997
and December 31, 1996 included in a quarterly report on Form F-4 or an annual
report on Form F-2, as the case may be, filed by CSB 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
CSB with the FDIC from and after January 1, 1994 (each a "Securities Reporting
Document"), which are all the documents (other than preliminary material) that
CSB was required to file with the FDIC since such date and all of which complied
when filed in all material respects with all applicable Securities Laws and
other 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 operations, 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 "CSB Financial Statements"). The CSB
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 CSB 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 CSB and its Subsidiaries as of the dates
and for the periods indicated, in accordance with GAAP consistently applied
except as disclosed therein, 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. CSB has delivered to First
Charter (i) copies of all management letters prepared by Coopers & Lybrand (and
any predecessor thereto) delivered to
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CSB since January 1, 1994 and (ii) copies of audited balance sheets and related
statements of operations, changes in shareholders' equity and cash flows for any
Subsidiary of CSB since January 1, 1994 for which a separate audit has been
performed (of which there are none).
5.06 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in Section
5.06 of the CSB Disclosure Schedule, neither CSB 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 CSB and its Subsidiaries as of December 31, 1996 included in
the CSB Financial Statements or reflected in the notes thereto, or (ii) which
are immaterial and were incurred after December 31, 1996 in the ordinary course
of business consistent with past practice.
5.07 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of CSB or any
of its Subsidiaries have been timely filed, or requests for extensions have
been timely filed, granted and have not expired, for all Taxable Periods
ending on or before December 31, 1996, and all such Tax Returns filed are
complete and accurate in all material respects.
(b) All Taxes with respect to those Taxable Periods referred to in
subsection (a) hereof have been paid.
(c) There is no audit examination, deficiency or refund litigation or
matter in controversy with respect to any Taxes of CSB and its
Subsidiaries. All such Taxes due with respect to completed and settled
examinations or concluded litigation have been paid or adequately reserved
for.
(d) Neither CSB nor any of its Subsidiaries has executed an extension
or waiver of any statute of limitations regarding the assessment or
collection of any Tax that is currently in effect.
(e) Adequate provision for any Taxes due or to become due for CSB and
any of its Subsidiaries for any Taxable Period or Taxable Periods through
and including the date of the most recent CSB Financial Statements has been
made and is reflected on such CSB Financial Statements. Deferred Taxes of
CSB and its Subsidiaries have been provided for in the CSB Financial
Statements in accordance with GAAP, applied on a consistent basis.
(f) CSB and its Subsidiaries have collected and withheld all Taxes
required to be collected or withheld and have timely submitted all such
collected and withheld amounts to the appropriate authorities. CSB and its
Subsidiaries are in compliance with, and their records contain all
information and documents (including properly completed IRS Forms W-9)
necessary to comply 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. Such records identify with
specificity all accounts subject to back-up withholding under Section 3406
of the Code, except for such instances of noncompliance and such omissions
as are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect.
(g) Neither CSB 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 CSB and its Subsidiaries
as of March 31, 1997 included in the CSB Financial Statements is, and the
Allowance shown on the consolidated balance sheet of CSB and its Subsidiaries as
of dates subsequent to the execution of this Agreement and prior to the
Effective Time 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 CSB and its Subsidiaries, other
extensions of credit (including letters of credit and commitments to make loans
or extend credit) by CSB and its Subsidiaries, and the off balance sheet
exposures of CSB and its Subsidiaries.
5.09 ACCOUNTING, TAX AND REGULATORY MATTERS. Neither CSB 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 for pooling of interests
accounting treatment or as a reorganization within the meaning of Section 368 of
the Code, or (ii) materially impede or delay receipt of any Approvals referred
to in Section 9.01(b).
5.10 PROPERTIES. Except as disclosed in any Securities Reporting Document
filed since December 31, 1996 and prior to the date hereof, CSB 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 CSB Financial Statements as being owned by CSB 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 CSB or its
Subsidiaries, are held under valid instruments enforceable in accordance with
their respective terms, subject to the Remedies Exception, and each
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such instrument is in full force and effect. All equipment and other tangible
property of CSB and its Subsidiaries in regular use has been well maintained and
is in good serviceable condition, reasonable wear and tear excepted, and are
usable in the ordinary course of business consistent with CSB's past practices.
5.11 COMPLIANCE WITH LAWS.
(a) Except as set forth in Section 5.11 of the CSB Disclosure
Schedule, each of CSB and its Subsidiaries is in compliance with all laws,
rules, regulations, policies, guidelines, reporting and licensing
requirements and orders and all Authorizations 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,
individually or in the aggregate, in a Material Adverse Effect.
(b) Except as set forth in Section 5.11 of the CSB Disclosure
Schedule, neither CSB 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 OCC, the FDIC, the Commission, the SEC and the staffs thereof
(collectively, the "Regulatory Authorities") (i) asserting that any of CSB
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, (iii) requiring or threatening to require CSB or any of its
Subsidiaries, or indicating that CSB or any of its Subsidiaries may be
required, to enter into or consent to the issuance of a cease and desist
order, agreement, directive, commitment or memorandum of understanding or
any other agreement, or to adopt a Board resolution or similar undertaking,
restricting or limiting or purporting to restrict or limit, in any manner
the operations of CSB or any of its Subsidiaries, including, without
limitation, any restriction on the payment of dividends, or (iv) otherwise
directing, restricting or limiting, or purporting to direct, restrict or
limit, in any manner the operations of CSB 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 "CSB Regulatory Agreement").
(c) Neither CSB nor any of its Subsidiaries has at any time consented
to or entered into any CSB Regulatory Agreement.
(d) Neither CSB 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) CSB 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 or
salary continuation, vacation, bonus or other 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, all employment agreements 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 CSB or any of its Subsidiaries or any
Affiliate thereof for the benefit of any Employee, their spouses or
dependents or other beneficiaries or under which any such person is
eligible to participate and under which CSB or any of its Subsidiaries
could have any liability, contingent or otherwise (collectively, the "CSB
Benefit Plans"). Any of the CSB Benefit Plans which is an "employee pension
benefit plan," as that term is defined in Section 3(2) of ERISA, is defined
and referred to herein as a "CSB Pension Plan." Any of the CSB Benefit
Plans pursuant to which CSB 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 CSB 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 CSB or any of its Subsidiaries, is defined and
referred to herein as a "CSB Stock Plan." Except as set forth in Section
5.12(a) of the CSB Disclosure Schedule, no CSB Benefit Plan provides for
any phantom stock right, stock appreciation right or any other right of a
participant thereunder to receive any amount of cash determined based on
the value of CSB Common Stock upon the exercise, maturation, or termination
of a right thereunder. No CSB Benefit Plan is or has been a multiemployer
plan within the meaning of Section 3(37) of ERISA.
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CSB has set forth in Section 5.12(a) of the CSB Disclosure Schedule
(i) a list of all of the CSB Benefit Plans, (ii) a list of CSB Benefit
Plans that are CSB Pension Plans, (iii) a list of CSB Benefit Plans that
are CSB Stock Plans and (iv) a list of the number of shares covered by,
exercise prices for, and holders of, all stock options outstanding as of
the date hereof under, the CSB Stock Plans, all of which are employee stock
options granted and available for grant under the CSB Incentive Stock
Option Plan (the "CSB Options").
(b) Each CSB Benefit Plan has been duly authorized by all necessary
corporate action by CSB and, if necessary, its Subsidiaries. All CSB
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, individually or
in the aggregate, in a Material Adverse Effect. No transaction prohibited
by Section 406 of ERISA and no "prohibited transaction" under Section 4975
of the Code have occurred with respect to any CSB Benefit Plan. There are
no investigations by any federal or state entity, or other claims (except
routine claims for benefits payable under the CSB Benefit Plans), suits or
proceedings against or with respect to which any CSB Benefit Plan is a
party or asserting any rights to or claims for benefits under any CSB
Benefit Plan that would give rise to any liability that, individually or in
the aggregate, could reasonably be expected to have a Material Adverse
Effect.
(c) Each CSB Pension Plan that is intended to be a tax-qualified plan
is the subject of a favorable determination letter from the IRS received in
the preceding two years from the date hereof to the effect that such CSB
Pension Plan is qualified under Section 401(a) of the Code, subject to the
customary reservations as to the CSB Pension Plan's operational compliance
with Code requirements. No such determination letter has been revoked, and
the IRS has not issued written notice of its intent to revoke the qualified
status of any such CSB Pension Plan. No event has occurred and no
circumstance exists that would reasonably be expected to result in the
disqualification of such CSB Pension Plan.
(d) All liabilities under any CSB Benefit Plan are fully accrued or
reserved against in the CSB Financial Statements in accordance with GAAP
applied on a consistent basis. No CSB Pension Plan to which CSB is or ever
has been a party is a defined benefit pension plan subject to coverage with
Title IV of ERISA.
(e) Except to the extent required under Section 601 ET SEQ. of ERISA
and Section 4980B of the Code, neither CSB nor any of its Subsidiaries
provides health or welfare benefits for any retired or former employee nor
is obligated to provide health or welfare benefits to any active employee
or beneficiary following such employee's retirement or other termination of
service. CSB or any of its Subsidiaries, as applicable, has the right to
modify and terminate benefits to retirees (other than benefits provided
under CSB Pension Plans) with respect to both retired and active employees.
Each CSB Benefit Plan has complied with the provisions of Section 601 ET
SEQ. of ERISA and Section 4980B of the Code.
(f) Except as set forth in Section 5.12(f) of the CSB 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 CSB Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any CSB
Benefit Plan or (iii) result in any acceleration of the time of payment or
vesting of any such benefits.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of Employees of CSB or
any of its Subsidiaries and their respective beneficiaries have been fully
reflected on the CSB Financial Statements to the extent required by and in
accordance with GAAP applied on a consistent basis.
(h) No event has occurred or circumstance exists with respect to any
CSB Benefit Plan that would prevent the transactions contemplated hereby,
including the Merger, from qualifying for pooling of interests accounting
treatment.
(i) Each holder of CSB Options has waived its rights under the CSB
Incentive Stock Option Plan to exercise any or all of the CSB Options and
receive cash in lieu of CSB Common Stock.
5.13 COMMITMENTS AND CONTRACTS. Except as set forth in Section 5.13 of the
CSB Disclosure Schedule, neither CSB nor any of its Subsidiaries, nor any of
their respective assets, business or operations, is a party or subject to, or is
bound or affected by, or receives benefits under, any of the following (whether
written or oral, express or implied) (any of such agreements hereinafter
referred to as a "CSB Contract"):
(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;
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(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
CSB or any of its Subsidiaries to compete in any line of business or which
involve any restriction of the geographical area in which CSB 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 CSB or involves money or other property with a value in excess of
$25,000;
(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;
(h) any agreement relating to the borrowing of money by CSB or any of
its Subsidiaries or the guarantee by any of them of any such obligation
(other than agreements evidencing deposit liabilities, purchases of federal
funds, fully-secured repurchase agreements and any Federal Reserve Bank
advances, trade payables and agreements relating to borrowing or advances
from the Federal Home Loan Bank); or
(i) 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. All of the CSB Contracts are in full force
and effect. Except as set forth in Section 5.14 of the CSB Disclosure Schedule,
neither CSB 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, and none of
CSB or any of its Subsidiaries has repudiated or waived any material provision
of, any CSB Contract or any other contract, agreement, commitment, arrangement,
lease, insurance policy or other instrument to which CSB or any of its
Subsidiaries is a party or by which CSB 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 CSB
Disclosure Schedule, there are no actions, suits, proceedings or investigations
instituted or pending or, to the best knowledge of CSB, threatened against CSB
or any of its Subsidiaries, or against any property, asset, interest or right of
any of them, that might reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, or that might reasonably be expected to
threaten or impede the consummation of the transactions contemplated by this
Agreement. Neither CSB 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, 1996, except
as disclosed in any Securities Reporting Document filed since December 31, 1996
and prior to the date hereof, there have been no events, changes or occurrences
which have had, or are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect. Neither CSB 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, (D) changed any accounting practices, or
(E) taken any action, or failed to take any action, prior to the date of this
Agreement, which action or failure, if taken after the date of this Agreement,
would represent or result in a material breach or violation of any of the
covenants and agreements of CSB set forth in Article VII of this Agreement.
5.17 REGULATORY REPORTS. Except as set forth in Section 5.17 of the CSB
Disclosure Schedule, since January 1, 1994, CSB and each of its Subsidiaries
have filed, and from the date hereof and prior to the Effective Time will file,
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 and all other Securities Reporting Documents,
(ii) the Federal Reserve Board, (iii) the Commission, and (iv) any other
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applicable state securities or banking authorities, which such Regulatory
Reports at the respective dates thereof complied and will comply in all material
respects with all applicable laws. No Regulatory Report with respect to periods
beginning on or after January 1, 1994 and until the Effective Time 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 required to be
stated therein or 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 CSB 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 CSB 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 CSB 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 CSB (the "CSB 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 CSB
Shareholders' Meeting or the First Charter Shareholders' Meeting. All documents
that CSB 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 CSB Disclosure
Schedule by CSB for the purposes of this Agreement is true and accurate in all
material respects.
5.19 INSURANCE. CSB 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 CSB
and its Subsidiaries provide adequate coverage against all pending or threatened
claims, and the fidelity bonds in effect as to which any of CSB or any of its
Subsidiaries is a named insured are sufficient for their purpose. None of CSB or
its Subsidiaries has received notice from any insurance carrier that (i) such
insurance will be canceled or that coverage thereunder will be reduced or
eliminated, or (ii) premium costs with respect to such policies of insurance
will be substantially increased.
5.20 LABOR. No work stoppage involving CSB or its Subsidiaries is pending
or, to the best knowledge of CSB's management, threatened. Neither CSB nor any
of its Subsidiaries is involved in, or, to the best knowledge of CSB's
management, threatened with or affected by, any labor or other
employment-related dispute, arbitration, lawsuit or administrative proceeding.
Employees of CSB and its Subsidiaries are not represented by any labor union,
and, to the best knowledge of CSB's management, no labor union is attempting to
organize employees of CSB or any of its Subsidiaries.
5.21 MATERIAL INTERESTS OF CERTAIN PERSONS. Except as disclosed in CSB's
Proxy Statement for its 1997 Annual Meeting of Shareholders, no executive
officer or director of CSB, 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
interest in any contract or property (real or personal), tangible or intangible,
used in or pertaining to the business of CSB or any of its Subsidiaries.
