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):
June 30, 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
(Address, including zip codes, of principal executive offices)
(704)786-3300
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Item 5 Other Events.
On June 30, 1997, First Charter Corporation ("FCC") and
Carolina State Bank ("CSB") entered into a Letter of Intent (the
"Letter of Intent") for the acquisition of CSB by FCC (the
"Acquisition"). In the Acquisition, FCC will acquire all of the
outstanding shares of common stock, $4.50 par value per share,
of CSB (the "CSB Common Stock") in exchange for 1.023 shares of
common stock, $5.00 par value per share, of FCC (the "FCC Common
Stock") for each share of CSB Common Stock. Pursuant to the
Letter of Intent, FCC and CSB will negotiate a definitive
agreement (the "Merger Agreement") providing for the Acquisition
and containing customary terms and conditions of closing. As of
June 30, 1997, 1,662,192 shares of CSB Common Stock were issued
and outstanding, and there were outstanding employee stock
options to purchase 58,600 shares.
The Acquisition is intended to qualify as a tax-free
reorganization and is anticipated to be accounted for as a
pooling of interests. Consummation of the Acquisition is subject
to certain additional conditions, including but not limited to
(i) the negotiation of the Merger Agreement;(ii) the approvals of
the shareholders of FCC and CSB; (iii) the approvals of
applicable banking regulatory authorities; and (iv) the
effectiveness of a registration statement related to the FCC
Common Stock to be issued in the Acquisition.
Immediately following the execution of the Letter of Intent,
FCC and CSB entered into a Stock Option Agreement dated June 30,
1997, 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 (the
"Option"). The number of shares of CSB Common Stock subject to
the Option will be increased to the extent that CSB issues
additional shares of CSB Common Stock (otherwise than pursuant to
an exercise of the Option) such that the number of shares of CSB
Common Stock subject to option continues to equal 19.9% of the
CSB Common Stock then issued and outstanding, without giving
effect to the issuance of shares pursuant to an exercise of the
Option. The Option was granted by CSB as a condition of and in
consideration for FCC's offer and entering into the Letter of
Intent. The Option is exercisable only upon the occurrence of
certain events generally related to a change in control of or a
material business combination by CSB. The Option also allows the
holder thereof to require that CSB repurchase (at a price
determined as specified in the Stock Option Agreement) the Option
or the shares of CSB Common Stock acquired pursuant to the
exercise of the CSB Option if certain conditions are met.
The descriptions of the Letter of Intent and the Stock
Option Agreement are qualified in their entirety to the copies of
such agreements included as Exhibits 99.1 and 99.2, respectively,
which are incorporated herein by reference.
CSB is a North Carolina state-chartered commercial bank with
four banking offices in Gaston, Cleveland and Rutherford
Counties, North Carolina. As of March 31, 1997, CSB had total
assets of approximately $139 million, total deposits of
approximately $120 million and shareholders' equity of
approximately $13 million.
Item 7 Financial Statements and Exhibits.
(c) The following exhibits are filed herewith
Exhibit No. Description
99.1 Letter of Intent between First Charter
Corporation and Carolina State Bank,
dated June 30, 1997
99.2 Stock Option Agreement between First
Charter Corporation, as grantee, and
Carolina State Bank, as issuer, dated
June 30, 1997
99.3 Joint news release disseminated on June 30,
1997 by First Charter Corporation and Carolina
State Bank
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: July 1, 1997
FIRST
CHARTER
CORPORATION
22 Union Street North
P.O. Box 228
Concord, NC 28026-0228
(704)786-3300
Lawrence M. Kimbrough
President and
Chief Executive Officer Transmitted Via Fax
June 27, 1997
Board of Directors
Carolina State Bank
316 South Lafayette Street
Shelby, North Carolina 28150-5352
Attention: Charles Harry
Chairman of the Board
Members of the Board:
Thank you for the opportunity to consider a combination of
Carolina State Bank and First Charter Corporation. Given the
dynamics of the greater Charlotte market and of our two
companies, we believe that this merger makes strong strategic
sense. In this letter we will outline the preliminary terms
under which we would like to continue discussions.
Since 1993, First Charter's strategic vision has been to
capitalize on our presence in one of the nation's fastest growing
markets to become one of the nation's top performing banking
companies. In short, we have endeavored to be a growth company.
We have been fortunate in that our efforts have produced returns
on assets that have placed us in the top 25 most profitable
banking companies nationwide in 1994, 1995 and 1996. During this
period, our earnings per share have grown at a compound annual
rate of 21%, well above that of the average banking company. The
combination of our past profitability and the appeal of our
market has prompted Wheat First Securities Research Analyst Chip
Whittmann to name First Charter as "pound-for-pound one of the
strongest banking franchises in the country."
The key to the continued attainment of our goals is furthering
our community banking focus, and we believe that the addition of
Carolina State Bank to our franchise is critical to our efforts.
