SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
August 15, 1997
FIRST CHARTER CORPORATION
(Exact name of registrant as specified in its charter)
North Carolina 0-15829 56-1355866
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
22 Union Street, North, Concord, North Carolina 28026-0228
(Addresses, including zip codes, of principal executive offices)
(704)786-3300
(Registrant's telephone number, including area code)
Item 5 Other Events.
On August 15, 1997, First Charter Corporation ("FCC") and
Carolina State Bank ("CSB") entered into an Agreement and Plan of
Merger (the "Merger Agreement") providing for the acquisition of
CSB by FCC through the merger of CSB with and into First Charter
National Bank, a wholly owned subsidiary of FCC (the "Merger").
Pursuant to the Merger Agreement, at the effective time of the
Merger (the "Effective Time"), each share of common stock, $4.50
par value per share, of CSB (the "CSB Common Stock"), other than
shares as to which dissenters' rights have been perfected and
shares owned by FCC directly or indirectly for its own account,
shall be converted into 1.023 shares of common stock, $5.00 par
value per share, of FCC (the "Exchange Ratio"), with cash
(without interest) to be paid in lieu of the issuance of
fractional shares of common stock of FCC. The transaction is
structured to qualify as a tax-free reorganization and is
anticipated to be accounted for as a pooling of interests.
Consummation of the Merger is subject to certain conditions,
including but not limited to (i) the approval of the shareholders
of FCC and CSB; (ii) the approvals of the Office of the
Comptroller of the Currency and any other applicable federal and
state regulatory authorities; (iii) the receipt of fairness
opinions and opinions of counsel and accountants; and (iv) the
continued effectiveness of a registration statement related to
the Common Stock of FCC to be issued in the Merger.
A copy of the joint news release issued by FCC and CSB on
August 15, 1997 with respect to the Merger Agreement is filed as
Exhibit 99.1 hereto and incorporated by reference herein. The
news release contained, among other things, information with
respect to merger and related costs anticipated to be incurred in
connection with the Merger.
As previously reported, in connection with the execution of
a letter of intent prior to negotiation of the Merger Agreement,
FCC and CSB entered into a Stock Option Agreement dated June 30,
1997 (the "Stock Option Agreement"), pursuant to which CSB
granted FCC an irrevocable option to purchase up to 330,776
shares of CSB Common Stock (19.9% of the CSB Common Stock
outstanding, before giving effect to the exercise of the option)
at a price of $13.25 per share, which 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.
The descriptions of the Merger Agreement and the Stock
Option Agreement are qualified in their entirety to the copies of
such agreements filed as Exhibits 99.2 and 99.3 hereto,
respectively, and which are incorporated herein by reference.
This Current Report on Form 8-K, including the news release,
contains forward-looking statements regarding the merger-related
expenses that involve risk and uncertainty. FCC notes that a
variety of factors could cause the merger-related expenses to
differ materially from the anticipated costs, such as the
inability of FCC to consummate the Merger by the end of fiscal
year 1997 or the inability of FCC to consolidate the operations
of CSB with FCC 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 thereof. FCC undertakes no
obligation to publicly revise this information to reflect events
and circumstances that arise after the date thereof.
Item 7 Financial Statements and Exhibits.
(c) The following exhibits are filed herewith:
Exhibit No. Description
99.1 Joint news release disseminated on August 15,
1997 by First Charter Corporation and Carolina
State Bank
99.2 Agreement and Plan of Merger between First
Charter Corporation and Carolina State Bank,
dated August 15, 1997
99.3 Stock Option Agreement between First Charter
Corporation, as grantee, and Carolina State Bank,
as issuer, dated June 30, 1997 (incorporated herein
by reference to Exhibit 99.2 of the Registrant's
Form 8-K, dated June 30, 1997)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
FIRST CHARTER CORPORATION
By: /s/ ROBERT O. BRATTON
Robert O. Bratton
Executive Vice President and
Chief Financial Officer
Dated: August 18, 1997
NEWS RELEASE FIRST
P. O. Box 225, Concord, NC 28026-0228 CHARTER
(704)786-3300*FAX (704)788-0445 CORPORATION
FOR IMMEDIATE RELEASE
FROM: First Charter Corporation Carolina State Bank
22 Union Street, North 316 South Lafayette Street
Concord, NC 28025 Shelby, NC 28150-5332
CONTACT: Lawrence M. Kimbrough John J. Godbold, Jr.
