<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
FIRST CHARTER CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NORTH CAROLINA 6711 56-1355866
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
22 UNION STREET NORTH
CONCORD, NORTH CAROLINA 28025
(704) 786-3300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
LAWRENCE M. KIMBROUGH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
FIRST CHARTER CORPORATION
22 UNION STREET NORTH
CONCORD, NORTH CAROLINA 28025
(704) 786-3300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
WITH COPIES TO:
<TABLE>
<S> <C> <C>
FRANK M. CONNER III H. JOE KING, JR. RAYMOND A. TIERNAN
ALSTON & BIRD LLP CHAIRMAN OF THE BOARD, PRESIDENT, ELIAS, MATZ, TIERNAN & HERRICK
601 PENNSYLVANIA AVENUE, N.W. AND L.L.P.
NORTH BUILDING, 11TH FLOOR CHIEF EXECUTIVE OFFICER 734 15TH STREET, N.W.
WASHINGTON, D.C. 20004 HFNC FINANCIAL CORP. WASHINGTON, D.C. 20005
(202) 756-3303 139 SOUTH TRYON STREET (202) 347-2172
CHARLOTTE, NORTH CAROLINA 28202
(704) 373-0400
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after the merger (the "Merger") described in this
Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$74,293 (3)
Common Stock, No par value........ 10,680,660 shares $13.44 $251,838,720 ($43,323)(3)
----------
$30,970
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</TABLE>
(1) This Registration Statement covers (i) the maximum number of shares of the
common stock of the Registrant which is expected to be issued in connection
with the Merger, and (ii) the maximum number of shares of common stock
reserved for issuance under various option and other plans of HFNC Financial
Corp. ("HFNC"), the obligations under which will be assumed by the
Registrant upon consummation of the Merger but which may be issued prior to
consummation of the Merger.
(2) Estimated solely for purposes of calculating the registration fee and based,
pursuant to Rule 457(c) and (f) under the Securities Act of 1933, as
amended, on the average of the high and low sales prices of HFNC common
stock as reported on The Nasdaq National Market System on July 27, 1998.
(3) In accordance with Rule 457(b), the filing fee of $43,323 paid pursuant to
Section 14(g) of the Securities Exchange Act of 1934, as amended, and Rule
0-11 thereunder at the time of filing of the Joint Proxy Statement included
in this Registration Statement as preliminary proxy materials of the
Registrant and HFNC has been credited to offset the $74,293 registration fee
that would otherwise be payable.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE TIME UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), SHALL
DETERMINE.
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<PAGE> 2
HFNC FINANCIAL CORP.
139 SOUTH TRYON STREET
CHARLOTTE, NORTH CAROLINA 28202
To the Shareholders of HFNC Financial Corp. August 12, 1998
You are cordially invited to attend a special meeting of the shareholders
(the "HFNC Special Meeting") of HFNC Financial Corp. ("HFNC") to be held at
, located at , Charlotte, North Carolina 28202 at
10:00 a.m., local time, on September 29, 1998, notice of which is enclosed.
At the HFNC Special Meeting, you will be asked to consider and vote on a
proposal to approve the Amended and Restated Agreement and Plan of Merger (the
"Agreement") by and between HFNC and First Charter Corporation, a North Carolina
corporation ("FCC"). Pursuant to the Agreement, HFNC will merge (the "Merger")
with and into FCC, with the effect that FCC will be the surviving corporation
resulting from the Merger. Upon consummation of the Merger, each share of the
$.01 par value common stock of HFNC ("HFNC Common Stock") issued and outstanding
will be converted into and exchanged for .57 of a share (subject to possible
adjustment as set forth in the Agreement, the "Exchange Ratio") of the no par
value common stock of FCC, with cash being paid in lieu of issuing fractional
shares.
The Agreement provides that in the event that the average trading price of
FCC common stock during a specified period is less than $19.60 and declines by
more than 15% in comparison to the average trading price of a group of 21 bank
holding companies specified in the Agreement, then HFNC will have the right to
terminate the Agreement unless FCC elects to increase the Exchange Ratio
pursuant to a formula included in the Agreement. For information with respect to
the operation of this provision and the considerations of the Board of Directors
of HFNC in determining whether to terminate the Agreement and of the Board of
Directors of FCC in determining whether to increase the Exchange Ratio, see
"SUMMARY -- The Merger" and "DESCRIPTION OF TRANSACTION -- Possible Adjustment
of Exchange Ratio" in the accompanying Joint Proxy Statement/Prospectus. Under
no circumstances would the Exchange Ratio be less than .57 of a share of FCC
common stock for each share of HFNC Common Stock.
Approval of the Agreement by the HFNC shareholders will also authorize the
HFNC Board of Directors to exercise its discretion whether to proceed with the
Merger in the event that HFNC has the right to exercise its termination right as
described above. The HFNC Board of Directors expects it would exercise such
discretion and decide whether to terminate the Agreement without a
resolicitation of shareholders.
Enclosed are the (i) Notice of HFNC Special Meeting, (ii) Joint Proxy
Statement/Prospectus, (iii) proxy card for the HFNC Special Meeting, and (iv)
pre-addressed return envelope for the proxy card. The Joint Proxy
Statement/Prospectus describes in more detail the Agreement and the proposed
Merger, including a description of the conditions to consummation of the Merger
and the effects of the Merger on the rights of HFNC's shareholders. Please read
these materials carefully and consider thoughtfully the information set forth in
them.
Sandler O'Neill & Partners, L.P., HFNC's financial advisor, has issued its
opinion, dated May 17, 1998, to your Board of Directors regarding the fairness,
from a financial point of view, of the Exchange Ratio to the shareholders of
HFNC. A copy of the opinion is included as Appendix B to the Joint Proxy
Statement/ Prospectus.
THE BOARD OF DIRECTORS OF HFNC HAS UNANIMOUSLY APPROVED AND ADOPTED THE
AGREEMENT AND CONSUMMATION OF THE MERGER AND RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE AGREEMENT.
Approval of the Agreement will require the affirmative vote of the holders
of a majority of the issued and outstanding shares of HFNC Common Stock entitled
to be voted at the HFNC Special Meeting. Whether or not you plan to attend the
HFNC Special Meeting, you are urged to complete, sign, date, and return promptly
the enclosed proxy card. If you attend the HFNC Special Meeting, you may vote in
person even if you previously returned your proxy card. The proposed Merger with
FCC is a significant step for HFNC and your vote on this matter is of great
importance.
<PAGE> 3
ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO VOTE FOR APPROVAL OF THE
AGREEMENT BY MARKING THE ENCLOSED PROXY CARD "FOR" ITEM 1.
I look forward to seeing you at the HFNC Special Meeting.
Sincerely,
H. Joe King, Jr.
Chairman of the Board, President, and
Chief Executive Officer
<PAGE> 4
FIRST CHARTER CORPORATION
22 UNION STREET NORTH
CONCORD, NORTH CAROLINA 28025
August 12, 1998
TO THE SHAREHOLDERS OF FIRST CHARTER CORPORATION:
You are cordially invited to attend a special meeting of the shareholders
(the "FCC Special Meeting") of First Charter Corporation ("FCC") to be held at
at __.m., local time, on September 29, 1998, notice of which is
enclosed.
At the FCC Special Meeting, you will be asked to consider and vote on a
proposal to approve the Amended and Restated Agreement and Plan of Merger (the
"Agreement") by and between FCC and HFNC Financial Corp., a North Carolina
corporation ("HFNC"). Pursuant to the Agreement, HFNC will merge (the "Merger")
with and into FCC, with the effect that FCC will be the surviving corporation
resulting from the Merger. Upon consummation of the Merger, each share of the
$.01 par value common stock of HFNC ("HFNC Common Stock") issued and outstanding
will be converted into and exchanged for .57 of a share (subject to possible
adjustment as set forth in the Agreement, the "Exchange Ratio") of the no par
value common stock of FCC ("FCC Common Stock"), with cash being paid in lieu of
issuing fractional shares.
In addition, you will also be asked at the FCC Special Meeting to consider
and vote upon a proposal to amend the Amended and Restated Articles of
Incorporation of FCC to increase the number of authorized shares of FCC Common
Stock from 25,000,000 to 50,000,000 (the "FCC Articles Amendment"). The FCC
Articles Amendment is not a condition precedent to consummating the proposed
Merger, but the Board of Directors of FCC believe that the proposed amendment is
in the best interest of FCC and its shareholders.
Enclosed are the (i) Notice of FCC Special Meeting, (ii) Joint Proxy
Statement/Prospectus, (iii) proxy card for the FCC Special Meeting, and (iv)
pre-addressed return envelope for the proxy card. The Joint Proxy Statement/
Prospectus describes in more detail the Agreement, the proposed Merger, and the
FCC Articles Amendment. Please read these materials carefully and consider
thoughtfully the information set forth in them.
Wheat First Securities, Inc., FCC's financial advisor, has issued its
opinion to your Board of Directors regarding the fairness, from a financial
point of view, of the Exchange Ratio to the shareholders of FCC. A copy of the
opinion is included as Appendix C to the Joint Proxy Statement/Prospectus.
THE BOARD OF DIRECTORS OF FCC HAS UNANIMOUSLY APPROVED AND ADOPTED THE
AGREEMENT AND CONSUMMATION OF THE MERGER, AND RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE AGREEMENT AND THE MERGER, INCLUDING THE ISSUANCE OF SHARES OF
FCC COMMON STOCK PURSUANT TO THE AGREEMENT AND FOR APPROVAL OF THE FCC ARTICLES
AMENDMENT. YOUR BOARD BELIEVES THAT, AMONG OTHER BENEFITS, THE MERGER WILL
RESULT IN A COMPANY WITH GREATER FINANCIAL STRENGTH AND INCREASED OPPORTUNITY
AND FLEXIBILITY FOR PROFITABLE EXPANSION AND DIVERSIFICATION. CONSUMMATION OF
THE MERGER IS SUBJECT TO CERTAIN CONDITIONS, INCLUDING APPROVAL OF THE AGREEMENT
BY THE HFNC SHAREHOLDERS AND APPROVAL OF THE MERGER BY VARIOUS REGULATORY
AGENCIES.
Approval of the Agreement will require the affirmative vote of the holders
of a majority of the issued and outstanding shares of FCC Common Stock entitled
to be voted at the FCC Special Meeting. Approval of the FCC Articles Amendment
will require the affirmative vote of the holders of a majority of the votes cast
at the FCC Special Meeting by holders of FCC Common Stock. Whether or not you
plan to attend the FCC Special Meeting, you are urged to complete, sign, date,
and return promptly the enclosed proxy card. If you attend the FCC Special
Meeting, you may vote in person even if you previously returned your proxy card.
The proposed Merger with HFNC is a significant step for FCC and your vote on
this matter is of great importance.
<PAGE> 5
ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO VOTE FOR APPROVAL OF (I)
THE AGREEMENT AND THE MERGER, INCLUDING THE ISSUANCE OF SHARES OF FCC COMMON
STOCK PURSUANT TO THE AGREEMENT BY MARKING THE ENCLOSED PROXY CARD "FOR" ITEM 1
AND (II) THE FCC ARTICLES AMENDMENT BY MARKING THE ENCLOSED PROXY CARD "FOR"
ITEM 2.
I look forward to seeing you at the FCC Special Meeting.
Sincerely,
Lawrence M. Kimbrough
President and Chief Executive Officer
<PAGE> 6
HFNC FINANCIAL CORP.
139 SOUTH TRYON STREET
CHARLOTTE, NORTH CAROLINA 28202
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AT 10:00 A.M. ON SEPTEMBER 29, 1998
NOTICE IS HEREBY GIVEN that a special meeting of the shareholders (the
"HFNC Special Meeting") of HFNC Financial Corp. ("HFNC") will be held at
, on September 29, 1998, at 10:00 a.m., local time, for the
following purposes:
1. Merger. To consider and vote upon a proposal to approve the Amended
and Restated Agreement and Plan of Merger (the "Agreement"), dated as of May 17,
1998, by and between HFNC and First Charter Corporation, a North Carolina
corporation ("FCC"), pursuant to which (i) HFNC will merge (the "Merger") with
and into FCC, with the effect that FCC will be the surviving corporation
resulting from the Merger, and (ii) each share of the $.01 par value common
stock of HFNC ("HFNC Common Stock") issued and outstanding at the effective time
of the Merger (excluding shares held by HFNC or FCC, or their respective
subsidiaries, in each case other than shares held in a fiduciary capacity or as
a result of debts previously contracted) will be converted into and exchanged
for .57 of a share (subject to possible adjustment as set forth in the
Agreement) of the no par value common stock of FCC, and cash in lieu of issuing
any fractional share. A copy of the Agreement is included in Appendix A to the
accompanying Joint Proxy Statement/Prospectus and is incorporated by reference
therein.
2. Other Business. To transact such other business as may come properly
before the HFNC Special Meeting or any adjournments or postponements of the HFNC
Special Meeting. Management is not aware of any other such business.
Only shareholders of record at the close of business on August, 1998, will
be entitled to receive notice of and to vote at the HFNC Special Meeting or any
adjournment or postponement thereof. APPROVAL OF THE AGREEMENT REQUIRES THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE ISSUED AND OUTSTANDING
SHARES OF HFNC COMMON STOCK ENTITLED TO BE VOTED AT THE HFNC SPECIAL MEETING.
Holders of HFNC Common Stock do not have dissenters' rights with respect to
the Merger.
THE BOARD OF DIRECTORS OF HFNC UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE FOR APPROVAL OF THE AGREEMENT.
BY ORDER OF THE BOARD OF DIRECTORS
H. Joe King, Jr.
Chairman of the Board, President, and
Chief Executive Officer
Charlotte, North Carolina
WHETHER OR NOT YOU PLAN TO ATTEND THE HFNC SPECIAL MEETING, PLEASE COMPLETE,
DATE, AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE PAID RETURN ENVELOPE IN ORDER TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED AT THE HFNC SPECIAL MEETING.
<PAGE> 7
FIRST CHARTER CORPORATION
22 UNION STREET NORTH
CONCORD, NORTH CAROLINA 28025
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AT 10:00 A.M. ON SEPTEMBER 29, 1998
NOTICE IS HEREBY GIVEN that a special meeting of the shareholders (the "FCC
Special Meeting") of First Charter Corporation ("FCC") will be held at
at 10:00 a.m., local time, on September 29, 1998, notice of which
is enclosed.
1. Merger. To consider and vote upon a proposal to approve the Amended
and Restated Agreement and Plan of Merger (the "Agreement"), dated as of May 17,
1998, by and between FCC and HFNC Financial Corp., a North Carolina corporation
("HFNC"), pursuant to which (i) HFNC will merge (the "Merger") with and into
FCC, with the effect that FCC will be the surviving corporation resulting from
the Merger, and (ii) each share of the $.01 par value common stock of HFNC
("HFNC Common Stock") issued and outstanding at the effective time of the Merger
(excluding shares held by HFNC or FCC, or their respective subsidiaries, in each
case other than shares held in a fiduciary capacity or as a result of debts
previously contracted) will be converted into and exchanged for .57 of a share
(subject to possible adjustment as set forth in the Agreement) of the no par
value common stock of FCC ("FCC Common Stock"), and cash in lieu of issuing any
fractional share. A copy of the Agreement is included in Appendix A to the
accompanying Joint Proxy Statement/Prospectus and is incorporated by reference
therein.
2. FCC Articles Amendment. To consider and vote upon a proposal to
approve an amendment to the Amended and Restated Articles of Incorporation of
FCC (the "FCC Articles Amendment") to increase the number of authorized shares
of FCC Common Stock from 25,000,000 to 50,000,000.
3. Other Business. To transact such other business as may come properly
before the FCC Special Meeting or any adjournments or postponements of the FCC
Special Meeting. Management is not aware of any other such business.
Only shareholders of record at the close of business on August 3, 1998,
will be entitled to receive notice of and to vote at the FCC Special Meeting or
any adjournment or postponement thereof. APPROVAL OF THE AGREEMENT REQUIRES THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE ISSUED AND OUTSTANDING
SHARES OF FCC COMMON STOCK ENTITLED TO BE VOTED AT THE FCC SPECIAL MEETING.
Approval of the FCC Articles Amendment requires the affirmative vote of the
holders of a majority of the votes cast as the FCC Special Meeting by holders of
FCC Common Stock.
Holders of FCC Common Stock do not have dissenters' rights with respect to
the Merger, the issuance of shares of FCC Common Stock pursuant to the
Agreement, or the FCC Articles Amendment.
THE BOARD OF DIRECTORS OF FCC UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR APPROVAL OF THE AGREEMENT AND FOR APPROVAL OF THE FCC ARTICLES AMENDMENT.
BY ORDER OF THE BOARD OF DIRECTORS
James W. Townsend, Jr.
Secretary
Concord, North Carolina
WHETHER OR NOT YOU PLAN TO ATTEND THE FCC SPECIAL MEETING, PLEASE COMPLETE,
DATE, AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE PAID RETURN ENVELOPE IN ORDER TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED AT THE FCC SPECIAL MEETING.
<PAGE> 8
PROSPECTUS
FIRST CHARTER CORPORATION
COMMON STOCK, NO PAR VALUE
JOINT PROXY STATEMENT
<TABLE>
<S> <C>
FIRST CHARTER CORPORATION HFNC FINANCIAL CORP.
22 UNION STREET NORTH 139 SOUTH TRYON STREET
CONCORD, NORTH CAROLINA 28025 CHARLOTTE, NORTH CAROLINA 28202
</TABLE>
This Prospectus of First Charter Corporation, a bank holding company
organized and existing under the laws of the State of North Carolina ("FCC"),
relates to up to 10,680,660 shares of common stock, no par value, of FCC ("FCC
Common Stock"), which are issuable to the shareholders of HFNC Financial Corp.,
a savings and loan holding company organized and existing under the laws of the
State of North Carolina ("HFNC"), upon consummation of the proposed merger (the
"Merger") of HFNC with and into FCC, with the effect that FCC will be the
surviving corporation of the Merger.
The Merger will be consummated pursuant to the terms of the Amended and
Restated Agreement and Plan of Merger, dated as of May 17, 1998 (the
"Agreement"), by and between FCC and HFNC. At the effective time of the Merger
(the "Effective Time"), except as described herein, each issued and outstanding
share of the $.01 par value common stock of HFNC ("HFNC Common Stock")
(excluding shares held by HFNC or FCC, or their respective subsidiaries, in each
case other than shares held in a fiduciary capacity or as a result of debts
previously contracted) will be converted into and exchanged for .57 of a share
of FCC Common Stock (subject to possible adjustment, the "Exchange Ratio"). Cash
(without interest) will be paid in lieu of the issuance of any fractional shares
of FCC Common Stock.
This Prospectus also serves as a Joint Proxy Statement of HFNC and FCC, and
is being furnished to the shareholders of HFNC and FCC in connection with the
solicitation of proxies by the Board of Directors of HFNC (the "HFNC Board") for
use at its special meeting of shareholders (including any adjournments or
postponements thereof, the "HFNC Special Meeting"), and by the Board of
Directors of FCC (the "FCC Board") for use at its special meeting of
shareholders (including any adjournments or postponements thereof, the "FCC
Special Meeting" and collectively with the HFNC Special Meeting, the
"Meetings"), each to be held on September 29, 1998, to consider and vote upon,
in the case of HFNC, the Agreement and, in the case of FCC, (i) the Agreement,
including the issuance of shares of FCC Common Stock pursuant to the Agreement,
and (ii) an amendment to the Amended and Restated Articles of Incorporation of
FCC (the "FCC Articles") to increase the number of authorized shares of FCC
Common Stock from 25,000,000 to 50,000,000 (the "FCC Articles Amendment"). This
Joint Proxy Statement/Prospectus (the "Joint Proxy Statement") and related
materials enclosed herewith are being mailed to the shareholders of HFNC and FCC
on or about August , 1998.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT
PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS, OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
------------------------
The date of this Joint Proxy Statement is August , 1998.
<PAGE> 9
AVAILABLE INFORMATION
Each of FCC and HFNC is subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, is required to file reports, proxy and information
statements, and other information with the Securities and Exchange Commission
(the "SEC"). Copies of such reports, proxy and information statements, and other
information can be obtained, at prescribed rates, from the SEC by addressing
written requests for such copies to the Public Reference Section at the SEC at
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. In addition,
such reports, proxy and information statements, and other information can be
inspected and copied at the public reference facilities referred to above and at
the regional offices of the SEC at 7 World Trade Center, 13th Floor, New York,
New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. The SEC also maintains a site on the World Wide
Web at http://www.sec.gov that contains reports, proxy and information
statements, and other information regarding registrants that file electronically
with the SEC. The shares of FCC Common Stock and HFNC Common Stock are listed
and traded on The Nasdaq National Market System (the "Nasdaq NMS") under the
symbol "FCTR" and "HFNC," respectively, and reports, proxy and information
statements, and other information concerning FCC and HFNC also may be inspected
at the offices of the National Association of Securities Dealers, Inc. (the
"NASD"), located at 1735 K Street, N.W., Washington, D.C. 20006.
This Joint Proxy Statement constitutes part of the Registration Statement
on Form S-4 of FCC (including any exhibits and amendments thereto, the
"Registration Statement") filed with the SEC under the Securities Act of 1933,
as amended (the "Securities Act"), relating to the securities offered hereby.
This Joint Proxy Statement does not include all of the information in the
Registration Statement, certain portions of which have been omitted pursuant to
the rules and regulations of the SEC. For further information about FCC, HFNC,
and the securities offered hereby, reference is made to the Registration
Statement. The Registration Statement may be inspected and copied, at prescribed
rates, at the SEC's public reference facilities at the addresses set forth
above.
All information contained in this Joint Proxy Statement or incorporated
herein by reference with respect to FCC was supplied by FCC, and all information
contained in this Joint Proxy Statement or incorporated herein by reference with
respect to HFNC was supplied by HFNC.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS JOINT PROXY
STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS JOINT PROXY STATEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE
SECURITIES OFFERED BY THIS JOINT PROXY STATEMENT IN ANY JURISDICTION TO OR FROM
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT NOR ANY
DISTRIBUTION OF THE SECURITIES BEING OFFERED PURSUANT TO THIS JOINT PROXY
STATEMENT SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF FCC OR HFNC OR THE INFORMATION SET FORTH OR
INCORPORATED BY REFERENCE HEREIN SINCE THE DATE OF THIS JOINT PROXY STATEMENT.