5.22 REGISTRATION OBLIGATIONS. Neither CSB 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 CSB
Disclosure Schedule, neither CSB 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 CSB or any of its Subsidiaries in connection with this Agreement
or the transactions contemplated hereby.
5.24 STATE TAKEOVER LAWS. CSB 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.
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5.25 ENVIRONMENTAL MATTERS. To CSB's best knowledge, neither CSB, any of
its Subsidiaries, nor any properties owned or operated by CSB or any of its
Subsidiaries or held as collateral by CSB 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, and there are no
circumstances that may prevent or interfere with such full compliance in the
future. 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 CSB's management, threatened under any Environmental
Law and relating to any properties owned or operated by CSB or any of its
Subsidiaries or held as collateral by CSB or any of its Subsidiaries, except for
any such action, suit or proceeding, or demand, claim, notice or investigation
pending or threatened, 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 human health or 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. Except as disclosed in CSB's Proxy Statement for
its 1997 Annual Meeting of Shareholders, to the best knowledge of CSB, no
individual, corporation, partnership, association or other entity owns, directly
or indirectly, more than five percent (5%) of the shares of CSB Common Stock.
5.27 INSURANCE OF DEPOSITS. The deposits of CSB are insured by the Bank
Insurance Fund of the FDIC to the maximum extent required or allowed by law; all
premiums due such fund have been paid in full in a timely fashion and, to the
best of its knowledge, CSB is in material compliance with the applicable
regulations and requirements of such agency.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF FIRST CHARTER
First Charter represents and warrants to CSB 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. Each Subsidiary of First Charter is duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated or organized. Each of First Charter and each of its
Subsidiaries 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 each of its Subsidiaries 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 each of its Subsidiaries has in effect all
Authorizations necessary for it to own, lease or operate 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. As of the date of this Agreement, the
authorized capital stock of First Charter consists of 10,000,000 shares of First
Charter Common Stock. At June 30, 1997, there were outstanding approximately
7,560,524 shares of First Charter Common Stock. All of the issued and
outstanding shares of First Charter Common Stock are duly and validly issued and
outstanding and are fully paid and nonassessable.
6.03 AUTHORIZATION OF MERGER AND RELATED TRANSACTIONS.
(a) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action in respect thereof on the part
of First Charter, including approval of the Merger and the issuance of
First Charter Common Stock in connection therewith by its Board of
Directors, subject to the approval of the shareholders of First Charter
with respect to the Merger to the extent required
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by applicable law. This Agreement, subject to any requisite shareholder
approval hereof with respect to the Merger, represents a valid and legally
binding obligation of First Charter, enforceable against First Charter in
accordance with its terms, except as such enforcement may be limited by the
Remedies Exception.
(b) Neither the execution and delivery of this Agreement by First
Charter, nor the consummation by First Charter of the transactions
contemplated hereby nor compliance by First Charter with any of the
provisions hereof will (i) conflict with or result in a breach of any
provision of its 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(a) 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 CSB 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
March 31, 1997 and December 31, 1996 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 Effective Time will deliver to CSB 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, 1994, 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, 1994 and until the Effective Time 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 CSB, 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 CSB 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 CSB 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
to be issued pursuant to the Merger will be duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights.
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6.08 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
or its Subsidiaries 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 CSB, 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.
6.12 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of First
Charter or any of its Subsidiaries have been timely filed, or requests for
extensions have been timely filed, granted and have not expired, for all
Taxable Periods ending on or before December 31, 1996, and all such Tax
Returns filed are complete and accurate in all material respects.
(b) All Taxes with respect to those Taxable Periods referred to in
subsection (a) hereof have been paid.
(c) There is no audit examination, deficiency or refund litigation or
matter in controversy with respect to any Taxes of First Charter and its
Subsidiaries. All such Taxes due with respect to completed and settled
examinations or concluded litigation have been paid or adequately reserved
for.
(d) Neither First Charter nor any of its Subsidiaries has executed an
extension or waiver of any statute of limitations regarding the assessment
or collection of any Tax that is currently in effect.
(e) Adequate provision for any Taxes due or to become due for First
Charter and any of its Subsidiaries for any Taxable Period or Taxable
Periods through and including the date of the most recent First Charter
Financial Statements has been made and is reflected on such First Charter
Financial Statements. Deferred Taxes of First Charter and its Subsidiaries
have been provided for in the First Charter Financial Statements in
accordance with GAAP, applied on a consistent basis.
6.13 COMPLIANCE WITH LAWS.
(a) Each of First Charter and each of its Subsidiaries is in
compliance with all laws, rules, regulations, policies, guidelines,
reporting and licensing requirements and orders and all Authorizations
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, individually or in the aggregate, in a material
adverse effect on the Condition of First Charter and its Subsidiaries on a
consolidated basis.
(b) Except as previously disclosed to CSB, neither First Charter nor
any of its Subsidiaries has received any notification or communication from
any Regulatory Authority (i) asserting that any of First Charter 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, (iii)
requiring or threatening to require First Charter or any of its
Subsidiaries, or indicating that First Charter or any of its Subsidiaries
may be required, to enter into or consent to the issuance of a cease and
desist order, agreement, directive, commitment or memorandum of
understanding or any other agreement, or to adopt a board
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resolution or similar undertaking, restricting or limiting or purporting to
restrict or limit, in a material manner the operations of First Charter and
its Subsidiaries on a consolidated basis, including, without limitation,
any restriction on the payment of dividends, or (iv) otherwise directing,
restricting or limiting, or purporting to direct, restrict or limit in a
material manner the operations of First Charter or any of its Subsidiaries
on a consolidated basis, 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
"First Charter Regulatory Agreement").
(c) Neither First Charter nor any of its Subsidiaries has at any time
consented to or entered into any First Charter Regulatory Agreement.
(d) Neither First Charter 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.
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, CSB shall, and shall
cause each of its Subsidiaries to, (i) conduct its business only 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, CSB shall not, and shall not permit any of its Subsidiaries to,
in each case without the prior written consent of First Charter (and CSB 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 or other obligation 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 with
respect to, or directly or indirectly redeem, purchase, exchange 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 any right to acquire cash based on the market value of CSB Common
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 for the issuance of CSB Common Stock pursuant to the
exercise of CSB Options outstanding as of the date hereof or 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
(including without limitation any shares of capital stock of any of its
Subsidiaries), or cancel, release or assign any indebtedness to any such
person or any claims held by any such person;
(d) except for purchases of U.S. Treasury securities which have
maturities of three years or less, make any material investment either by
purchase of stock or securities, contributions to capital, property
transfers, or purchase of any property or assets of, or otherwise acquire
direct or indirect control over any other Person;
(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, or waive,
release, compromise or assign any material rights or claims;
(f) increase or modify in any manner the compensation or fringe
benefits of any of its Employees or pay or accelerate the vesting of any
pension or retirement or severance allowance 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 other "employee
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benefit plan" within the meaning of ERISA or any employment, severance,
consulting or other similar agreement with or for the benefit of any
Employee, or accelerate the vesting of any stock options or other
stock-based compensation; provided, however, that, with the prior approval
of First Charter, CSB may accrue and pay bonuses and put in effect
regularly scheduled salary increases, which are in either case in the
ordinary course and consistent with past practices;
(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) commence any claim, action or proceeding other than in accordance
with past practice, 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,
or involving restrictions upon the operations of CSB or any of its
Subsidiaries;
(i) amend its Articles of Incorporation or its bylaws or other
governing documents;
(j) fail to maintain its material licenses and permits or to file in a
timely fashion all federal, state, local and foreign Tax Returns;
(k) fail to maintain, or enter into, any CSB Regulatory Agreements;
(l) make any capital expenditures of more than $10,000 individually or
$25,000 in the aggregate;
(m) fail to maintain each CSB Benefit Plan or timely make all
contributions or accruals required thereunder in accordance with GAAP
applied on a consistent basis; or
(n) 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) CSB shall, and shall cause its Subsidiaries to, afford First
Charter, and its accountants, counsel and other representatives,
reasonable access during normal business hours to the properties, books,
contracts, tax returns, commitments and records of CSB 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 CSB and its Subsidiaries will cooperate fully with all such reviews
and investigations.
(ii) First Charter shall afford CSB 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, CSB 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 CSB for its internal use.
During this period, CSB also shall notify First Charter promptly of any
material change in the Condition of CSB 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 CSB 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 CSB, 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
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another source, or (iii) is required to be disclosed to the SEC, the OCC,
the Federal Reserve Board, FDIC, the Commission or any other Regulatory
Authority, or is otherwise required to be disclosed by law. Each of First
Charter and CSB 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) CSB 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 CSB 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 CSB
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. CSB and its Subsidiaries shall
furnish First Charter with all information concerning CSB, its Subsidiaries and
the holders of CSB Common Stock as First Charter may reasonably request in
connection with the foregoing and also shall promptly cooperate in the
preparation of and shall promptly file the Joint Proxy Statement with the FDIC.
8.03 SHAREHOLDER APPROVALS. Each of First Charter and CSB 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 Board of
Directors of First Charter and CSB shall submit for approval of its shareholders
the matters to be voted upon at the First Charter Shareholders' Meetings or the
CSB Shareholders' Meeting, as the case may be, shall prepare and file with the
FDIC or the SEC, as the case may be, the Joint Proxy Statement and shall mail
the Joint Proxy Statement to its respective shareholders, 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 CSB agrees to vote in favor of the consummation of the
Merger at the CSB Shareholders' Meeting and to use his or her best efforts to
obtain the approval of the Merger by the shareholders of CSB.
8.04 PRESS RELEASES. Prior to the public dissemination of any press release
or other public disclosure or communication or correspondence with shareholders
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, disclosure, communication or
correspondence, except to the extent that any such disclosure is required
pursuant to the Securities Laws in the opinion of counsel to such party, in
which case such party may, upon failure to so mutually agree and upon specific
advice of counsel, make such disclosure.
8.05 NOTICE OF DEFAULTS. CSB shall promptly notify First Charter of (i) any
material change in its consolidated 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 CSB or any of its Subsidiaries, 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; provided, however, that nothing herein shall preclude either party from
exercising its rights under this Agreement or the Stock Option Agreement. First
Charter and CSB 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 CSB, desirable for the
consummation of the transactions contemplated by this Agreement, including
without limitation the approval of the OCC. 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
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proper officers and directors of First Charter shall be deemed to have been
granted authority in the name of CSB to take all such necessary or desirable
action.
Without limiting the foregoing, CSB will take such actions as may be
reasonably necessary to cause each of its "affiliates" for purposes of the
Securities Act to deliver to First Charter within 10 days after the execution of
this Agreement (but in any event prior to 30 days prior to the Effective Time) a
written agreement substantially in the form of Exhibit A to this Agreement.
Section 8.06 of the CSB Disclosure Schedule sets forth a list of each Person
whom CSB believes would be considered an "affiliate" of CSB for such purposes.
8.07 CONVERSION OF STOCK OPTIONS.
(a) At the Effective Time, all rights with respect to CSB Common Stock
pursuant to the CSB Options that 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 CSB Option, in accordance with the terms of the CSB Incentive 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 CSB 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 CSB
Option shall be equal to the number of shares of CSB Common Stock subject
to such CSB Option immediately prior to the Effective Time multiplied by
the Exchange Ratio, (iii) the per share exercise price under each such CSB
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, and (iv) First Charter and its Compensation Committee shall
administer the CSB Incentive Stock Option Plan governing such CSB Options;
provided, however, that the terms of each CSB 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. FCC shall not be obligated to
issue any fraction of a share of First Charter Common Stock upon exercise
of CSB Options, and any fraction of a share of First Charter Common Stock
that otherwise would be subject to a converted CSB Option shall represent
the right to receive cash (without interest) upon exercise of the converted
CSB Option in an amount equal to such fractional part of a share of First
Charter Common Stock multiplied by the difference in the Fair Market Value
of one share of First Charter Common Stock on the last business day
preceding the date of exercise of such CSB Option and the per share
exercise price of such CSB Option. 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 CSB Option
which is an "incentive stock option," as defined in Section 422 of the
Code.
(b) Except as expressly provided herein or as otherwise agreed in
writing by the parties, (i) the provisions of the CSB Stock Plans and any
other plan, program or arrangement pursuant to which CSB may, or may be
required to, issue stock or stock-based compensation, shall be terminated
by the Effective Time, and (ii) CSB shall ensure that following the
Effective Time no holder of CSB Options or any participant in any CSB Stock
Plan shall have any right thereunder to acquire any equity securities of
CSB or any of its Subsidiaries.
8.08 REGULATORY AND TAX MATTERS. No party shall take any action which would
adversely affect or delay the ability of either First Charter or CSB 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.
8.09 ACQUISITION PROPOSALS. CSB 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
("Representatives") to, initiate, encourage or solicit, directly or indirectly,
the making of any proposal or offer (an "Acquisition Proposal") to acquire all
or any significant part of the business and properties or capital stock of CSB
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. Except
to the extent necessary to comply with the fiduciary duties of CSB's Board of
Directors as advised in writing by counsel, CSB shall not, and shall not permit
its Representatives to, (x) participate in any discussions or negotiations
regarding, or furnish to any other person any information with respect to, an
Acquisition Proposal or (y) enter into any agreements to effect an Acquisition
Proposal. In the event CSB receives an Acquisition Proposal or such discussions
are sought to be initiated or continued with CSB, CSB shall promptly inform
First Charter as to the material terms thereof. CSB shall immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any Persons heretofore conducted with
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respect to any Acquisition Proposal, and shall direct and use its best efforts
to cause all of its Representatives not to engage in any of the foregoing.
8.10 POOLING OPINION. First Charter shall use its best efforts to obtain by
the Effective Time 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 dated as of the
Effective Time.
8.11 FAIRNESS OPINIONS.
(a) CSB 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, which firm is acceptable to CSB and to First Charter, to
the effect that the Exchange Ratio is fair to CSB'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 satisfactory to First Charter to the effect that
the Exchange Ratio is fair to the shareholders of First Charter from a
financial point of view.
8.12 EMPLOYEE BENEFITS. Employees of CSB shall become eligible for the
employee benefit plans and benefits of First Charter on the same terms as such
plans and benefits are generally offered from time to time to employees of First
Charter in comparable positions; provided, however, that for a period of six
months following the Effective Time, employees of CSB whose employment is
terminated under circumstances such that they would be entitled to benefits
under CSB's severance pay policy as in effect on the date hereof shall receive
such benefits as determined under such plan in lieu of any benefits to which
they may otherwise be entitled under First Charter's severance pay policy. Such
employees shall be credited under such First Charter plans for their years of
eligibility, vesting and benefit services earned under such employee benefit
plans of CSB as if such service had been earned with First Charter.