President and Chief President and Chief
Executive Officer Executive Officer
(704)786-3300 (704)480-4444
DATE: August 15, 1997
FIRST CHARTER CORPORATION AND CAROLINA STATE BANK
ANNOUNCE SIGNING OF AGREEMENT TO MERGE
First Charter Corporation (First Charter) and Carolina State
Bank announced today the signing of a definitive agreement for
the acquisition of Carolina State Bank by First Charter. The
agreement provides, among other things, for the merger of
Carolina State Bank into First Charter National Bank, a wholly-
owned subsidiary of First Charter, and the exchange of 1.023
shares of First Charter common stock for each share of Carolina
State Bank common stock outstanding at the effective time of the
merger. No fractional shares of First Charter stock will be
issued. In addition, Carolina State Bank has previously granted
First Charter the option to purchase up to 19.9 percent of its
outstanding common stock, under certain circumstances. Based on
a First Charter stock price of $22.00 per share on August 14,
1997, the total transaction value equals $38.7 million or $22.51
for each share of Carolina State Bank common stock.
The transaction will create a community banking company
serving the Greater Charlotte Metropolitan Area of North Carolina
with combined assets of approximately $700 million. Carolina
State Bank will add four full service banking offices in
Cleveland and Rutherford Counties to First Charter's twelve
offices which serve Cabarrus, Mecklenburg and Rowan Counties. At
June 30, 1997, Carolina State Bank had approximately $141.5
million in assets and $120.6 million in deposits.
First Charter anticipates one-time merger and related
charges of $1.6 to $2.2 million, net of tax effects, in
connection with the transaction, including an estimated $150,000
to $200,000 provision for loan losses to conform Carolina State
Bank's credit risk practices to First Charter's.
Consummation of the merger, which is expected to occur by
the end of the fourth quarter of 1997, is subject to certain
customary conditions, including receipt of regulatory approvals
and approval by the shareholders of First Charter and Carolina
State Bank. The transaction is structured to qualify as a tax-
free reorganization and is anticipated to be accounted for as a
pooling of interests.
First Charter Corporation common stock is traded on the
NASDAQ National Market under the quotation symbol "FCTR."
The foregoing information contains forward-looking
statements regarding First Charter's proposed merger-related
expenses in connection with the acquisition of Carolina State
Bank. 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
Carolina State Bank 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.
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
BETWEEN
FIRST CHARTER CORPORATION
AND
CAROLINA STATE BANK
August 15, 1997
TABLE OF CONTENTS
PAGE
ARTICLE I
CERTAIN DEFINITIONS
1.01 CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . .2
ARTICLE II
THE MERGER AND RELATED TRANSACTIONS
2.01 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.02 TIME AND PLACE OF CLOSING . . . . . . . . . . . . . . . . .7
2.03 EFFECTIVE TIME. . . . . . . . . . . . . . . . . . . . . . .8
2.04 RESERVATION OF RIGHT TO REVISE TRANSACTION; FURTHER
ACTIONS.. . . . . . . . . . . . . . . . . . . . . . . . . .8
ARTICLE III
MANNER OF CONVERTING SHARES
3.01 CONVERSION. . . . . . . . . . . . . . . . . . . . . . . . .9
3.02 ANTI-DILUTION PROVISIONS. . . . . . . . . . . . . . . . . 10
ARTICLE IV
EXCHANGE OF SHARES
4.01 EXCHANGE PROCEDURES . . . . . . . . . . . . . . . . . . . 11
4.02 RIGHTS OF CSB SHAREHOLDERS. . . . . . . . . . . . . . . . 12
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CSB
5.01 ORGANIZATION, STANDING, AND AUTHORITY . . . . . . . . . . 13
5.02 CSB CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . 13
5.03 SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . 14
5.04 AUTHORIZATION OF MERGER AND RELATED TRANSACTIONS. . . . . 15
5.05 SECURITIES REPORTING DOCUMENTS AND FINANCIAL STATEMENTS . 16
5.06 ABSENCE OF UNDISCLOSED LIABILITIES. . . . . . . . . . . . 17
5.07 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . 17
5.08 ALLOWANCE FOR LOAN LOSSES . . . . . . . . . . . . . . . . 18
5.09 ACCOUNTING, TAX AND REGULATORY MATTERS. . . . . . . . . . 18
5.10 PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . 18
5.11 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . 19
5.12 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . 20
5.13 COMMITMENTS AND CONTRACTS . . . . . . . . . . . . . . . . 22
5.14 MATERIAL CONTRACT DEFAULTS. . . . . . . . . . . . . . . . 23
5.15 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . 23
5.16 ABSENCE OF CERTAIN CHANGES OR EVENTS. . . . . . . . . . . 24
5.17 REGULATORY REPORTS. . . . . . . . . . . . . . . . . . . . 24
5.18 STATEMENTS TRUE AND CORRECT . . . . . . . . . . . . . . . 24
5.19 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . 25
5.20 LABOR . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.21 MATERIAL INTERESTS OF CERTAIN PERSONS . . . . . . . . . . 26
5.22 REGISTRATION OBLIGATIONS. . . . . . . . . . . . . . . . . 26
5.23 BROKERS AND FINDERS . . . . . . . . . . . . . . . . . . . 26
5.24 STATE TAKEOVER LAWS . . . . . . . . . . . . . . . . . . . 26
5.25 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . 26
5.26 OWNERSHIP OF SHARES.. . . . . . . . . . . . . . . . . . . 27
5.27 INSURANCE OF DEPOSITS.. . . . . . . . . . . . . . . . . . 27
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF FIRST CHARTER