THIS JOINT PROXY STATEMENT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITH
RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS, AND BUSINESS OF FCC
FOLLOWING THE CONSUMMATION OF THE MERGER, INCLUDING STATEMENTS RELATING TO THE
COST SAVINGS AND REVENUE ENHANCEMENTS THAT ARE EXPECTED TO BE REALIZED FROM THE
MERGER AND THE EXPECTED IMPACT OF THE MERGER ON FCC'S FINANCIAL PERFORMANCE.
THESE FORWARD-LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES.
FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHER THINGS, THE
FOLLOWING POSSIBILITIES: (I) EXPECTED COST SAVINGS FROM THE MERGER CANNOT BE
FULLY REALIZED; (II) DEPOSIT ATTRITION, CUSTOMER LOSS, OR REVENUE LOSS FOLLOWING
THE MERGER IS GREATER THAN EXPECTED; (III) COMPETITIVE PRESSURE IN THE BANKING
INDUSTRY INCREASES SIGNIFICANTLY; (IV) COSTS OR DIFFICULTIES RELATED TO THE
INTEGRATION OF THE BUSINESSES OF FCC AND THE INSTITUTIONS TO BE ACQUIRED ARE
GREATER THAN EXPECTED; (V) CHANGES IN THE INTEREST RATE ENVIRONMENT REDUCE
MARGINS; (VI) GENERAL ECONOMIC CONDITIONS, EITHER NATIONALLY OR REGIONALLY, ARE
LESS FAVORABLE THAN EXPECTED, RESULTING IN, AMONG OTHER THINGS, A DETERIORATION
IN CREDIT QUALITY; (VII) CHANGES OCCUR IN THE REGULATORY ENVIRONMENT; (VIII)
CHANGES OCCUR IN BUSINESS CONDITIONS AND INFLATION; (IX) CHANGES
i
<PAGE> 10
OCCUR IN THE SECURITIES MARKETS; AND (X) DISRUPTIONS OF THE OPERATIONS OF FCC OR
ANY OF ITS SUBSIDIARIES, OR ANY OTHER GOVERNMENTAL OR PRIVATE ENTITY AS A RESULT
OF THE "YEAR 2000 PROBLEM." THE FORWARD-LOOKING EARNINGS ESTIMATES INCLUDED IN
THIS JOINT PROXY STATEMENT HAVE NOT BEEN EXAMINED OR COMPILED BY THE INDEPENDENT
PUBLIC ACCOUNTANTS OF FCC OR HFNC, NOR HAVE SUCH ACCOUNTANTS APPLIED ANY
PROCEDURES THERETO. ACCORDINGLY, SUCH ACCOUNTANTS DO NOT EXPRESS AN OPINION OR
ANY OTHER FORM OF ASSURANCE ON THEM.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the SEC by FCC pursuant to
the Exchange Act are hereby incorporated by reference herein (SEC File No.
000-15829):
(a) FCC's Annual Report on Form 10-K for the year ended December 31,
1997 (the "FCC 1997 Form 10-K");
(b) FCC's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998 (the "FCC March 31, 1998 Form 10-Q");
(c) FCC's Current Report on Form 8-K dated May 28, 1998; and
(d) The description of the FCC Common Stock contained in FCC's
Registration Statement under Section 12 of the Exchange Act and any
amendment or report filed for the purpose of updating such description.
The following documents previously filed with the SEC by HFNC pursuant to
the Exchange Act are hereby incorporated by reference herein (SEC File No.
000-27388):
(a) HFNC's Annual Report on Form 10-K for the fiscal year ended June
30, 1997 (the "HFNC 1997 Form 10-K");
(b) HFNC's Quarterly Reports on Form 10-Q for the quarters ended
September 30, 1997, December 31, 1997, and March 31, 1998 (the "HFNC March
31, 1998 Form 10-Q"); and
(c) HFNC's Current Report on Form 8-K dated May 29, 1998; and
(d) The description of HFNC Common Stock contained in HFNC's
Registration Statement under Section 12 of the Exchange Act and any
amendment or report filed for the purpose of updating such description.
All documents filed by FCC and HFNC pursuant to Sections 13(a), 13(c), 14,
or 15(d) of the Exchange Act after the date of this Joint Proxy Statement and
prior to final adjournment of the Meetings shall be deemed to be incorporated by
reference in this Joint Proxy Statement and to be a part hereof from the date of
filing of such documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes hereof to the extent that a statement
contained herein or in any subsequently filed document which also is, or is
deemed to be, incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part hereof, except as so modified or superseded.
This Joint Proxy Statement incorporates documents by reference which are
not presented herein or delivered herewith. FCC will provide without charge,
upon the written or oral request of any person, including any beneficial owner,
to whom this Joint Proxy Statement is delivered, a copy of any and all
information (excluding certain exhibits) relating to FCC that has been
incorporated by reference in the Registration Statement. Such requests should be
directed to Robert O. Bratton, Executive Vice President and Principal Financial
and Accounting Officer, First Charter Corporation, 22 Union Street North,
Concord, North Carolina 28025 (telephone (704) 786-3300). HFNC will provide
without charge, upon the written or oral request of any person, including any
beneficial owner, to whom this Joint Proxy Statement is delivered, a copy of any
and all information (excluding certain exhibits) relating to HFNC that has been
incorporated by reference in the Registration Statement. Such requests should be
directed to H. Joe King, Jr., President and Chief Executive Officer, HFNC
Financial Corp., 139 South Tryon Street, Charlotte, North Carolina 28202
ii
<PAGE> 11
(telephone (704) 373-0400). In order to ensure timely delivery of the documents,
any request should be made by September 22, 1998.
First Charter Map
iii
<PAGE> 12
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
SUMMARY..................................................... 1
The Parties............................................... 1
Meetings of Shareholders.................................. 1
The Merger................................................ 3
Amendment of FCC's Articles............................... 8
Comparative Market Prices of Common Stock................. 8
Selected Consolidated Financial Data...................... 9
Historical and Pro Forma Comparative Per Share Data....... 14
Selected Pro Forma Consolidated Financial Data............ 15
MEETINGS OF SHAREHOLDERS.................................... 17
Date, Place, Time, and Purpose............................ 17
Record Date, Voting Rights, Required Vote, and
Revocability of Proxies................................ 17
Solicitation of Proxies................................... 19
Dissenters' Rights........................................ 20
DESCRIPTION OF TRANSACTION.................................. 20
General................................................... 20
Possible Adjustment of Exchange Ratio..................... 20
Effect of the Merger on HFNC Options...................... 22
Background of and Reasons for the Merger.................. 23
Opinion of HFNC's Financial Advisor....................... 25
Opinion of FCC's Financial Advisor........................ 30
Effective Time of the Merger.............................. 33
Dissenters' Rights........................................ 33
Distribution of Consideration............................. 34
Conditions to Consummation of the Merger.................. 34
Regulatory Approval....................................... 35
Waiver, Amendment, and Termination........................ 35
Conduct of Business Pending the Merger.................... 36
Management and Operations After the Merger................ 38
Effect on Certain Employees and Benefit Plans............. 38
Interests of Certain HFNC Persons in the Merger........... 40
Interests of Certain FCC Persons in the Merger............ 42
Federal Income Tax Consequences of the Merger............. 42
Accounting Treatment...................................... 44
Expenses and Fees......................................... 44
Resales of FCC Common Stock............................... 44
Option Agreements......................................... 45
EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS.............. 48
Anti-takeover Provisions Generally........................ 48
Authorized Capital Stock.................................. 49
Amendment of Charter and Bylaws........................... 50
Classified Board of Directors and Absence of Cumulative
Voting................................................. 50
Director Removal and Vacancies............................ 51
Limitations on Director Liability......................... 51
Indemnification........................................... 51
Special Meeting of Shareholders........................... 52
</TABLE>
iv
<PAGE> 13
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Actions by Shareholders Without a Meeting................. 52
Shareholder Nominations and Proposals..................... 53
Business Combinations..................................... 53
Limitations on Ability to Vote Stock...................... 54
Shareholders' Rights to Examine Books and Records......... 54
Dividends................................................. 55
COMPARATIVE MARKET PRICES AND DIVIDENDS..................... 56
BUSINESS OF HFNC............................................ 57
General................................................... 57
Recent Developments....................................... 57
BUSINESS OF FCC............................................. 57
General................................................... 57
Recent Developments....................................... 58
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION...... 58
CERTAIN REGULATORY CONSIDERATIONS........................... 64
General................................................... 64
Payment of Dividends...................................... 65
Capital Adequacy.......................................... 65
Support of Subsidiary Institutions........................ 66
Prompt Corrective Action.................................. 67
DESCRIPTION OF FCC COMMON STOCK............................. 68
AMENDMENT OF FCC'S ARTICLES................................. 69
General................................................... 69
Certain Effects of FCC Articles Amendment................. 69
Recommendation of the FCC Board........................... 70
OTHER MATTERS............................................... 70
SHAREHOLDER PROPOSALS....................................... 70
EXPERTS..................................................... 71
OPINIONS.................................................... 71
</TABLE>
APPENDICES:
Appendix A -- Amended and Restated Agreement and Plan of Merger, dated as of
May 17, 1998, by and between HFNC Financial Corp. and First
Charter Corporation
Appendix B -- Opinion of Sandler O'Neill & Partners, L.P.
Appendix C -- Opinion of Wheat First Securities, Inc.
v
<PAGE> 14
SUMMARY
The following is a summary of certain information contained in this Joint
Proxy Statement and the documents incorporated herein by reference. This summary
is not intended to be a complete description of the matters covered in this
Joint Proxy Statement and is qualified in its entirety by the more detailed
information appearing elsewhere or incorporated by reference in this Joint Proxy
Statement. Shareholders are urged to read carefully the entire Joint Proxy
Statement, including the Appendices. As used in this Joint Proxy Statement, the
terms "FCC" and "HFNC" refer to First Charter Corporation and HFNC Financial
Corp., respectively, and, where the context requires, to those entities and
their respective subsidiaries.
THE PARTIES
HFNC. HFNC, a North Carolina corporation, is a savings and loan holding
company which was organized in August 1995 in connection with the conversion of
Home Federal Savings and Loan Association ("Home Federal") from mutual to stock
form (the "Conversion"). The Conversion was effected on December 28, 1995, at
which time Home Federal converted to a federal stock savings and loan
association and became a wholly-owned subsidiary of HFNC. As of March 31, 1998,
HFNC had total consolidated assets of approximately $979.6 million, total
consolidated loans of approximately $790.3 million, total consolidated deposits
of approximately $432.1 million, and total consolidated shareholders' equity of
approximately $168.9 million.
Home Federal is a community oriented savings institution which has
traditionally offered a wide variety of savings products to its retail customers
while concentrating its lending activities on the origination of loans secured
by one- to four-family residential dwellings. Home Federal conducts its business
from its main office, eight branch offices, and a loan origination office, all
located in Mecklenburg County, North Carolina.
The principal executive offices of HFNC are located at 139 South Tryon
Street, Charlotte, North Carolina 28202 and its telephone number at such address
is (704) 373-0400. Additional information with respect to HFNC and its
subsidiaries is included elsewhere herein and in documents incorporated by
reference in this Joint Proxy Statement. See "AVAILABLE INFORMATION" and
"DOCUMENTS INCORPORATED BY REFERENCE."
FCC. FCC, a North Carolina corporation, is a bank holding company
registered with the Board of Governors of the Federal Reserve System (the
"Federal Reserve") under the Bank Holding Company Act of 1956, as amended (the
"BHC Act"). As of March 31, 1998, FCC had total consolidated assets of
approximately $776 million, total consolidated loans of approximately $549
million, total consolidated deposits of approximately $636 million, and total
consolidated shareholders' equity of approximately $81 million.
FCC conducts its business activities through its two banking subsidiaries,
First Charter National Bank, a national banking association, and Bank of Union,
a state-chartered commercial bank (collectively, the "FCC Banking
Subsidiaries"). The FCC Banking Subsidiaries provide a wide variety of retail
and commercial banking services through 21 branch offices, two limited service
facilities, and 43 ATMs located in Cabarrus, Mecklenburg, Rowan, Cleveland,
Rutherford, and Union Counties, North Carolina.
The principal executive offices of FCC are located at 22 Union Street
North, Concord, North Carolina 28025, and its telephone number at such address
is (704) 786-3300. Additional information with respect to FCC and its
subsidiaries is included in documents incorporated by reference in this Joint
Proxy Statement. See "AVAILABLE INFORMATION" and "DOCUMENTS INCORPORATED BY
REFERENCE."
MEETINGS OF SHAREHOLDERS
HFNC. This Joint Proxy Statement is being furnished to the holders of HFNC
Common Stock in connection with the solicitation by the HFNC Board of proxies
for use at the HFNC Special Meeting at which HFNC shareholders will be asked to
vote upon (i) a proposal to approve the Agreement, and (ii) such other business
as may properly come before the HFNC Special Meeting. The HFNC Special Meeting
will be held at , at 10:00 a..m., local time, on September 29,
1998. See "MEETINGS OF SHAREHOLDERS -- Date, Place, Time, and Purpose."
1
<PAGE> 15
The HFNC Board has fixed the close of business on August 3 , 1998, as the
record date (the "HFNC Record Date") for determination of the shareholders
entitled to notice of and to vote at the HFNC Special Meeting. Only holders of
record of shares of HFNC Common Stock on the HFNC Record Date will be entitled
to notice of and to vote at the HFNC Special Meeting. Each share of HFNC Common
Stock is entitled to one vote. On the HFNC Record Date, there were
shares of HFNC Common Stock outstanding. See "MEETINGS OF
SHAREHOLDERS -- Record Date, Voting Rights, Required Vote, and Revocability of
Proxies."
Approval of the Agreement and the transactions contemplated thereby
requires the affirmative vote of the holders of a majority of the issued and
outstanding shares of HFNC Common Stock entitled to be voted at the HFNC Special
Meeting. Each share of HFNC Common Stock is entitled to one vote on each matter
submitted to the shareholders. The directors and executive officers of HFNC
(including immediate family members and affiliated entities) owned, as of the
HFNC Record Date, shares, or approximately % of the
outstanding shares of HFNC Common Stock. The directors and executive officers of
FCC owned, as of the HFNC Record Date, shares, or approximately
% of the outstanding shares of HFNC Common Stock. See "MEETINGS OF
SHAREHOLDERS -- Record Date, Voting Rights, Required Vote, and Revocability of
Proxies."
For information with respect to the number and percentage of shares of HFNC
Common Stock beneficially owned by directors and executive officers of HFNC as
well as to the beneficial owners of 5% or more of the outstanding shares of HFNC
Common Stock, see "Beneficial Ownership of Common Stock by Certain Beneficial
Owners and Management" in the HFNC Annual Meeting Proxy Statement for the HFNC
1997 Annual Meeting of Shareholders. See "Documents Incorporated by Reference."
FCC. This Joint Proxy Statement is likewise being furnished to the holders
of FCC Common Stock in connection with the solicitation by the FCC Board of
proxies for use at the FCC Special Meeting at which FCC shareholders will be
asked to vote upon (i) a proposal to approve the Agreement, including the
issuance of shares of FCC Common Stock pursuant to the Agreement, (ii) a
proposal to approve the FCC Articles Amendment, and (iii) such other business as
may properly come before the FCC Special Meeting. The FCC Special Meeting will
be held at , at 10:00 a..m., local time, on September 29, 1998.
See "MEETINGS OF SHAREHOLDERS -- Date, Place, Time, and Purpose."
The FCC Board has fixed the close of business on August 3, 1998, as the
record date (the "FCC Record Date") for determination of the shareholders
entitled to notice of and to vote at the FCC Special Meeting. Only holders of
record of shares of FCC Common Stock on the FCC Record Date will be entitled to
notice of and to vote at the FCC Special Meeting. Each share of FCC Common Stock
is entitled to one vote. On the FCC Record Date, there were
shares of FCC Common Stock outstanding. See "MEETINGS OF SHAREHOLDERS -- Record
Date, Voting Rights, Required Vote, and Revocability of Proxies."
Approval of the Agreement requires the affirmative vote of the holders of a
majority of the issued and outstanding shares of FCC Common Stock entitled to be
voted at the FCC Special Meeting. Approval of the FCC Articles Amendment
requires the affirmative vote of the holders of a majority of the votes cast at
the FCC Special Meeting by holders of FCC Common Stock. The directors and
executive officers of FCC (including immediate family members and affiliated
entities) owned, as of the FCC Record Date, shares, or
approximately % of the outstanding shares of FCC Common Stock. The
directors and executive officers of HFNC owned, as of the FCC Record Date,
shares, or approximately % of the outstanding shares of FCC
Common Stock. See "MEETINGS OF SHAREHOLDERS -- Record Date, Voting Rights,
Required Vote, and Revocability of Proxies."
For information with respect to the number and percentage of shares of FCC
Common Stock beneficially owned by directors and executive officers of FCC as
well as to the beneficial owners of 5% or more of the outstanding shares of FCC
Common Stock, see "Principal Shareholders" in the FCC Annual Meeting Proxy
Statement for the FCC 1998 Annual Meeting of Shareholders. See "DOCUMENTS
INCORPORATED BY REFERENCE."
2
<PAGE> 16
THE MERGER
General. The Agreement provides for the merger of HFNC with and into FCC.
At the Effective Time, each share of HFNC Common Stock then issued and
outstanding (excluding shares held by HFNC or FCC, or their respective
subsidiaries, in each case other than shares held in a fiduciary capacity or as
a result of debts previously contracted) will be converted into and exchanged
for .57 of a share of FCC Common Stock (subject to possible adjustment as set
forth in the Agreement). In addition, at the Effective Time, each award, option,
or other right to purchase or acquire shares of HFNC Common Stock pursuant to
stock options, stock appreciation rights, or stock awards (the "HFNC Options")
granted by HFNC under the HFNC stock plans (the "HFNC Stock Plans"), which are
outstanding at the Effective Time, whether or not exercisable, shall be
converted into and become rights with respect to FCC Common Stock on a basis
that reflects the Exchange Ratio. As a result, shareholders of HFNC will become
shareholders of FCC, and each of the subsidiaries of HFNC shall continue to
conduct its business and operations as a subsidiary of FCC.
The transactions described in the Agreement are subject to the approvals of
the shareholders of HFNC, the shareholders of FCC, the Federal Reserve, and
certain state regulatory authorities, and the satisfaction of certain other
conditions described in this Agreement. It is the intention of the parties to
this Agreement that the Merger (i) for federal income tax purposes shall qualify
as a "reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and (ii) for accounting purposes
shall qualify for treatment as a pooling of interests.
In the event both of the following conditions are satisfied, (i) the
"Average Closing Price" (defined in the Agreement as the average of the daily
last sale prices of FCC Common Stock quoted on the Nasdaq NMS (as reported by
The Wall Street Journal or, if not reported therein, another authoritative
source as reasonably selected by FCC) for the 10 consecutive full trading days
for which such shares are traded on the Nasdaq NMS ending at the close of
trading on the later of the date of the Meetings and the date on which the
consent of the Federal Reserve shall be received (the "Determination Date")) is
less than $19.60 and (ii)(1) the quotient obtained by dividing the Average
Closing Price by $24.50 (such quotient being the "FCC Ratio") is less than (2)
the quotient obtained by dividing the weighted average of the closing prices
(the "Index Price") of 21 bank holding companies designated in the Agreement
(the "Index Group") on the Determination Date by the Index Price on May 15,
1998, less 15% (such quotient being the "Index Ratio"), then, HFNC will have the
right to terminate the Agreement unless FCC elects to adjust the Exchange Ratio
in the manner described under "DESCRIPTION OF TRANSACTION -- Possible Adjustment
of Exchange Ratio." UNDER NO CIRCUMSTANCES WOULD THE EXCHANGE RATIO BE LESS THAN
.57 OF A SHARE OF FCC COMMON STOCK FOR EACH SHARE OF HFNC COMMON STOCK.
In making its determination of whether to terminate the Agreement, the HFNC
Board will take into account, consistent with its fiduciary duties, all relevant
facts and circumstances that exist at such time, including, without limitation,
information concerning the business, financial condition, results of operations,
and prospects of FCC (including the recent performance of FCC Common Stock, the
historical financial data of FCC, customary statistical measurements of FCC's
financial performance, and the future prospects for FCC Common Stock following
the Merger), and the advice of its financial advisor and legal counsel. If the
HFNC Board elects to terminate the Agreement, FCC would then determine whether
to proceed with the Merger at the higher Exchange Ratio. In making this
determination, the principal factors FCC will consider include the projected
effect of the Merger on FCC's pro forma earnings per share and whether FCC's
assessment of HFNC's earning potential as part of FCC justifies the issuance of
an increased number of shares of FCC Common Stock. If FCC declines to adjust the
Exchange Ratio, HFNC may elect to proceed without the adjustment, provided it
does so within 10 days of the Determination Date. FCC IS UNDER NO OBLIGATION TO
ADJUST THE EXCHANGE RATIO.
Approval of the Agreement by the HFNC shareholders will also authorize the
HFNC Board to exercise its discretion whether to proceed with the Merger in the
event that HFNC has the right to exercise its termination right as described
above. The HFNC Board expects it would exercise such discretion and decide
whether to terminate the Agreement without a resolicitation of shareholders.
No fractional shares of FCC Common Stock will be issued. Rather, cash
(without interest) will be paid in lieu of any fractional share interest to
which any holder of HFNC Common Stock would otherwise be
3
<PAGE> 17
entitled upon consummation of the Merger, in an amount equal to such fractional
part of a share of FCC Common Stock multiplied by the closing price of one share
of FCC Common Stock on the Nasdaq NMS (as reported by The Wall Street Journal
or, if not reported thereby, another authoritative source as reasonably selected
by FCC) on the last trading day preceding the Effective Time. See "DESCRIPTION
OF TRANSACTION -- GENERAL."