Accordingly, we have aggressively examined the potential benefits
that can be derived from the transaction and have incorporated
these in our proposal of 1.023 shares of First Charter
Corporation Common Stock for each share of Carolina State Bank
Common Stock, including all stock options and warrants
outstanding this date. Based on a recent closing price of First
Charter Common Stock of $21.75 per share, this would equate to a
value per share equal to $22.25 for each Carolina State Bank
share. This offer, intended to be a tax-free exchange, would
give Carolina State Bank shareholders a 68% premium to their
current market price.
To provide assurance of the underlying value of this proposal to
the shareholders of Carolina State Bank, we would suggest the
incorporation of a formula in the definitive agreement providing
for a threshold price of First Charter Corporation Common Stock.
If the average trading price of First Charter stock prior to the
time of the consummation of the merger were to decline below that
threshold price, the board of Carolina State Bank would have the
right to terminate the agreement. Our suggestion would be that
the threshold price for First Charter Corporation Common Stock be
set at $20.00 per share. The average trading price would be
based on the average of the daily price of First Charter stock
for the 20 consecutive trading days ending the date that is four
business days before the consummation date of the merger.
We condition this offer on the issuance of an option to purchase
a number of shares of Carolina State Bank Common Stock equivalent
to 19.9% of the issued and outstanding shares of Carolina State.
The option price would be $13.25 per share, which was the bid
price quoted for Carolina State Bank Common Stock as of June 26,
1997. Such stock option is set forth in the form of a Stock
Option Agreement delivered with this letter and is to be executed
at the time of acceptance by you of this preliminary proposal.
The combination of our companies would create the Charlotte
region's super-community bank. The company would have more than
$700 million in assets. From a shareholder perspective, the
company would have a market capitalization of approximately $190
million and a pro forma average weekly trading volume of over
11,000 shares. Further, our assumptions are based on a
conservative price for First Charter Common Stock relative to
other banking companies. Accordingly, we believe that we are
allowing for substantial upside potential as the value of our
combined franchise is recognized.
The addition of Carolina State Bank and its dynamic markets will
represent a significant portion of the First Charter franchise
going forward. As a result, we believe that it is important to
add three Carolina State Bank directors to the First Charter
Corporation Board of Directors. It is our intention to invite
you, Mr. Dedmon and Mr. Godbold to become holding company
directors of First Charter immediately following the consummation
of the merger.
This proposal is, of course, preliminary and is subject to, among
other things: (i) satisfactory completion of due diligence; (ii)
receipt of all regulatory and shareholder approvals; (iii)
receipt of an opinion that the transaction may be accounted for
as a pooling of interests; (iv) receipt of an opinion that the
transaction will constitute a tax-free reorganization; (v) the
effectiveness of a registration statement filed with the
Securities and Exchange Commission with respect to the First
Charter Corporation Common Stock to be issued in the transaction;
and (vi) negotiation of a definitive agreement providing for the
acquisition and containing terms and conditions of closing that
are customary to transactions of this type.
We are excited about this opportunity and believe that we have
constructed an offer that provides immediate full value for the
Carolina State Bank shareholders, that gives your shareholders
the opportunity to receive cash dividends, as declared, that
provides dramatic improvement in stock liquidity and that offers
significant longer-term value. Given the importance of Carolina
State Bank to the combined company, we would like to discuss the
role of management, board and employees going forward.
We look forward to hearing from you, and, if we can answer any
questions, please do not hesitate to call.
Sincerely,
/s/ LAWRENCE M.KIMBROUGH
LMK/acf
Accepted and agreed to this 30th day of June, 1997
/s/ CHARLES HARRY
Charles Harry
Chairman of the Board
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated June 30, 1997, between First
Charter Corporation, a North Carolina corporation ("Grantee"),
and Carolina State Bank, a North Carolina banking corporation
chartered under Chapter 53 of the North Carolina General Statutes
("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into a Letter of
Intent of even date herewith (the "Letter of Intent") providing
for the acquisition by Grantee of all the outstanding shares of
Issuer in exchange for shares of Grantee, which Letter of Intent
has been executed by the parties hereto prior to the execution of
this Agreement; and
WHEREAS, pursuant to the Letter of Intent, Grantee and
Issuer shall negotiate a definitive agreement (the "Merger
Agreement") providing for such acquisition of Issuer by Grantee;
and
WHEREAS, as a condition and inducement to Grantee's pursuit
of the transactions contemplated by the Letter of Intent and in
consideration therefor, Issuer has agreed to grant Grantee the
Option (as hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the
Letter of Intent, the parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the Option ) to purchase, subject to the
terms hereof, up to 330,776 fully paid and, except as otherwise
provided in Chapter 53 of the North Carolina General Statutes,
nonassessable shares of the common stock, $4.50 par value, of
Issuer ("Common Stock"), at a price per share equal to $13.25 (as
adjusted as set forth herein, the "Option Price"); provided, that
in no event shall the number of shares for which this Option is
exercisable exceed 19.9% of the issued and outstanding shares of
Common Stock. The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option Price are
subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common
Stock are issued or otherwise become outstanding after the date
of this Agreement (other than pursuant to this Agreement or the
Merger Agreement, when executed and delivered), the number of
shares of Common Stock subject to the Option shall be increased
so that, after such issuance, it equals 19.9% of the number of
shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option.