Notwithstanding the foregoing, nothing in this Agreement shall be deemed to
confer on any employee of CSB the right of continued employment with First
Charter or any of its Subsidiaries, including the Surviving Bank.
8.13 INDEMNIFICATION. For three years after the Effective Time, First
Charter shall, and shall cause the Surviving Bank to, indemnify, defend, and
hold harmless the present and former directors, officers, employees and agents
of CSB (each, an "Indemnified Party") after the Effective Time against all
losses, expenses, claims, damages or liabilities arising out of actions or
omissions occurring on or prior to the Effective Time to the full extent then
permitted under North Carolina and federal law and by CSB's Articles of
Incorporation and Bylaws as in effect on the date hereof except the right to
indemnification shall not arise in those instances in which the party seeking
indemnification has participated in the breach of any covenant or agreement
contained herein or knowingly caused any representation or warranty of CSB
contained herein to be false or inaccurate in any respect and the claim arises
principally from such breach or the falsity or inaccuracy of such representation
or warranty. This Section 8.13 shall survive the Effective Time and is intended
to benefit CSB and each of the Indemnified Parties and his or her heirs and
representatives (each of whom shall be entitled to enforce this Section 8.13
against First Charter) and shall be binding upon all successors and assigns
(whether by operation of law or by contract) of First Charter.
8.14 TERMINATION OF EMPLOYMENT AGREEMENTS. The Board of Directors of CSB
shall provide the appropriate notice and otherwise take all action necessary as
soon as possible hereafter to ensure that the term of the Employment Agreement
dated November 13, 1990 between CSB and John J. Godbold, Jr. shall terminate on
and not extend past November 12, 2001.
ARTICLE IX
CONDITIONS
9.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each of First Charter and CSB 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 CSB 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 OCC and any other Regulatory
Authorities whose approval is required for consummation of the transactions
contemplated hereby and all required waiting periods shall have expired;
provided, that no such Approval shall be subject to any condition or
restriction 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.
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<PAGE>
(c) The Registration Statement shall have been declared effective and
shall not be subject to a stop order or any threatened stop order, and all
necessary consents, waivers or approvals required under applicable state
Securities Laws shall have been obtained.
(d) Neither First Charter nor CSB 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 CSB 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 CSB to the extent that they
receive solely First Charter Common Stock in exchange for their CSB Common
Stock in the Merger.
(f) Each of First Charter and CSB shall have received the fairness
opinions contemplated by Section 8.11.
9.02 CONDITIONS TO OBLIGATIONS OF CSB TO EFFECT THE MERGER. The obligations
of CSB to effect the Merger shall be subject to the fulfillment or waiver at or
prior to the Effective Time of the following additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of First Charter set forth in Article VI hereof shall be true and correct
in all material respects as of the date of this Agreement and as of the
Effective Time (as though made on and as of the Effective Time except to
the extent such representations and warranties are by their express
provisions made as of a specified date) and CSB shall have received a
certificate dated the Effective Time and signed by the president and chief
executive officer, executive vice president or other duly authorized
officer of First Charter to that effect.
(b) PERFORMANCE OF OBLIGATIONS. First Charter shall have performed in
all material respects all obligations required to be performed by it under
this Agreement prior to the Effective Time, and CSB shall have received a
certificate dated the Effective Time and signed by the president and chief
executive officer, executive vice president or other duly authorized
officer of First Charter to that effect.
(c) OTHER DOCUMENTS AND INFORMATION. First Charter shall have provided
CSB true, correct and complete copies, certified as appropriate, of its
Articles of Incorporation, Bylaws, Board of Directors and shareholder
resolutions, incumbency certificates and such other documents and
information as may be reasonably requested by CSB or its counsel.
(d) OPINION OF COUNSEL. CSB shall have received a written opinion of
counsel for First Charter, dated as of the Effective Time and in form and
substance reasonably satisfactory to and covering such matters as are
reasonably requested by CSB and customary for transactions of this type.
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 or waiver at or prior to the Effective Time of the following
additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. (i) All of the representations and
warranties of CSB set forth in Article V 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 (ii) each of the
representations and warranties of CSB set forth in Section 5.02 and Section
5.16 shall be true and correct in all 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 First Charter
shall have received a certificate dated as of the Effective Time and signed
by the chairman or the chief executive officer or other duly authorized
officer of CSB to the effect of (i) and (ii) above.
(b) PERFORMANCE OF OBLIGATIONS. CSB 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 dated as of the Effective Time and signed by the
chairman or the chief executive officer or other duly authorized officer of
CSB to that effect.
(c) OTHER DOCUMENTS AND INFORMATION. CSB shall have provided First
Charter true, correct and complete copies, certified as appropriate, of its
Articles of Incorporation, Bylaws, Board of Directors and shareholder
resolutions, incumbency certificates and such other documents as may be
reasonably requested by First Charter or its counsel.
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(d) OPINION OF COUNSEL. First Charter shall have received a written
opinion of counsel for CSB dated as of the Effective Time, and in form and
substance reasonably satisfactory to and covering such matters as are
reasonably requested by First Charter and customary for transactions of
this type.
(e) AFFILIATES' LETTERS. First Charter shall have received the letters
from all affiliates of CSB as contemplated by Section 8.06 hereof.
(f) POOLING OPINION. First Charter shall have received an opinion from
KPMG Peat Marwick, LLP, dated as of the Effective Time, to the effect that
the Merger may be accounted for as a pooling-of-interests. In connection
therewith, First Charter and KPMG Peat Marwick, LLP, as applicable, also
shall have received a letter, dated as of the Effective Time, in form and
substance reasonably satisfactory to them, from Coopers & Lybrand L.L.P. to
the effect that such firm is not aware of any matters relating to CSB and
its Subsidiaries which would preclude CSB from participating in a business
combination to be accounted for as a pooling-of-interests.
(g) CSB OPTIONS. No holder of any CSB Option shall have made a claim
to receive cash upon surrender or exercise of options in conjunction with
consummation of the Merger or otherwise.
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 CSB 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 CSB; or
(b) by the Board of Directors of either First Charter or CSB (if the
terminating party is not then in breach of any of its representations or
warranties or its obligations hereunder) pursuant to notice in the event of
a breach or failure by the other party of any representation, warranty,
covenant or agreement of the other party contained herein, which breach or
failure is material in the context of the transactions contemplated hereby
and which has not been, or cannot be, cured within 30 days after written
notice of such breach is given to the other party; or
(c) by the Board of Directors of either First Charter or CSB if any of
such terminating party's conditions precedent set forth in Article IX
hereof has not been satisfied as of the Effective Time or if satisfaction
of such a condition is or becomes impossible (other than through such
terminating party's failure to comply with its obligations under this
Agreement) and such terminating party has not waived such condition at or
before the Effective Time; or
(d) by the Board of Directors of First Charter or the Board of
Directors of CSB if the Effective Time does not occur by March 31, 1998, if
the failure to consummate the transactions contemplated hereby on or before
such date is not caused by any breach of this Agreement by the party
electing to terminate pursuant to this Section 10.1(d) or the failure by
such party to comply fully with its obligations under this Agreement; or
(e) by the Board of Directors of CSB, if the Average Price of First
Charter Common Stock shall be less than $20.00 (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 $20.00 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
(f) by the Board of Directors of First Charter if First Charter
determines that the shareholders' equity of CSB is less than reported in
the consolidated balance sheet as of March 31, 1997 of CSB included in the
CSB Financial Statements; provided, however, that for purposes of this
Section 10.01(f), the amount of shareholders' equity determined as of any
date after the date hereof may be computed exclusive of the impact on such
shareholders' equity of any merger-related expenses as approved by First
Charter; or
(g) by the Board of Directors of First Charter if First Charter
determines that CSB has established an Allowance that is unsatisfactory to
First Charter.
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<PAGE>
10.02 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.01 hereof, this Agreement
shall become void and have no effect, except that (i) the provisions of Section
8.01(d) and Article XI of this Agreement shall survive any such termination and
abandonment, and (ii) a termination hereof shall not relieve the breaching party
from any liability arising out of an intentional breach of any provision of this
Agreement giving rise to such termination. The Stock Option Agreement shall be
governed by its own terms as to its termination.
10.03 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS FOLLOWING
THE EFFECTIVE TIME. Except for Articles III, IV and XI and Section 8.07, 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 CSB shall divide equally all printing and
mailing expenses and filing fees incurred in connection with this Agreement, the
Registration Statement and the Joint Proxy Statement. Nothing contained in this
Section 11.01 shall constitute or be deemed to constitute liquidated damages for
the willful breach by a party of the terms of this Agreement or otherwise limit
the rights of the non-breaching party.
11.02 STOCK OPTION AGREEMENT. The parties hereto hereby acknowledge that
the terms of the Stock Option Agreement and the grant thereunder to First
Charter of the option to purchase CSB Common Stock are integral to the execution
of this Agreement and hereby acknowledge the validity and continued
effectiveness of the Stock Option Agreement as a condition and an inducement to
First Charter's willingness to execute this Agreement.
11.03 ENTIRE AGREEMENT. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the parties hereto with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Except as expressly
provided in Section 8.13 hereof, nothing in this Agreement, expressed or
implied, is intended to confer upon any Person, other than First Charter and CSB
or their respective successors, any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
11.04 AMENDMENTS. To the extent permitted by law, this Agreement may be
amended at any time prior to the Closing by a subsequent writing signed on
behalf of each of First Charter and CSB; provided, however, that the provisions
hereof relating to the manner or basis in which shares of CSB capital stock will
be exchanged for the Merger Consideration shall not be amended after the First
Charter Shareholders' Meeting or the CSB Shareholders' Meeting without any
requisite approval of the holders of the issued and outstanding shares of First
Charter Common Stock or CSB Common Stock, as the case may be, entitled to vote
thereon.
11.05 WAIVERS. Prior to or at the Effective Time, each of First Charter and
CSB 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. No such
waiver shall be effective unless in writing signed by a duly authorized officer
of the waiving party. The failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
11.06 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, whether by operation of law or otherwise. 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. Subject to the
preceding sentence, the terms and conditions of this Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns.
11.07 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 (with receipt confirmed at the point of transmittal), or
by registered
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<PAGE>
or certified mail, postage prepaid to the persons at the addresses set forth
below (or at such other address as may be provided hereunder), and shall be
deemed to have been delivered as of the date so delivered:
<TABLE>
<S> <C>
CSB: Carolina State Bank
316 South Lafayette Street
Shelby, North Carolina 28150
Facsimile: (704) 480-4441
Attention: John J. Godbold, Jr.
President
Copy to Counsel: The Sanford Holshouser Law Firm
234 Fayetteville Street
Suite 100
Post Office Box 2447
Raleigh, North Carolina 27602
Facsimile: (919) 890-4180
Attention: Alfred P. Carlton, Jr.
First Charter: First Charter Corporation
22 Union Street North
Post Office Box 228
Concord, North Carolina 28026-0228
Facsimile: (704) 788-0445
Attention: Lawrence M. Kimbrough
President and Chief Executive Officer
Copy to Counsel: Smith Helms Mulliss & Moore, L.L.P.
214 North Church Street (28202)
Post Office Box 31247
Charlotte, North Carolina 28231
Facsimile: (704) 334-8467
Attention: J. Richard Hazlett
</TABLE>
11.08 SPECIFIC PERFORMANCE. The parties hereby acknowledge and agree that
the failure of either party 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
for which damages, even if available, will not be an adequate remedy.
Accordingly, each party hereby consents to the issuance of injunctive relief by
any court of competent jurisdiction to compel performance of the other party's
obligations or any arbitration award hereunder and to the granting by any such
court of the remedy of the specific performance hereunder.
11.09 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 THEN
CURRENT 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
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<PAGE>
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 11.07.
11.10 GOVERNING LAW. This Agreement shall in all respects be governed by
and construed in accordance with the laws of the State of North Carolina.
11.11 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.
11.12 CAPTIONS. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
11.13 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. If any provision
of this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is unenforceable.
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<PAGE>
IN WITNESS WHEREOF, First Charter and CSB 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
CAROLINA STATE BANK
By: /s/ JOHN J. GODBOLD, JR.
PRESIDENT
BOARD DIRECTORS OF CAROLINA STATE BANK
/s/ CHARLES F. HARRY, III (SEAL)
CHARLES F. HARRY, III
/s/ JOHN J. GODBOLD, JR. (SEAL)
JOHN J. GODBOLD, JR.
/s/ DENNIS A. BEAM, JR. (SEAL)
DENNIS A. BEAM, JR.
/s/ T. CARL DEDMON (SEAL)
T. CARL DEDMON
/s/ B. THOMAS ELLIS (SEAL)
B. THOMAS ELLIS
/s/ JOE B. GODFREY (SEAL)
JOE B. GODFREY
/s/ LARRY D. HAMRICK, SR. (SEAL)
LARRY D. HAMRICK, SR.
/s/ MILLIE KEETER-SPANGLER (SEAL)
MILLIE KEETER-SPANGLER
/s/ CHARLES F. MAUNEY (SEAL)
CHARLES F. MAUNEY
/s/ CHARLES W. RHODEN, JR. (SEAL)
CHARLES W. RHODEN, JR.
/s/ JAMES M. ROSE, SR. (SEAL)
JAMES M. ROSE, SR.
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<PAGE>
EXHIBIT A
FORM OF AFFILIATE AGREEMENT
August , 1997
First Charter Corporation
22 Union Street, North
Concord, North Carolina 28025
Re: Affiliate Agreement
Gentlemen:
As a shareholder of Carolina State Bank, a commercial bank chartered under
the laws of the State of North Carolina ("CSB"), the undersigned will become a
shareholder of First Charter Corporation, a bank holding company organized under
the laws of the State of North Carolina ("FCC"), pursuant to the merger (the
"Merger") described in the Agreement and Plan of Merger between FCC and CSB
dated as of August 15, 1997 (the "Agreement"). Under the terms of the Agreement,
upon consummation of the Merger, each share of CSB common stock, $4.50 par value
per share ("CSB Stock"), will be converted into 1.023 shares of FCC common
stock, $5.00 par value per share ("FCC Common Stock"), with cash to be paid in
lieu of the issuance of any fractional shares of FCC Common Stock. This
Affiliate Agreement is provided pursuant to Section 8.06 of the Agreement and
constitutes an agreement between the undersigned and FCC regarding certain
rights and obligations of the undersigned in connection with (i) the shares of
CSB Stock beneficially owned by the undersigned, (ii) the shares of FCC Common
Stock into which such shares are converted as a result of the Merger and (iii)
any shares of FCC Common Stock otherwise beneficially owned by the undersigned.