Relative Contributions of HFNC and FCC to Resulting Entity. Assuming the
Merger had been consummated as of March 31, 1998, the respective contributions
of HFNC and FCC to FCC as the resulting entity of the Merger on the basis of
total assets, total shareholders' equity, net interest income, and net income,
would have been as follows:
<TABLE>
<CAPTION>
AT OR FOR THE THREE
MONTHS ENDED
MARCH 31, 1998
----------------------
HFNC FCC
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Total assets........................................... $979,554 $775,783
Total shareholders' equity............................. 168,920 81,173
Net interest income.................................... 7,822 8,489
Net income............................................. 3,159 3,011
</TABLE>
In addition, based on the total number of shares of HFNC Common Stock and
FCC Common Stock outstanding on August 3, 1998, and assuming the Merger had been
consummated on such date, the former shareholders of HFNC would have been
entitled to cast approximately % of the votes in an election of directors
of FCC as the resulting entity of the Merger and the shareholders of FCC would
have been entitled to cast approximately % of the votes in an election of
FCC directors as the resulting entity of the Merger.
Reasons for the Merger; Recommendations of the Boards of Directors of HFNC
and FCC. The HFNC Board believes that the Agreement and the Merger are in the
best interests of HFNC and its shareholders, and the FCC Board believes that the
Agreement, the Merger, and the issuance of shares of FCC Common Stock pursuant
to the Agreement are in the best interests of FCC and its shareholders. Each
Board has approved the matters to be adopted or approved by its respective
shareholders. The HFNC Board recommends that the HFNC shareholders vote FOR
approval of the Agreement. The FCC Board recommends that FCC shareholders vote
FOR approval of the Agreement and the issuance of shares of FCC Common Stock
pursuant to the Agreement. The Boards of Directors of HFNC and FCC believe that,
among other things, the Merger will result in a company with expanded
opportunities for profitable growth and that the combined resources and capital
of HFNC and FCC will provide an enhanced ability to compete in the changing and
competitive financial services industry. See "DESCRIPTION OF
TRANSACTION -- Background of and Reasons for the Merger."
Opinion of Financial Advisors. Sandler O'Neill & Partners, L.P. ("Sandler
O'Neill") has rendered an opinion to the HFNC Board that, based on and subject
to the procedures, matters, and limitations described in its opinion and such
other matters as it considered relevant, as of the date of its opinion, the
Exchange Ratio is fair to the holders of HFNC Common Stock from a financial
point of view. The opinion of Sandler O'Neill is included as Appendix B to this
Joint Proxy Statement. HFNC shareholders are urged to read the Sandler O'Neill
opinion in its entirety for a description of the procedures followed,
assumptions made, matters considered, and qualifications and limitations on the
review undertaken in connection therewith. See "DESCRIPTION OF
TRANSACTION -- Opinion of HFNC's Financial Advisor."
Similarly, Wheat First Securities, Inc. ("Wheat First") has rendered an
opinion to the FCC Board that, based on and subject to the procedures, matters,
and limitations described in its opinion and such other matters as it considered
relevant, as of the date of its opinion, the Exchange Ratio is fair, from a
financial point of view, to the shareholders of FCC. The opinion of Wheat First
is included as Appendix C to this Joint Proxy Statement. FCC shareholders are
urged to read the Wheat First opinion in its entirety for a description of the
procedures followed, matters considered, and limitations on the reviews
undertaken in connection therewith. See "DESCRIPTION OF TRANSACTION -- Opinion
of FCC's Financial Advisor."
4
<PAGE> 18
Management and Operations After the Merger. Upon consummation of the
Merger, the current directors of FCC will continue to serve as directors of FCC.
In addition, the FCC Board will take all corporate actions necessary to appoint
Ray W. Bradley, Jr., Joe M. Logan, John M. McCaskill, and Willie E. Royal as
directors of FCC to serve until the 1999 Annual Meeting of Shareholders of FCC
(the "1999 Annual Meeting"). At the 1999 Annual Meeting, FCC will nominate John
H. McCaskill for election to the FCC Board. Those former directors of HFNC who
are members of the Board of Directors of FCC immediately prior to the 1999
Annual Meeting, but who do not remain on the FCC Board after the 1999 Annual
Meeting and whose age exceeds the retirement age for directors of FCC, shall be
appointed Directors Emeritus and shall receive for the first year following the
1999 Annual Meeting, compensation equal to $8,000 per Director Emeritus. See
"DESCRIPTION OF TRANSACTION -- Management and Operations After the Merger."
Effective Time. Subject to the conditions to the obligations of the
parties to effect the Merger, the Effective Time will occur on the date and at
the time that the Articles of Merger (as defined in the Agreement) become
effective with the Secretary of State of the State of North Carolina. Subject to
the terms and conditions of the Agreement, unless otherwise agreed upon in
writing by the duly authorized officers of HFNC and FCC, the parties will use
their reasonable efforts to cause the Effective Time to occur on or before the
15th business day (as designated by FCC) following the last to occur of (i) the
effective date (including expiration of any applicable waiting period) of the
last consent of any regulatory authority having authority over and approving or
exempting the Merger and (ii) the date on which the shareholders of HFNC and FCC
approve the matters relating to the Agreement required to be approved by such
shareholders. See "DESCRIPTION OF TRANSACTION -- Effective Time of the Merger,"
"-- Conditions to Consummation of the Merger," and "-- Waiver, Amendment, and
Termination."
NO ASSURANCE CAN BE PROVIDED THAT THE NECESSARY SHAREHOLDER AND REGULATORY
APPROVALS CAN BE OBTAINED OR THAT THE OTHER CONDITIONS PRECEDENT TO THE MERGER
CAN OR WILL BE SATISFIED. HFNC AND FCC ANTICIPATE THAT ALL CONDITIONS TO THE
CONSUMMATION OF THE MERGER WILL BE SATISFIED SO THAT THE MERGER CAN BE
CONSUMMATED ON OR ABOUT SEPTEMBER 30, 1998. HOWEVER, DELAYS IN THE CONSUMMATION
OF THE MERGER COULD OCCUR.
Distribution of Consideration. Promptly after the Effective Time, FCC and
HFNC will cause an exchange agent selected by FCC (the "Exchange Agent"), to
mail to each holder of record of a certificate or certificates (collectively,
the "Certificates") which, immediately prior to the Effective Time, represented
outstanding shares of HFNC Common Stock, a letter of transmittal and
instructions for use in effecting the surrender and cancellation of the
Certificates in exchange for certificates representing shares of FCC Common
Stock. Cash will be paid to the holders of HFNC Common Stock in lieu of issuing
any fractional shares of FCC Common Stock. In no event will the holder of any
surrendered Certificate(s) be entitled to receive interest on any cash to be
issued to such holder, and in no event will HFNC, FCC, or the Exchange Agent be
liable to any holder of HFNC Common Stock for any consideration delivered in
good faith to a public official pursuant to any applicable abandoned property,
escheat, or similar law. See "DESCRIPTION OF TRANSACTION -- Distribution of
Consideration."
Regulatory Approval and Other Conditions. The Merger is subject to the
prior approval of the Federal Reserve. An application has been filed with the
Federal Reserve for the requisite approval. THERE CAN BE NO ASSURANCE THAT SUCH
REGULATORY APPROVAL WILL BE OBTAINED OR AS TO THE TIMING OF SUCH APPROVAL.
Consummation of the Merger is subject to various other conditions,
including receipt of the required approvals of the HFNC and FCC shareholders,
receipt of opinions of counsel as to the tax-free nature of certain aspects of
the Merger, receipt of a letter from each of the independent accountants of FCC
and HFNC to the effect that the Merger will qualify for pooling-of-interests
accounting treatment, and certain other conditions at the Effective Time. See
"DESCRIPTION OF TRANSACTION -- Regulatory Approval" and "-- Conditions to
Consummation of the Merger."
Waiver, Amendment, and Termination. The Agreement may be terminated and
the Merger abandoned at any time prior to the Effective Time by mutual consent
of the HFNC Board and the FCC Board, or by the action of the Board of Directors
of either company under certain circumstances, including, but not limited to, if
the Merger is not consummated by April 30, 1999, unless the failure to
consummate by such date is due to a breach of the Agreement by the party seeking
to terminate. To the extent permitted by law and as set forth in
5
<PAGE> 19
the Agreement, except with respect to the manner or basis in which shares of
HFNC Common Stock are to be exchanged for shares of FCC Common Stock, the
Agreement may be amended upon the written agreement of FCC and HFNC without the
approval of shareholders before or after the matters relating to the Agreement
required to be approved by the HFNC and FCC shareholders are approved by such
shareholders, and the Merger may be abandoned notwithstanding approval of the
matters relating to the Agreement required to be approved by the HFNC
shareholders. See "DESCRIPTION OF TRANSACTION -- Waiver, Amendment, and
Termination."
Dissenters' Rights. Holders of HFNC Common Stock do not have dissenters'
rights with respect to the Merger. Holders of FCC Common Stock do not have
dissenters' rights with respect to the Merger, the issuance of shares of FCC
Common Stock pursuant to the Agreement, or the FCC Articles Amendment.
Interests of Certain Persons in the Merger. Certain members of HFNC's
management and the HFNC Board may be deemed to have certain interests in the
Merger that are in addition to their interests as shareholders of HFNC
generally. These additional interests may be deemed to arise from certain
actions FCC has agreed to take regarding the employment and consulting
arrangements of certain HFNC executive officers and the compensation and
indemnification of HFNC directors. The HFNC Board and the FCC Board were aware
of these interests and considered them, among other matters, in approving the
Merger. These interests relate to: (i) the receipt, under certain circumstances,
by certain executive officers of HFNC of certain economic benefits pursuant to
the terms of their respective employment agreements; (ii) the assumption by FCC
of the HFNC Options on a basis that reflects the Exchange Ratio, including HFNC
Options held by the "HFNC Executive Officer Group" (as defined herein) and the
"HFNC Non-Executive Officer Director Group" (as defined herein) entitling them,
as of the HFNC Record Date, to purchase in the aggregate 429,810 shares of HFNC
Common Stock having an aggregate market value of approximately $
million (based upon the $ closing price of HFNC Common Stock on the
Nasdaq NMS on , 1998 and a weighted average exercise price of
$ ); (iii) the vesting of 370,824 shares of HFNC Common Stock under the
HFNC Management Recognition and Retention Plan (the "HFNC MRRP"), including
289,014 shares of HFNC Common Stock held by the HFNC Executive Officer Group and
the HFNC Non-Executive Officer Director Group having an aggregate value of
$ million (based upon the $ closing price of HFNC Common Stock
on the Nasdaq NMS on , 1998), pursuant to the HFNC MRRP; and (iv)
the continued indemnification by FCC of the former directors, officers,
employees, and agents of HFNC and its subsidiaries following consummation of the
Merger to the full extent provided under North Carolina law and by HFNC's
Articles of Incorporation (the "HFNC Articles") and Bylaws (the "HFNC Bylaws")
and to provide liability insurance to HFNC officers and directors for a period
of three years after the Effective Time. See "DESCRIPTION OF
TRANSACTION -- Interests of Certain HFNC Persons in the Merger."
In addition, upon consummation of the Merger, the former shareholders of
HFNC may hold just in excess of 50% of the outstanding shares of FCC Common
Stock and as a result, a change of control provision that is included in each of
FCC's stock-based plans (the "FCC Stock Plans") will automatically cause any
outstanding unvested options (the "FCC Options") to vest, including FCC Options
held by the "FCC Executive Officer Group" (as defined herein) and the "FCC
Non-Executive Officer Director Group" (as defined herein) entitling them, as of
the FCC Record Date, to purchase in the aggregate shares of FCC Common
Stock having an aggregate market value of approximately $ million
(based upon the $ closing price of FCC Common Stock on the Nasdaq NMS
on , 1998). In addition, under the change in control agreements that
FCC entered into with various executive officers, consummation of the Merger may
constitute a change in control of FCC and if such officer's employment is
terminated by FCC without cause or by the officer for good reason during the one
year following the Effective Time, such officer will be entitled to a payment
from FCC in an amount determined under such officer's change in control
agreement. See "DESCRIPTION OF TRANSACTION -- Interests of Certain FCC Persons
in the Merger."
Federal Income Tax Consequences of the Merger. Consummation of the Merger
is conditioned on the receipt of an opinion of counsel to the effect that, among
other things, the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code and no gain or loss will be recognized by holders of
HFNC Common Stock upon the exchange in the Merger of HFNC Common Stock solely
for FCC
6
<PAGE> 20
Common Stock (except to the extent of any cash received in lieu of a fractional
share interest in FCC Common Stock). Subject to the provisions and limitations
of Section 302(a) of the Code, gain or loss will be recognized upon the receipt
of cash in lieu of fractional share interests. See "DESCRIPTION OF
TRANSACTION -- Federal Income Tax Consequences of the Merger."
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCE OF EACH SHAREHOLDER AND OTHER CIRCUMSTANCES, EACH HFNC
SHAREHOLDER IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE
PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE MERGER (INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL, AND FOREIGN INCOME AND OTHER LAW).
Accounting Treatment. It is intended that the Merger will be accounted for
as a pooling-of-interests transaction for accounting and financial reporting
purposes, and FCC will not consummate the Merger if such accounting treatment is
not available. See "DESCRIPTION OF TRANSACTION -- Accounting Treatment."
Certain Differences in Shareholders' Rights. At the Effective Time,
holders of HFNC Common Stock, whose rights are governed by the HFNC Articles and
the HFNC Bylaws, and by the North Carolina Business Corporation Act (the
"NCBCA"), will automatically become FCC shareholders, and their rights as FCC
shareholders will be governed by the FCC Articles and Bylaws (the "FCC Bylaws")
and the NCBCA. The rights of FCC shareholders differ from the rights of HFNC
shareholders in certain important respects, including but not limited to: (i)
anti-takeover provisions generally; (ii) authorized capital stock; (iii)
amendment of charter and bylaws; (iv) classified board of directors and absence
of cumulative voting; (v) director removal and vacancies; (vi) limitations on
director liability; (vii) indemnification; (viii) special meetings of
shareholders; (ix) actions by shareholders without a meeting; (x) shareholder
nominations and proposals; (xi) business combinations; (xii) limitations on
ability to vote stock; (xiii) shareholders' rights to examine books and records;
and (xiv) dividends.. See "EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS."
Conduct of Business Pending the Merger. Pursuant to the Agreement, each of
HFNC and FCC generally have agreed that unless the prior written consent of the
other has been obtained, and except as otherwise expressly contemplated in the
Agreement, each of HFNC and FCC and their respective subsidiaries will (i)
operate its business only in the usual, regular, and ordinary course, (ii)
preserve intact its business organization and assets and maintain its rights and
franchises, (iii) use its reasonable efforts to maintain its current employee
relationships, and (iv) take no action which would (a) adversely affect the
ability of any party to obtain any consents required for the transactions
contemplated by the Agreement without imposition of a condition or restriction
of the type referred to in the Agreement or (b) adversely affect the ability of
either party to perform its covenants and agreements under the Agreement.
HFNC has also agreed that until the earlier of the Effective Time or
termination of the Agreement, HFNC will not, except with the prior written
consent of the chief executive officer or chief financial officer of FCC (which
consent shall not be unreasonably withheld), agree or commit to, or permit its
subsidiaries to agree or commit to, take certain actions, including generally,
but not limited to: (i) incurring, guaranteeing, or otherwise becoming
responsible for, any additional debt obligation for borrowed money in excess of
$500,000; (ii) declare or pay any dividends, except that HFNC generally may
declare and pay regular quarterly cash dividends on the shares of HFNC Common
Stock at a rate of $.08 per share, with usual and regular record and payments
dates in accordance with past practice (as previously disclosed by HFNC to FCC);
(iii) subject to certain exceptions, permit to become outstanding, any
additional shares of HFNC Common Stock, or any other capital stock of HFNC or
any of its subsidiaries or any rights to acquire such stock or any security
convertible into such stock; (iv) subject to certain exceptions, acquire direct
or indirect control of any other entity; (v) subject to certain exceptions,
grant any increase in compensation or benefits or pay any bonus to the employees
or officers of HFNC or any of its subsidiaries; or (vi) subject to certain
exceptions, enter into or amend any employment contract between HFNC or any of
its subsidiaries and any person, which HFNC or the relevant subsidiary does not
have an unconditional right to terminate without liability.
FCC has also agreed that until the earlier of the Effective Time or
termination of the Agreement, FCC will not, except for the prior written consent
of the chief executive officer or chief financial officer of HFNC (which consent
shall not be unreasonably withheld), agree or commit to, or permit its
subsidiaries to agree or
7
<PAGE> 21
commit to, take certain actions, including generally, but not limited to: (i)
declare or pay any dividends, except that FCC generally may declare and pay
regular quarterly cash dividends on the shares of FCC Common Stock at a rate of
$.15 per share; (ii) amend the FCC Articles or the FCC Bylaws in a manner which
would adversely effect in any manner the terms of the FCC Common Stock or the
ability of FCC to consummate the transactions contemplated by the Agreement; or
(iii) make any acquisition (including an acquisition of branch offices and
related deposit liabilities) that could affect the ability of FCC to consummate
the transactions contemplated by the Agreement in a reasonably timely manner.
See "DESCRIPTION OF TRANSACTION -- Conduct of Business Pending the Merger."
Option Agreements. HFNC and FCC have entered into reciprocal stock option
agreements (the "Option Agreements") pursuant to which (i) HFNC granted FCC an
option to purchase, under certain circumstances and subject to certain
adjustments and limitation, up to 3,421,300 shares, or approximately 19.9% of
the outstanding shares, of HFNC Common Stock at a price of $13.63 per share (the
"HFNC Option Agreement") and (ii) FCC granted HFNC an option to purchase, under
certain circumstances and subject to certain adjustments and limitations, up to
1,859,970 shares, or approximately 19.9% of the outstanding shares, of FCC
Common Stock at a price of $28.00 per share (the "FCC Option Agreement"). Under
the terms of each of the Option Agreements, the Total Profit (as defined in the
Option Agreements) and the Notional Total Profit (as defined in the Option
Agreements) that a holder may realize under each Option Agreement, as a result
of exercising the Option Agreement, may not exceed $7.5 million. The Option
Agreements are exerciseable upon the occurrence of certain events that create
the potential for another party to acquire control of the issuer. To the best
knowledge of HFNC and FCC, no such event which would permit exercise of either
of the Option Agreements has occurred as of the date of this Joint Proxy
Statement. The Option Agreements were granted by HFNC and FCC as a condition of
and in consideration of the other party entering into the Agreement and are
intended to increase the likelihood that the Merger will be effected by making
it more difficult and more expensive for a third party to acquire control of
either HFNC or FCC. See "DESCRIPTION OF TRANSACTION -- Option Agreements."
AMENDMENT OF FCC'S ARTICLES
At the FCC Special Meeting, the shareholders of FCC also will be voting on
a proposal to approve the FCC Articles Amendment thereby increasing the number
of authorized shares of FCC Common Stock from 25,000,000 to 50,000,000. See
"AMENDMENT OF FCC'S ARTICLES."
COMPARATIVE MARKET PRICES OF COMMON STOCK
Shares of FCC Common Stock and HFNC Common Stock are traded on the Nasdaq
NMS under the symbol "FCTR" and "HFNC," respectively.
The following table sets forth the reported closing sale prices per share
for FCC Common Stock and HFNC Common Stock and the equivalent per share prices
giving effect to the Merger (as explained below) for HFNC Common Stock on (i)
May 15, 1998, the last trading day preceding the public announcement of the
execution of the Agreement, and (ii) August , 1998, the latest
practicable date prior to the mailing of this Joint Proxy Statement.
<TABLE>
<CAPTION>
FCC HFNC EQUIVALENT PRICE
COMMON STOCK COMMON STOCK PER HFNC SHARE(1)
------------ ------------ -----------------
<S> <C> <C> <C>
May 15, 1998.......................... $24.50 $13.63 $13.97
August , 1998.......................
</TABLE>
- ---------------
(1) The equivalent price per share of HFNC Common Stock at each specified date
represents the closing sale price of a share of FCC Common Stock on such
date multiplied by an Exchange Ratio of .57. See "COMPARATIVE MARKET PRICES
AND DIVIDENDS."
There can be no assurance as to what the market price of the FCC Common
Stock will be if and when the Merger is consummated, or anytime thereafter.
8
<PAGE> 22
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables present selected consolidated financial data for FCC
and HFNC as of and for the respective interim periods ended March 31, 1998 and
1997 and as of and for each of the years in the five-year periods ended December
31, 1997 and June 30, 1997, respectively. The information for FCC has been
derived from the consolidated financial statements of FCC, including the
unaudited consolidated financial statements of FCC incorporated in this Joint
Proxy Statement by reference to the FCC March 31, 1998 Form 10-Q and audited
consolidated financial statements of FCC incorporated in this Joint Proxy
Statement by reference to the FCC 1997 Form 10-K, and should be read in
conjunction therewith and with the notes thereto. See "DOCUMENTS INCORPORATED BY
REFERENCE." The information for HFNC has been derived from the consolidated
financial statements of HFNC, including the unaudited consolidated financial
statements of HFNC incorporated in this Joint Proxy Statement by reference to
the HFNC March 31, 1998 Form 10-Q and audited consolidated financial statements
of HFNC incorporated in this Joint Proxy Statement by reference to the HFNC 1997
Form 10-K and should be read in conjunction therewith and with the notes
thereto. See "DOCUMENTS INCORPORATED BY REFERENCE." Historical results are not
necessarily indicative of results to be expected for any future period. In the
opinion of the respective management's of FCC and HFNC, all adjustments (which
include normal recurring adjustments and those related to the adoption of any
new accounting principles) necessary to arrive at a fair statement of interim
results of operations of FCC and HFNC, respectively, have been included. With
respect to FCC and HFNC, results for the three-months and nine-months periods,
respectively, ended March 31, 1998, are not necessarily indicative of results
which may be expected for any other interim period or for the year as a whole.