Nothing contained in this Section l(b) or elsewhere in this
Agreement shall be deemed to authorize Issuer or Grantee to
breach any provision of the Letter of Intent or the Merger
Agreement, when executed and delivered.
2. (a) The Holder (as hereinafter defined) may exercise
the Option, in whole or part, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent
Triggering Event (as hereinafter defined) shall have occurred
prior to the occurrence of an Exercise Termination Event (as
hereinafter defined). Each of the following shall be an Exercise
Termination Event: (i) the effective time of the acquisition, as
set forth in the Merger Agreement, when executed and delivered;
(ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the
occurrence of an Initial Triggering Event; (iii) the passage of
12 months (or such longer period as provided in Section l0) after
termination of the Merger Agreement if such termination follows
the occurrence of an Initial Triggering Event; (iv) the passage
of 90 days after October 31, 1997 (or such longer period as
provided in Section 10), if Grantee and Issuer shall have failed
to execute and deliver the Merger Agreement by October 31, 1997
and no Initial Triggering Event shall have occurred by such date;
or (v) the passage of 12 months after October 31, 1997 (or such
longer period as provided in Section 10), if Grantee and Issuer
shall have failed to execute and deliver the Merger Agreement by
October 31, 1997 and an Initial Triggering Event shall have
occurred prior to such date. The term "Holder" shall mean the
holder or holders of the Option. The rights set forth in
Sections 7 and 9 shall terminate when the right to exercise the
Option terminates (other than as a result of a complete exercise
of the Option) as set forth herein.
(b) The term "Initial Triggering Event" shall mean any
of the following events or transactions occurring after the date
hereof:
(i) Issuer or any of its Subsidiaries (as
hereinafter defined) (each an "Issuer Subsidiary"), without
having received Grantee's prior written consent, shall have
entered into an agreement to engage in an Acquisition
Transaction (as hereinafter defined) with any person (the
term "person" for purposes of this Agreement having the
meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of
the Securities Exchange Act of 1934 (the "1934 Act"), and
the rules and regulations thereunder) other than Grantee or
any of its Subsidiaries (each a "Grantee Subsidiary") or the
Board of Directors of Issuer shall have recommended that the
shareholders of Issuer approve or accept any Acquisition
Transaction other than as contemplated by the Letter of
Intent, the Merger Agreement when executed and delivered or
this Agreement. For purposes of this Agreement, (a)
"Acquisition Transaction" shall mean (x) a merger or
consolidation, or any similar transaction, involving Issuer
or any Significant Subsidiary (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC")) of Issuer, (y) a purchase, lease or
other acquisition of all or substantially all of the assets
or deposits of Issuer or any Significant Subsidiary of
Issuer, or (z) a purchase or other acquisition (including by
way of merger, consolidation, share exchange or otherwise)
of securities representing 15% or more of the voting power
of Issuer or any Significant Subsidiary of Issuer, and (b)
"Subsidiary" shall have the meaning set forth in Rule 12b-2
under the 1934 Act;
(ii) Any person other than Grantee, any Grantee
Subsidiary or any Issuer Subsidiary acting in a fiduciary
capacity shall have acquired beneficial ownership or the
right to acquire beneficial ownership of 15% or more of the
outstanding shares of Common Stock (the term "beneficial
ownership" for purposes of this Agreement having the meaning
assigned thereto in Section 13(d) of the 1934 Act, and the
rules and regulations thereunder);
(iii) The shareholders of the Issuer shall not
have approved the transactions contemplated by the Letter of
Intent and the Merger Agreement when executed and delivered
at the meeting held for that purpose or any adjournment
thereof, or such meeting shall not have been held or shall
have been canceled prior to termination of the Merger
Agreement, in either case after Issuer's Board of Directors
shall have withdrawn or modified (or publicly announced its
intention to withdraw or modify or its interest in
withdrawing or modifying) its recommendation that the
shareholders of Issuer approve the transactions contemplated
by the Letter of Intent and the Merger Agreement, or Issuer
or any Issuer Subsidiary, without having received Grantee's
prior written consent, shall have authorized, recommended,
or proposed (or publicly announced its intention to
authorize, recommend or propose or its interest in
authorizing, recommending or proposing) an agreement to
engage in an Acquisition Transaction, with any person other
than Grantee or a Grantee Subsidiary;
(iv) Any person other than Grantee or any Grantee
Subsidiary shall have made a bona fide proposal to Issuer or
its shareholders to engage in an Acquisition Transaction;
(v) Issuer shall have willfully breached any
covenant or obligation contained in the Merger Agreement
when executed and delivered in anticipation of engaging in
an Acquisition Transaction, and such breach would entitle
Grantee to terminate the Merger Agreement; or
(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to
which Grantee has given its prior written consent, shall
have filed an application or notice with the Federal
Reserve Board, the FDIC or other federal or state bank
regulatory authority, which application or notice has been
accepted for processing, for approval to engage in an
Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean
any of the following events or transactions occurring after the
date hereof:
(i) The acquisition by any person of beneficial
ownership of 25% or more of the then outstanding Common
Stock; or
(ii) The occurrence of the Initial Triggering
Event described in clause (i) of subsection (b) of this
Section 2, except that the percentage referred to in sub-