In consideration of the Merger and the mutual covenants contained herein,
the undersigned and FCC hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that he may be
considered an "affiliate" of CSB under Rule 145(c) as defined in Rule 405 of the
Rules and Regulations of the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended ("1933 Act").
2. Restriction on Disposition. Except as contemplated by the Agreement, the
undersigned agrees that he will not sell, pledge, transfer or otherwise dispose
of his interests in, or reduce his risk relative to, any of (i) the shares of
CSB Stock with respect to which the undersigned has or shares direct or indirect
beneficial ownership, (ii) the shares of FCC Common Stock into which such shares
are converted upon consummation of the Merger or (iii) any other shares of FCC
Common Stock with respect to which the undersigned has or shares direct or
indirect beneficial ownership, in each case for a period beginning 30 days prior
to the Effective Time (as defined in the Agreement) until such time as there has
been a publication of financial results covering at least 30 days of post-Merger
combined operations of CSB and FCC. FCC represents to and agrees with the
undersigned that its regular quarterly announcement of earnings will constitute
such a publication of financial results and that from the date of the Merger
through the date of the second anniversary of the Merger, FCC will make
available "adequate current public information" about FCC as defined under Rule
144(c) of the SEC.
3. Covenants and Warranties of the Undersigned. The undersigned represents,
warrants and agrees that:
(a) The FCC Common Stock received by the undersigned as a result of
the Merger will be taken for his own account and not with a view to
distribution.
(b) FCC has informed the undersigned that any distribution by the
undersigned of FCC Common Stock has not been registered under the 1933 Act
and that shares of FCC Common Stock received pursuant to the Merger can
only be sold by the undersigned (i) following registration under the 1933
Act, (ii) in conformity with the requirements of Rule 145 promulgated by
the SEC as the same now exists or may hereafter be amended, or (iii) to the
extent some other exemption from registration under the 1933 Act might be
available. THE UNDERSIGNED UNDERSTANDS THAT FCC IS UNDER NO OBLIGATION TO
FILE A REGISTRATION STATEMENT WITH THE SEC COVERING THE DISPOSITION OF THE
UNDERSIGNED'S SHARES OF FCC COMMON STOCK.
(c) The undersigned is aware that FCC and CSB intend to treat the
Merger as a reorganization under Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code"), for Federal income tax purposes. The
undersigned acknowledges that Section 1.368-1(b) of the regulations under
the Code requires "continuity of interest" in order for the
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<PAGE>
Merger to be treated as a reorganization under Section 368 of the Code. The
undersigned has no knowledge of any plan or intention on the part of the
CSB shareholders to sell or otherwise dispose of the FCC Common Stock to be
received in the Merger that will reduce the CSB shareholders' aggregate
ownership of FCC Common Stock to a number of shares of FCC Common Stock
having, in the aggregate, a value at the time of the Merger of less than
50% of the total fair market value of the CSB Stock outstanding immediately
prior to the Merger.
4. Restriction on Transfer. The undersigned understands and agrees that
stop transfer instructions with respect to the shares of FCC Common Stock
received by the undersigned pursuant to the Merger will be given to FCC's
transfer agent and that there will be placed on the certificates for such
shares, or shares issued in substitution thereof, a legend stating in substance:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities
Act of 1933, as amended (the "1933 Act"), applies and may not be
sold, pledged, transferred or otherwise disposed of except or
unless (1) covered by an effective registration statement under
the 1933 Act, (2) in accordance with Rule 145, or (3) in
accordance with a legal opinion satisfactory to counsel for FCC
that such sale or transfer is otherwise exempt from the
registration requirements of the 1933 Act."
Such legend will also be placed on any certificate representing FCC securities
issued subsequent to the original issuance of the FCC Common Stock pursuant to
the Merger as a result of any stock dividend, stock split or other
recapitalization as long as the FCC Common Stock issued to the undersigned
pursuant to the Merger has not been transferred in such manner to justify the
removal of the legend therefrom. FCC agrees that upon request of the
undersigned, FCC shall cause any such legend to be removed from any
certificate(s) of the undersigned upon evidence satisfactory to FCC and its
counsel that the shares of FCC Common Stock represented by such certificate(s)
could be sold or transferred by the undersigned under the circumstances set
forth in Rule 145(d)(3).
5. Understanding of Restrictions on Dispositions. The undersigned has
carefully read the Agreement and this Affiliate Agreement and discussed the
requirements and impact upon his ability to sell, pledge, transfer or otherwise
dispose of the shares of FCC Common Stock beneficially owned by the undersigned,
to the extent he believes necessary, with his counsel.
6. Transfer Under Rule 145(d). If the undersigned desires to sell or
otherwise transfer the shares of FCC Common Stock received by him in connection
with the Merger at any time during the period ending two years after the date of
consummation of the Merger, the undersigned will provide any necessary
representation letter to the transfer agent for FCC Common Stock together with
such additional information as the transfer agent may reasonably request. If
FCC's counsel concludes that such proposed sale or transfer complies with the
requirements of Rule 145(d), FCC shall cause such counsel to provide such
opinions as may be necessary to FCC's transfer agent so that the undersigned may
complete the proposed sale or transfer.
7. Acknowledgments. The undersigned recognizes and agrees that the
foregoing provisions apply to all shares of FCC Common Stock received in
exchange for shares of CSB Stock, whether directly or indirectly beneficially
owned by the undersigned, including shares owned by (a) the undersigned's
spouse, if that spouse has the same home as the undersigned, (b) any relative of
the undersigned who has the same home as the undersigned, (c) any trust or
estate in which the undersigned, such spouse, and any such relative collectively
own at least a 10% beneficial interest or of which any of the foregoing serves
as trustee, executor, or in any similar capacity, and (d) any corporation or
other organization in which the undersigned, such spouse, and any such relative
collectively own at least 10% of any class of equity securities or of the equity
interest.
8. Miscellaneous. This Affiliate Agreement is the complete agreement
between FCC and the undersigned concerning the subject matter hereof. Any notice
required to be sent to any party hereunder shall be sent by registered or
certified mail, return receipt requested, using the addresses set forth herein
or such other address as shall be furnished in writing by the parties. This
Affiliate Agreement shall be governed by the laws of the State of North
Carolina.
[Signatures on following page.]
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<PAGE>
This Affiliate Agreement is executed as of the day and year first above
written.
Very truly yours,
Signature
Printed or Typed Name
Address for Notices
AGREED TO AND ACCEPTED as of , 1997.
FIRST CHARTER CORPORATION
By:
Name: Lawrence M. Kimbrough
Title: President
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<PAGE>
APPENDIX B
INTERSTATE/JOHNSON LANE Interstate Tower
P.O. Box 1012
Charlotte, North Carolina 28201-1012
Telephone (704) 379-9000
October 24, 1997
Board of Directors
First Charter Corporation
22 Union Street North
Concord, NC 28026-0228
Members of the Board:
You have requested our opinion (the "Opinion") expressed below, on behalf
of the shareholders of First Charter Corporation, of the consideration to be
received by the shareholders of Carolina State Bank in the proposed merger (the
"Merger") pursuant to the Agreement and Plan of Merger (the "Agreement") dated
August 15, 1997 between First Charter Corporation and Carolina State Bank.
Pursuant to the Agreement and upon the effectiveness of the Merger, Carolina
State Bank will be merged with and into First Charter National Bank, a wholly
owned subsidiary of First Charter Corporation, and each of the issued and
outstanding shares of Carolina State Bank will be converted into the right to
receive 1.023 shares of First Charter Corporation (the "Exchange Ratio").
Interstate/Johnson Lane Corporation is one of the largest independent
investment banking firms headquartered in the Southeast. As part of its regular
investment banking business, Interstate/Johnson Lane Corporation evaluates
securities in connection with negotiated underwritings, leveraged buyouts,
secondary distributions, private placements, estate and gift valuations, mergers
and acquisitions, employee stock ownership plan purchases and other activities.
We have developed our Opinion on the basis of the findings and conclusions
arising from our conduct of due diligence with respect to First Charter
Corporation and Carolina State Bank. In arriving at our Opinion, we have, among
other things:
1) reviewed the terms and conditions of the Agreement;
2) analyzed certain historical business and financial information relating
to First Charter Corporation and Carolina State Bank;
3) conducted discussions with members of the senior management of First
Charter Corporation and Carolina State Bank with respect to the business
and prospects of First Charter Corporation and Carolina State Bank and
the strategic objectives of the Merger;
4) reviewed financial and market information as to certain other publicly
traded companies believed by us to be reasonably similar to Carolina
State Bank;
5) considered the financial terms of selected mergers and acquisition
transactions in the bank industry believed by us to be reasonably
similar to the proposed Merger;
6) performed a pro forma dilution analysis using financial projections for
First Charter Corporation and Carolina State Bank in calendar years 1997
and 1998, including potential cost savings, merger costs and synergies,
to estimate the impact to the shareholders of First Charter Corporation.
7) conducted such other financial studies, analyses and investigations as
appropriate and relevant as the basis for the conclusions set forth in
this Opinion.
We have relied upon and assumed, without independent verification, the
accuracy and completeness of the financial and other information furnished to us
by First Charter Corporation and Carolina State Bank including, without
limitation, all financial projections of First Charter Corporation and Carolina
State Bank. Accordingly, we do not make any warranties, nor do we express any
opinion regarding the accuracy of such projections. We have also relied upon the
assurances of management of First Charter Corporation and Carolina State Bank
that they are unaware of any facts that would make the information provided to
us incomplete or misleading.
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Based upon and subject to the forgoing and such other matters as we
considered relevant, it is our opinion that as of the date hereof, the Exchange
Ratio to be paid for Carolina State Bank is fair, from a financial point of
view, to the shareholders of First Charter Corporation.
Our fees for rendering our Opinion are not contingent upon the Opinion
expressed herein, and neither Interstate/Johnson Lane Corporation nor any of its
affiliates or employees has a present or intended material financial interest in
the Company. Further, Interstate/Johnson Lane Corporation is independent of all
parties participating in the proposed Merger.
This Opinion is furnished pursuant to our engagement letter dated July 23,
1997. Our Opinion is directed to the Board of Directors of First Charter
Corporation and does not constitute a recommendation to any shareholder of First
Charter Corporation as to how such shareholder should vote in connection with
the Merger. This Opinion is a summary discussion of our underlying analyses and
may be included in communications to the shareholders of First Charter
Corporation provided that Interstate/Johnson Lane Corporation approves of such
disclosures prior to publication.
Very truly yours,
/s/ INTERSTATE/JOHNSON LANE CORPORATION
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The Carson Medlin Company
Investment Bankers
APPENDIX C
October 24, 1997
Board of Directors
Carolina State Bank
316 South Lafayette Street
Shelby, North Carolina 28150
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, of the consideration to be received by the unaffiliated stockholders of
Carolina State Bank ("Carolina State") under the terms of a certain Agreement
and Plan of Merger (the "Agreement") by and between Carolina State and First
Charter Corporation ("First Charter") pursuant to which Carolina State will
merge with and into First Charter (the "Merger"). Under the terms of the
Agreement, each of the outstanding shares of Carolina State common stock shall
be converted into the right to receive 1.023 shares of First Charter common
stock. The foregoing summary of the Merger is qualified in its entirety by
reference to the Agreement.
The Carson Medlin Company is a National Association of Securities Dealers,
Inc. (NASD) member investment banking firm which specializes in the securities
of southeastern United States financial institutions. As part of our investment
banking activities, we are regularly engaged in the valuation of southeastern
United States financial institutions and transactions relating to their
securities. We regularly publish our research on independent community banks
regarding their financial and stock price performance. We are familiar with the
commercial banking industry in North Carolina and the Southeast and the major
commercial banks operating in that market. We have been retained by Carolina
State in a financial advisory capacity to render our opinion hereunder, for
which we will receive compensation.
In reaching our opinion, we have analyzed the respective financial
positions, both current and historical, of First Charter and Carolina State. We
have reviewed: (i) the Letter of Intent signed June 30, 1997; (ii) the
Agreement; (iii) the annual reports to stockholders of First Charter, including
audited financial statements for the five years ended December 31, 1996; (iv)
the annual reports to stockholders of Carolina State, including audited
financial statements for the five years ended December 31, 1996; (v) the proxy
statement of Carolina State prepared for its annual meeting of the shareholders
held on April 15, 1997; (vi) the proxy statement of First Charter dated March 5,
1997 for its annual meeting of the shareholders held on April 29, 1997;
(vii) unaudited interim financial statements of Carolina State and First Charter
for the six months ended June 30, 1997; (viii) a draft of the Joint Proxy
Statement-Prospectus; and (ix) certain other financial and operating information
with respect to the business, operations and prospects of First Charter and
Carolina State. We also: (i) held discussions with members of the senior
management of Carolina State and First Charter regarding their respective
historical and current business operations, financial conditions and future
prospects; (ii) reviewed the historical market prices and trading activity for
the common stocks of First Charter and Carolina State and compared them with
those of certain publicly traded companies which we deemed to be relevant;
(iii) compared the results of operations of First Charter and Carolina State
with those of certain banking companies which we deemed to be relevant;
(iv) compared the proposed financial terms of the Merger with the financial
terms, to the extent publicly available, of certain other recent business
combinations of commercial banking organizations; (v) analyzed the pro forma
financial impact of the Merger on First Charter; and (vi) conducted such other
studies, analyses, inquiries and examinations as we deemed appropriate.
We have relied upon and assumed, without independent verification, the
accuracy and completeness of all information provided to us. We have not
performed or considered any independent appraisal or evaluation of the assets of
Carolina State or First Charter. The opinion we express herein is necessarily
based upon market, economic and other relevant considerations as they exist and
can be evaluated as of the date of this letter.
Based upon the foregoing, it is our opinion that the consideration provided
for in the Proposed Agreement is fair, from a financial point of view, to the
unaffiliated stockholders of Carolina State Bank.