9
<PAGE> 23
FIRST CHARTER CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Interest income.................. $ 14,930 $ 12,990 $ 55,954 $ 50,907 $ 45,935 $ 35,824 $ 30,228
Interest expense................. 6,441 5,807 24,751 22,797 19,836 13,265 11,407
-------- -------- -------- -------- -------- -------- --------
Net interest income............ 8,489 7,183 31,203 28,110 26,099 22,559 18,821
Provision for loan losses........ 710 409 2,702 1,540 1,991 1,105 1,134
-------- -------- -------- -------- -------- -------- --------
Net interest income after
provision for loan losses.... 7,779 6,774 28,501 26,570 24,108 21,454 17,687
Noninterest income............... 2,566 2,213 9,452 7,271 6,278 5,560 5,394
Noninterest expense.............. 6,089 5,137 25,642 19,354 19,181 17,283 16,067
-------- -------- -------- -------- -------- -------- --------
Income before income taxes..... 4,256 3,850 12,311 14,487 11,205 9,731 7,014
Income taxes..................... 1,245 1,164 3,910 4,418 2,901 2,653 1,828
-------- -------- -------- -------- -------- -------- --------
Net income before cumulative
effect of change in
accounting principle......... 3,011 2,686 8,401 10,069 8,304 7,078 5,186
Cumulative effect of change in
accounting principle........... -- -- -- -- -- -- 300
-------- -------- -------- -------- -------- -------- --------
Net income..................... $ 3,011 $ 2,686 $ 8,401 $ 10,069 $ 8,304 $ 7,078 $ 5,486
======== ======== ======== ======== ======== ======== ========
PER SHARE DATA:(1)
Basic
Net income before cumulative
effect of change in
accounting principle......... $ 0.32 $ 0.29 $ 0.91 $ 1.10 $ 0.95 $ 0.81 $ 0.61
Net income..................... 0.32 0.29 0.91 1.10 0.95 0.81 0.65
Diluted
Net income before cumulative
effect of change in
accounting principle......... 0.32 0.29 0.90 1.09 0.94 0.80 0.61
Net income..................... 0.32 0.29 0.90 1.09 0.94 0.80 0.64
Cash dividends declared.......... 0.140 0.125 0.530 0.500 0.430 0.340 0.260
Period-end book value............ 8.70 8.20 8.39 7.80 7.08 6.18 5.79
BALANCE SHEET DATA (AT PERIOD END):
Total assets..................... $775,783 $675,099 $761,694 $680,257 $626,490 $536,182 $454,469
Loans, net....................... 540,628 463,086 515,799 449,988 408,761 346,412 289,487
Allowance for loan losses........ 8,088 6,661 8,004 6,528 6,056 5,056 4,605
Deposits......................... 635,834 562,154 621,354 569,856 515,434 450,986 393,398
Total shareholders' equity....... 81,173 72,877 77,804 71,721 64,571 54,092 49,047
PERFORMANCE RATIOS:
Net income to average
shareholders' equity(2)........ 15.20% 14.82% 11.04% 14.77% 14.28% 13.48% 11.12%
Net income to average total
assets(2)...................... 1.62 1.63 1.20 1.55 1.45 1.44 1.29
Shareholders' equity to total
assets......................... 10.46 10.80 10.21 10.54 10.31 10.09 10.79
</TABLE>
10
<PAGE> 24
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CAPITAL RATIOS:
Tier 1 risk-based capital........ 13.03% 14.30% 12.92% 14.47% 14.15% 14.25% 14.55%
Total risk-based capital......... 14.27 15.55 14.15 15.73 15.40 15.50 15.77
Leverage......................... 10.25 10.67 10.65 10.65 10.86 10.05 10.74
ASSET QUALITY RATIOS:
Loans to deposits................ 86.30% 83.56% 84.30% 80.11% 80.48% 77.93% 74.76%
Allowance for loan losses as a
percentage of gross loans...... 1.47 1.42 1.53 1.43 1.46 1.44 1.57
Net loans charged off during
period to average loans(2)..... 0.47 0.23 0.25 0.24 0.26 0.23 0.33
Problem assets as a percentage of
total assets................... 0.76 0.69 0.74 0.45 0.51 1.17 1.31
</TABLE>
- ---------------
(1) All per share data reflects a 6-for-5 stock split declared in the second
quarter of 1997, and a stock split effected in the form of a 33 1/3% stock
dividend declared in the fourth quarter of 1994.
(2) March 31, 1998 and 1997 amounts have been annualized.
11
<PAGE> 25
HFNC FINANCIAL CORP. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEARS ENDED JUNE 30,
------------------- -----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Interest income.............. $ 52,143 $ 48,801 $ 65,316 $ 52,142 $ 46,121 $ 47,810 $ 53,047
Interest expense............. 30,015 24,926 34,619 28,009 24,251 20,348 24,330
-------- -------- -------- -------- -------- -------- --------
Net interest income........ 22,128 23,875 30,697 24,133 21,870 27,462 28,717
Provision for loan losses
(recovered)................ (46) 200 (59) 337 486 1,352 4,791
-------- -------- -------- -------- -------- -------- --------
Net interest income after
provision for loan
losses................... 22,174 23,675 30,756 23,796 21,384 26,110 23,926
Noninterest income........... 6,474 946 1,202 1,817 1,430 2,636 1,341
Noninterest expense.......... 12,181 15,953 19,985 12,423 12,807 12,051 11,476
-------- -------- -------- -------- -------- -------- --------
Income before income
taxes.................... 16,467 8,668 11,973 13,190 10,007 16,695 13,791
Income taxes................. 6,442 3,337 4,609 4,566 3,857 6,379 7,213
-------- -------- -------- -------- -------- -------- --------
Net income before
cumulative effect of
change in accounting
principle................ 10,025 5,331 7,364 8,624 6,150 10,316 6,578
Cumulative effect of change
in accounting principle.... -- -- -- (1,050) -- 2,054 --
-------- -------- -------- -------- -------- -------- --------
Net income................. $ 10,025 $ 5,331 $ 7,364 $ 7,574 $ 6,150 $ 12,370 $ 6,578
======== ======== ======== ======== ======== ======== ========
PER SHARE DATA:(1)
Basic net income before
cumulative effect of
accounting change.......... $ 0.64 $ 0.33 $ 0.46 n/a n/a n/a n/a
Diluted net income before
cumulative effect of
accounting change.......... 0.61 0.33 0.45 n/a n/a n/a n/a
Basic net income............. 0.64 0.33 0.46 n/a n/a n/a n/a
Diluted net income........... 0.61 0.33 0.45 n/a n/a n/a n/a
Cash dividends declared...... 0.220 5.190(2) 5.260(2) n/a n/a n/a n/a
Period-end book value........ 9.83 9.23(2) 9.37(2) 14.34 n/a n/a n/a
BALANCE SHEET DATA (AT PERIOD
END):
Total assets................. $979,554 $842,917 $892,920 $788,878 $589,659 $574,676 $588,337
Loans, net................... 790,254 617,870 658,323 505,131 436,008 436,642 481,896
Allowance for loan losses.... 7,085 7,905 7,612 7,496 8,088 7,828 7,181
Deposits..................... 432,054 447,858 443,840 448,571 490,566 445,496 465,434
Total shareholders' equity... 168,920 158,736(2) 161,060(2) 246,504 81,812 73,172 60,803
PERFORMANCE RATIOS:
Net income to average
shareholders' equity(3).... 8.11% 2.91% 3.46% 4.22% 7.89% 17.57% 11.18%
Net income to average total
assets(3).................. 1.46 0.83 0.86 1.11 1.05 2.15 1.11
Shareholders' equity to total
assets..................... 17.24 18.83 18.04 31.25 13.87 12.73 10.33
</TABLE>
12
<PAGE> 26
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEARS ENDED JUNE 30,
------------------- -----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CAPITAL RATIOS:
Tier 1 risk-based capital.... 30.86% 34.08% 32.56% 61.64% 24.77% 21.77% 16.36%
Total risk-based capital..... 32.18 35.81 34.16 63.53 27.34 24.14 18.33
Leverage..................... 17.56 17.52 18.00 32.64 13.26 12.59 10.12
ASSET QUALITY RATIOS:
Loans to deposits............ 184.55% 139.73% 150.04% 114.28% 90.53% 99.77% 105.08%
Allowance for loan losses as
a percentage of gross
loans...................... 0.89 1.26 1.14 1.46 1.82 1.76 1.47
Net loans charged off
(recovered) during period
to average loans(3)........ 0.09 (0.05) (0.03) 0.20 0.05 0.16 0.33
Problem assets as a
percentage of total
assets..................... 0.73 0.99 0.87 1.41 2.17 3.70 5.46
</TABLE>
- ---------------
(1) During the June 30, 1996 fiscal year, HFNC converted from mutual to stock
form. Accordingly, the per share data for periods prior to June 30, 1996, is
marked as "n/a."
(2) Includes the payment of a $5.00 per share special distribution to
shareholders on March 18, 1997.
(3) March 31, 1998 and 1997 amounts have been annualized.
13
<PAGE> 27
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
The following table sets forth certain comparative per share data relating
to earnings before accounting changes, cash dividends, and book value on: (i) a
historical basis for FCC and HFNC; (ii) a pro forma combined basis per share of
FCC Common Stock, giving effect to the Merger; and (iii) an equivalent pro forma
basis per share of HFNC Common Stock, giving effect to the Merger. The FCC pro
forma combined information and the HFNC equivalent pro forma information give
effect to the Merger and reflect an Exchange Ratio of .57 of a share of FCC
Common Stock for each outstanding share of HFNC Common Stock. The Merger is
expected to be accounted for using the pooling-of-interests method of
accounting. The pro forma information gives effect to the Merger as though it
were consummated as of January 1, 1995. The pro forma data are presented for
information purposes only and are not necessarily indicative of the results of
operations or combined financial position that would have resulted had the
Merger been consummated at the dates or during the periods indicated, nor are
they necessarily indicative of future results of operations or combined
financial position. The pro forma book value per share data and the earnings per
share amounts do not reflect acquisition-related charges to be incurred in
connection with consummation of the Merger.
The information shown below should be read in conjunction with, and is
qualified in its entirety by, the historical consolidated financial statements
of FCC and HFNC, including the respective notes thereto. See "DOCUMENTS
INCORPORATED BY REFERENCE" and "-- Selected Consolidated Financial Data."
FIRST CHARTER CORPORATION AND HFNC FINANCIAL CORP.
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
INCOME PER SHARE
FCC
Basic.................................................. $ 0.91 $ 1.10 $ 0.95
Diluted................................................ 0.90 1.09 0.94
HFNC(1)
Basic.................................................. 0.69 0.58 n/a
Diluted................................................ 0.66 0.58 n/a
FCC pro forma, combined
Basic.................................................. 1.06 1.06 1.46
Diluted................................................ 1.03 1.06 1.45
HFNC pro forma equivalent(2)
Basic.................................................. 0.60 0.60 0.83
Diluted................................................ 0.58 0.60 0.83
CASH DIVIDENDS PER SHARE
FCC....................................................... 0.530 0.500 0.430
HFNC(1)(3)................................................ 5.280 0.120 n/a
FCC pro forma............................................. 3.540 0.568 0.430
HFNC pro forma equivalent(2).............................. 2.018 0.324 0.245
</TABLE>
14
<PAGE> 28
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
<S> <C> <C>
BOOK VALUE PER COMMON SHARE
FCC....................................................... $ 8.70 $ 8.39
HFNC...................................................... 9.83 9.23
FCC pro forma............................................. 13.07 12.79
HFNC pro forma equivalent (2)............................. 7.45 6.95
</TABLE>
- ---------------
(1) Converted from fiscal year-end (June 30) to FCC's fiscal year-end (December
31). In addition, during the June 30, 1996 fiscal year, HFNC converted from
mutual to stock form. Accordingly, the 1995 HFNC historical per share data
is marked as "n/a."
(2) The equivalent pro forma per share data for HFNC are computed by multiplying
FCC's pro forma information by .57, the Exchange Ratio.
(3) Includes the payment of a $5.00 per share special distribution to
shareholders on March 18, 1997.
SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following selected pro forma consolidated financial data for the three
months ended March 31, 1998 and 1997 and for the five-year period ended December
31, 1997, give effect to the Merger as of the date or at the beginning of the
periods indicated, with the Merger treated as a pooling of interests for
accounting purposes. The pro forma balance sheet data at March 31, 1998, reflect
preliminary estimates by FCC of acquisition-related charges to be incurred in
connection with consummation of the Merger; however, the income statement data
does not reflect the estimated acquisition-related charges. The selected pro
forma consolidated financial data as of December 31, 1997, 1996, 1995, 1994,
1993, and for the years then ended include historical operating results of HFNC
on a calendar year basis rather than on a June 30 fiscal year basis as
originally reported. Such calendar year financial data for HFNC has not been
audited. The selected pro forma consolidated financial data are presented for
informational purposes only and are not necessarily indicative of the
consolidated financial position or results of operations which actually would
have occurred if the Merger had been consummated at the date or at the beginning
of the periods indicated or which may be obtained in the future.
The information shown below should be read in conjunction with, and is
qualified in its entirety by, the historical consolidated financial statements
of FCC and HFNC, including the respective notes thereto. See "DOCUMENTS
INCORPORATED BY REFERENCE" and "-- Selected Consolidated Financial Data."
15
<PAGE> 29
SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31, (1)
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Interest income..................... $ 33,091 $ 29,606 $ 123,067 $ 111,540 $ 93,211 $ 81,400 $ 81,215
Interest expense.................... 16,780 14,515 62,828 52,310 47,783 34,119 33,394
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income............... 16,311 15,091 60,239 59,230 45,428 47,281 47,821
Provision for loan losses........... 662 648 2,684 1,873 2,331 1,764 3,522
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after
provision for loan losses....... 15,649 14,443 57,555 57,357 43,097 45,517 44,299
Noninterest income................ 3,737 2,527 15,327 8,537 8,242 7,482 7,431
Noninterest expense................. 9,941 10,081 42,947 36,568 31,850 29,683 28,451
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes........ 9,445 6,889 29,935 29,326 19,489 23,316 23,279
Income taxes........................ 3,275 2,334 10,765 9,723 5,631 8,610 8,812
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income before cumulative
effect of change in accounting
principle....................... 6,170 4,555 19,170 19,603 13,858 14,706 14,467
Cumulative effect of change in
accounting principle.............. -- -- -- -- (1,050) -- 2,354
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income........................ $ 6,170 $ 4,555 $ 19,170 $ 19,603 $ 12,808 $ 14,706 $ 16,821
========== ========== ========== ========== ========== ========== ==========
PER SHARE DATA:(2)
Basic
Net income before cumulative
effect of change in accounting
principle....................... $ 0.34 $ 0.25 $ 1.06 $ 1.06 $ 1.58 $ 1.67 $ 1.70
Net income........................ 0.34 0.25 1.06 1.06 1.46 1.67 1.98
Diluted
Net income before cumulative
effect of change in accounting
principle....................... 0.33 0.24 1.03 1.06 1.57 1.68 1.69
Net income........................ 0.33 0.24 1.03 1.06 1.45 1.68 1.97
Cash dividends declared............. 0.186 3.015 3.540 0.568 0.430 0.340 0.260
Period-end book value............... 13.07 12.19 12.79 17.01 16.28 14.91 13.90
BALANCE SHEET DATA (AT PERIOD END):
Total assets........................ $1,763,530 $1,518,016 $1,672,480 $1,581,870 $1,552,749 $1,122,327 $1,028,743
Loans, net.......................... 1,330,882 1,080,956 1,246,228 1,043,862 859,358 781,551 741,039
Allowance for loan losses........... 15,173 14,566 15,263 14,409 13,795 13,076 12,402
Deposits............................ 1,067,888 1,010,012 1,059,262 1,013,810 985,230 900,709 857,863
Total shareholders' equity.......... 253,200 231,613 243,909 323,107 308,073 130,409 117,735
PERFORMANCE RATIOS:
Net income to average shareholders'
equity(3)......................... 10.10% 5.97% 7.47% 6.23% 9.83% 11.73% 13.36%
Net income to average total
assets(3)......................... 1.47 1.18 1.21 1.34 1.16 1.37 1.43
Shareholders' equity to total
assets............................ 14.17 15.26 14.58 20.43 19.84 11.62 11.44
CAPITAL RATIOS:
Tier 1 risk-based capital........... 21.53% 23.78% 21.95% 33.98% 35.90% 18.28% 17.23%
Total risk-based capital............ 22.81 25.26 23.30 35.47 37.48 20.06 18.99
Leverage............................ 14.31 14.59 14.94 20.83 23.94 11.53 11.31
ASSET QUALITY RATIOS:
Loans to deposits................... 126.05% 108.47% 119.09% 104.39% 88.62% 88.22% 87.83%
Allowance for loan losses as a
percentage of gross loans......... 1.13 1.33 1.21 1.36 1.58 1.65 1.65
Net loans charged off during period
to average loans(3)............... 0.23 0.18 0.16 0.17 0.19 0.11 0.31
Problem assets as a percentage of
total assets...................... 0.74 0.86 0.77 0.72 1.03 2.14 2.86
</TABLE>
- ---------------
(1) For the purposes of preparing the Selected Pro Forma Consolidated Financial
Data, HFNC's financial information has been converted from its fiscal
year-end (June 30) to FCC's fiscal year-end (December 31).
(2) All per share data reflects a 6-for-5 stock split declared by FCC in the
second quarter of 1997, and a stock split effected in the form of a 33 1/3%
stock dividend declared by FCC in the fourth quarter of 1994.
(3) March 31, 1998 and 1997 amounts have been annualized.
16
<PAGE> 30
MEETINGS OF SHAREHOLDERS
DATE, PLACE, TIME, AND PURPOSE
HFNC. This Joint Proxy Statement is being furnished to the holders of HFNC
Common Stock in connection with the solicitation by the HFNC Board of proxies
for use at the HFNC Special Meeting at which HFNC shareholders will be asked to
vote upon (i) a proposal to approve the Agreement, and (ii) such other business
as may properly come before the HFNC Special Meeting. The HFNC Special Meeting
will be held at , at 10:00 am., local time, on September 29,
1998. See "DESCRIPTION OF TRANSACTION."
FCC. This Joint Proxy Statement is being furnished to the holders of FCC
Common Stock in connection with the solicitation by the FCC Board of proxies for
use at the FCC Special Meeting at which FCC shareholders will be asked to vote
upon (i) a proposal to approve the Agreement, including the issuance of shares
of FCC Common Stock pursuant to the Agreement, (ii) a proposal to approve the
FCC Articles Amendment, and (iii) such other business as may properly come
before the FCC Special Meeting. The FCC Special Meeting will be held at
at 10:00 a.m., local time, on September 29, 1998. See
"DESCRIPTION OF TRANSACTION."
RECORD DATE, VOTING RIGHTS, REQUIRED VOTE, AND REVOCABILITY OF PROXIES
HFNC. The close of business on August 3, 1998, has been fixed as the HFNC
Record Date for determining holders of outstanding shares of HFNC Common Stock
entitled to notice of and to vote at the HFNC Special Meeting. Only holders of
HFNC Common Stock of record on the books of HFNC at the close of business on the
HFNC Record Date are entitled to notice of and to vote at the HFNC Special
Meeting. As of the HFNC Record Date, there were shares of HFNC
Common Stock issued and outstanding held by approximately holders
of record.
Each holder of record of shares of HFNC Common Stock on the HFNC Record
Date is entitled to cast one vote per share on (i) the proposal to adopt the
Agreement, and (ii) on any other matter properly submitted for the vote of the
HFNC shareholders at the HFNC Special Meeting. The presence, either in person or
by properly executed proxy, of the holders of a majority of the outstanding
shares of HFNC Common Stock entitled to vote at the HFNC Special Meeting is
necessary to constitute a quorum at the HFNC Special Meeting.
HFNC intends to count shares of HFNC Common Stock present in person at the
HFNC Special Meeting but not voting, and shares of HFNC Common Stock for which
it has received proxies but with respect to which holders of shares have
abstained on any matter, as present at the HFNC Special Meeting for purposes of
determining the presence or absence of a quorum for the transaction of business.
Approval of the Agreement requires the affirmative vote of the holders of a
majority of the issued and outstanding shares of HFNC Common Stock entitled to
vote at the HFNC Special Meeting. Brokers who hold shares in street name for
customers who are the beneficial owners of such shares are prohibited from
giving a proxy to vote shares held for such customers on the approval of the
Agreement without specific instructions from such customers. Given that the
approval of the Agreement requires the affirmative vote of the holders of a
majority of the outstanding shares of HFNC Common Stock entitled to be voted
thereon, any abstention, non-voting share or "broker non-vote" with respect to
such shares of HFNC Common Stock will have the same effect as a vote AGAINST the
approval of the Agreement.
Shares of HFNC Common Stock represented by properly executed proxies, if
such proxies are received prior to or at the HFNC Special Meeting and not
revoked, will be voted in accordance with the instructions indicated on the
proxies. IF NO INSTRUCTIONS ARE INDICATED, SUCH PROXIES WILL BE VOTED (I) FOR
THE PROPOSAL TO APPROVE THE AGREEMENT AND (II) IN THE DISCRETION OF THE
PROXYHOLDER AS TO ANY OTHER MATTER WHICH MAY COME PROPERLY BEFORE THE HFNC
SPECIAL MEETING. IF NECESSARY, THE PROXYHOLDER MAY VOTE IN FAVOR OF A PROPOSAL
TO ADJOURN THE HFNC SPECIAL MEETING IN ORDER TO PERMIT FURTHER SOLICITATION OF
PROXIES IN THE EVENT THERE ARE NOT SUFFICIENT VOTES TO APPROVE THE FOREGOING
PROPOSALS AT THE TIME OF THE HFNC SPECIAL MEETING. HOWEVER, NO PROXYHOLDER WILL
VOTE ANY PROXIES VOTED AGAINST APPROVAL OF THE AGREEMENT FOR A PROPOSAL TO
ADJOURN THE HFNC SPECIAL MEETING.
17
<PAGE> 31
A HFNC shareholder who has given a proxy solicited by the HFNC Board may
revoke it at any time prior to its exercise at the HFNC Special Meeting by
either (i) giving written notice of revocation to the Corporate Secretary of
HFNC, (ii) properly submitting to HFNC a duly executed proxy bearing a later
date, or (iii) attending the HFNC Special Meeting and voting in person. All
written notices of revocation and other communications with respect to
revocation of proxies should be addressed as follows: HFNC Financial Corp., 139
South Tryon Street, Charlotte, North Carolina 28202; Attention: Ann G. Benton,
Corporate Secretary.
The directors and executive officers of HFNC (including immediate family
members and affiliated entities) owned, as of the HFNC Record Date,
shares, or approximately % of the outstanding shares of HFNC
Common Stock. The directors and executive officers of FCC owned, as of the HFNC
Record Date, shares, or approximately % of the outstanding
shares of HFNC Common Stock.