clause (z) shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of
the occurrence of any Initial Triggering Event or Subsequent
Triggering Event (together, a "Triggering Event"), it being
understood that the giving of such notice by Issuer shall not be
a condition to the right of the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes
to exercise the Option, it shall send to Issuer a written notice
prior to an Exercise Termination Event (the date of which being
herein referred to as the "Notice Date") specifying (i) the total
number of shares it will purchase pursuant to such exercise and
(ii) a place and date not earlier than three business days nor
later than 10 business days from the Notice Date for the closing
of such purchase (the "Closing Date"); provided that if prior
notification to or approval of the Federal Reserve Board or any
other regulatory agency is required in connection with such
purchase, the Holder shall promptly file the required notice or
application for approval, shall promptly notify the Issuer of
such filing and shall expeditiously process the same, and the
period of time that otherwise would run pursuant to this sentence
shall run instead from the date on which any required
notification periods have expired or been terminated or such
approvals have been obtained and any requisite waiting period or
periods shall have passed. Any exercise of the Option shall be
deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of
this Section 2, the Holder shall pay to Issuer the aggregate
purchase price for the shares of Common Stock purchased pursuant
the exercise of the Option in immediately available funds by wire
transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery
of immediately available funds as provided in subsection (f) of
this Section 2, Issuer shall deliver to the Holder a certificate
or certificates representing the number of shares of Common Stock
purchased by the Holder and, if the Option should be exercised in
part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable
thereunder.
(h) Certificates for Common Stock delivered at a
closing hereunder may be endorsed with a restrictive legend that
shall read substantially as follows:
"The transfer of the shares represented by this
certificate is subject to certain provisions of an
agreement between the registered holder hereof and
Issuer and to resale restrictions arising under
the Securities Act of 1933, as amended. A copy of
such agreement is on file at the principal office
of Issuer and will be provided to the holder
hereof without charge upon receipt by Issuer of a
written request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933 (the "1933 Act") in
the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the Holder shall have
delivered to Issuer a copy of a letter from the staff of the SEC,
or an opinion of counsel, in form and substance satisfactory to
Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions of
this Agreement in the above legend shall be removed by delivery
of substitute certificate(s) without such reference if the shares
have been sold or transferred in compliance with the provisions
of this Agreement and under circumstances that do not require the
retention of such reference; and (iii) the legend shall be
removed in its entirety if the conditions in the proceeding
clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by
law.
(i) Upon the giving by the Holder to Issuer of the
written notice of exercise of the Option provided for under
subsection (e) of this Section 2 and the tender of the applicable
purchase price in immediately available funds, the Holder shall
be deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that
certificates representing such shares of Common Stock shall not
then be actually delivered to the Holder. Issuer shall pay all
expenses, and any and all United States federal, state and local
taxes and other charges that may be payable in connection with
the preparation, issue and delivery of stock certificates under
this Section 2 in the name of the Holder or its assignee,
transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain,
free from preemptive rights, sufficient authorized but unissued
or treasury shares of Common Stock so that the Option may be
exercised without additional authorization of Common Stock after
giving effect to all other options, warrants, convertible
securities and other rights to purchase Common Stock; (ii) that
it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions
to be observed or performed hereunder by Issuer; (iii) promptly
to take all action as may from time to time be required (including
(x) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. Section 18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, or any state or other federal banking law, prior
approval of or notice to the Federal Reserve Board or to any
state or other federal regulatory authority is necessary before
the Option may be exercised, cooperating fully with the Holder in
preparing such applications or notices and providing such
information to the Federal Reserve Board or such state or other
federal regulatory authority as they may require) in order to
permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and
(iv) promptly to take all action provided herein to protect the
rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal
office of Issuer, for other Agreements providing for Options of
different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set
forth herein, in the aggregate the same number of shares of
Common Stock purchasable hereunder. The terms "Agreement" and
"Option" as used herein include any Agreements and related
Options for which this Agreement (and the Option granted hereby)
may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated,
Issuer will execute and deliver a new Agreement of like tenor and
date.
5. The number of shares of Common Stock purchasable upon
the exercise of the Option shall be subject to adjustment from
time to time as provided in this Section 5.