Very truly yours,
/s/ THE CARSON MEDLIN COMPANY
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APPENDIX D
PROVISIONS OF APPLICABLE LAW
RELATING TO
DISSENTERS' RIGHTS OF APPRAISAL
I. PROVISIONS OF FEDERAL LAW
A. 12 U.S.C. (SECTION MARK)215A. MERGER OF NATIONAL BANKS OR STATE BANKS INTO
NATIONAL BANKS.
(a) APPROVAL OF COMPTROLLER, BOARD AND SHAREHOLDERS; MERGER AGREEMENT; NOTICE;
CAPITAL STOCK; LIABILITY OF RECEIVING ASSOCIATION
One or more national banking associations or one or more State banks, with
the approval of the Comptroller, under an agreement not inconsistent with
sections 215-215b of this title, may merger into a national banking association
located within the same State, under the charter of the receiving association.
The merger agreement shall --
(1) be agreed upon in writing by a majority of the board of directors of
each association or State bank participating in the plan of merger;
(2) be ratified and confirmed by the affirmative vote of the shareholders
of each such association or State bank owning at least two-thirds of its capital
stock outstanding, or by a greater proportion of such capital stock in the case
of a State bank if the laws of the State where it is organized so require, at a
meeting to be held on the call of the directors, after publishing notice of the
time, place, and object of the meeting for four consecutive weeks in a newspaper
of general circulation published in the place where the association or State
bank is located, or, if there is no such newspaper, then in the newspaper of
general circulation published nearest thereto, and after sending such notice to
each shareholder of record by certified or registered mail at least ten days
prior to the meeting, except to those shareholders who specifically waive
notice, but any additional notice shall be given to the shareholders of such
State bank which may be required by the laws of the State where it is organized.
Publication of notice may be waived in cases where the Comptroller determines
that an emergency exists justifying such a waiver, by unanimous action of the
shareholders of the association or State bank:
(3) specify the amount of the capital stock of the receiving association,
which shall not be less than that required under existing law for the
organization of a national bank in the place in which it is located and which
will be outstanding upon completion of the merger, the amount of stock (if any)
to be allocated, and cash (if any) to be paid, to the shareholders of the
association or State bank being merged into the receiving association.
(4) provide that the receiving association shall be liable for all
liabilities of the association or State bank being merged into the receiving
association.
(b) DISSENTING SHAREHOLDERS
If a merger shall be voted for at the called meetings by the necessary
majorities of the shareholders of each association or State bank participating
in the plan of merger, and thereafter the merger shall be approved by the
Comptroller, any shareholder of any association or State bank to be merged into
the receiving association who has voted against such merger at the meeting of
the association or bank of which he is a stockholder, or has given notice in
writing at or prior to such meeting to the presiding officer that he dissents
from the plan of merger, shall be entitled to receive the value of the shares so
held by him when such merger shall be approved by the Comptroller upon written
request made to the receiving association at any time before thirty days after
the date of consummation of the merger, accompanied by the surrender of his
stock certificates.
(c) VALUATION OF SHARES
The value of the shares of any dissenting shareholder shall be ascertained,
as of the effective date of the merger, by an appraisal made by a committee of
three persons, composed of (1) one selected by the vote of the holders of the
majority of the stock, the owners of which are entitled to payment in cash; (2)
one selected by the directors of the receiving association; and (3) one selected
by the two so selected. The valuation agreed upon by any two of the three
appraisers shall govern. If the value so fixed shall not be satisfactory to any
dissenting shareholder who has requested payment, that shareholder may, within
five days after being notified of the appraised value of his shares, appeal to
the Comptroller, who shall cause a reappraisal to be made which shall be final
and binding as to the value of the shares of the appellant.
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(d) APPLICATION TO SHAREHOLDERS OF MERGING ASSOCIATIONS; APPRAISAL BY
COMPTROLLER; EXPENSES OF RECEIVING ASSOCIATION; SALE AND RESALE OF SHARES;
STATE APPRAISAL AND MERGER LAW
If, within ninety days from the date of consummation of the merger, for any
reason one or more of the appraisers is not selected as herein provided, or the
appraisers fail to determine the value of such shares, the Comptroller shall
upon written request of any interested party cause an appraisal to be made which
shall be final and binding on all parties. The expenses of the Comptroller in
making the reappraisal or the appraisal, as the case may be, shall be paid by
the receiving association. The value of the shares ascertained shall be promptly
paid to the dissenting shareholders by the receiving association. The shares of
stock of the receiving association which would have been delivered to such
dissenting shareholders had they not requested payment shall be sold by the
receiving association at an advertised public auction, and the receiving
association shall have the right to purchase any of such shares at such public
auction, if it is the highest bidder therefor, for the purpose of reselling such
shares within thirty days thereafter to such person or persons and at such price
not less than par as its board of directors by resolution may determine. If the
shares are sold at public auction at a price greater than the amount paid to the
dissenting shareholders, the excess in such sale price shall be paid to such
dissenting shareholders. The appraisal of such shares of stock in any State bank
shall be determined in the manner prescribed by the law of the State in such
cases, rather than as provided in this section, if such provision is made in the
State law; and no such merger shall be in contravention of the law of the State
under which such bank is incorporated. The provisions of this subsection shall
apply only to shareholders of (and stock owned by them in) a bank or association
being merged into the receiving association.
(e) STATUS OF RECEIVING ASSOCIATION; PROPERTY RIGHTS AND INTEREST VESTED AND
HELD AS FIDUCIARY
The corporate existence of each of the merging banks or banking
associations participating in such merger shall be merged into and continued in
the receiving association and such receiving association shall be deemed to be
the same corporation as each bank or banking association participating in the
merger. All rights, franchises and interests of the individual merging banks or
banking associations in and to every type of property (real, personal, and
mixed) and choses in action shall be transferred to and vested in the receiving
association by virtue of such merger without any deed or other transfer. The
receiving association, upon the merger and without any order or other action on
the part of any court or otherwise, shall hold and enjoy all rights or property,
franchises, and interests, including appointments, designations, and
nominations, and all other rights and interests as trustee, executor,
administrator, registrar of stocks and bonds, guardian of estates, assignee,
receiver, and committee of estates of lunatics, and in every other fiduciary
capacity, in the same manner and to the same extent as such rights, franchises,
and interests were held or enjoyed by any one of the merging banks or banking
associations at the time of the merger, subject to the conditions hereinafter
provided.
(f) REMOVAL AS FIDUCIARY; DISCRIMINATION
Where any merging bank or banking association, at the time of the merger,
was acting under appointment of any court as trustee, executor, administrator,
registrar of stocks and bonds, guardian of estates, assignee, receiver, or
committee of estates of lunatics, or in any other fiduciary capacity, the
receiving association shall be subject to removal by a court of competent
jurisdiction in the same manner and to the same extent as was such merging bank
or banking association prior to the merger. Nothing contained in this section
shall be considered to impair in any manner the right of any court to remove the
receiving association and to appoint in lieu thereof a substitute trustee,
executor, or other fiduciary, except that such right shall not be exercised in
such manner as to discriminate against national banking associations, nor shall
any receiving association be removed solely because of the fact that it is a
national banking association.
(g) ISSUANCE OF STOCK BY RECEIVING ASSOCIATION; PREEMPTIVE RIGHTS
Stock of the receiving association may be issued as provided by the terms
of the merger agreement, free from any preemptive rights of the shareholders of
the respective merging banks.
B. 12 U.S.C. (SECTION MARK)215B. DEFINITIONS.
As used in sections 215-215b of this title, the term --
(1) "State bank" means any bank association, trust company, savings bank
(other than a mutual savings bank), or other banking institution which is
engaged in the business of receiving deposits and which is incorporated under
the laws of any State, or which is operating under the Code of Law of the
District of Columbia (except a national banking association located in the
District of Columbia):
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(2) "State" means the several States and Territories, the Commonwealth of
Puerto Rico, the Virgin Islands and the District of Columbia:
(3) "Comptroller" means the Comptroller of the Currency; and
(4) "Receiving association" means the national banking association into
which one or more national banking associations or one or more State banks,
located within the same State, merge.
II. PROVISIONS OF NORTH CAROLINA LAW
N.C.G.S. (SECTION MARK)53-16. CONSOLIDATION, CONVERSION OR MERGER OF STATE BANKS
OR TRUST COMPANIES WITH NATIONAL BANKS.
(a) Nothing in the law of this State shall restrict the right of a State
bank or trust company to consolidate, convert into, or merge with a national
bank. The action to be taken by such consolidating, converting, or merging State
bank and its rights and liability and those of its stockholders shall be the
same as those prescribed by the law of the United States for national banks at
the time of the action, except that a vote of the holders of two thirds of each
class of voting stock of a State bank shall be required for the consolidation,
conversion, or merger and that upon consolidation, conversion, or merger by a
State bank with or into a national bank the rights of dissenting stockholders
shall be those hereinafter specified.
(b) Upon consolidation, conversion, or merger the resulting national bank
shall be the same business as each consolidating, converting, or merging bank
with all the property rights, powers, and duties of each consolidating,
converting, or merging bank, except as affected by the law of the United States
and by the charter and bylaws of the resulting bank, and any reference to a
consolidating, converting, or merging bank in any writing, whether executed or
taking effect before or after the consolidation, conversion, or merger shall be
deemed and taken a reference to the resulting bank if not inconsistent with the
other provisions of such writing.
(c) The holders of shares of the stock of a State bank which were voted
against a consolidation, conversion, or merger into a national bank shall be
entitled to receive their value in cash, if and when the consolidation,
conversion, or merger becomes effective, upon written demand, made to the
resulting national bank at any time within 30 days after the effective date of
the consolidation, conversion, or merger accompanied by the surrender of the
stock certificate or certificates. The value of such shares shall be determined
as of the date of the stockholders' meeting approving the consolidation,
conversion, or merger, by three appraisers, one to be selected by the owners of
two thirds of the dissenting shares involved, one by the board of directors of
the resulting national bank and the third by the two so chosen. The valuation
agreed upon by any two appraisers shall govern. If the appraisal is not
completed within 90 days after the consolidation, conversion, or merger becomes
effective, the Comptroller of the currency shall cause an appraisal to be made.
(d) The amount fixed as the value of the shares of stock of the
consolidating, converting or merging bank at the time of the stockholders'
meeting approving the consolidation, conversion, or merger and the amount fixed
by the appraisal as hereinbefore provided, where the fixed value is not
accepted, shall constitute a debt of the resulting national bank.
(e) Upon the completion of the consolidation, conversion, or merger the
permit to operate of any consolidating, converting or merging State bank shall
automatically terminate.
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APPENDIX E
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
FIRST CHARTER CORPORATION
The undersigned Corporation, a business corporation incorporated under the
North Carolina Business Corporation Act, pursuant to action by its shareholders,
hereby sets forth its Amended and Restated Articles of Incorporation:
ARTICLE 1: The name of the Corporation is First Charter Corporation.
ARTICLE 2: The period of duration of the Corporation shall be perpetual.
ARTICLE 3: The purposes for which the Corporation is organized are:
(a) to purchase, own, and hold the stock of other corporations, and to
do every act and thing covered generally by the denomination "bank holding
corporation" or "holding corporation," and especially to direct the
operations of banks, banking associations or other corporations through the
ownership of stock therein;
(b) to purchase, subscribe for, acquire, own, hold, sell, exchange,
assign, transfer, create security interests in, pledge, or otherwise
dispose of shares of the capital stock, or any bonds, notes, securities, or
evidences of indebtedness created by any other corporation or corporations
organized under the laws of this state or any other state and also bonds or
evidences of indebtedness of the United States or of any state, district,
territory or subdivision or municipality thereof and to issue in exchange
therefor shares of the capital stock, bonds, notes, or other obligations of
the Corporation and while the owner thereof to exercise all the rights,
powers and privileges of ownership including the right to vote on any
shares of stock so owned;
(c) to promote, lend money to, and guarantee the dividends, stocks,
bonds, notes, evidences of indebtedness, contracts, or other obligations
of, and otherwise aid in any manner which shall be lawful, any corporation
or association of which any bonds, stocks or other securities or evidences
of indebtedness shall be held by or for the Corporation, or in which, or in
the welfare of which, the Corporation shall have any interest, and to do
any acts and things permitted by law and designed to protect, preserve,
improve, or enhance the value of any such bonds, stocks, or other
securities or evidences of indebtedness or the property of the Corporation;
(d) to engage in any other lawful act or activity for which
corporations may be organized under Chapter 55 of the General Statutes of
North Carolina, as amended, including, but not limited to, manufacturing,
purchasing or otherwise acquiring, owning, mortgaging, pledging, selling,
assigning and transferring, or otherwise disposing of, investing, trading,
dealing in and with, goods, wares and merchandise and property of every
class and description, whether real, personal, mixed, tangible, or
intangible; entering into or serving in any kind of management,
investigative, advisory, promotional, protective, insurance, guarantyship,
suretyship, fiduciary or representative relationship or capacity for any
persons or corporations whatsoever; and
(e) to engage in, conduct and operate any other business which may be
deemed adapted, directly or indirectly, to add to the profits of its
business or to increase the value of its property.
In furtherance and not in limitation of the power conferred by the laws of
the State of North Carolina upon corporations organized for the foregoing
purposes, the Corporation shall have power to borrow money, to lend money, to
guarantee obligations, to purchase, construct, lease or otherwise acquire, own,
hold, use, maintain, operate or otherwise manage or control, sell, exchange,
lease, mortgage, pledge or otherwise dispose of, property of any kind or
character, real, personal or mixed, tangible or intangible, necessary, useful or
convenient therefor, and to acquire, hold, mortgage, pledge or dispose of
shares, bonds and other evidences of indebtedness and securities of the United
States of America or any state or municipality therein or of any domestic or
foreign Corporation.
The foregoing clauses shall be construed as enumerating specific purposes
and powers, but no recitation, expression or declaration of specific purposes or
powers herein enumerated shall be deemed to be exclusive, but it is hereby
expressly declared that all other lawful purposes and powers not inconsistent
therewith are hereby included.
The Board of Directors of the Corporation shall have the authority to adopt
resolutions approving the indemnification, to the fullest extent permitted by
Chapter 55 of the North Carolina General Statutes, of any person made a party to
any action or
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proceeding, whether civil, criminal or administrative, by reason of the fact
that such person was serving as director, officer, employee or agent of the
Corporation.