In addition, as of the HFNC Record Date, HFNC, as a fiduciary, custodian,
and agent, had sole or shared voting power over shares, or
%, of the issued and outstanding shares of HFNC Common Stock, under trust
agreements and other instruments and agreements, including shares held as
trustee or agent of various HFNC employee benefit and stock purchase plans. HFNC
also held shares, or %, of the issued and outstanding shares
of FCC Common Stock as of the FCC Record Date. It is the policy of HFNC not to
vote such shares in the absence of instructions from other appropriate parties
having an interest in such stock, such as co-fiduciaries and participants in
such plans, unless the subsidiary has sole authority with respect to shares
thereto.
For information with respect to beneficial owners of 5% or more of the
outstanding shares of HFNC Common Stock, and information with respect to the
number and percentage of outstanding shares of HFNC Common Stock beneficially
owned by the directors and executive officers of HFNC, see "Beneficial Ownership
of Common Stock by Certain Beneficial Owners and Management" in the HFNC Annual
Meeting Proxy Statement for the HFNC 1997 Annual Meeting of Shareholders. See
"Documents Incorporated by Reference."
FCC. The close of business on August 3, 1998, has been fixed as the FCC
Record Date for determining holders of outstanding shares of FCC Common Stock
entitled to notice of and to vote at the FCC Special Meeting. Only holders of
FCC Common Stock of record on the books of FCC at the close of business on the
FCC Record Date are entitled to notice of and to vote at the FCC Special
Meeting. As of the FCC Record Date, there were shares of FCC
Common Stock issued and outstanding held by approximately holders
of record.
Each holder of record of shares of FCC Common Stock on the FCC Record Date
is entitled to cast one vote per share on (i) the proposal to approve the
Agreement, including the issuance of shares of FCC Common Stock pursuant to the
Agreement, (ii) the proposal to approve the FCC Articles Amendment, and (iii) on
any other matter properly submitted for the vote of the FCC shareholders at the
FCC Special Meeting. The presence, either in person or by properly executed
proxy, of the holders of a majority of the outstanding shares of FCC Common
Stock entitled to vote at the FCC Special Meeting is necessary to constitute a
quorum at the FCC Special Meeting.
FCC intends to count shares of FCC Common Stock present in person at the
FCC Special Meeting but not voting, and shares of FCC Common Stock for which it
has received proxies but with respect to which holders of shares have abstained
on any matter, as present at the FCC Special Meeting for purposes of determining
the presence or absence of a quorum for the transaction of business. Approval of
the Agreement requires the affirmative vote of the holders of a majority of the
outstanding shares of FCC Common Stock entitled to be voted at the FCC Special
Meeting, while approval of the FCC Articles Amendment requires the affirmative
vote of a majority of the votes cast at the FCC Special Meeting by holders of
FCC Common Stock. Brokers who hold shares in street name for customers who are
the beneficial owners of such shares are prohibited from giving a proxy to vote
shares held for such customers on the approval of the Agreement or the FCC
Articles Amendment without specific instructions from such customers. Given that
the approval of the Agreement requires the affirmative vote of the holders of a
majority of the outstanding shares of FCC Common Stock entitled to be voted at
the FCC Special Meeting, any abstention, non-voting share or "broker
18
<PAGE> 32
non-vote" with respect to such shares of FCC Common Stock will have the effect
as a vote AGAINST the approval of the Agreement. However, given that the
approval of the FCC Articles Amendment requires the affirmative vote of a
majority of the votes cast at the FCC Special Meeting by holders of FCC Common
Stock, any abstention, non-voting share, or "broker-non-vote" with respect to
such shares of FCC Common Stock will not have the effect of a vote AGAINST the
approval of the FCC Articles Amendment.
Shares of FCC Common Stock represented by properly executed proxies, if
such proxies are received prior to or at the FCC Special Meeting and not
revoked, will be voted in accordance with the instructions indicated on the
proxies. IF NO INSTRUCTIONS ARE INDICATED, SUCH PROXIES WILL BE VOTED (i) FOR
THE PROPOSAL TO APPROVE THE AGREEMENT, (ii) FOR THE PROPOSAL TO APPROVE THE FCC
ARTICLES AMENDMENT, AND (iii) IN THE DISCRETION OF THE PROXYHOLDER AS TO ANY
OTHER MATTER WHICH MAY COME PROPERLY BEFORE THE FCC SPECIAL MEETING. IF
NECESSARY, THE PROXYHOLDER MAY VOTE IN FAVOR OF A PROPOSAL TO ADJOURN THE FCC
SPECIAL MEETING IN ORDER TO PERMIT FURTHER SOLICITATION OF PROXIES IN THE EVENT
THERE ARE NOT SUFFICIENT VOTES TO APPROVE THE FOREGOING PROPOSAL AT THE TIME OF
THE FCC SPECIAL MEETING. HOWEVER, NO PROXYHOLDER WILL VOTE ANY PROXIES VOTED
AGAINST APPROVAL OF THE AGREEMENT OR THE FCC ARTICLES AMENDMENT FOR A PROPOSAL
TO ADJOURN THE FCC SPECIAL MEETING.
A FCC shareholder who has given a proxy solicited by the FCC Board may
revoke it at any time prior to its exercise at the FCC Special Meeting by either
(i) giving written notice of revocation to the Corporate Secretary of FCC, (ii)
properly submitting to FCC a duly executed proxy bearing a later date, or (iii)
attending the FCC Special Meeting and voting in person. All written notices of
revocation and other communications with respect to revocation of proxies should
be addressed as follows: First Charter Corporation, 22 Union Street North,
Concord, North Carolina 28025.
The directors and executive officers of FCC (including immediate family
members and affiliated entities) owned, as of the FCC Record Date,
shares, or approximately % of the outstanding shares of FCC
Common Stock. The directors and executive officers of HFNC owned, as of the FCC
Record Date, shares, or approximately % of the outstanding
shares of FCC Common Stock.
In addition, as of the FCC Record Date, FCC, as a fiduciary, custodian, and
agent, had sole or shared voting power over shares, or %, of
the issued and outstanding shares of FCC Common Stock, under trust agreements
and other instruments and agreements, including shares held as trustee or agent
of various FCC employee benefit and stock purchase plans. FCC also held
shares, or %, of the issued and outstanding shares of HFNC
Common Stock as of the HFNC Record Date. It is the policy of FCC not to vote
such shares in the absence of instructions from other appropriate parties having
an interest in such stock, such as co-fiduciaries and participants in such
plans, unless the subsidiary has sole authority with respect to shares thereto.
For information with respect to beneficial owners of 5% or more of the
outstanding shares of FCC Common Stock, and information with respect to the
number and percentage of outstanding shares of FCC Common Stock beneficially
owned by the directors and executive officers of FCC, see "Principal
Shareholders" in the FCC Annual Meeting Proxy Statement for the FCC 1998 Annual
Meeting of Shareholders. See "DOCUMENTS INCORPORATED BY REFERENCE."
SOLICITATION OF PROXIES
Proxies may be solicited by the directors, officers, employees, and agents
of HFNC and FCC by mail, in person, or by telephone or telegraph. Such persons
will receive no additional compensation for such services. HFNC and FCC may make
arrangements with brokerage firms and other custodians, nominees, and
fiduciaries, if any, for the forwarding of solicitation materials to the
beneficial owners of HFNC Common Stock and FCC Common Stock held of record by
such persons. Any such brokers, custodians, nominees, and fiduciaries will be
reimbursed for the reasonable out-of-pocket expenses incurred by them for such
services. All expenses associated with the fees for filing the Registration
Statement with the SEC and expenses related to the printing and mailing of this
Joint Proxy Statement will be shared by FCC and HFNC as provided in the
Agreement. See "DESCRIPTION OF TRANSACTION -- Expenses and Fees."
19
<PAGE> 33
DISSENTERS' RIGHTS
HFNC Common Stock. Holders of HFNC Common do not have dissenters' rights
with respect to the Merger.
FCC Common Stock. Holders of FCC Common Stock do not have dissenters'
rights with respect to the Merger, the issuance of shares of FCC Common Stock
pursuant to the Agreement, or the FCC Articles Amendment.
DESCRIPTION OF TRANSACTION
The following information describes material aspects of the Merger. This
description does not purport to be complete and is qualified in its entirety by
reference to the Appendices hereto, including the Agreement, which is included
as Appendix A to this Joint Proxy Statement and incorporated herein by
reference. All shareholders are urged to read the Appendices in their entirety.
GENERAL
The Agreement provides for the acquisition of HFNC by FCC pursuant to the
merger of HFNC with and into FCC, with the effect that FCC will be the surviving
corporation resulting from the Merger. At the Effective Time, each share of HFNC
Common Stock then issued and outstanding (excluding shares held by HFNC, FCC, or
their respective subsidiaries, in each case other than shares held in a
fiduciary capacity or as a result of debts previously contracted) will be
converted into and exchanged for .57 of a share of FCC Common Stock, subject to
possible adjustment as described under "-- Possible Adjustment of Exchange
Ratio."
No fractional shares of FCC Common Stock will be issued. Rather, cash
(without interest) will be paid in lieu of any fractional share to which any
holder of HFNC Common Stock would be entitled upon consummation of the Merger,
in an amount equal to such fractional part of a share of FCC Common Stock
multiplied by the closing price of such common stock on the Nasdaq NMS (as
reported by The Wall Street Journal or, if not reported thereby, another
authoritative source as reasonably selected by FCC) on the last trading day
preceding the Effective Time.
As of the HFNC Record Date, HFNC had shares of HFNC Common
Stock outstanding. Based upon the Exchange Ratio, upon consummation of the
Merger, FCC will issue approximately shares of FCC Common Stock.
Accordingly, FCC would then have outstanding approximately shares
of FCC Common Stock, based on the number of shares of FCC Common Stock
outstanding on the FCC Record Date (excluding shares to be issued pursuant to
the exercise of stock options and for other purposes).
POSSIBLE ADJUSTMENT OF EXCHANGE RATIO
Under certain circumstances described below, the Exchange Ratio could be
adjusted pursuant to certain provisions of the Agreement. UNDER NO CIRCUMSTANCES
WOULD THE EXCHANGE RATIO BE LESS THAN .57 OF A SHARE OF FCC COMMON STOCK FOR
EACH SHARE OF HFNC COMMON STOCK. An adjustment could occur only if the HFNC
Board elects to terminate the Agreement pursuant to the provisions of the
Agreement described below, and if FCC then elects to avoid termination of the
Agreement by increasing the Exchange Ratio.
If:
(i) the Average Closing Price (as defined below) is less than $19.60
and
(ii) (a) the number obtained by dividing the Average Closing Price by
$24.50 (the "FCC Ratio") is less than (b) the number obtained by dividing
the weighted average of the closing prices of the common stock of the bank
holding companies defined as the "Index Group" in the Agreement (the "Index
Price") on the Determination Date (as defined below) by the Index Price on
May 15, 1998, less 15% (the "Index Ratio"), then
20
<PAGE> 34
HFNC may elect to terminate the Agreement (the "Stock Price Termination Right")
unless FCC increases the Exchange Ratio such that the shares of FCC Common Stock
issued in exchange for each share of HFNC Common Stock have a value (based on
the Average Closing Price) equal to the lesser of (i) $11.17 and (ii) the value
(based on the Average Closing Price) of the shares of FCC Common Stock that
would have been exchanged for each share of HFNC Common Stock if the relative
performance of FCC Common Stock as determined above was 15% lower than the
relative performance of the Index Group. If the Merger is approved by the HFNC
shareholders, the HFNC Board may elect not to terminate the Agreement and to
consummate the Merger without resoliciting the HFNC shareholders even if HFNC's
Stock Price Termination Right is triggered and as a result of the Exchange
Ratio, the value of the shares of FCC Common Stock (valued at the Average
Closing Price) issued in exchange for each share of HFNC Common Stock would be
less than the lesser of (i) $11.17 and (ii) the value (based on the Average
Closing Price) of the shares of FCC Common Stock that would have been exchanged
for each share of HFNC Common Stock if the relative performance of FCC Common
Stock as determined above was 15% lower than the relative performance of the
Index Group.
The Average Closing Price is the average of the daily last sales prices of
FCC Common Stock as reported on the Nasdaq NMS (as reported by The Wall Street
Journal, or, if not reported thereby, another authoritative source as chosen by
FCC) for 10 consecutive full trading days in which such shares are traded on the
Nasdaq NMS ending at the close of trading on the Determination Date.
The Determination Date is the later of the date of the Meetings and the
date on which consent to the Merger of the Federal Reserve shall be received
(without regard to any requisite waiting period thereof).
These conditions reflect the parties' agreement that HFNC shareholders will
assume the risk of declines in the value of FCC Common Stock to $19.60. Any
adjustment of the Exchange Ratio below a decline in the price of FCC Common
Stock to $19.60 would be dependent on whether the Average Closing Price of FCC
Common Stock is less than a market basket of comparable bank holding company
common stocks (the Index Group referenced above) by more than 15%.
In making its determination of whether to terminate the Agreement, the HFNC
Board will take into account, consistent with its fiduciary duties, all relevant
facts and circumstances that exist at such time, including, without limitation,
information concerning the business, financial condition, results of operations,
and prospects of FCC (including the recent performance of FCC Common Stock, the
historical financial data of FCC, customary statistical measurements of FCC's
financial performance, and the future prospects for FCC Common Stock following
the Merger), and the advice of its financial advisor and legal counsel. If the
HFNC Board elects to terminate the Agreement, FCC would then determine whether
to proceed with the Merger at the higher Exchange Ratio. In making this
determination, the principal factors FCC will consider include the projected
effect of the Merger on FCC's pro forma earnings per share and whether FCC's
assessment of HFNC's earning potential as part of FCC justifies the issuance of
an increased number of shares of FCC Common Stock. If FCC declines to adjust the
Exchange Ratio, HFNC may elect to proceed without the adjustment, provided it
does so within 10 days of the Determination Date. FCC IS UNDER NO OBLIGATION TO
ADJUST THE EXCHANGE RATIO.
The operation of the adjustment mechanism can be illustrated by three
scenarios. (For purposes of the scenarios, it has been assumed that the initial
Exchange Ratio is .57, the Starting Price of FCC Common Stock is $24.50, and the
Index Price, as of the Starting Date, is $100.)
(1) The first scenario occurs if the Average Closing Price is not less
than $19.60. Under this scenario, regardless of any comparison between the
FCC Ratio and the Index Ratio, there would be no possible adjustment to the
Exchange Ratio, even though the value of the consideration to be received
by HFNC shareholders could have fallen from a pro forma $13.97 per share,
as of the Starting Date, to $11.17 per share, as of the Determination Date.
(2) The second scenario occurs if the Average Closing Price is less
than $19.60, but the FCC Ratio is not below the Index Ratio (meaning the
decline in the price of the FCC Common Stock compared to the Starting Price
is not greater than the decline of the common stock prices of the Index
Group less
21
<PAGE> 35
15%). Under this scenario, there also would be no possible adjustment to
the Exchange Ratio, even though the value of the consideration to be
received by HFNC shareholders would have fallen from a pro forma $13.97 per
share, as of the Starting Date, to an amount based on the then lower
Average Closing Price of FCC Common Stock, as of the Determination Date.
(3) The third scenario occurs if the Average Closing Price declines
below $19.60 and the FCC Ratio is below the Index Ratio (meaning the
decline in the price of FCC Common Stock compared to the Starting Price is
not greater than the decline of the common stock price of the Index Group
less 15%). Under this scenario, the adjustment in the Exchange Ratio is
designed to ensure, subject to the HFNC Board exercising its right to
terminate the Agreement and the FCC Board electing to avoid such
termination that, if the Merger is consummated the HFNC shareholders
receive shares of FCC Common Stock having a value (based upon the Average
Closing Price) that corresponds to at least $11.17 or a 15% decline from
the stock price performance reflected by the Index Group, whichever is
less.
For example, if the Average Closing Price were $18.00, and the Index
Price as of the Determination Date were $90, the FCC Ratio (.73) would be
below the Index Ratio (.75). HFNC could terminate the Agreement unless FCC
elected within five days to increase the Exchange Ratio to equal .5856,
which represents the lesser of (a) 0.6206 [the result of dividing $11.17
(the product of $19.60 and the .57 Exchange Ratio) by the Average Closing
Price ($18.00), rounded to the nearest ten thousandth] and (b) .5856 [the
result of dividing the Index Ratio at the Determination Date (.75) times
.57, by the FCC Ratio (.73), rounded to the nearest ten thousandth]. Based
upon the assumed $18.00 Average Closing Price, the new Exchange Ratio would
represent a value to the HFNC shareholders of $10.54 per share.
If the Average Closing Price were $18.00, and the Index Price as of
the Determination Date, were $100, the FCC Ratio (.73) would be below the
Index Ratio (.85, or 1 minus .15), HFNC could terminate the Agreement
unless FCC elected within five days to increase the Exchange Ratio to equal
.6206, which represents the lesser of (a) .6206 [the result of dividing
$11.17 (the product of $19.60 and the .57 Exchange Ratio) by the Average
Closing Price ($18.00), rounded to the nearest ten thousandth] and (b)
.6637 [the result of dividing the Index Ratio at the Determination Date
(.85) times .57, by the FCC Ratio (.73), rounded to the nearest ten
thousandth]. Based upon the assumed $18.00 Average Closing Price, the new
Exchange Ratio would represent a value to the HFNC shareholders of $11.17
per share.
However, it is possible that the HFNC Board would not elect to exercise its
termination right even if the Average Closing Price is below $19.60 and the FCC
Ratio is below the Index Ratio. Under these circumstances, the Exchange Ratio
would remain at .57, regardless of the fact that the Average Closing Price is
below $19.60. Conversely it is possible that if the HFNC Board does elect to
exercise its termination right, the FCC Board would not elect to increase the
Exchange Ratio to prevent such termination, and under these circumstances the
Agreement would terminate.
As of the date of this Joint Proxy Statement, the closing price of FCC
Common Stock on the Nasdaq NMS was $ , which represents a value to HFNC
shareholders based on the Exchange Ratio of .57 of $ per share.
The actual market value of a share of FCC Common Stock at the Effective
Time and at the time certificates for those shares are delivered following
surrender and exchange of Certificates for shares of HFNC Common Stock may be
more or less than the Average Closing Price. HFNC shareholders are urged to
obtain current market quotations for FCC Common Stock. See "COMPARATIVE MARKET
PRICES AND DIVIDENDS."
As of the HFNC Record Date, HFNC had shares of HFNC Common
Stock outstanding. Based upon the Exchange Ratio, upon consummation of the
Merger, FCC will issue approximately shares of FCC Common Stock.
EFFECT OF THE MERGER ON HFNC OPTIONS
At the Effective Time, each HFNC Option granted by HFNC under the HFNC
Stock Plans (as defined in the Agreement) that is outstanding at the Effective
Time, whether or not exercisable, will be converted into
22
<PAGE> 36
and become an option with respect to FCC Common Stock, and FCC will assume each
HFNC Option, in accordance with the terms of the HFNC Stock Plan and stock
option or other agreement by which it is evidenced, except that from and after
the Effective Time, (i) FCC and its Compensation Committee will be substituted
for HFNC and the committee of the HFNC Board administering such HFNC Stock Plan,
( ii) each HFNC Option assumed by FCC may be exercised solely for or converted
into shares of FCC Common Stock, (iii) the number of shares of FCC Common Stock
subject to such HFNC Option will be equal to the number of shares of HFNC Common
Stock subject to such HFNC Option immediately prior to the Effective Time
multiplied by the Exchange Ratio and rounding down to the nearest whole share,
and (iv) the per share exercise price under each such HFNC Option will be
adjusted by dividing the per share exercise price under each such HFNC Option by
the Exchange Ratio and rounding up to the nearest cent.
BACKGROUND OF AND REASONS FOR THE MERGER
Background of the Merger. HFNC completed its initial pubic offering of
HFNC Common Stock on December 28, 1995 in connection with the conversion of Home
Federal from mutual to stock form. HFNC and Home Federal engaged Sandler O'Neill
as a financial and marketing advisor in connection with the offering of HFNC
Common Stock in the Conversion. The Conversion resulted in net proceeds of
$168.4 million and, due in large part to such conversion proceeds, HFNC's equity
to assets ratio at December 31, 1995 was 33.7%. Subsequently, HFNC had numerous
discussions with Sandler O'Neill concerning, among other things, leveraging its
capital position, enhancing shareholder value, and other strategic alternatives,
including the payment of a special distribution. As part of the effort to
enhance shareholder value, HFNC announced in February 1997 a special
distribution of $5.00 per share which was paid on March 18, 1997. In addition,
in furtherance of its leveraging strategy and as a means to enhance the value of
its franchise, during fiscal 1997, HFNC increased its loan portfolio by $153.2
million or 30.3% and opened both a new branch office and loan origination
facility. For fiscal 1997, HFNC's return on average equity, excluding the
special SAIF assessment, was 4.34% and its equity to assets ratio at June 30,
1997 was 18.0%.
Notwithstanding such efforts, the HFNC Board was not satisfied with HFNC's
return on equity and its ability to continue to prudently leverage its assets
and thereby enhance profitability. As a result, Sandler O'Neill met with H. Joe
King, Jr. and J. Harold Barnes, Jr. on April 25, 1997 to review HFNC's financial
performance and its strategic alternatives. On May 12, 1997, Sandler O'Neill met
with the HFNC Board to update the HFNC Board on market conditions and to discuss
HFNC's strategic alternatives, including the possibility of a sale of HFNC as a
means to enhance shareholder value. On May 30, 1997, the HFNC Board met again
with Sandler O'Neill to discuss a possible sale. At such meeting, Sandler
O'Neill identified eight possible acquirors and reviewed the benefits of a
potential transaction with each company. Given the large capital base and market
capitalization of HFNC, the potential acquirors were all significantly larger
than HFNC. On June 17, 1997, the HFNC Board met to further consider the May 30,
1997 meeting and the presentation by Sandler O'Neill, the ability of HFNC to
profitably deploy its capital through long-term growth in an increasingly
competitive industry, and the ability of HFNC to provide its shareholders with
the level of returns necessary to remain an independent financial institution.
After a lengthy review and discussion of such factors, the HFNC Board decided to
engage Sandler O'Neill to serve as HFNC's financial advisor to identify
potential acquirors and explore the benefits of a possible sale of HFNC.