(a) In the event of any change in Common Stock by
reason of stock dividends, split-ups, mergers, recapitalizations,
combinations, subdivisions, conversions, exchanges of shares or
the like, the type and number of shares of Common Stock
purchasable upon exercise hereof shall be appropriately adjusted
and proper provision shall be made so that, in the event that any
additional shares of Common Stock are to be issued or otherwise
become outstanding as a result of any such change (other than
pursuant to an exercise of the Option), the number of shares of
Common Stock that remain subject to the Option shall be increased
so that, after such issuance and together with shares of Common
Stock previously issued pursuant to the exercise of the Option
(as adjusted on account of any of the foregoing changes in the
Common Stock), it equals 19.9% of the number of shares of Common
Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock
purchasable upon exercise is adjusted as provided in this Section
5, the Option Price shall be adjusted by multiplying the Option
Price by a fraction, the numerator of which shall be equal to the
number of shares of Common Stock purchasable prior to the
adjustment and the denominator of which shall be equal to the
number of shares of Common Stock purchasable after the
adjustment.
6. Upon the occurrence of a Subsequent Triggering Event
that occurs prior to an Exercise Termination Event, Issuer shall,
at the request of Grantee delivered prior to an Exercise
Termination Event (or such later period as provided in Section
10) (whether on its own behalf or on behalf of any subsequent
holder of this Option (or part thereof) or any of the shares of
Common Stock issued pursuant hereto), promptly prepare, file and
keep current a registration statement under the 1933 Act covering
any shares issued and issuable pursuant to this Option and shall
use its best efforts to cause such registration statement to
become effective and remain current in order to permit the sale
or other disposition of any shares of Common Stock issued upon
total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee.
Issuer will use its best efforts to cause such registration
statement first to become effective and then to remain effective
for such period not in excess of 120 days from the day such
registration statement first becomes effective or such shorter
time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such
registrations. The Issuer shall bear the costs of such
registrations (including, but not limited to, attorneys' fees,
printing costs and filing fees). The foregoing notwithstanding,
if, at the time of any request by Grantee for registration of
Option Shares as provided above, Issuer is in registration with
respect to an underwritten public offering of shares of Common
Stock, and if in the good faith judgment of the managing
underwriter or managing underwriters, or, if none, the sole
underwriter or underwriters, of such offering the inclusion of
the Option Shares would interfere with the successful marketing
of the shares of Common Stock offered by Issuer, the number of
Option Shares otherwise to be covered in the registration
statement contemplated hereby may be reduced; provided, however,
that after any such required reduction the number of Option
Shares to be included in such offering for the account of the
Holder shall constitute at least 25% of the total number of
shares to be sold by the Holder and Issuer in the aggregate; and
provided further, however, that if such reduction occurs, then
the Issuer shall file a registration statement for the balance as
promptly as practical thereafter as to which no reduction
pursuant to this Section 6 shall be permitted or occur and the
Holder shall thereafter be entitled to one additional
registration. Each such Holder shall provide all information
reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. If requested by any such Holder
in connection with such registration, Issuer shall become a party
to any underwriting agreement relating to the sale of such
shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements for Issuer.
Upon receiving any request under this Section 6 from any Holder,
Issuer agrees to send a copy thereof to any other person known to
Issuer to be entitled to registration rights under this Section
6, in each case by promptly mailing the same, postage prepaid, to
the address of record of the persons to receive such copies.
7. (a) Upon the occurrence of a Subsequent Triggering
Event that occurs prior to an Exercise Termination Event, (i) at
the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as provided in Section
10), Issuer shall repurchase the Option from the Holder at a
price (the "Option Repurchase Price") equal to the amount by
which (A) the market/offer price (as defined below) exceeds (B)
the Option Price, multiplied by the number of shares for which
this Option may then be exercised and (ii) at the request of the
owner of Option Shares from time to time (the "Owner"), delivered
prior to the occurrence of an Exercise Termination Event (or such
later period as provided in Section 10), Issuer shall repurchase
such number of the Option Shares from the Owner as the Owner
shall designate at a price (the "Option Share Repurchase Price")
equal to the higher of (A) the Purchase Price paid for the Option
Shares so designated and (B) the market/offer price multiplied by
the number of Option Shares so designated. The term
"market/offer price" shall mean the highest of (i) the price per
share of Common Stock at which a tender or exchange offer
therefor has been made, (ii) the price per share of Common Stock
to be paid by any third party pursuant to an agreement with
Issuer, (iii) the highest closing price for shares of Common
Stock within the three-month period immediately preceding the
date the Holder gives notice of the required repurchase of this
Option or the Owner gives notice of the required repurchase of
Option Shares, as the case may be, or (iv) in the event of a sale
of all or substantially all of Issuer's assets or deposits, the
sum of the net price paid in such sale for such assets or
deposits, and the current market value of the remaining net
assets of Issuer as determined by an investment banking firm
selected by the Holder or the Owner, as the case may be, divided
by the number of shares of Common Stock of Issuer outstanding at
the time of such sale. In determining the market/offer price,
the value of consideration other than cash shall be determined by
an investment banking firm selected by the Holder or Owner, as
the case may be.