ARTICLE 4: The aggregate number of shares the Corporation is authorized to
issue is twenty-five million (25,000,000) shares of Common Stock, without par
value.
ARTICLE 5: The shareholders of the Corporation shall have no preemptive
right to acquire additional shares of the Corporation.
ARTICLE 6: The address of the registered office of the Corporation is 22
Union Street, North, Post Office Box 228, Concord, Cabarrus County, North
Carolina, 28025-0228 and the name of its registered agent at such address is
Robert O. Bratton.
ARTICLE 7: The board of directors of the Corporation shall be and is
divided into three classes, Class I, Class II and Class III, which shall be as
nearly equal in number as possible. Each director shall serve for a term ending
on the date of the third annual meeting of shareholders following the annual
meeting at which the director was elected.
ARTICLE 8: The Corporation shall not consolidate with, or merge with or
into, any other corporation or convey to any corporation, other person or
otherwise dispose of all or substantially all the assets or dispose of by any
means all or substantially all the stock or assets of any major subsidiary of
the Corporation unless such consolidation, merger, conveyance or disposition is
approved (a) by the affirmative vote of not less than seventy-five percent (75%)
of the aggregate voting power of the outstanding stock entitled to vote thereon,
and (b) by the affirmative vote of not less than seventy-five percent (75%) of
the aggregate voting power of the outstanding stock entitled to vote thereon,
which shall include the affirmative vote of at least fifty percent (50%) of the
voting power of the outstanding stock of shareholders entitled to vote thereon
other than controlling shareholders, (i) if the shareholder entitled to vote
thereon is a person who, including affiliates of such person, is the beneficial
owner (as the terms are defined in the Securities Exchange Act of 1934 and in
the rules thereunder) of more than twenty percent (20%) of the voting power of
the Corporation (a "controlling shareholder"), provided that shares held, voted
or otherwise controlled by a person as a trustee, plan administrator, officer of
the Corporation or otherwise pursuant to an employee benefit plan of the
Corporation or of an affiliate of the Corporation shall not be deemed to be
beneficially owned by any person for the purpose of determining whether a person
is a controlling shareholder, and (ii) if, prior to the acquisition of twenty
percent (20%) of the voting power of the Corporation by a shareholder, the Board
of Directors of the Corporation had not unanimously approved such consolidation,
merger, conveyance or disposition. If there is a controlling shareholder, this
Article 8 can be amended only by the affirmative vote of the voting power of the
Corporation then required to approve a consolidation, merger, conveyance or
disposition under this Article 8.
ARTICLE 9: The vote of three-quarters of the number of directors fixed in
the manner provided in the Bylaws of the Corporation shall be required for the
approval of a plan of merger or plan of consolidation or similar plan of the
Corporation with any other corporation(s) or entity(ies) in which the
Corporation is the acquired corporation or for adopting a resolution
recommending a sale, lease or exchange of all or substantially all the property
of the Corporation.
The Board of Directors of the Corporation, when evaluating any offer of
another party to (a) make a tender or exchange offer for any equity security of
the Corporation, (b) merge or consolidate the Corporation with another
corporation, or (c) purchase or otherwise acquire all or substantially all of
the properties and assets of the Corporation, shall, in connection with the
exercise of its judgment in determining what is in the best interests of the
Corporation and its shareholders, give due consideration to all relevant
factors, including without limitation, the social and economic effects on the
employees, customers and other constituents of the Corporation and its
subsidiaries and on the communities in which the Corporation and its
subsidiaries operate or are located. The provisions of this Article 9 may be
amended only by the affirmative vote of the voting power of the Corporation as
would be required at the time of such amendment to amend Article 8 hereof.
ARTICLE 10: To the fullest extent permitted by the North Carolina Business
Corporation Act, as the same exists or may hereafter be amended, a director of
the Corporation shall not be personally liable to the Corporation, its
shareholders or otherwise for monetary damage for breach of his or her duty as a
director. Any repeal or modification of this Article 10 shall be prospective
only and shall not adversely affect any limitation on the personal liability of
a director of the Corporation existing at the time of such repeal or
modification.
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PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
There are no provisions in the Registrant's Restated Charter and no
contracts between the Registrant and its directors and officers nor resolutions
adopted by the Registrant, relating to indemnification. However, in accordance
with the provisions of the NCBCA, the Registrant's Bylaws provide that, in
addition to the indemnification of directors and officers otherwise provided by
the NCBCA, the Registrant shall, under certain circumstances, indemnify its
directors, executive officers and certain other designated officers against any
and all liability and expenses, including reasonable attorneys' fees, in any
proceeding (including without limitation a proceeding brought by or on behalf of
the Registrant itself) arising out of their status or activities as directors
and officers, except for liability or litigation expense incurred on account of
activities of such person which at the time taken were known or believed by such
person to be clearly in conflict with the best interests of the Registrant. The
Registrant's Bylaws further provide that the Registrant shall also indemnify
such person for reasonable costs, expenses and attorneys' fees incurred in
connection with the enforcement of the rights to indemnification granted in the
Bylaws, if it is determined in accordance with the procedures set forth in the
Bylaws that such person is entitled to indemnification thereunder. Pursuant to
such bylaw and as authorized by statute, the Registrant maintains insurance on
behalf of its directors and officers against liability asserted against such
persons in such capacity whether or not such directors or officers have the
right to indemnification pursuant to the bylaw or otherwise. In addition, the
Registrant's Restated Articles of Incorporation prevent the recovery by the
Registrant or any of its shareholders of monetary damages against its directors
to the fullest extent permitted by the NCBCA.
In addition to the above-described provisions, Sections 55-8-50 through
55-8-58 of the NCBCA contain provisions prescribing the extent to which
directors and officers shall or may be indemnified. Section 55-8-51 of the NCBCA
permits a corporation, with certain exceptions, to indemnify a current or former
director against liability if (i) he conducted himself in good faith, (ii) he
reasonably believed (x) in the case of conduct in his official capacity with the
corporation, that his conduct was in the best interests of the corporation and
(y) in all other cases his conduct was at least not opposed to the corporation's
best interests, and (iii) in the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful. A corporation may not
indemnify a director in connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation or in
connection with a proceeding charging improper personal benefit to him, whether
or not involving action in his official capacity, in which he was adjudged
liable on basis that personal benefit was improperly received by him. The above
standard of conduct is determined by the Board of Directors or a committee
thereof or special legal counsel or the shareholders as prescribed in Section
55-8-55.
Sections 55-8-52 and 55-8-56 of the NCBCA require a corporation to
indemnify a director or officer in the defense of any proceeding to which he was
a party because of his capacity as a director or officer against reasonable
expenses when he is wholly successful, on the merits or otherwise, in his
defense, unless the articles of incorporation provide otherwise. Upon
application, the court may order indemnification of the director or officer if
the court determines that he is entitled to mandatory indemnification under
Section 55-8-2, in which case the court shall also order the corporation to pay
the reasonable expenses incurred to obtain court-ordered indemnification or if
he is adjudged fairly and reasonably so entitled in view of all relevant
circumstances under Section 55-8-54. Section 55-8-56 allows a corporation to
indemnify and advance expenses to an officer, employee or agent who is not a
director to the same extent, consistent with public policy, as a director or as
otherwise set forth in the Corporation's articles of incorporation or bylaws or
by resolution of the Board of Directors or contact.
In addition, Section 55-8-57 permits a corporation to provide for
indemnification of directors, officers, employees or agents, in its articles of
incorporation or bylaws or by contract or resolution, against liability in
various proceedings and to purchase and maintain insurance policies on behalf of
these individuals.
THE FOREGOING IS ONLY A GENERAL SUMMARY OF CERTAIN ASPECTS OF NORTH
CAROLINA LAW DEALING WITH INDEMNIFICATION OF DIRECTORS AND OFFICERS AND DOES NOT
PURPORT TO BE COMPLETE. IT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
RELEVANT STATUTES WHICH CONTAIN DETAILED SPECIFIC PROVISIONS REGARDING THE
CIRCUMSTANCES UNDER WHICH AND THE PERSON FOR WHOSE BENEFIT INDEMNIFICATION SHALL
OR MAY BE MADE AND ACCORDINGLY ARE INCORPORATED HEREIN BY REFERENCE AS EXHIBIT
99.10 OF THIS REGISTRATION STATEMENT.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits and financial statement schedules are filed with or
incorporated by reference in this Registration Statement:
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
<C> <S>
2.1 Agreement and Plan of Merger between First Charter and CSB dated as of August 15, 1997 (included as Appendix A
to the Joint Proxy Statement-Prospectus, with the exception of a list of the schedules thereto, which is filed
as an exhibit hereto)
3(i) Restated Charter of First Charter (incorporated herein by reference to Exhibit 3(i) of First Charter's
Registration Statement on Form S-4, Registration No. 33-63157)
3(ii) Bylaws of First Charter (incorporated herein by reference to Exhibit 3.2 of First Charter's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995)
5.1 Opinion of Smith Helms Mulliss & Moore, L.L.P. regarding legality of shares*
8.1 Opinion of Smith Helms Mulliss & Moore, L.L.P. regarding federal income tax consequences
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Smith Helms Mulliss & Moore, L.L.P. (included in Exhibit 5.1)
23.4 Consent of Smith Helms Mulliss & Moore, L.L.P. (included in Exhibit 8.1)
23.5 Consent of Interstate/Johnson Lane Corporation
23.6 Consent of Carson Medlin Company
23.7 Consent of Mr. John J. Godbold, Jr.*
23.8 Consent of Mr. Charles F. Harry III*
23.9 Consent of Mr. T. Carl Dedmon*
24.1 Power of Attorney and Certified Resolutions*
99.1 Notice of Special Meeting of Shareholders of First Charter
99.2 Form of Proxy for Special Meeting of Shareholders of First Charter
99.3 President's Letter to First Charter Shareholders
99.4 Notice of Special Meeting of Shareholders of CSB
99.5 Form of Proxy for Special Meeting of Shareholders of CSB
99.6 President's letter to CSB Shareholders
99.7 Opinion of Interstate Johnson Lane Corporation (included as Appendix B to this Joint Proxy Statement-
Prospectus)
99.8 Opinion of Carson Medlin Company (included as Appendix C to the Joint Proxy Statement-Prospectus)
99.9 Stock Option Agreement between First Charter and CSB dated as of June 30, 1997 (incorporated herein by
reference to Exhibit 99.2 of First Charter's Current Report on Form 8-K filed July 2, 1997)
99.10 Provisions of North Carolina law regarding indemnification of directors and officers*
99.11 CSB's Annual Report on Form F-2 for the fiscal year ended December 31, 1996*
99.12 CSB's Quarterly Report on Form F-4 for the quarter ended March 31, 1997*
99.13 CSB's Quarterly Report on Form F-4 for the quarter ended June 30, 1997*
99.14 CSB's Amendment No. 1 to its Quarterly Report on Form F-4 for the quarter ended June 30, 1997*
99.15 CSB's Current Report on Form F-3 filed June 4, 1997*
99.16 CSB's Current Report on Form F-3 filed July 17, 1997*
99.17 CSB's Current Report on Form F-3 filed September 10, 1997*
</TABLE>
* Previously filed.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
II-2
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in olume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change in such information in the Registration Statement:
PROVIDED, HOWEVER, that paragraphs (a)(l)(i) and (a)(l)(ii) do not apply if the
Registration Statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
(c) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(d)(1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
II-3
<PAGE>
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(f) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(g) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Concord, State of North Carolina, on October 24, 1997.
FIRST CHARTER CORPORATION
By: /s/ Lawrence M. Kimbrough
LAWRENCE M. KIMBROUGH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
<S> <C> <C>
/s/ Lawrence M. Kimbrough President, Chief Executive Officer and Director (Principal October 24, 1997
(LAWRENCE M. KIMBROUGH) Executive Officer)
/s/ Robert O. Bratton Executive Vice President (Principal Financial and Principal October , 1997
(ROBERT O. BRATTON) Accounting Officer)
Director October , 1997
(WILLIAM R. BLACK)
*MICHAEL R. COLTRANE Director October 24, 1997
(MICHAEL R. COLTRANE)
*J. ROY DAVIS, JR. Director October 24, 1997
(J. ROY DAVIS, JR.)
*JAMES B. FINCHER Director October 24, 1997
(JAMES B. FINCHER)
*H. CLARK GOODWIN Director October 24, 1997
(H. CLARK GOODWIN)
*FRANK H. HAWFIELD, JR. Director October 24, 1997
(FRANK H. HAWFIELD, JR.)
*J. KNOX HILLMAN, JR. Director October 24, 1997
(J. KNOX HILLMAN, JR.)
*BRANSON C. JONES Director October 24, 1997
(BRANSON C. JONES)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
<S> <C> <C>
*JERRY E. MCGEE Director October 24, 1997
(JERRY E. MCGEE)
*HUGH H. MORRISON Director October 24, 1997
(HUGH H. MORRISON)
Director October , 1997
(THOMAS R. REVELS)
*By: /s/ Lawrence M. Kimbrough
LAWRENCE M. KIMBROUGH,
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
Exhibit 2.1
List of Schedules
to
Agreement and Plan of Merger
between
First Charter Corporation
and
Carolina State Bank
August 15, 1997
Schedule 5.02(b). Outstanding Securities of CSB and
Commitments to Issue Securities.
Schedule 5.02(c). Securities Required to be Issued Under
Stock Plans of CSB.
Schedule 5.03. Subsidiaries of CSB.
Schedule 5.04(b). Certain Contracts of CSB.
<PAGE>
Schedule 5.06. Undisclosed Liabilities of CSB.
Schedule 5.12(a). Benefit Plans of CSB.
Schedule 5.12(f). Severance and Other Obligations of CSB.
Schedule 5.13(a). Employment Contracts of CSB.
Schedule 5.13(d). Material Contracts of CSB.
Schedule 5.13(i). Hedging, Interest Rate Exchanges or Swaps of CSB.
Schedule 5.14. Certain Contract Defaults of CSB.
Schedule 5.15. Certain Legal Proceedings of CSB.
Schedule 5.17. Certain Regulatory Filings of CSB.
Schedule 5.23. Financial Advisors of CSB.
Schedule 8.06. Affiliates of CSB.