In early July 1997, Sandler O'Neill contacted eight institutions or their
holding companies to determine their possible interest in pursuing an
acquisition of HFNC and presentations were made to five companies between July
and early August 1997. Following the initial presentations, follow-up
conversations were held by Sandler O'Neill with each party and a meeting was
held between HFNC and one institution on July 30, 1997 to discuss preliminarily
a possible acquisition of HFNC by such company. In addition, in late August, a
presentation was made to an additional institution which expressed interest in
HFNC. Subsequently, five of these six companies advised Sandler O'Neill that
they were either not interested in pursuing a possible acquisition of HFNC at
that time or would only consider discussions at a price level below the then
market price of HFNC Common Stock. Sandler O'Neill and HFNC pursued discussions
with the remaining company through the middle of September 1997. On September
19, 1997, Sandler O'Neill presented to the HFNC Board a status report on the
discussions and marketing activities which included a presentation with
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respect to a possible transaction with the institution with whom discussions
were ongoing. The HFNC Board authorized Sandler O'Neill and management to
continue discussions with this institution to determine if this institution was
interested in making a formal proposal to acquire HFNC. Discussions continued
for several more weeks. Subsequently, this institution advised Sandler O'Neill
and HFNC that it was not interested in making a formal offer.
During October and November, Sandler O'Neill and HFNC evaluated whether a
possible strategic combination in the form of a merger of equals type
transaction would be in the long-term interests of HFNC shareholders. In early
December, Sandler O'Neill made a presentation to FCC regarding a merger with
HFNC. Between December 1997 and January 1998, one of the companies initially
contacted by Sandler O'Neill initiated further discussions with HFNC, however,
such company chose not to make a formal offer. By mid January there were active
discussions between HFNC and FCC and their advisors, including a meeting on
January 26, 1998 between Sandler O'Neill and Wheat First. Another meeting was
held on March 20, 1998 between HFNC, Sandler O'Neill, FCC, and Wheat First to
further discuss the transaction. On April 24, 1998, the HFNC Board met to
consider the preliminary terms of a merger transaction with FCC and to discuss
with Sandler O'Neill the financial aspects of such transaction.
In early May 1998, representatives of both HFNC and FCC conducted due
diligence reviews of the other's financial condition, business, and operations.
Concurrently, the management of HFNC reviewed and revised several drafts of the
definitive agreement with the assistance of HFNC's legal counsel and financial
advisor and a draft of the definitive agreement was delivered to each of HFNC's
directors for their review. On May 17, 1998, the HFNC Board reviewed the
proposed transaction and the definitive agreement with HFNC's legal counsel and
Sandler O'Neill. The HFNC Board considered all factors deemed relevant,
including Sandler O'Neill's opinion that the Exchange Ratio is fair to HFNC's
shareholders from a financial point of view. The HFNC Board determined that the
proposed Merger is in the best interests of HFNC and its shareholders and
unanimously approved the Merger. HFNC and FCC publicly announced the Merger on
May 18, 1998.
Recommendation of the HFNC Board; Reasons for the Merger. The HFNC Board
believes that the Merger is fair to, and in the best interest of, HFNC and its
shareholders. ACCORDINGLY, THE HFNC BOARD HAS UNANIMOUSLY APPROVED THE AGREEMENT
AND UNANIMOUSLY RECOMMENDS THAT HOLDERS OF HFNC COMMON STOCK VOTE FOR THE
APPROVAL OF THE AGREEMENT. See "-- Opinion of HFNC's Financial Advisor."
The terms of the Agreement, including the Exchange Ratio and the value of
the FCC Common Stock to be received by HFNC's shareholders, were the result of
arm's length negotiations between the representatives of HFNC and FCC. In
reaching its determination that the Merger and the Agreement are fair to, and in
the best interests of, HFNC and its shareholders, HFNC's Board consulted with
its financial advisor, as well as with HFNC's management, and considered a
number of factors, including, without limitation, the following: (i) the belief
that the terms of the Agreement are attractive in that the Agreement provides
that HFNC's shareholders will become shareholders of FCC, a company that the
HFNC Board believes has very positive future prospects; (ii) the written opinion
of Sandler O'Neill that the Exchange Ratio is fair to HFNC's shareholders from a
financial point of view, (iii) the pro forma financial information on the
Merger, including, among other things, earnings per share, dilution analysis,
and ratio impact information; (iv) the sustainability of core earnings by FCC
and potential for growth; (v) the tax free nature of the transaction to HFNC and
HFNC's shareholders; (vi) the historical stock price information for both FCC
and HFNC; (vii) the review by the HFNC Board of the business, operations,
management, earnings and financial condition of FCC on both a historical and a
prospective basis, of (A) the enhanced opportunities for operating efficiencies,
particularly in terms of integration of operations and support functions such as
product development, asset-liability management, marketing, data processing,
loan review and finance and accounting, that could result from the Merger and
(B) the enhanced opportunities for growth that the Merger would make possible,
particularly the ability to respond to changing competitive, technological and
regulatory environments; (viii) the HFNC Board's belief that the combined
enterprise, having a greater size and greater resources than HFNC, could offer
HFNC's customers a broader range of products and services than HFNC presently
offers as an independent entity; (ix) the Board's review of alternatives to the
Merger (including the alternatives of remaining independent and growing
internally, remaining independent for a period of time and then selling
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HFNC and remaining independent and growing through future acquisitions),
including the range of possible values to HFNC's shareholders obtainable through
implementation of such alternatives and the timing and likelihood of actually
receiving such values; (x) the HFNC Board's belief that the Merger represents a
strategic alliance between FCC and HFNC; and (xi) the current and prospective
economic environment and competitive constraints facing financial institutions,
including HFNC and FCC.
In approving the Merger, the HFNC Board did not identify any one factor or
group of factors as being more important or significant than any other factor in
the decision making process, although individual directors may have given one or
more factors more weight than other factors.
Recommendation of the FCC Board; Reasons for the Merger. The FCC Board
believes that the Merger is fair to, and in the best interest of, FCC and its
shareholders. ACCORDINGLY, THE FCC BOARD HAS UNANIMOUSLY APPROVED THE AGREEMENT
AND UNANIMOUSLY RECOMMENDS THAT HOLDERS OF FCC COMMON STOCK VOTE FOR THE
APPROVAL OF THE AGREEMENT AND THE ISSUANCE OF SHARES OF FCC COMMON STOCK
PURSUANT TO THE AGREEMENT. See " -- Opinion of FCC's Financial Advisor."
The terms of the Merger, including the Exchange Ratio, are the result of
arm's-length negotiations between representatives of FCC and HFNC. In reaching
its decision to approve the Agreement, the FCC Board consulted with its legal
advisors regarding the terms of the transaction, with its financial advisor
regarding the financial aspects of the proposed transaction and the fairness of
the Exchange Ratio, and with management of FCC, and, without assigning any
relative or specific weights, considered a number of factors which the FCC Board
deemed material, both from a short-term and long-term perspective, including,
without limitation, those set forth in "-- Background of and Reasons for the
Merger -- Background of the Merger," and the following: (i) the information
presented to the directors by the management of FCC concerning the business,
operations, earnings, asset quality, and financial condition of HFNC, including
the composition of the earning assets portfolio of HFNC; (ii) the financial
terms of the Merger, including the relationship of the value of the
consideration issuable in the Merger to the market value, tangible book value,
and earnings per share of HFNC Common Stock; (iii) the nonfinancial terms of the
Merger, including the treatment of the Merger as a tax-free exchange of HFNC
Common Stock for FCC Common Stock for federal income tax purposes and
arrangements relating to the continued involvement of the management and the
HFNC Board with the combined company; (iv) the likelihood of the Merger being
approved by applicable regulatory authorities without undue conditions or delay;
(v) the opportunity for reducing the noninterest expense of the operations of
HFNC and the ability of the operations of HFNC after the Effective Time to
contribute to the earnings of FCC; (vi) the attractiveness of the HFNC
franchise, the market position of HFNC in the market in which it operates; (vii)
the report of Wheat First reviewing a comparison of HFNC to selected peer
savings and loans and of premiums paid in other merger transactions; and (viii)
the opinion rendered by Wheat First as to the fairness, from a financial point
of view, of the Exchange Ratio to the holders of FCC Common Stock.
The foregoing discussion is not intended to be exhaustive but includes all
of the material factors considered by the FCC Board in determining to recommend
that shareholders approve the Agreement, including the issuance of shares of FCC
Common Stock pursuant to the Agreement. The FCC Board did not quantify or
otherwise attempt to assign relative or specific weights to the factors
considered in reaching its determination that the Agreement, the Merger, and the
issuance of shares of FCC Common Stock pursuant to the Agreement are in the best
interests of shareholders.
OPINION OF HFNC'S FINANCIAL ADVISOR
Pursuant to a letter agreement dated as of May 22, 1997 (the "Sandler
O'Neill Agreement"), HFNC retained Sandler O'Neill as an independent financial
advisor in connection with HFNC's consideration of a possible business
combination with a second party. Sandler O'Neill is a nationally recognized
investment banking firm whose principal business specialty is banks and savings
institutions. In the ordinary course of its investment banking business, Sandler
O'Neill is regularly engaged in the valuation of such businesses and their
securities in connection with mergers and acquisitions and other corporate
transactions.
Pursuant to the terms of the Sandler O'Neill Agreement, Sandler O'Neill
acted as financial advisor to HFNC in connection with the Merger. In connection
therewith, the HFNC Board requested Sandler O'Neill
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to render its opinion as to the fairness, from a financial point of view, of the
Exchange Ratio to the holders of HFNC Common Stock. At the May 17, 1998 meeting
at which the HFNC Board approved and adopted the Agreement, Sandler O'Neill
delivered to the HFNC Board its oral opinion, subsequently confirmed in writing
(the "Sandler O'Neill Fairness Opinion"), that, as of such date, the Exchange
Ratio was fair, from a financial point of view, to the holders of shares of the
HFNC Common Stock. THE FULL TEXT OF THE SANDLER O'NEILL FAIRNESS OPINION, WHICH
SETS FORTH THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND
QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH
RENDERING SUCH OPINION, IS ATTACHED AS APPENDIX B TO THIS JOINT PROXY STATEMENT
AND IS INCORPORATED HEREIN BY REFERENCE. THE DESCRIPTION OF THE OPINION SET
FORTH HEREIN IS QUALIFIED IN ITS ENTIRELY BY REFERENCE TO APPENDIX B. HFNC'S
SHAREHOLDERS ARE URGED TO READ THE SANDLER O'NEILL FAIRNESS OPINION IN ITS
ENTIRETY IN CONNECTION WITH THEIR CONSIDERATION OF THE PROPOSED MERGER.
THE SANDLER O'NEILL FAIRNESS OPINION WAS PROVIDED TO THE HFNC BOARD FOR ITS
INFORMATION AND IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF
VIEW, OF THE EXCHANGE RATIO TO HOLDERS OF SHARES OF HFNC COMMON STOCK. IT DOES
NOT ADDRESS THE UNDERLYING BUSINESS DECISION OF HFNC TO ENGAGE IN THE MERGER OR
ANY OTHER ASPECT OF THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
HOLDER OF SHARES OF HFNC COMMON STOCK AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT
THE HFNC SPECIAL MEETING WITH RESPECT TO THE MERGER OR ANY OTHER MATTER RELATED
THERETO.
In connection with rendering the Sandler O'Neill Fairness Opinion, Sandler
O'Neill performed a variety of financial analyses. The following is a summary of
such analyses, but does not purport to be a complete description of all the
analyses underlying Sandler O'Neill's opinion. The preparation of a fairness
opinion is a complex process involving subjective judgments and is not
necessarily susceptible to a partial analysis or summary description. Sandler
O'Neill believes that its analyses must be considered as a whole and that
selecting portions of such analyses and the factors considered therein, without
considering all factors and analyses, could create an incomplete view of the
analyses and processes underlying its opinion. In performing its analyses,
Sandler O'Neill made numerous assumptions with respect to industry performance,
business and economic conditions and various other industry matters, many of
which cannot be predicted and are beyond the control of HFNC, FCC, and Sandler
O'Neill. Any estimates contained in Sandler O'Neill's analyses are not
necessarily indicative of future results or values, which may be significantly
more or less favorable than such estimates. Estimates on the values of companies
do not purport to be appraisals or necessarily reflect the prices at which
companies or their securities may actually be sold. Because such estimates are
inherently subject to uncertainty, none of HFNC, FCC, or Sandler O'Neill assumes
responsibility for their accuracy.
Summary of Proposal. Sandler O'Neill reviewed the financial terms of the
proposed merger of equals transaction. Based on the closing price of FCC Common
Stock on May 15, 1998 of $24.50 and an Exchange Ratio of 0.57, Sandler O'Neill
calculated an implied transaction value per share of HFNC Common Stock of
$13.97. Based on the closing price of HFNC Common Stock on May 15, 1998 of
$13.63, the transaction value represents only a slight market premium. Based
upon HFNC's March 31, 1998 financial information, Sandler O'Neill calculated the
price-to-tangible book value and price to last 12-months' earnings. This
analysis yielded a price-to-tangible book value multiple of 142% and a price to
last 12 months' earnings multiple of 18.6x.
Stock Trading History. Sandler O'Neill reviewed the history of the
reported trading prices and volume of HFNC Common Stock and FCC Common Stock,
and the relationship between the movements in the prices of HFNC Common Stock
and FCC Common Stock, respectively, to movements in certain stock indices,
including the Standard & Poor's 500 Index, the Nasdaq Banking Index and a
selected composite group (identified below) of publicly traded savings
institutions (in the case of HFNC) and commercial banks (in the case of FCC).
Comparable Company Analysis. Sandler O'Neill used publicly available
information to compare selected financial and market trading information,
including balance sheet composition, asset quality ratios, loan loss reserve
levels, profitability, capital adequacy, dividends and trading multiples, for
HFNC and two groups of selected institutions. The first group consisted of HFNC
and the following nine publicly traded Southeastern savings institutions (the
"Regional Thrift Group"): First Financial Holdings Inc., First Liberty Financial
Corp., Eagle Bancshares, CENIT Bancorp Inc., First Coastal Bankshares, Inc.,
Coastal Financial
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Corp., FirstSpartan Financial Corp., Cooperative Bankshares Inc., and First
Citizens Corp. Sandler O'Neill also compared HFNC to a group of 15 publicly
traded savings institutions which had a return on equity (based on last 12
months' earnings) of greater than 15% and a price-to-tangible book value of
greater than 220% (the "Highly-Valued Thrift Group"). The Highly-Valued Thrift
Group was comprised of InterWest Bancorp Inc., Anchor BanCorp Wisconsin,
Flagstar Bancorp Inc., D & N Financial Corp., First Federal Capital Corp., WSFS
Financial Corp., Metropolitan Financial Corp., CFSB Bancorp Inc., People's
Bancshares Inc., Great Southern Bancorp Inc., Home Federal Bancorp, American
Bank of Connecticut, MetroWest Bank, Coastal Financial Corp., and Highland
Bancorp Inc. The analysis compared publicly available financial information for
HFNC and the median data for each of the Regional Thrift Group and the
Highly-Valued Thrift Group as of and for each of the fiscal years 1993 through
1997 and as of and for the 12 months ended March 31, 1998 (or in some cases
December 31, 1997).
Sandler O'Neill also used publicly available information to perform a
similar comparison of selected financial and market trading information for FCC
and two different groups of commercial banks. The first group consisted of FCC
and the following 12 publicly traded commercial banks (the "Regional Bank
Group"): MainStreet Bank Group Inc., Triangle Bancorp Inc., LSB Bancshares Inc.,
Anchor Financial Corp., First National Corp., Union Bankshares Corp., Bank of
Granite Corp., First Bancorp, James River Bankshares Inc., FNB Financial
Services Corp., FNB Corp., and Peoples Bank. Sandler O'Neill also compared FCC
to a group of 16 publicly traded commercial banks which had a return on average
equity (based on last 12 months' earnings) of greater than 15% and a price to
tangible book value of greater than 300% (the "Highly-Valued Bank Group"). The
Highly-Valued Bank Group was comprised of Greater Bay Bancorp, Sterling
Bancshares Inc., Citizens Bancshares, U.S.B. Holding Co. Inc., Independent Bank
Corp., Midwest Banc Holdings Inc., Shoreline Financial Corp., Suffolk Bancorp,
Arrow Financial Corp., Premier Bancshares Inc., Tompkins County Trustco Inc.,
Anchor Financial Corp., Glacier Bancorp Inc., Bank of Granite Corp., Bank of
Commerce, and Sun Bancorp Inc. The analysis compared publicly available
financial information for FCC and each of the groups as of and for each of the
years ended December 31, 1993 through December 31, 1997 and as of and for the 12
months ended March 31, 1998 (or in some cases December 31, 1997).
Analyses of Selected Merger Transactions. Sandler O'Neill reviewed 50
transactions announced from October 1, 1997 to May 7, 1998 (the "Analysis
Period") involving publicly traded savings institutions as acquired institutions
with transaction values over $15 million ("Nationwide Transactions"), 7
transactions announced during the Analysis Period involving publicly traded
savings institutions in the Southeast as acquired institutions with transaction
values over $15 million ("Regional Transaction") and 10 transactions announced
during the Analysis Period involving publicly traded savings institutions with a
ratio of tangible equity to total assets greater than 10% and a return on
average equity of less than 10% as acquired institutions with transaction values
over $15 million ("Comparable Institution Transactions"). Sandler O'Neill
reviewed the ratios of transaction value to last 12 months' normalized net
income, transaction value to tangible book value, transaction value to book
value, tangible book premium to core deposits, transaction value to total
deposits and transaction value to total assets and computed high, low, mean and
median ratios and premiums for the respective groups of transactions. These
multiples were applied to HFNC's financial information as of and for the 12
months ended March 31, 1998. Based upon the median multiples for the Nationwide
Transactions, Sandler O'Neill derived an imputed range of values per share of
HFNC Common Stock of $8.18 to $22.21. Based upon the median multiples for the
Regional Transactions, Sandler O'Neill derived an imputed range of values per
share of HFNC Common Stock of $9.38 to $21.39. Based upon the median multiples
for the Comparable Institution Transactions, Sandler O'Neill derived an imputed
range of values per share of HFNC Common Stock of $9.38 to $18.83.
Discounted Dividend Stream and Terminal Value Analysis. Sandler O'Neill
also performed an analysis which estimated the future stream of after-tax
dividend flows of HFNC through the year 2002 under various circumstances,
assuming HFNC performed in accordance with the earnings forecasts of its
management and assuming that HFNC grew at a rate more consistent with the growth
rate of the banking industry ("Conservative Scenario"). To approximate the
terminal value of HFNC Common Stock at December 31, 2002, Sandler O'Neill
applied price to earnings multiples ranging from 14x to 26x and applied
multiples of
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tangible book value ranging from 100% to 175%. The dividend income streams and
terminal values were then discounted to present values using different discount
rates (ranging from 10% to 18%) chosen to reflect different assumptions
regarding required rates of return of holders or prospective buyers of HFNC
Common Stock. This analysis, assuming the current dividend payout ratio,
indicated an imputed range of values per share of HFNC Common Stock of between
$8.29 and $19.42 based on management's projections and $6.60 and $15.25 based on
the Conservative Scenario when applying the price to earnings multiples, and an
imputed range of values per share of HFNC Common Stock of between $7.21 and
$15.75 based on management's projections and $6.94 and $15.30 based on the
Conservative Scenario, when applying multiples of tangible book value. In
connection with its analysis, Sandler O'Neill used sensitivity analyses to
consider the effects changes in the underlying assumptions (including variations
with respect to the growth rate of assets, net interest spread, non-interest
income, non-interest expenses and dividend payout ratio) would have on the
resulting present value and discussed these changes with the HFNC Board.
Sandler O'Neill also performed a similar analysis which estimated the
future stream of after-tax dividend flows of FCC through 2002 under various
circumstances, assuming FCC performed in accordance with the earnings forecasts
of its management. To approximate the terminal value of FCC Common Stock at
December 31, 2002, Sandler O'Neill applied price to earnings multiples ranging
from 14x to 26x and applied multiples of tangible book value ranging from 150%
to 400%. The dividend income streams and terminal values were then discounted to
present values using different discount rates (ranging from 10% to 18%) chosen
to reflect different assumptions regarding required rates of return of holders
or prospective buyers of FCC Common Stock. This analysis, assuming the current
dividend payout ratio and management's earnings forecasts, indicated an imputed
range of values per share of FCC Common Stock of between $16.09 and $39.19 when
applying the price to earnings multiples, and an imputed range of values per
share of FCC Common Stock of between $11.31 and $36.91 when applying multiples
of tangible book value. In connection with its analysis, Sandler O'Neill used
sensitivity analyses to consider the effects changes in the underlying
assumptions (including variations with respect to the levels of assets, net
interest spread, non-interest income, non-interest expense and dividend payout
ratio) would have on the resulting present value and discussed these changes
with the HFNC Board.
Sandler O'Neill noted that the discounted dividend stream and terminal
value analysis is a widely used valuation methodology, but the results of such
methodology are highly dependent upon the numerous assumptions that must be
made, and the results thereof are not necessarily indicative of actual values or
actual future results.
Pro Forma Merger Analysis. Sandler O'Neill analyzed certain potential pro
forma effects of the Merger on FCC, based upon an Exchange Ratio of 0.57, HFNC's
and FCC's current and projected income statements and balance sheets, and
assumptions regarding the economic environment, accounting and tax treatment of
the Merger, charges associated with the Merger, operating efficiencies and other
adjustments discussed with the senior managements of HFNC and FCC. This analysis
indicated that the Merger would be accretive to FCC's earnings per share in each
year analyzed following the year in which the Merger was consummated, and
accretive to tangible book value per share of FCC Common Stock in all of the
years analyzed. From the perspective of a shareholder of HFNC, as compared to
management's projected stand-alone performance of HFNC, this analysis indicated
that the Merger would be significantly accretive to earnings per share in each
year following the year in which the Merger was consummated, and dilutive to
tangible book value per share in all of the years analyzed. The actual results
achieved by the combined company may vary from projected results and the
variations may be material.