(b) The Holder and the Owner, as the case may be, may
exercise its right to require Issuer to repurchase the Option and
any Option Shares pursuant to this Section 7 by surrendering for
such purpose to Issuer, at its principal office, a copy of this
Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the
Holder or the Owner, as the case may be, elects to require Issuer
to repurchase this Option and/or the Option Shares in accordance
with the provisions of this Section 7. As promptly as
practicable, and in any event within ten business days after the
surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating
thereto, Issuer shall deliver or cause to be delivered to the
Holder the Option Repurchase Price and/or to the Owner the Option
Share Repurchase Price therefor or the portion thereof that
Issuer is not then prohibited under applicable law and regulation
from so delivering.
(c) To the extent that Issuer is prohibited under
applicable law or regulation, or as a consequences of
administrative policy, from repurchasing the Option and/or the
Option Shares in part or in full, Issuer shall immediately so
notify the Holder and/or the Owner and thereafter deliver or
cause to be delivered, from time to time, to the Holder and/or
the Owner, as appropriate, the portion of the Option Repurchase
Price and the Option Share Repurchase Price, respectively, that
it is no longer prohibited from delivering, within ten business
days after the date on which Issuer is no longer so prohibited;
provided, however, that if Issuer at any time after delivery of a
notice of repurchase pursuant to paragraph (b) of this Section 7
is prohibited under applicable law or regulation, or as a
consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase
Price and the Option Share Repurchase Price, respectively, in
full (and Issuer hereby undertakes to use its best efforts to
obtain all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to
accomplish such repurchase), the Holder or Owner may revoke its
notice of repurchase of the Option or the Option Shares either in
whole or to the extent of the prohibition, whereupon, in the
latter case, Issuer shall promptly (i) deliver to the Holder
and/or the Owner, as appropriate, that portion of the Option
Purchase Price or the Option Share Repurchase Price that Issuer
is not prohibited from delivering; and (ii) deliver, as
appropriate, either (A) to the Holder, a new Agreement evidencing
the right of the Holder to purchase that number of shares of
Common Stock obtained by multiplying the number of shares of
Common Stock for which the surrendered Agreement was exercisable
at the time of delivery of the notice of repurchase by a
fraction, the numerator of which is the Option Repurchase Price
less the portion thereof theretofore delivered to the Holder and
the denominator of which is the Option Repurchase Price, or (B)
to the Owner, a certificate for the Option Shares it is then so
prohibited from repurchasing.
8. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (i) to consolidate
with or merge into any person, other than Grantee or a Grantee
Subsidiary, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or a Grantee Subsidiary, to merge into
Issuer and Issuer shall be the continuing or surviving
corporation, but, in connection with such merger, the then
outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other person or
cash or any other property or the then outstanding shares of
Common Stock shall after such merger represent less than 50% of
the outstanding shares and share equivalents of the merged
company, or (iii) to sell or otherwise transfer all or
substantially all of its or any Significant Subsidiary's assets
or deposits to any person, other than Grantee or a Grantee
Subsidiary, then, and in each such case, the agreement governing
such transaction shall make proper provision so that the Option
shall, upon the consummation of any such transaction and upon the
terms and conditions set forth herein, be converted into, or
exchanged for, an option (the "Substitute Option"), at the
election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the
Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (ii) Issuer in a
merger in which Issuer is the continuing or surviving person
and (iii) the transferee of all or substantially all of
Issuer's assets or deposits (or the assets or deposits of a
Significant Subsidiary of Issuer).
(ii) "Substitute Common Stock" shall mean the
common stock issued by the issuer of the Substitute Option
upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the
market/offer price, as defined in Section 7.
(iv) "Average Price" shall mean the average
closing price of a share of the Substitute Common Stock for
the one year immediately preceding the consolidation, merger
or sale in question, but in no event higher than the closing
price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that
if Issuer is the issuer of the Substitute Option the Average
Price shall be computed with respect to a share of common
stock issued by the person merging into Issuer or by any
company which controls or is controlled by such person as
the Holder may elect.
(c) The Substitute Option shall have the same terms as
the Option, provided, that if the terms of the Substitute Option
cannot, for legal reasons, be the same as the Option, such terms
shall be as similar as possible and in no event less advantageous
to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this
Agreement (after giving effect for such purpose to the provisions
of Section 9), which agreement shall be applicable to the
Substitute Option.
(d) The Substitute Option shall be exercisable for
such number of shares of Substitute Common Stock as is equal to
the Assigned Value multiplied by the number of shares of Common
Stock for which the Option is then exercisable, divided by the
Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the
Option Price multiplied by a fraction, the numerator of which
shall be the number of shares of Common Stock for which the
Option is then exercisable and the denominator of which shall be
the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 19.9% of the shares of Substitute Common Stock outstanding
prior to exercise of the Substitute Option.
(f) Issuer shall not enter into any transaction
described in subsection (a) of this Section 8 unless the
Acquiring Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer
hereunder.