6.01 ORGANIZATION, STANDING AND AUTHORITY. . . . . . . . . . . 28
6.02 FIRST CHARTER CAPITAL STOCK.. . . . . . . . . . . . . . . 28
6.03 AUTHORIZATION OF MERGER AND RELATED TRANSACTIONS. . . . . 28
6.04 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . 29
6.05 FIRST CHARTER SEC REPORTS . . . . . . . . . . . . . . . . 30
6.06 STATEMENTS TRUE AND CORRECT . . . . . . . . . . . . . . . 30
6.07 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . 30
6.08 REGULATORY MATTERS. . . . . . . . . . . . . . . . . . . . 30
6.09 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . 31
6.10 BROKERS AND FINDERS . . . . . . . . . . . . . . . . . . . 31
6.11 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . 31
6.12 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . 31
6.13 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . 32
ARTICLE VII
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
7.01 CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME . . . . . 34
7.02 FORBEARANCES. . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.01 ACCESS AND INFORMATION. . . . . . . . . . . . . . . . . . 37
8.02 REGISTRATION STATEMENT. . . . . . . . . . . . . . . . . . 38
8.03 SHAREHOLDER APPROVALS . . . . . . . . . . . . . . . . . . 38
8.04 PRESS RELEASES. . . . . . . . . . . . . . . . . . . . . . 39
8.05 NOTICE OF DEFAULTS. . . . . . . . . . . . . . . . . . . . 39
8.06 MISCELLANEOUS AGREEMENTS AND CONSENTS; AFFILIATES
AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 39
8.07 CONVERSION OF STOCK OPTIONS . . . . . . . . . . . . . . . 40
8.08 REGULATORY AND TAX MATTERS. . . . . . . . . . . . . . . . 41
8.09 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . 41
8.10 POOLING OPINION . . . . . . . . . . . . . . . . . . . . . 41
8.11 FAIRNESS OPINIONS . . . . . . . . . . . . . . . . . . . . 42
8.12 EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . . 42
8.13 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 42
8.14 TERMINATION OF EMPLOYMENT AGREEMENTS. . . . . . . . . . . 43
ARTICLE IX
CONDITIONS
9.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.02 Conditions to Obligations of CSB to Effect the
Merger. . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.03 CONDITIONS TO OBLIGATIONS OF FIRST CHARTER TO EFFECT
THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE X
TERMINATION
10.01 TERMINATION. . . . . . . . . . . . . . . . . . . . . 47
10.02 EFFECT OF TERMINATION. . . . . . . . . . . . . . . . 48
10.03 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS FOLLOWING THE EFFECTIVE TIME . . . . . . . 48
ARTICLE XI
GENERAL PROVISIONS
11.01 EXPENSES . . . . . . . . . . . . . . . . . . . . . . 49
11.02 STOCK OPTION AGREEMENT.. . . . . . . . . . . . . . . 49
11.03 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . 49
11.04 AMENDMENTS . . . . . . . . . . . . . . . . . . . . . 49
11.05 WAIVERS. . . . . . . . . . . . . . . . . . . . . . . 49
11.06 NO ASSIGNMENT. . . . . . . . . . . . . . . . . . . . 50
11.07 NOTICES. . . . . . . . . . . . . . . . . . . . . . . 50
11.08 SPECIFIC PERFORMANCE . . . . . . . . . . . . . . . . 51
11.09 ARBITRATION. . . . . . . . . . . . . . . . . . . . . 51
11.10 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . 52
11.11 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . 52
11.12 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . 52
11.13 SEVERABILITY . . . . . . . . . . . . . . . . . . . . 52
EXHIBIT A. . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
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.
W I T N E S S E T H:
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.
"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.
"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.
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.
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.
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.
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 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 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
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.
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;
(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
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.
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 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.
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 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 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 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
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 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 satis-
factory to First Charter to the effect that the Exchange
Ratio is fair to the shareholders of First Charter from a
financial point of view.
8.12 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.
(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.
(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.
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
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:
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
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 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.
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.
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 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.]
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