Contribution Analysis. Sandler O'Neill reviewed the relative contributions
to, among other things, total assets, total securities, total net loans, total
deposits, total borrowings, total tangible equity, last twelve months' net
income and last quarter annualized net income to be made by HFNC and FCC to the
combined institution based on data as of and for the quarter ended March 31,
1998. This analysis indicated that HFNC's implied contribution was 55.8% of
total assets, 45.5% of total securities, 59.4% of total net loans, 40.5% of
total deposits, 87.4% of total borrowings, 67.6% of total tangible equity, 43.0%
of the last 12 months' net income normalized for securities gains and
merger-related expenses and 51.2% of last quarter annualized net income.
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Based upon an Exchange Ratio of 0.57, holders of the HFNC Common Stock would own
approximately 51% of the outstanding shares of the combined institution.
In connection with rendering the Sandler O'Neill Fairness Opinion, Sandler
O'Neill reviewed, among other things: (i) the Agreement and exhibits thereto;
(ii) the Option Agreements; (iii) certain publicly available financial
statements of HFNC and other historical financial information provided by HFNC
that Sandler O'Neill deemed relevant; (iv) certain publicly available financial
statements of FCC and other historical financial information provided by FCC
that Sandler O'Neill deemed relevant; (v) certain financial analyses and
forecasts of HFNC prepared by and reviewed with management of HFNC and the views
of senior management of HFNC regarding HFNC's past and current business,
operations, results thereof, financial condition and future prospects; (vi)
certain financial analyses and forecasts of FCC prepared by and reviewed with
management of FCC and the views of senior management of FCC regarding FCC's past
and current business, operations, results thereof, financial condition and
future prospects; (vii) the pro forma impact of the Merger on HFNC and FCC;
(viii) the publicly reported historical price and trading activity for HFNC
Common Stock and FCC Common Stock, including a comparison of certain financial
and stock market information for HFNC and FCC with similar publicly available
information for certain other companies the securities of which are publicly
traded; (ix) the financial terms of recent business combinations in the savings
institution industry, to the extent publicly available; (x) the current market
environment generally and the banking environment in particular, and (xi) such
other information, financial studies, analyses and investigations and financial,
economic, and market criteria as Sandler O'Neill considered relevant.
In performing its reviews and analyses, Sandler O'Neill assumed and relied
upon, without independent verification, the accuracy and completeness of all the
financial information, analyses and other information that was publicly
available or otherwise furnished to, reviewed by or discussed with it, and
Sandler O'Neill does not assume any responsibility or liability therefor.
Sandler O'Neill did not make an independent evaluation or appraisal of the
specific assets, the collateral securing assets or the liabilities (contingent
or otherwise) of HFNC or FCC or any of their subsidiaries, or the collectibility
of any such assets, nor was it furnished with any such evaluations or
appraisals. Sandler O'Neill is not an expert in the evaluation of allowances for
loan losses and it has not made an independent evaluation of the adequacy of the
allowance for loan losses of HFNC or FCC, nor has it reviewed any individual
credit files relating to HFNC or FCC. With HFNC's consent, Sandler O'Neill has
assumed that the respective aggregate allowances for loan losses for both HFNC
and FCC are adequate to cover such losses and will be adequate on it pro forma
basis for the combined entity. In addition, Sandler O'Neill has not conducted
any physical inspection of the properties or facilities of HFNC or FCC. With
respect to all financial information and projections reviewed with each
company's management, Sandler O'Neill assumed that they had been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the respective managements of the respective future financial
performances of HFNC and FCC and that such performances will be achieved.
Sandler O'Neill expressed no opinion as to such financial projections or the
assumptions on which they were based.
Sandler O'Neill's opinion was necessarily based upon market, economic, and
other conditions as they existed on, and could be evaluated as of, the date of
such opinion. Sandler O'Neill assumed, in all respects material to its analysis,
that all of the representations and warranties contained in the Agreement and
the related agreements are true and correct, that each party to such agreements
will perform all of the covenants required to be performed by such party under
such agreements and that the conditions precedent in the Agreement are not
waived. Sandler O'Neill also assumed, with HFNC's consent, that there has been
no material change in HFNC's and FCC's assets, financial condition, results of
operations, business, or prospects since the date of the last financial
statements made available to them, that the Merger will be accounted for using
the pooling of interests method of accounting, that HFNC and FCC will remain as
going concerns for all periods relevant to its analyses and that the Merger will
qualify as a tax-free reorganization for federal income tax purposes.
Under the Sandler O'Neill Agreement, HFNC will pay Sandler O'Neill a
transaction fee in connection with the Merger, a substantial portion of which is
contingent upon the consummation of the Merger. Under the terms of the Sandler
O'Neill Agreement, HFNC will pay Sandler O'Neill a transaction fee equal to
0.70%
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of the aggregate purchase price paid in the transaction. Based on the closing
price of FCC Common Stock on (the date of this Joint Proxy
Statement), HFNC would pay Sandler O'Neill a transaction fee of approximately
$ million, of which approximately $450,000 has been paid and the
balance will be paid if the Merger is consummated. Sandler O'Neill has also
received a fee of $150,000 for rendering the Sandler O'Neill Fairness Opinion.
HFNC has also agreed to reimburse Sandler O'Neill for its reasonable
out-of-pocket expenses incurred in connection with its engagement and indemnify
Sandler O'Neill and its affiliates and their respective partners, directors,
officers, employees, agents, and controlling persons against certain expenses
and liabilities, including liabilities under the securities laws,
Sandler O'Neill has in the past provided other financial advisory services
to HFNC and has received compensation for such services. In the ordinary course
of its business, Sandler O'Neill may actively trade the equity securities of
HFNC and FCC and their respective affiliates for its own account and for the
accounts of customers and, accordingly, may at my time hold a long or short
position in such securities.
OPINION OF FCC'S FINANCIAL ADVISOR
FCC retained Wheat First to act as its financial advisor in connection with
the Merger and to render its opinion to the FCC Board as to the fairness, from a
financial point of view, of the Exchange Ratio to the holders of FCC Common
Stock. Wheat First is a nationally recognized investment banking firm regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate, and other purposes. The FCC Board selected
Wheat First to serve as its financial advisor in connection with the Merger on
the basis of such firm's expertise. Wheat First regularly publishes research
reports regarding the financial services industry and the businesses and
securities of publicly owned companies in that industry, including FCC. In the
ordinary course of its business, Wheat First and its affiliates may actively
trade in the equity securities of FCC or HFNC for its account and the accounts
of its customers, and therefore may from time to time hold long or short
positions in such security.
Representatives of Wheat First attended the meeting of the FCC Board on May
17, 1998 at which the Agreement was considered and approved. At the meeting,
Wheat First issued a written opinion (the "Wheat First Fairness Opinion") that,
as of such date, the Exchange Ratio was fair, from a financial point of view, to
the holders of FCC Common Stock.
The full text of Wheat First's opinion, which sets forth certain
assumptions made, matters considered and limitations on review undertaken is
attached as Appendix C to this Joint Proxy Statement, is incorporated herein by
reference, and should be read in its entirety in connection with this Joint
Proxy Statement. The summary of the opinion of Wheat First set forth in this
Joint Proxy Statement is qualified in its entirety by reference to the opinion.
No limitations were imposed by the FCC Board upon Wheat First with respect to
the investigations made or procedures followed by it in rendering the FCC
Fairness Opinion. Wheat First's opinion has been furnished to the FCC Board for
its benefit and use. Wheat First's opinion is directed only to the fairness,
from a financial point of view, of the Exchange Ratio to the holders of FCC
Common Stock and does not constitute a recommendation to any shareholder of FCC
as to how such shareholder should vote on the Merger.
In arriving at the Wheat First Fairness Opinion, Wheat First reviewed
certain publicly available business and financial information relating to FCC
and HFNC and certain other information provided to it, including the following:
(i) FCC's Annual Reports to Stockholders, Annual Reports on Form 10-K and
related financial information for the three fiscal years ended December 31,
1997; (ii) FCC's Quarterly Reports on Form 10-Q and related financial
information for the quarter ended March 31, 1998; (iii) HFNC's Annual Reports to
Stockholders, Annual Reports on Form 10-K and related financial information for
the two fiscal years ended June 30, 1997; (iv) HFNC's Quarterly Reports on Form
10-Q and related financial information for the quarters ended September 30,
1997, December 31, 1997, and March 31, 1998; (v) certain publicly available
information with respect to historical market prices and trading activities for
FCC Common Stock and HFNC Common Stock and for certain publicly traded financial
institutions which Wheat First deemed relevant; (vi) certain publicly available
information with respect to banking companies and the financial terms of
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certain other mergers and acquisitions which Wheat First deemed relevant; (vii)
the Agreement; (viii) certain estimates of the cost savings and revenue
enhancements and divestitures projected by FCC and HFNC for the combined
company; (ix) other financial information concerning the businesses and
operations of FCC and HFNC, including certain audited financial information and
certain internal financial analyses and forecasts for FCC and HFNC prepared by
senior managements of these companies; and (x) such financial studies, analyses,
inquiries and other matters as Wheat First deemed necessary. In addition, Wheat
First met with members of the senior managements of FCC and HFNC to discuss the
business and prospects of each company.
In connection with its review, Wheat First relied upon and assumed the
accuracy and completeness of all of the foregoing information provided to it or
publicly available, including representations and warranties of FCC and HFNC
included in the Agreement, and Wheat First has not assumed any responsibility
for independent verification of such information. Wheat First relied upon the
managements of FCC and HFNC as to the reasonableness and achievability of its
financial and operational forecasts and projections, and the assumptions and
bases therefor, provided to Wheat First, and assumed that such forecasts and
projections reflect the best currently available estimates and judgments of such
management and that such forecasts and projections will be realized in the
amounts and in the time periods currently estimated by such managements. Wheat
First also assumed, without independent verification, that the aggregate
allowances for loan losses and other contingencies for FCC and HFNC are adequate
to cover such losses. Wheat First did not review any individual credit files of
FCC and HFNC, nor did it make an independent evaluation or appraisal of the
assets or liabilities of FCC and HFNC. Wheat First also assumed that the Merger
will be consummated in accordance with the terms and conditions of the Agreement
in due course without unnecessary delay.
Additionally, Wheat First considered certain financial and stock market
data of FCC and HFNC and compared that data with similar data for certain
publicly-held financial institutions and considered the financial terms of
certain other comparable transactions that recently have been announced or
effected, as further discussed below.
In connection with rendering its opinion, Wheat First performed a variety
of financial analyses. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to partial analysis
or summary description. Moreover, the evaluation of the fairness, from a
financial point of view, of the Exchange Ratio to holders of FCC Common Stock
was to some extent a subjective one based on the experience and judgment of
Wheat First and not merely the result of mathematical analysis of financial
data. Accordingly, notwithstanding the separate factors summarized below, Wheat
First believes that its analyses must be considered as a whole and that
selecting portions of its analyses and of the factors considered by it, without
considering all analyses and factors, could create an incomplete view of the
evaluation process underlying its opinion. The ranges of valuations resulting
from any particular analysis described below should not be taken to be Wheat
First's view of the actual value of FCC or HFNC.
In performing its analyses, Wheat First made numerous assumptions with
respect to industry performance, business and economic conditions, and other
matters, many of which are beyond the control of FCC or HFNC. The analyses
performed by Wheat First are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than suggested
by such analyses. Additionally, analyses relating to the values of businesses do
not purport to be appraisals or to reflect the prices at which businesses
actually may be sold. In rendering its opinion, Wheat First assumed that, in the
course of obtaining the necessary regulatory approvals for the Merger, no
conditions will be imposed that will have a material adverse effect on the
contemplated benefits of the Merger, on a pro forma basis, to FCC.
Wheat First's opinion is just one of the many factors taken into
consideration by the FCC Board in determining to approve the Agreement. Wheat
First's opinion does not address the relative merits of the Merger as compared
to any alternative business strategies that might exist for FCC, nor does it
address the effect of any other business combination in which FCC might engage.
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The following is a summary of the analyses performed by Wheat First in
connection with the Wheat First Fairness Opinion delivered to the FCC Board on
May 17, 1998:
Comparable Acquisitions Analysis. Wheat First performed an analysis of
premiums paid in 12 selected acquisition of thrifts headquartered in Alabama,
Georgia, Maryland, Mississippi, North Carolina, South Carolina, Tennessee,
Virginia, or West Virginia announced between February 1, 1997 and May 17, 1998
with deal values between $60 million and $500 million (the "Selected
Transactions"). Offer premium to market, multiples of book value, trailing 12
months' earnings and annualized latest quarter earnings were compared to the
premium and multiples implied by the consideration offered to HFNC in the
Merger. The Selected Transactions included the following pending and completed
transactions: BB&T Corp./Maryland Federal Bancorp, Inc.; United Bankshares,
Inc./Fed One Bancorp, Inc.; Triangle Bancorp, Inc./United Federal Savings; One
Valley Bancorp/FFVA Financial Corp.; BB&T Corp./Life Bancorp, Inc.; Regions
Financial Corp./PALFED, Inc.; Carolina First Corp./First Southeast Financial
Corp.; Crestar Financial Corp./ American National Bancorp; Union Planters
Corp./Magna Bancorp, Inc.; BB&T Corp./Virginia First Financial Corp.; Provident
Bankshares Corp./First Citizens Corp.; and CCB Financial Corp./American Federal
Bank.
Based on the market value of FCC Common Stock on May 15, 1998, and
financial data for HFNC as of March 31, 1998, the analysis yielded ratios of the
implied consideration based on the Exchange Ratio offered by FCC to HFNC: (i)
premium to market of 2.5% compared to an average of 35.4%, a minimum of 8.9%,
and a maximum of 77.3% for the Selected Transactions; (ii) to book value of
142.1% compared to an average of 234.9%, a minimum of 189.1%, and a maximum of
323.3% for the Selected Transactions; (iii) to trailing 12 months' earnings per
share multiple of 28.2x compared to an average of 23.3x, a minimum of 15.1x, and
a maximum of 33.7x for the Selected Transactions; and (iv) to latest quarter
earnings per share annualized of 23.1x compared to an average of 21.4x, a
minimum of 14.9x, and a maximum of 32.7x for the Selected Transactions.
The following comparisons were based on financial data as of and for the
three-month period ended March 31, 1998, for HFNC and the 12 months' reporting
period prior to the announcement of each transaction for each acquiree in the
Selected Transactions: HFNC had: (i) equity to assets of 17.24% compared to an
average of 9.25%, a minimum of 6.06%, and a maximum of 13.31% for the Selected
Transaction acquirees; (ii) nonperforming assets plus loans 90 days past due to
total assets of 0.73% compared to an average of 1.13%, a minimum of 0.11%, and a
maximum of 3.25% for the Selected Transaction acquirees; (iii) returns on
average assets before extraordinary items of 0.92% compared to an average of
1.00%, a minimum of 0.56%, and a maximum of 1.68% for the Selected Transaction
acquirees; (iv) returns on average equity before extraordinary items of 5.07%
compared to an average of 10.84%, a minimum of 5.78%, and a maximum of 17.21%
for the Selected Transaction acquirees; (v) net interest margin of 3.33%
compared to an average of 3.66%, a minimum of 2.64%, and a maximum of 5.74% for
the Selected Transaction acquirees; and (vi) an efficiency ratio of 53.84%
compared to an average of 58.78%, a minimum of 44.62%, and a maximum of 75.13%
for the Selected Transaction acquirees.
Impact Analysis. Wheat First estimated the impact of the transaction to
FCC's book value and 1998 estimated earnings per share assuming that the Merger
qualifies as a pooling of interests for accounting and financial reporting
purposes. Utilizing financial data as of March 31, 1998 for both FCC and HFNC,
and assuming certain adjustments to the equity of HFNC, Wheat First noted that
the Merger could result in 52.9% accretion to FCC's book value per share. Wheat
First also noted that, assuming certain fully phased-in revenue enhancements and
expense savings (based on projections by Wheat First and FCC management), the
Merger could result in 2.4% accretion to FCC's 1998 estimated earnings per
share. Wheat First noted further that such accretion to earnings could improve
over time.
Discounted Dividends Analysis. Using discounted dividends analysis, Wheat
First estimated the present value of the future stream of dividends that HFNC
could produce over the next five years, under various circumstances, assuming
the company performed in accordance with the earnings forecasts of management
and an assumed level of expense savings were achieved. Wheat First then
estimated the terminal values for HFNC Common Stock at the end of the period by
applying multiples ranging from 18 times to 20 times
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earnings projected in year five. The dividend streams and terminal values were
then discounted to present values using different discount rates (ranging from
16% to 18%) chosen to reflect different assumptions regarding the required rates
of return to holders or prospective buyers of HFNC Common Stock. This discounted
dividend analysis indicated reference ranges of between $16.65 and $19.57 per
share for HFNC Common Stock. These values compare to the implied consideration
based on the Exchange Ratio offered by FCC to HFNC in the Merger of $13.97 based
on the market value of FCC Common Stock on May 15, 1998.
No company or transaction used as a comparison in the above analysis is
identical to FCC, HFNC, or the Merger. Accordingly, an analysis of the results
of the foregoing necessarily involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies and other factors that could affect the public trading value of the
companies used for comparison in the above analysis.
The Wheat First Fairness Opinion included as Appendix C to this Joint Proxy
Statement, is based solely upon the information available to Wheat First and the
economic, market, and other circumstances as they existed as of such date.
Events occurring after that date could materially affect the assumptions and
conclusions contained in Wheat First's opinion. Wheat First has not undertaken
to reaffirm or revise its opinion or otherwise comment on any events occurring
after the date of its opinion.
As compensation for Wheat First's services, FCC has agreed to pay Wheat
First a financial advisory fee equal to $700,000 payable as follows: $100,000
upon the execution of the Agreement and $600,000 upon the date of closing of the
Merger. FCC has agreed also to reimburse Wheat First for its out-of-pocket
expenses incurred in connection with the activities contemplated by its
engagement, regardless of whether the Merger is consummated. FCC has further
agreed to indemnify Wheat First against certain liabilities, including certain
liabilities under federal securities laws. The payment of the above fees is not
contingent upon Wheat First rendering a favorable opinion with respect to the
Merger. In addition, FCC will pay Wheat First a financial advisory retainer of
$300,000, which is payable on June 30, 1998, for financial advisory services.
EFFECTIVE TIME OF THE MERGER
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Time will occur on the date and at the time that the
Articles of Merger reflecting the Merger becomes effective with the Secretary of
State of the State of North Carolina. Subject to the terms and conditions of the
Agreement, unless otherwise agreed upon in writing by FCC and HFNC, the parties
will use their reasonable efforts to cause the Effective Time to occur on or
before the 15th business day (as designated by FCC) following the last to occur
of (i) the effective date (including any applicable waiting period in respect
thereof) of the last required consent of any regulatory authority having
authority over and approving or exempting the Merger and (ii) the date on which
the shareholders of HFNC and FCC approve the matters relating to the Agreement
required to be approved by such shareholders.
No assurance can be provided that the necessary shareholder and regulatory
approvals can be obtained or that other conditions precedent to the Merger can
or will be satisfied. HFNC and FCC anticipate that all conditions to
consummation of the Merger will be satisfied so that the Merger can be
consummated on or about September 30, 1998. However, delays in the consummation
of the Merger could occur.
The Board of Directors of either HFNC or FCC generally may terminate the
Agreement if the Merger is not consummated by April 30, 1999, unless the failure
to consummate the transactions contemplated by the Agreement on or before such
date is caused by any breach of the Agreement by the party seeking termination
or certain other specific conditions exist. See "-- Conditions to Consummation
of the Merger" and "-- Waiver, Amendment, and Termination."
DISSENTERS' RIGHTS
HFNC Common Stock. Holders of HFNC Common do not have dissenters' rights
with respect to the Merger.
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FCC Common Stock. Holders of FCC Common Stock do not have dissenters'
rights with respect to the Merger, the issuance of shares of FCC Common Stock
pursuant to the Agreement, or the FCC Articles Amendment.
DISTRIBUTION OF CONSIDERATION
Promptly after the Effective Time, FCC and HFNC will cause the Exchange
Agent to mail to the former shareholders of HFNC a letter of transmittal,
together with instructions for the exchange of the Certificates representing
shares of HFNC Common Stock for certificates representing shares of FCC Common
Stock.
HFNC SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE
THE LETTER OF TRANSMITTAL AND INSTRUCTIONS.
Upon surrender to the Exchange Agent of Certificates for HFNC Common Stock,
together with a properly completed letter of transmittal, there will be issued
and mailed to each holder of HFNC Common Stock surrendering such items a
certificate or certificates representing the number of shares of FCC Common
Stock to which such holder is entitled and a check for the amount to be paid in
lieu of any fractional share (without interest), if any, together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon), if any. FCC will not be obligated to deliver the
consideration to which any former holder of HFNC Capital Stock is entitled as a
result of the Merger until the holder surrenders such holder's Certificates
representing the shares of HFNC Common Stock. Whenever a dividend or other
distribution is declared by FCC on FCC Common Stock, the record date for which
is at or after the Effective Time, the declaration will include dividends or
other distributions on all shares of FCC Common Stock issuable pursuant to the
Agreement, but beginning 30 days after the Effective Time, no dividend or other
distribution payable after the Effective Time with respect to FCC Common Stock
will be paid to the holder of any unsurrendered HFNC Common Stock Certificate
until the holder duly surrenders such Certificate. Upon surrender of such HFNC
Common Stock Certificate, however, both the FCC Common Stock certificate,
together with all undelivered dividends or other distributions (without
interest) and any undelivered cash payment to be paid in lieu of a fractional
share (without interest), will be delivered and paid with respect to the shares
represented by such Certificate. In the event any HFNC Common Stock Certificate
has been lost, stolen, or destroyed, upon the making of an affidavit of that
fact by the person claiming the Certificate to be lost, stolen, or destroyed
and, if required by FCC, the posting by such person of a bond in such amount as
FCC may reasonably direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen, or destroyed Certificate the consideration to
which the former holder of HFNC Common Stock is entitled.