9. (a) At the request of the holder of the Substitute
Option (the "Substitute Option Holder"), the issuer of the
Substitute Option (the "Substitute Option Issuer") shall
repurchase the Substitute Option from the Substitute Option
Holder at a price (the "Substitute Option Repurchase Price")
equal to the amount by which (i) the highest Closing Price (as
hereinafter defined) exceeds (ii) the exercise price of the
Substitute Option, multiplied by the number of shares of
Substitute Common Stock for which the Substitute Option may then
be exercised, and at the request of the owner (the "Substitute
Share Owner") of shares of Substitute Common Stock (the
"Substitute Shares"), the Substitute Option Issuer shall
repurchase the Substitute Shares at a price (the "Substitute
Share Repurchase Price") equal to the highest Closing Price
multiplied by the number of Substitute Shares so designated. The
term "Highest Closing Price" shall mean the highest closing price
for shares of Substitute Common Stock within the three-month
period immediately preceding the date the Substitute Option
Holder gives notice of the required repurchase of the Substitute
Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, if applicable.
(b) The Substitute Option Holder and the Substitute
Share Owner, as the case may be, may exercise its respective
right to require the Substitute Option Issuer to repurchase the
Substitute Option and the Substitute Shares pursuant to this
Section 9 by surrendering for such purpose to the Substitute
Option Issuer, at its principal office, the agreement for such
Substitute Option (or, in the absence of such an agreement, a
copy of this Agreement) and certificates for Substitute Shares
accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the
case may be, elects to require the Substitute Option Issuer to
repurchase the Substitute Option and/or the Substitute Shares in
accordance with the provisions of this Section 9. As promptly as
practicable, and in any event within ten business days after the
surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or
notices relating thereto, the Substitute Option Issuer shall
deliver or cause to be delivered to the Substitute Option Holder
the Substitute Option Repurchase Price and/or to the Substitute
Share Owner the Substitute Share Repurchase Price therefor or the
portion thereof which the Substitute Option Issuer is not then
prohibited under applicable law and regulation from so
delivering.
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation, or as a
consequence of administrative policy, from repurchasing the
Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner
and thereafter deliver or cause to be delivered, from time to
time, to the Substitute Option Holder and/or the Substitute Share
Owner, as appropriate, the portion of the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price,
respectively, that it is no longer prohibited from delivering,
within ten business days after the date on which the Substitute
Option Issuer is no longer so prohibited; provided, however, that
if the Substitute Option Issuer is at any time after delivery of
a notice of repurchase pursuant to subsection (b) of this Section
9 prohibited under applicable law or regulation or as a
consequence of administrative policy, from delivering to the
Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its best efforts to obtain all
required regulatory and legal approvals as promptly as
practicable in order to accomplish such repurchase), the
Substitute Option Holder or Substitute Share Owner may revoke its
notice of repurchase of the Substitute Option or the Substitute
Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall
promptly (i) deliver to the Substitute Option Holder and/or
Substitute Share Owner, as appropriate, that portion of the
Substitute Option Repurchase Price or the Substitute Share
Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Substitute Option Holder, a new Substitute
Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock
obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was
exercisable at the time of delivery of the notice of repurchase
by a fraction, the numerator of which is the Substitute Option
Repurchase Price less the portion thereof delivered to the
Substitute Option Holder and the denominator of which is the
Substitute Option Repurchase Price, or (B) to the Substitute
Share Owner, a certificate for the Substitute Option Shares it is
then so prohibited from repurchasing.
10. The periods for exercise of certain rights under
Sections 2, 6, 7, 9 and 12 shall be extended: (i) to the extent
necessary to obtain all regulatory approvals for the exercise of
such rights (for so long as the Holder is using commercially
reasonable efforts to obtain such regulatory approvals), and for
the expiration of all statutory waiting periods; and (ii) to the
extent necessary to avoid liability under Section 16(b) of the
1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer, and no other corporate proceedings
on the part of Issuer are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by
Issuer and constitutes a valid and binding agreement of Issuer,
enforceable in accordance with its terms.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times
from the date hereof through the termination of this Agreement in
accordance with its terms will have reserved for issuance upon
the exercise of the option, that number of shares of Common Stock
equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares,
upon issuance pursuant thereto, will be duly authorized, validly
issued, fully paid, nonassessable (except as otherwise required
under Chapter 53 of the North Carolina General Statutes), and
will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any
preemptive rights.
12. Neither of the parties hereto may assign any of its
rights or obligations under this Agreement or the Option created
hereunder to any other person, without the express written
consent of the other party, except that in the event a Subsequent
Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions
hereof, may assign in whole or in part its rights and obligations
hereunder following such Subsequent Triggering Event; provided,
however, that until the date 30 days following the date on which
the Federal Reserve Board or other applicable federal or state
regulatory authority has approved applications by Grantee to
acquire the shares of Common Stock subject to the Option, Grantee
may not assign its rights under the Option except in (i) a widely
dispersed public distribution, (ii) a private placement in which
no one party acquires the right to purchase in excess of 2% of
the voting shares of Issuer, (iii) an assignment to a single
party (i.e., a broker or investment banker) for the purpose of
conducting a widely disbursed public distribution on Grantee s
behalf, or (iv) any other manner approved by the Federal Reserve
Board.