<PAGE>
SMITH HELMS MULLISS & MOORE, L.L.P
Attorneys at Law
Post Office Box 31247
Charlotte, North Carolina 28231
(704) 343-2000
October 24, 1997
First Charter Corporation
First Charter National Bank
22 Union Street North
Concord, NC 28026-0228
Carolina State Bank
316 South Lafayette Street
Shelby, NC 28150
RE: MERGER OF CAROLINA STATE BANK INTO FIRST CHARTER NATIONAL BANK:
FEDERAL INCOME TAX CONSEQUENCES
Ladies and Gentlemen:
We have served as tax counsel to First Charter Corporation ("First
Charter") in connection with the adoption of the Agreement and Plan of Merger,
dated as of August 15, 1997 (the "Merger Agreement"), by and between First
Charter and Carolina State Bank ("CSB"). Except to the extent otherwise defined
herein, capitalized terms used herein have the same meaning set forth in the
Merger Agreement.
<PAGE>
The Merger Agreement provides for the merger of CSB, a North Carolina
state-chartered commercial bank, with and into First Charter National Bank, a
national banking association and the wholly-owned subsidiary of First Charter
("FCNB"), in accordance with the laws of the United States and the State of
North Carolina (the "Merger"). FCNB will survive the merger, and the separate
corporate existence of CSB will cease. According to the Merger Agreement, each
outstanding share of CSB common stock ("CSB Common Stock"), subject to the
exercise of dissenters' rights, will be converted into and exchanged for shares
of First Charter common stock ("First Charter Common Stock") pursuant to the
Exchange Ratio provided by the Merger Agreement; PROVIDED, HOWEVER, that any
shares of CSB Common Stock held by First Charter or any of its wholly owned
Subsidiaries or CSB or its wholly owned Subsidiaries immediately prior to the
Effective Time, other than shares held by First Charter or CSB 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. No fractional shares
of First Charter Common Stock will be issued to exchanging holders of CSB Common
Stock, and cash will be paid in lieu thereof. No shares of FCNB stock will be
issued to exchanging holders of CSB Common Stock or otherwise in the Merger.
Consummation of the Merger is subject to certain conditions set forth in the
Merger Agreement.
In rendering this opinion we have assumed, without independent
verification, the legal capacity of natural persons, the genuineness of all
signatures on, and the authenticity of, all documents submitted to us as
originals, and the conformity to original documents of all documents submitted
to us as certified, conformed or photostatic copies thereof and the authenticity
of the originals of such documents. We have further assumed that each of the
parties to the Merger Agreement has the requisite corporate power and authority
to enter into and to perform the Merger Agreement and the transactions
contemplated thereby, that the Merger Agreement has been duly authorized,
executed and delivered by and constitutes a legal, valid and binding obligation
of each of the parties thereto, and that all requisite regulatory approvals have
been duly obtained.
We have been provided with a copy of letters dated of even date
herewith in which the Chief Executive Officer of each of First Charter and FCNB
and of CSB, respectively, makes certain representations regarding the
transaction (the "Representations").
In rendering the opinions set forth below, we have considered the
Merger Agreement, the Representations, applicable case law and applicable
provisions of (i) the Internal Revenue Code of 1986, as amended and as currently
in effect (the "Code"), (ii) the regulations adopted under the Code, (iii) the
Revenue Rulings and Revenue Procedures published under and with respect to the
Code and (iv) the North Carolina General Statutes as currently in effect and
regulations promulgated thereunder. No assurance can be given that legislative,
administrative or judicial decisions or interpretations may not be forthcoming
that would differ materially from the opinions set forth herein. In addition, it
should be noted that an opinion of counsel represents only that counsel's best
legal judgment and has no binding effect on the Internal Revenue Service or
North Carolina Department of Revenue or official status of any kind.
<PAGE>
Based solely upon the matters and resources we have considered as
indicated above, and in reliance thereon, and subject to the limitations,
qualifications and exceptions set forth below, we are of the opinion that, upon
consummation of the Merger in strict accordance with all the terms and
conditions of the Merger Agreement, the transaction will be treated as follows
for federal income tax purposes:
(a) The merger of CSB with and into FCNB will constitute a
reorganization within the meaning of Section 368(a) of the Code. CSB, FCNB and
First Charter will each be "a party to the reorganization" within the meaning of
Section 368(b) of the Code.
(b) No gain or loss will be recognized by CSB on the transfer of its
assets to FCNB in constructive exchange for First Charter Common Stock and the
assumption by FCNB of the liabilities of CSB. No gain or loss will be recognized
by CSB on the distribution of First Charter Common Stock to the CSB
shareholders.
(c) No gain or loss will be recognized by FCNB or First Charter upon
the receipt of CSB's assets by FCNB in constructive exchange for First Charter
Common Stock.
(d) The tax basis of the assets of CSB in the hands of FCNB will be the
same as the tax basis of those assets in the hands of CSB immediately prior to
the Merger.
(e) The holding period of the assets of CSB in the hands of FCNB will
include the period during which such assets were held by CSB.
(f) No gain or loss will be recognized by those CSB shareholders who
receive solely First Charter Common Stock (including fractional shares, if any)
in exchange for their CSB Common Stock.
(g) The tax basis of the First Charter Common Stock (including
fractional shares, if any) received by the CSB shareholders will be the same as
the tax basis of the CSB Common Stock surrendered in exchange therefor.
(h) The holding period of the First Charter Common Stock (including
fractional shares, if any) received by the CSB shareholders will include the
period during which the CSB Common Stock surrendered in exchange therefor was
held, provided that the CSB Common Stock was held as a capital asset on the date
of consummation of the Merger.
<PAGE>
(i) The payment of cash to a CSB shareholder in lieu of the actual
issuance of fractional shares of First Charter Common Stock will be treated for
federal income tax purposes as if such fractional shares were in fact
distributed as part of the exchange and the cash was then distributed by First
Charter in redemption of such fractional shares subject to Section 302 of the
Code. If the redemption meets one of the four tests set forth in that section,
the shareholder will be treated as if such shareholder sold such fractional
shares of First Charter Common Stock for the amount of cash received, and such
shareholder will recognize gain (or loss) to the extent that the amount of the
cash received exceeds (or is less than) the shareholder's tax basis allocable to
such fractional shares. Any gain or loss recognized will be capital gain or
loss, assuming that the fractional shares of First Charter Common Stock would
have been a capital asset in the hands of the shareholder. If none of the four
tests provided in Section 302 is met, the assumed redemption will be treated as
a dividend, and the shareholder will most likely be required to recognize as
ordinary income the full amount of the cash received.
(j) The receipt of cash by a dissenting CSB shareholder will be treated
as received by that shareholder as a distribution by CSB in redemption of such
shareholder's CSB Common Stock, subject to the provisions and limitations of
Section 302 of the Code. If the redemption meets one of the four tests set forth
in that section, the shareholder will be treated as if such shareholder sold his
shares of CSB Common Stock for the amount of cash received, and such shareholder
will recognize gain (or loss) to the extent that the amount of the cash received
exceeds (or is less than) the shareholder's tax basis applicable to such
shareholder=s shares of CSB Common Stock. Any gain or loss recognized will be
capital gain or loss, assuming that the shares of CSB Common Stock are a capital
asset in the hands of the shareholder. If none of the four tests provided in
Section 302 is met, the assumed redemption will be treated as a dividend, and
the shareholder will most likely be required to recognize as ordinary income the
full amount of the cash received.
We are of the further opinion that the Merger will be treated in
substantially the same manner for North Carolina income tax purposes as for
federal income tax purposes.
<PAGE>
In rendering this opinion, we are not expressing an opinion as to the
laws of any jurisdiction other than the State of North Carolina and the United
States of America, and we assume no responsibility as to the applicability of
the laws of any other jurisdiction to the subject transaction or to the effects
of such laws thereon. Except to the extent specifically provided herein, no
opinion is expressed or implied concerning the federal income tax consequences
of the transactions described in the Merger Agreement or the consequences under
any other federal, state or local tax laws. In particular, no opinion is
expressed herein regarding the income tax consequences of the proposed
conversion of any outstanding options and warrants in respect of CSB Common
Stock into options and warrants in respect to First Charter Common Stock in
connection with the transactions described in the Merger Agreement.
The opinions expressed herein are for the exclusive benefit of First
Charter, FCNB, CSB and their respective shareholders in connection with the
transactions described in the Merger Agreement. This opinion may not be relied
upon by them for any other purpose, and may not be relied upon, or used,
circulated or quoted, by, nor may copies thereof be provided to, any other
person or entity for any purpose whatsoever without our prior consent. Unless
the prior written consent of our firm is obtained, this opinion is not to be
quoted or otherwise referred to in any report, proxy statement or registration
statement, nor is it to be filed with or furnished to any governmental agency or
other person, except as otherwise required by law. We consent to the filing of
this letter as an exhibit to the Registration Statement on Form S-4 being filed
by First Charter for the registration of 1,760,370 shares of First Charter
Common Stock in connection with the transactions contemplated by the Merger
Agreement and to a summary of the provisions hereof in the Joint Proxy
Statement-Prospectus constituting a part of such Registration Statement.
This opinion is specifically limited to those matters expressed herein,
effective as of the date hereof. We assume no duty to inform you of any changes
in our opinion hereafter due to any change in law or facts that may hereafter
occur or come to our attention.
Very truly yours,
/s/ SMITH HELMS MULLISS & MOORE, L.L.P.
<PAGE>
EXHIBIT 23.1
The Board of Directors
First Charter Corporation:
We consent to the use of our report dated January 13, 1997, included in
First Charter Corporation's Form 10-K for the year ended December 31, 1996
incorporated herein by reference and to the reference to our firm under the
heading "Experts" in the Joint Proxy Statement/Prospectus for the acquisition of
Carolina State Bank.
/s/ KPMG PEAT MARWICK LLP
Charlotte, North Carolina
October 24, 1997
PAGE
<PAGE>
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
of First Charter Corporation on Form S-4 of our report dated January 17, 1997,
on our audits of the consolidated financial statements of Carolina State Bank as
of December 31, 1996 and 1995, and for each of the three years in the period
ended December 31, 1996, which report is included in the Form F-2 for the year
ended December 31, 1996, which is incorporated by reference in this Registration
Statement. We also consent to the references to our firm under the captions
"Experts," "Conditions to the Merger," "Accounting Treatment," and "Independent
Public Accountants."
/s/ COOPERS & LYBRAND L.L.P.
Raleigh, North Carolina
October 24, 1997
<PAGE>
<PAGE>
FINANCIAL ADVISOR'S CONSENT
October 24, 1997
The Board of Directors
First Charter Corporation:
We consent to references to our firm in this Registration Statement on
Form S-4 in the report and opinion letter dated October 24, 1997 relating
to the fairness, from a financial point of view, to the shareholders of
First Charter Corporation in connection with the merger of Carolina State
Bank with and into First Charter National Bank, pursuant to an Agreement
Plan of Merger dated August 15, 1997, and to the references to us in such
Joint Proxy Statement and any amendments thereto.
/s/ Interstate/Johnson Lane Corporation
INTERSTATE/JOHNSON LANE CORPORATION
Charlotte, North Carolina
<PAGE>
CONSENT OF THE CARSON MEDLIN COMPANY
We hereby consent to the inclusion as Appendix C to the Proxy Statement/
Prospectus constituting part of the Registration Statement on Form S-4 of
First Charter Corporation of our letter to the Board of Directors of Carolina
State Bank and to the references made to such letter and to the firm in
such Proxy Statement/Prospectus. In giving such consent, we do not thereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or the rules and regulations of
the Securities and Exchange Commission thereunder.
/s/ The Carson Medlin Company
THE CARSON MEDLIN COMPANY
Raleigh, North Carolina
October 24, 1997
<PAGE>
EXHIBIT 99.1
FIRST CHARTER CORPORATION
22 Union Street, North
Concord, North Carolina 28025
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 10, 1997
TO THE SHAREHOLDERS:
Notice is hereby given that a Special Meeting of Shareholders (the "Special
Meeting") of First Charter Corporation ("First Charter") will be held at the
corporate and operations center of First Charter, located at 22 Union Street,
North, in Concord, North Carolina, on December 10, 1997 at 9:00 a.m. for the
following purposes:
1. To consider and vote on a proposal to approve the Agreement and
Plan of Merger dated August 15, 1997 by and between First Charter and
Carolina State Bank ("CSB"), and the transactions contemplated thereby,
which include, among other things (i) the merger of CSB with and into First
Charter National Bank, a national bank subsidiary of First Charter (the
"Merger") and (ii) the issuance of 1.023 shares of First Charter's common
stock, $5 par value, for each outstanding share of CSB's common stock,
$4.50 par value, upon consummation of the Merger, as more fully described
in the enclosed Joint Proxy Statement-Prospectus;
2. To consider and vote on a proposal to approve the Amended and
Restated Articles of Incorporation of First Charter, which include
amendments to (i) increase the number of shares of common stock that First
Charter is authorized to issue from 10,000,000 to 25,000,000, and (ii) make
certain technical changes to conform the Articles of Incorporation to
changes in the North Carolina Business Corporation Act, as more fully
described in the enclosed Joint Proxy Statement-Prospectus; and
3. To transact such other business as may properly come before the
Special Meeting or any adjournment thereof;
Pursuant to the provisions of the North Carolina Business Corporation Act,
October 24, 1997 has been fixed as the record date for the determination of
shareholders entitled to notice of and to vote at the Special Meeting and,
accordingly, only holders of First Charter's common stock of record at the close
of business on that date will be entitled to notice of and to vote at such
meeting and at any adjournment or adjournments thereof.
APPROVAL OF THE MATTERS DESCRIBED IN 1 AND 2 ABOVE REQUIRES THE AFFIRMATIVE VOTE
OF A MAJORITY OF THE SHARES OF FIRST CHARTER'S COMMON STOCK VOTED WITH RESPECT
THERETO. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, IT IS IMPORTANT
THAT YOU MARK, DATE, SIGN AND RETURN PROMPTLY THE PROXY CARD IN THE ENCLOSED,
SELF-ADDRESSED, STAMPED ENVELOPE. IF YOU ATTEND THE SPECIAL MEETING AND DESIRE
TO REVOKE YOUR PROXY AND VOTE IN PERSON, YOU MAY DO SO. IN ANY EVENT, A PROXY
MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED.
By Order of the Board of Directors
JAMES W. TOWNSEND, JR.