13. Each of Grantee and Issuer will use its best efforts to
make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the
consummation of the transactions contemplated by this Agreement,
including without limitation applying to the Federal Reserve
Board under the BHCA for approval to acquire the shares issuable
hereunder, but Grantee shall not be obligated to apply to state
banking authorities for approval to acquire the shares of Common
Stock issuable hereunder until such time, if ever, as it deems
appropriate to do so.
14. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party
hereto and that the obligations of the parties hereto shall be
enforceable by either party hereto through injunctive or other
equitable relief.
15. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or
state regulatory agency of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions and
covenants and restrictions contained in this Agreement shall
remain in full force and effect, and shall in no way be affected,
impaired or invalidated. If for any reason such court or
regulatory agency determines that the Holder is not permitted to
acquire, or Issuer is not permitted to repurchase pursuant to
Section 7, the full number of shares of Common Stock provided in
Section 1(a) hereof (as adjusted pursuant to Section 5 hereof),
it is the express intention of Issuer to allow the Holder to
acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible, without any amendment or
modification hereof.
16. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given
when delivered in person, by fax, telecopy, or by registered or
certified mail (postage prepaid, return receipt requested) at the
following address or at such other address for a party as shall
be specified by like notice):
(a) If to Grantee:
First Charter Corporation
22 Union Street, North
Concord, North Carolina 28025
Attention: Lawrence M. Kimbrough
President and Chief Executive Officer
with a copy to
Smith Helms Mulliss & Moore, L.L.P.
214 North Church Street
Charlotte, North Carolina 28202
Attention: Anne Team Kelly
(b) If to Issuer:
Carolina State Bank
316 S. Lafayette Street
Shelby, North Carolina 28150
Attention: John J. Godbold, Jr.
President and Chief Executive Officer
with a copy to
The Sanford Holshouser Law Firm
234 Fayetteville Street, Suite 100
Raleigh, North Carolina 27602
Attention: Alfred P. Carlton, Jr.
and a copy to
Orr Management Company
110 S. Stratford Road
Winston-Salem, North Carolina 27104
Attention: Laney G. Orr, III
17. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina,
regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
18. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement.
19. Except as otherwise expressly provided herein, each of
the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses
of its own financial consultants, investment bankers, accountants
and counsel.
20. Except as otherwise expressly provided herein or in the
Letter of Intent, this Agreement contains the entire agreement
between the parties with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or understandings
with respect thereof, written or oral. The terms and conditions
of this Agreement shall inure to the benefit of be binding upon
the parties hereto and their respective successors and permitted
assignees. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party other than the parties hereto,
and their respective successors except as assignees, any rights,
remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
IN WITNESS WHEREOF, each of the parties had caused this
Agreement to be executed on its behalf by their officers
thereunto duly authorized, all as the date first above written.
FIRST CHARTER CORPORATION
By:/s/LAWRENCE M. KIMBROUGH
President and Chief Executive Officer
CAROLINA STATE BANK
By:/s/JOHN J. GODBOLD, JR.
President and Chief Executive Officer
FIRST
CHARTER CAROLINA STATE
CORPORATION BANK
FOR IMMEDIATE RELEASE
June 30, 1997
FROM: First Charter Corporation
22 Union Street, North
Concord, North Carolina 28026-0228
CONTACT: Lawrence M. Kimbrough
President and Chief Executive Officer
(704) 786-3300 Ext. 292
FROM: Carolina State Bank
316 South Lafayette Street
Shelby, North Carolina 28150-5352
CONTACT: John J. Godbold, Jr.
President and Chief Executive Officer
(704) 480-4444
FIRST CHARTER CORPORATION AND CAROLINA STATE BANK
ANNOUNCE PRELIMINARY PLANS TO COMBINE
First Charter Corporation (FCTR) and Carolina State Bank
announced today the signing of a letter of intent for the
acquisition of Carolina State Bank by First Charter Corporation.
The transaction would create a community banking company serving
the Greater Charlotte Metropolitan Area of North Carolina with
combined assets of approximately $700 million.
In the transaction, Carolina State Bank shareholders would
receive 1.023 shares of First Charter Common Stock for each share
of Carolina State Bank Common Stock. Based on a First Charter
stock price of $21.75 per share on June 27, 1997, the total
transaction value equals $38.3 million of $22.25 for each share
of Carolina State Bank Common Stock. The transaction will be
structured to qualify as a tax-free reorganization and is
anticipated to be accounted for as a pooling of interests. In
addition, in connection with the signing of the letter of intent,
Carolina State Bank has granted First Charter the option to
purchase up to 19.9 percent of its outstanding common stock,
under certain circumstances. Orr Management Company of Winston-
Salem advised Carolina State Bank in the negotiations.
Consummation of the transaction is subject to certain conditions,
including negotiation of a definitive agreement containing
customary terms and conditions of closing and receipt of
regulatory and shareholder approvals. First Charter Corporation
Common Stock is traded on the NASDAQ National Market under the
quotation symbol "FCTR."