SECRETARY
Concord, North Carolina
October , 1997
<PAGE>
<PAGE>
EXHIBIT 99.2
[FORM OF PROXY CARD]
REVOCABLE PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
OF FIRST CHARTER CORPORATION
SPECIAL MEETING, DECEMBER 10, 1997
KNOW ALL MEN BY THESE PRESENTS, that the undersigned shareholder of First
Charter Corporation, a North Carolina corporation ("First Charter"), hereby
constitutes and appoints Robert O. Bratton, David E. Keul and Anne C. Forrest,
and each or any of them, severally as attorneys and proxies for the undersigned,
with full power of substitution, for and on behalf of the undersigned to act and
to vote, according to the number of shares of First Charter's Common Stock held
of record by the undersigned on October 24, 1997 and as fully as the undersigned
would be entitled to act and vote if personally present, at the Special Meeting
of Shareholders to be held at First Charter's corporate and operations center at
22 Union Street, North, Concord, North Carolina, on December 10, 1997, 9:00 a.m.
(local time) or at any adjournments or postponements thereof, as follows:
1. Proposal to approve the Agreement and Plan of Merger dated August 15,
1997 by and between First Charter and Carolina State Bank ("CSB"), and the
transactions contemplated thereby, which include, among other matters (i) the
merger of CSB with and into First Charter National Bank, a national bank
subsidiary of First Charter (the "Merger") at the effective time of the Merger,
and (ii) the issuance of 1.023 shares of First Charter common stock, $5 par
value, for each outstanding share of CSB common stock, $4.50 par value, upon
consummation of the Merger, all as more fully described in the accompanying
Joint Proxy Statement-Prospectus.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Proposal to approve the Amended and Restated Articles of Incorporation of
First Charter, which include amendments to (i) increase the number of shares of
common stock that First Charter is authorized to issue from 10,000,000 to
25,000,000, and (ii) make certain technical changes to conform the Articles of
Incorporation to changes in the North Carolina Business Corporation Act, as more
fully described in the accompanying Joint Proxy Statement-Prospectus.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To vote the shares of First Charter Corporation Common Stock represented
by this appointment of proxy upon such other matters as may properly come before
the Special Meeting and any adjournments thereby in their discretion.
<PAGE>
(PLEASE MARK, SIGN AND DATE THE REVERSE SIDE OF THIS CARD
AND MAIL IT IN THE ENCLOSED RETURN ENVELOPE.)
<PAGE>
[REVERSE SIDE OF PROXY CARD]
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTIONS ARE GIVEN, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2 ON THE FRONT SIDE OF THIS CARD. SHOULD OTHER MATTERS
PROPERLY COME BEFORE THE SPECIAL MEETING, THE PROXIES WILL BE AUTHORIZED TO VOTE
THE SHARES REPRESENTED BY THIS APPOINTMENT OF PROXY IN THEIR DISCRETION. THIS
APPOINTMENT OF PROXY MAY BE REVOKED BY THE HOLDER OF THE SHARES TO WHICH IT
RELATES AT ANY TIME BEFORE IT IS EXERCISED BY FILING WITH THE SECRETARY OF FIRST
CHARTER CORPORATION A WRITTEN INSTRUMENT REVOKING IT OR A DULY EXECUTED
APPOINTMENT OF PROXY BEARING A LATER DATE OR BY ATTENDING THE SPECIAL MEETING
AND ANNOUNCING HIS OR HER INTENTION TO VOTE IN PERSON.
By signing this proxy, the
undersigned hereby acknowledges
receipt of the Notice of Special
Meeting, dated October , 1997,
and the accompanying Joint Proxy
Statement-Prospectus.
Signature of Shareholder
Signature of Shareholder (if held
jointly)
Please sign exactly as your name
appears on your stock certificate
and fill in the date. If your
shares are held jointly, all joint
owners must sign. If you are
signing as an executor,
administrator, trustee, guardian,
custodian or corporate officer,
please give your full title as
such.
Dated:
<PAGE>
<PAGE>
EXHIBIT 99.3
[First Charter Corporation Letterhead]
October , 1997
Dear Fellow Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
First Charter Corporation ("First Charter"), which will be held on December 10,
1997, at 9:00 a.m., local time, at First Charter's corporate and operations
center located at 22 Union Street, North, in Concord, North Carolina. At our
Special Meeting, you will be asked to consider and vote upon a proposal to
approve an Agreement and Plan of Merger, dated August 15, 1997, between First
Charter and Carolina State Bank ("CSB"), and the transactions contemplated
thereby, which include (i) the merger of CSB into First Charter National Bank,
a national bank subsidiary of First Charter (the "Merger"), and (ii) the
issuance of 1.023 shares of First Charter common stock for each outstanding
share of CSB common stock upon consummation of the Merger.
The proposed merger has been approved by the Board of Directors of each
company. Your Board of Directors believes that the merger provides enhanced
opportunities to maximize the individual and collective strengths of the two
companies in serving the interests of their shareholders, customers, employees
and communities. Your Board has determined that the merger is in the best
interest of First Charter and its shareholders and recommends that you vote FOR
approval of the Agreement. The investment banking firm of Interstate/Johnson
Lane Corporation has advised your Board of Directors that, in its opinion, as of
October 24, 1997, the exchange ratio of 1.023 shares of First Charter common
stock for each share of CSB common stock is fair to you from a financial point
of view. Consummation of the merger is subject to certain conditions, including
the approval of the Agreement by First Charter's and CSB's shareholders and the
approval of the merger by certain regulatory agencies.
Also at our Special Meeting, you will be asked to consider and vote upon
Amended and Restated Articles of Incorporation for First Charter, which include
amendments to (i) increase the number of shares of common stock that First
Charter is authorized to issue from 10,000,000 to 25,000,000, and (ii) make
certain technical changes to reflect changes in the North Carolina Business
Corporation Act. If the Merger is approved and the shares of First Charter
common stock are thereafter issued, First Charter will have approximately
shares outstanding. Therefore, your Board of Directors believes that it
is necessary to authorize more shares of common stock that may be issued from
time to time in the future by First Charter, whether in connection with
acquisitions or stock dividends or otherwise.
Specific information regarding the Special Meeting, the Agreement and the
Merger, as well as the Amended and Restated Articles of Incorporation, is
contained in the enclosed Notice of Special Meeting, Joint Proxy
Statement-Prospectus and Proxy. Please read these materials carefully.
IT IS VERY IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING,
WHETHER OR NOT YOU PLAN TO ATTEND IN PERSON. THE AFFIRMATIVE VOTE OF A MAJORITY
OF THE SHARES OF FIRST CHARTER COMMON STOCK VOTED WITH RESPECT TO THE MERGER AND
WITH RESPECT TO THE AMENDED AND RESTATED ARTICLES OF INCORPORATION IS REQUIRED
TO APPROVE EACH OF THESE MATTERS. THEREFORE, I URGE YOU TO EXECUTE, DATE AND
RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED, SELF ADDRESSED, STAMPED ENVELOPE
AS SOON AS POSSIBLE TO ASSURE THAT YOUR SHARES WILL BE VOTED AT THE SPECIAL
MEETING.
On behalf of the Board of Directors, I thank you for your support and urge
you to vote FOR approval of the Agreement.
Sincerely,
LAWRENCE M. KIMBROUGH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
<PAGE>
EXHIBIT 99.4
<PAGE>
<PAGE>
EXHIBIT 99.4
CAROLINA STATE BANK
316 South Lafayette Street
Shelby, North Carolina 28150
Telephone: (704) 480-4444
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
, 1997
TO THE SHAREHOLDERS:
Notice is hereby given that a Special Meeting of the Shareholders of
Carolina State Bank (the "Bank") will be held at 6:00 p.m., local time on
December 10, 1997 at the main office of the Bank, located at 316 South Lafayette
Street, Shelby, Cleveland County, North Carolina, or at any adjournment thereof,
for the following purposes:
1. To approve the Agreement and Plan of Merger between the Bank and
First Charter Corporation dated August 15, 1997, and the merger of
Carolina State Bank into First Charter National Bank.
2. To transact such other businesses as may properly come before the
meeting or any adjournment or adjournments thereof.
Shareholders of record at the close of business on October 24, 1997 are
entitled to notice of, and to vote at, the meeting and any adjournment or
adjournments thereof. The Corporation's stock transfer books will not be closed.
Shareholders are urged to complete, date, sign, and return promptly the
enclosed proxy in the enclosed pre-paid envelope. It is desirable that as many
shareholders as possible be represented at the meeting. Consequently, whether or
not you now expect to be present, please execute and return the enclosed proxy.
If you return the enclosed proxy, you may nevertheless attend the meeting and
vote in person, in which case your returned proxy will be disregarded.
By order of the Board of Directors
JOHN J. GODBOLD, JR.
PRESIDENT
Dated: October , 1997
<PAGE>
<PAGE>
<PAGE>
CAROLINA STATE BANK
P R O X Y EXHIBIT 99.5
316 South Lafayette Street, Shelby, North Carolina 28150
APPOINTMENT OF PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CAROLINA
STATE BANK
FOR THE SPECIAL MEETING TO BE HELD DECEMBER 10, 1997
The undersigned shareholder of Carolina State Bank, a North Carolina banking
corporation (the "Bank"), hereby constitutes and appoints Joe B. Godfrey, M.D.
and Larry D. Hamrick, Sr., or either of them (the "Proxies"), proxies with full
power of substitution to act and vote for and on behalf of the undersigned at
the Special Meeting of Shareholders of the Bank to be held on December 10, 1997,
at 6:00 p.m. local time, at the main office of the Bank, located at 316 South
Lafayette Street, Shelby, Cleveland County, North Carolina, or at any
adjournment thereof, as fully as the undersigned would be entitled to act and
vote if personally present, upon the proposals set forth herein and described in
the Joint Proxy Statement-Prospectus, and in their discretion with respect to
such other matters that may properly be brought before the meeting or any
adjournment thereof. If only one such Proxy be present and acting at such at the
Meeting, or any adjournment thereof, then that one shall have and may exercise
all the powers hereby conferred.
This appointment of proxy when properly executed will be voted in the manner
directed herein. You are encouraged to specify your choices by marking the
appropriate boxes, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. The Board of Directors
recommends a vote "FOR" the proposals. The signer hereby revokes all
appointments of proxy heretofore given by the signer to vote at said meeting or
any adjournments thereof.
1. TO APPROVE THE AGREEMENT AND PLAN OF MERGER BETWEEN CAROLINA STATE BANK
AND FIRST CHARTER CORPORATION DATED AUGUST 15, 1997, AND THE MERGER OF CAROLINA
STATE BANK INTO FIRST CHARTER NATIONAL BANK.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(continued on other side)
<PAGE>
<PAGE>
(continued from other side)
2. IN THEIR DISCRETION, UPON ANY OTHER BUSINESS THAT MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE SHARES REPRESENTED BY THIS APPOINTMENT OF PROXY WILL BE VOTED AS
DIRECTED ABOVE. IN THE ABSENCE OF ANY DIRECTION, THE PROXIES WILL VOTE THE
SHARES REPRESENTED BY THIS APPOINTMENT FOR THE PROPOSALS LISTED ABOVE AND,
SHOULD OTHER MATTERS PROPERLY COME BEFORE THE MEETING, IN ACCORDANCE WITH THE
BEST JUDGMENT OF THE PROXIES. THIS APPOINTMENT OF PROXY MAY BE REVOKED BY THE
SHAREHOLDER AT ANY TIME BEFORE IT IS EXERCISED BY FILING A LATER DATED
APPOINTMENT WITH THE BANK'S SECRETARY OR BY ATTENDING THE MEETING AND ANNOUNCING
AN INTENT TO VOTE IN PERSON.
Signature of Shareholder
Signature of Shareholder
Dated: , 1997
Please sign appointment of proxy
as name appears. JOINT OWNERS
SHOULD EACH SIGN PERSONALLY.
Trustees and others signing in a
representative capacity should
indicate the capacity in which
they sign.
IMPORTANT: PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD IN THE
ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND. FAILURE TO VOTE WILL HAVE
THE SAME EFFECT AS A NO VOTE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
<PAGE>
<PAGE>
EXHIBIT 99.6
[CSB LETTERHEAD]
October , 1997
Dear Carolina State Bank Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Carolina State Bank ("CSB"), which will be held on December 10, 1997, at 6:00
p.m., local time, at the main office of CSB, located at 316 South Lafayette
Street, in Shelby, North Carolina. At this Special Meeting, you will be asked to
consider and vote upon a proposal to approve an Agreement and Plan of Merger
(the "Agreement") pursuant to which CSB will merge with and into a wholly owned
subsidiary of First Charter Corporation ("First Charter"), and each share of
your CSB common stock will be converted in a tax-free exchange into 1.023 shares
of First Charter common stock.
The proposed merger has been approved by the Board of Directors of each
company. Your Board of Directors believes that the merger provides enhanced
opportunities to maximize the individual and collective strengths of the two
companies in serving the interests of their shareholders, customers, employees
and communities. Your Board has determined that the merger is in the best
interests of CSB and its shareholders and recommends that you vote FOR approval
of the Agreement. The investment banking firm of Carson Medlin Company has
advised your Board of Directors that, in its opinion, as of October 24, 1997,
the exchange ratio of 1.023 shares of First Charter common stock for each share
of CSB common stock is fair to you from a financial point of view.
Consummation of the merger is subject to certain conditions, including the
approval of the Agreement by First Charter's and CSB's shareholders and the
approval of the merger by certain regulatory agencies.
Specific information regarding the Special Meeting and the Agreement is
enclosed in the formal Notice of Special Meeting and Joint Proxy
Statement-Prospectus. Please read these materials carefully.
IT IS VERY IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL
MEETING, WHETHER OR NOT YOU PLAN TO ATTEND IN PERSON. THE AFFIRMATIVE VOTE OF
TWO-THIRDS OF ALL OF THE OUTSTANDING SHARES OF CSB COMMON STOCK IS REQUIRED TO
APPROVE THE AGREEMENT. THUS, A FAILURE TO VOTE WILL HAVE THE SAME EFFECT AS A
VOTE AGAINST THE AGREEMENT. THEREFORE, I URGE YOU TO EXECUTE, DATE AND RETURN
THE ENCLOSED PROXY APPOINTMENT CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS
SOON AS POSSIBLE TO ASSURE THAT YOUR SHARES WILL BE VOTED AT THE SPECIAL
MEETING. YOU SHOULD NOT SEND IN CERTIFICATES FOR YOUR CSB SHARES AT THIS TIME.
On behalf of the Board of Directors, I thank you for your support and urge
you to vote FOR approval of the Agreement.
Sincerely,
JOHN J. GODBOLD, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