At the Effective Time, the stock transfer books of HFNC will be closed to
holders of HFNC Common Stock and no transfer of shares of HFNC Common Stock by
any such holder will thereafter be made or recognized. If Certificates
representing shares of HFNC Common Stock are presented for transfer after the
Effective Time, they will be canceled and exchanged for the consideration to
which such holder of HFNC Common Stock is entitled.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to various conditions, including (i)
receipt of the approval of the shareholders of HFNC and FCC of matters relating
to the Agreement required to be approved by such shareholders, (ii) receipt of
certain regulatory approvals required for consummation of the Merger, (iii)
receipt by FCC of a written opinion of counsel from Alston & Bird LLP and by
HFNC of a written opinion of counsel from Elias, Matz, Tiernan & Herrick L.L.P.
as to the tax-free nature of the Merger (except to the extent of cash received),
(iv) approval of the shares of FCC Common Stock issuable pursuant to the Merger
for listing on the Nasdaq NMS, subject to official notice of issuance, (v) the
Registration Statement being declared effective under the Securities Act, (vi)
the accuracy, as of the date of the Agreement and as of the Effective Time, of
the representations and warranties of HFNC and FCC as set forth in the
Agreement, (vii) the performance of all agreements and the compliance with all
covenants of HFNC and FCC as set forth in the Agreement, (viii) receipt of all
consents required for consummation of the Merger or for the preventing
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of any default under any contract or permit which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a material adverse
effect on HFNC or FCC, (ix) receipt by FCC and HFNC of letters from KPMG Peat
Marwick LLP and Deloitte & Touche LLP to the effect that the Merger will qualify
for pooling-of-interests accounting treatment, (x) the absence of any law or
order or any action taken by any court, governmental, or regulatory authority of
competent jurisdiction prohibiting, restricting, or making illegal the
consummation of the transactions contemplated by the Agreement, (xi) receipt by
FCC of agreements from each person HFNC and FCC reasonably believe may be deemed
an affiliate of HFNC and FCC, and (xii) satisfaction of certain other
conditions, including the receipt of various certificates from the officers of
HFNC and FCC. See "-- Regulatory Approval" and "-- Waiver, Amendment, and
Termination."
No assurance can be provided as to when or if all of the conditions
precedent to the Merger can or will be satisfied or waived by the party
permitted to do so. Except in limited circumstances, in the event the Merger is
not effected on or before April 30, 1999, the Agreement may be terminated and
the Merger abandoned by the Board of Directors of either HFNC or FCC. See
" -- Waiver, Amendment, and Termination."
REGULATORY APPROVAL
THE MERGER MAY NOT PROCEED IN THE ABSENCE OF RECEIPT OF THE REQUISITE
REGULATORY APPROVALS. THERE CAN BE NO ASSURANCE THAT SUCH REGULATORY APPROVALS
WILL BE OBTAINED OR AS TO THE TIMING OF SUCH APPROVALS. APPLICATIONS FOR THE
APPROVALS DESCRIBED BELOW HAVE BEEN SUBMITTED TO THE APPROPRIATE REGULATORY
AUTHORITIES.
It is a condition to the consummation of the Merger that FCC and HFNC shall
have received all applicable regulatory approvals to consummate the transactions
contemplated by the Agreement. There can be no assurance that such approvals
will not contain terms, conditions or requirements which cause such approvals to
fail to satisfy such condition to the consummation of the Merger.
Neither HFNC nor FCC is aware of any material governmental approvals or
actions that are required for consummation of the Merger, except as described
below. Should any other approval or action be required, it presently is
contemplated that such approval or action would be sought.
The Merger is subject to the prior approval of the Federal Reserve,
pursuant to Section 4 of the BHC Act. In evaluating the Merger, the Federal
Reserve must consider, among other factors, the financial and managerial
resources and future prospects of the institutions and the convenience and needs
of the communities to be served. The relevant statutes prohibit the Federal
Reserve from approving the Merger if (i) it would result in a monopoly or be in
furtherance of any combination or conspiracy to monopolize or attempt to
monopolize the business of banking in any part of the United States or (ii) its
effect in any section of the country could be to substantially lessen
competition or to tend to create a monopoly, or if it would result in a
restraint of trade in any other manner, unless the Federal Reserve should find
that any anticompetitive effects are outweighed clearly by the public interest
and the probable effect of the transaction in meeting the convenience and needs
of the communities to be served. The Merger may not be consummated until the
30th day (which the Federal Reserve may reduce to 15 days) following the date of
the Federal Reserve approval, during which time the United States Department of
Justice would be afforded the opportunity to challenge the transaction on
antitrust grounds. The commencement of any antitrust action would stay the
effectiveness of the approval of the agencies, unless a court of competent
jurisdiction should specifically order otherwise.
WAIVER, AMENDMENT, AND TERMINATION
To the extent permitted by law, the Agreement may be amended by a
subsequent writing signed by each of the parties upon the approval of the Board
of Directors of each of the parties, before or after approval of the matters
relating to the Agreement required to be approved by the HFNC and FCC
shareholders; provided, that after the Meetings, no amendment may be made which
modifies in any material respect the consideration to be received by the holders
of HFNC Common Stock without the further approval of the shareholders of HFNC
and FCC. In addition, prior to or at the Effective Time, generally either HFNC
or FCC, or both, acting through their respective Boards of Directors, chief
executive officers, or other authorized officers, may
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waive any default in the performance of any term of the Agreement by the other
party, may waive or extend the time for the compliance or fulfillment by the
other party of any and all of its obligations under the Agreement, and may waive
any of the conditions precedent to the obligations of such party under the
Agreement, except any condition that, if not satisfied, would result in the
violation of any applicable law or governmental regulation. No such waiver will
be effective unless written and unless executed by a duly authorized officer of
HFNC or FCC, as the case may be.
The Agreement may be terminated and the Merger abandoned at any time prior
to the Effective Time, notwithstanding the provisions of the Agreement and the
approval of the Agreement by the HFNC and FCC shareholders, (i) by the mutual
consent of the Boards of Directors of HFNC and FCC and (ii) by the HFNC Board or
the FCC Board (a) in the event of any inaccuracy of any representation or
warranty of the other party contained in the Agreement which cannot be or has
not been cured within 30 days after giving written notice to the breaching party
of such inaccuracy and which inaccuracy would provide the terminating party the
ability to refuse to consummate the Merger under the applicable standards set
forth in the Agreement (provided that the terminating party is not then in
breach of any representation or warranty contained in the Agreement under the
applicable standards set forth in the Agreement or in material breach of any
covenant or other agreement contained in the Agreement), (b) in the event of a
material breach by the other party of any covenant or agreement contained in the
Agreement which cannot be or has not been cured within 30 days after the giving
of written notice to the breaching party of such breach (provided that the
terminating party is not then in breach of any representation or warranty
contained in the Agreement under the applicable standards set forth in the
Agreement or in material breach of any covenant or other agreement contained in
the Agreement), (c) if (1) any consent of any regulatory authority required for
consummation of the Merger and the other transactions contemplated by the
Agreement has been denied by final nonappealable action, or if any action taken
by such authority is not appealed within the time limit for appeal or (2) the
shareholders of HFNC or FCC fail to vote their approval of the matters submitted
for the approval of such shareholders at the Meetings, or (d) if the Merger is
not consummated by April 30, 1999, provided that the failure to consummate is
not caused by any breach of the Agreement by the party electing to terminate. In
addition, HFNC may terminate the Agreement based on a decline in the price of
FCC Common Stock as described under "-- Possible Adjustment of Exchange Ratio."
If the Merger is terminated as described above, the Agreement will become
void and have no effect, except that certain provisions of the Agreement,
including those relating to the obligations to share certain expenses, maintain
the confidentiality of certain information obtained, and return all documents
obtained from the other party under the Agreement, will survive. See
"-- Expenses and Fees."
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Agreement, each of HFNC and FCC generally have agreed that
unless the prior written consent of the other party has been obtained, and
except as otherwise expressly contemplated in the Agreement, each of such
parties and its subsidiaries will: (i) operate its business only in the usual,
regular, and ordinary course; (ii) preserve intact its business organization and
assets and maintain its rights and franchises; (iii) use its reasonable efforts
to maintain its current employee relationships; and (iv) take no action which
would (a) materially adversely affect the ability of any party to obtain any
consents required for the transactions contemplated by the Agreement without
imposition of or condition or restriction of the type referred to in the
Agreement or (b) adversely affect the ability of any party to perform its
covenants and agreements under the Agreement.
HFNC has also agreed that until the earlier of the Effective Time or
termination of the Agreement, HFNC will not, except with the prior written
consent of the chief executive officer or chief financial officer of FCC (which
consent shall not be unreasonably withheld), agree or commit to do, or permit
any of its subsidiaries to agree or commit to do, any of the following: (i)
amend the charter, bylaws, or other governing instruments of HFNC or any HFNC
subsidiary (each a "HFNC company" and together, the "HFNC companies"); (ii)
incur, guarantee, or otherwise become responsible for any additional debt
obligation for borrowed money (other than indebtedness of a HFNC company to
another HFNC company) in excess of an aggregate of $500,000 (for the HFNC
companies on a consolidated basis) except in the ordinary course of
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business consistent with past practices (which shall include, for Home Federal,
the creation of deposit liabilities, purchases of federal funds, advances from
the Federal Reserve Bank or the Federal Home Loan Bank, and entry into
repurchase agreements fully secured by U.S. government or agency securities), or
impose, or suffer the imposition, on any asset of any HFNC company of any lien
or permit any such lien to exist (other than in connection with deposits,
repurchase agreements, Federal Home Loan Bank advances, bankers acceptances,
"treasury tax and loan" accounts established in the ordinary course of business,
the satisfaction of legal requirements in the exercise of trust powers, and
liens in effect as of the date of the Agreement that were previously disclosed
to FCC by HFNC); (iii) repurchase, redeem, or otherwise acquire or exchange
(other than exchanges in the ordinary course under employee benefit plans),
directly or indirectly, any shares, or any securities convertible into any
shares, of the capital stock of any HFNC company, or declare or pay any dividend
or make any other distribution in respect of HFNC's capital stock, provided that
HFNC may (to the extent legally and contractually permitted to do so), but shall
not be obligated to, declare and pay regular quarterly cash dividends on the
shares of HFNC Common Stock at a rate of $.08 per share, with usual and regular
record and payment dates in accordance with past practice, provided that,
notwithstanding the provisions of the Agreement, the parties shall cooperate in
selecting the Effective Time to ensure that, with respect to the quarterly
period in which the Effective Time occurs, the holders of HFNC Common Stock do
not receive both a dividend in respect of their HFNC Common Stock and a dividend
in respect of FCC Common Stock or fail to receive any dividend; (iv) except for
the Agreement, or pursuant to the HFNC Option Agreement or the exercise of
rights outstanding as of the date of the Agreement and the terms thereof in
existence on the date of the Agreement, issue, sell, pledge, encumber, authorize
the issuance of, enter into any contract to issue, sell, pledge, encumber, or
authorize the issuance of, or otherwise permit to become outstanding, any
additional shares of HFNC Common Stock, or any other capital stock of any HFNC
company, or any stock appreciation rights, or any option, warrant, conversion,
or other right to acquire any such stock, or any security convertible into any
such stock; (v) adjust, split, combine, or reclassify any capital stock of any
HFNC company or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of HFNC Common Stock, or sell, lease,
mortgage, or otherwise dispose of or otherwise encumber (a) any shares of stock
of any subsidiary of HFNC (unless any such shares of stock are sold or otherwise
transferred to another HFNC company) or (b) any asset other than in the ordinary
course of business for reasonable and adequate consideration; (vi) except for
purchases of U.S. Treasury securities or U.S. government agency securities,
having maturities of three years or less, purchase any securities or make any
mat erial investment, either by purchase of stock or securities, contributions
to capital, asset transfers, or purchase of any assets, in any person other than
a wholly-owned HFNC subsidiary, or otherwise acquire direct or indirect control
over any person, with certain exceptions; (vii) grant any increase in
compensation or benefits to the employees or officers of any HFNC company,
except in the ordinary course of business consistent with past practices as
previously disclosed to FCC by HFNC or as required by law, pay any severance or
termination pay or any bonus other than pursuant to written policies or written
contracts in effect on the date of the Agreement or as set forth in Section
8.13(f) of the Agreement, enter into or amend any severance agreements with
officers of any HFNC company, grant any material increase in fees or other
increases in compensation or other benefits to directors of any HFNC company, or
voluntarily accelerate the vesting of any stock options or other stock-based
compensation or employee benefits; (viii) enter into or amend any employment
contract between any HFNC company and any person (unless such amendment is
required by law) that the HFNC company does not have the unconditional right to
terminate without liability (other than liability for services already rendered
or as required by law), at any time on or after the Effective Time; (ix) adopt
any new employee benefit plan of any HFNC company or make any material change in
or to, any existing employee benefit plans of any HFNC company other than any
such change that is required by law or that, in the opinion of counsel, is
necessary or advisable to maintain the tax qualified status of any such plan;
(x) make any significant change in any tax or accounting methods or systems of
internal accounting controls, except as may be appropriate to conform to changes
in tax laws or regulatory accounting requirements or generally accepted
accounting principles; (xi) commence any litigation other than as necessary for
the prudent operation of its business or settle any litigation involving any
liability of any HFNC company for material money damages or restrictions upon
the operations of any HFNC company; or (xii) except in the ordinary course of
business, modify, amend, or terminate any material contract or waive, release,
compromise, or assign any material rights or claims.
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<PAGE> 51
HFNC has further agreed, that, except with respect to the Agreement and the
transactions contemplated thereby, no HFNC company or any representative thereof
will, directly or indirectly, solicit or engage in negotiations concerning any
acquisition proposal, or provide any confidential information or assistance to,
or have any discussions with, any person with respect to an acquisition
proposal; provided, that HFNC may, and may authorize and permit its
representatives to, provide persons with confidential information, have
discussions or negotiations with, or otherwise facilitate an effort or attempt
by such person to make or implement an acquisition proposal not solicited in
violation of the Agreement if the HFNC Board, after having consulted with, and
based upon the advice of, outside counsel, determines in good faith that the
failure to take such actions could constitute a breach of the fiduciary duties
of the HFNC Board under applicable law, subject to the satisfaction of certain
conditions.
FCC has also agreed that until the earlier of the Effective Time or
termination of the Agreement, FCC will not, except for the prior written consent
of the chief executive officer or chief financial officer of HFNC (which consent
shall not be unreasonably withheld), agree or commit to, or permit its
subsidiaries to agree or commit to, take certain actions including generally,
but not limited to: (i) declare or pay any dividends, except that FCC generally
may declare and pay regular quarterly cash dividends on the shares of FCC Common
Stock at a rate of $.15 per share; (ii) amend the FCC Articles or the FCC Bylaws
in a manner which would adversely effect in any manner the terms of the FCC
Common Stock or the ability of FCC to consummate the transactions contemplated
hereby; or (iii) make any acquisition (including an acquisition of branch
offices and related deposit liabilities) that could effect the ability of FCC to
consummate the transactions contemplated by the Agreement in a reasonably timely
manner.
FCC has further agreed, that, except with respect to the Agreement and the
transactions contemplated thereby, no FCC company or any representative thereof
will, directly or indirectly, solicit or engage in negotiations concerning any
acquisition proposal, or provide any confidential information or assistance to,
or have any discussions with, any person with respect to an acquisition
proposal; provided, that FCC may, and may authorize and permit its
representatives to, provide persons with confidential information, have
discussions or negotiations with, or otherwise facilitate an effort or attempt
by such person to make or implement an acquisition proposal not solicited in
violation of the Agreement if the FCC Board, after having consulted with, and
based upon the advice of, outside counsel, determines in good faith that the
failure to take such actions could constitute a breach of the fiduciary duties
of the FCC Board under applicable law, subject to the satisfaction of certain
conditions.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Upon consummation of the Merger, the current directors of FCC will continue
to serve as directors of FCC. In addition, the FCC Board will take all corporate
action necessary to appoint Ray W. Bradley, Jr., Joe M. Logan, John M.
McCaskill, and Willie E. Royal as directors of FCC to serve until the 1999
Annual Meeting. At the 1999 Annual Meeting, FCC will nominate John H. McCaskill
for election to the FCC Board. Those former directors of HFNC who are members of
the Board of Directors of FCC immediately prior to the 1999 Annual Meeting, but
who do not remain on the FCC Board after the 1999 Annual Meeting and whose age
exceeds the retirement age for directors of FCC, shall be appointed Directors
Emeritus and shall receive for the first year following the 1999 Annual Meeting,
compensation equal to $8,000 per Director Emeritus.
Similarly, current officers of FCC will continue to serve in their
respective capacities on behalf of FCC. Information concerning the management of
FCC is included in the documents incorporated herein by reference. See
"DOCUMENTS INCORPORATED BY REFERENCE." For additional information regarding the
interests of certain persons in the Merger, see "-- Interests of Certain Persons
in the Merger."
EFFECT ON CERTAIN EMPLOYEES AND BENEFIT PLANS
Employee Severance. Pursuant to the Agreement, employees of HFNC (other
than employees whose severance benefits are provided for in written employment
agreements) whose employment is terminated by FCC within six months' after the
Effective Time (unless termination of such employment is for cause) will be
entitled to a severance payment from FCC equal in amount to one week's base
salary for each full year such
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<PAGE> 52
employee was employed by HFNC, subject to a minimum of two weeks severance and a
maximum of 26 weeks severance, together with any accrued but unused vacation
leave with respect to the calendar year in which termination occurs.
Employee Stock Ownership Plan. Pursuant to the HFNC Employee Stock
Ownership Plan ("HFNC ESOP"), each participant in such plan not fully vested
will, in accordance with the terms of the HFNC ESOP, become fully vested in his
or her HFNC ESOP account as of the Effective Time. HFNC and FCC have agreed to
cooperate to cause the HFNC ESOP to be amended, in a manner reasonably
acceptable to the parties, to provide that the HFNC ESOP will terminate at the
Effective Time. Between the date of the Agreement and the Effective Time, the
existing HFNC ESOP indebtedness will be paid in the ordinary course of business
pursuant to the existing loan amortization schedule and HFNC will make such
contributions to the HFNC ESOP as necessary to fund such payments. Any
indebtedness of the HFNC ESOP remaining as of the Effective Time will be repaid
from the trust associated with the HFNC ESOP through sale of the FCC Common
Stock received by the HFNC ESOP, subject to the satisfaction of various
conditions in the Agreement requiring that such sales be made in accordance with
applicable state securities laws and regulations and to ensure satisfaction of
the pooling-of-interest requirements for the Merger. Upon the repayment of the
HFNC ESOP loan, the remaining funds in the HFNC ESOP suspense account will be
allocated (subject to certain limitations under the Code and other applicable
laws and regulations) to HFNC ESOP participants' accounts (as determined under
the terms of the HFNC ESOP). The parties have further agreed that, subject to
the conditions described in the Agreement, as soon as practicable after the
Effective Time and repayment of their HFNC ESOP loan, participants in the HFNC
ESOP will be entitled at their election to have the amounts in their HFNC ESOP
accounts either distributed to them in a lump sum or rolled over to another
tax-qualified plan or individual retirement account. The parties have further
agreed that the actions relating to termination of the HFNC ESOP will be adopted
conditioned upon consummation of the Merger and upon receiving a favorable
determination letter from the Internal Revenue Service with regard to the
continued qualification of the HFNC ESOP after any required amendments. Further,
the parties have agreed that as of and following the Effective Time, FCC will
cause the HFNC ESOP to be maintained for the exclusive benefit of employees and
other persons who are participants or beneficiaries therein prior to the
Effective Time. For information with respect to the impact of the Merger on the
HFNC ESOP, see Note 2 to the "PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION."
Other Employee Benefit Plans. The Agreement also provides that, after the
Effective Time, FCC will provide to officers and employees of the HFNC
companies, employee benefits under employee benefit plans on terms and
conditions which, when taken as a whole, are substantially similar to those
currently provided by the FCC companies to their similarly-situated officers and
employees. For purposes of participation, vesting, and benefit accrual (but not
an accrual of benefits under FCC's tax-qualified defined benefit plans) under
such employee benefit plans, (i) service under any qualified defined benefit or
contribution plans of HFNC will be treated as service under FCC's qualified
defined benefit or contribution plans and (ii) service under any other employee
benefit plans of HFNC will be treated as service under any similar employee
benefit plans maintained by FCC. FCC will cause the FCC welfare benefit plans
that cover the continuing employees after the Effective Time to (i) waive any
waiting period on restrictions and limitations for preexisting conditions on
insurability and (ii) cause any deductible, co-insurance, or a maximum
out-of-pocket payments made by the continuing employees under HFNC's welfare
benefit plans to be credited to such continuing employees under the FCC welfare
benefit plans, so as to reduce the amount of any deductible, co-insurance, or
maximum out-of-pocket payments payable by the continuing employees under the FCC
welfare benefit plans.
Bonus Plans. The Agreement further provides that HFNC may continue to
administer such bonus programs and arrangements in accordance with and
consistent with past practice as were in effect prior to the execution of the
Agreement through June 30, 1998. Thereafter, the bonuses to which employees of
HFNC may be entitled for the period from June 30, 1998 through and including the
Effective Time, will be determined by mutual agreement between HFNC and FCC.
Retention Bonuses. The parties have further agreed that each employee of
HFNC identified to FCC will be entitled to receive a "retention bonus" from HFNC
equal to not more than six months' of such employee's annual base salary as of
the date of the Agreement in the event that such employee remains an
39
<PAGE> 53
employee of HFNC until the Effective Time (or in certain cases, the date the
system conversion occurs after the Effective Time) and satisfactorily fulfills
the duties and responsibilities of the position of such employee of HFNC through
the Effective Time; provided, that retention bonuses, in the aggregate, may not
exceed $150,000.
INTERESTS OF CERTAIN HFNC PERSONS IN THE MERGER
General. Certain members of HFNC's management and of the HFNC Board have
interests in the Merger that are in addition to any interest they may have as
shareholders of HFNC generally. These interests include, among other things,
provisions in the Agreement relating to liquidating payments, consulting
agreements, stock options, restricted stock, and indemnification of HFNC
directors and officers as described below. See "-- Management and Operations
After the Merger" and "-- Effect on Certain Employees and Benefit Plans."
Employment Agreements. HFNC and Home Federal are a party to employment
agreements with H. Joe King, Jr. and J. Harold Barnes, Jr. (the "Employment
Agreements"). Pursuant to the terms of the Employment Agreements, the respective
officers are entitled to receive payments equal to three times their salaries,
as defined therein, in 36 equal monthly installments. Based on the estimated
salary of Mr. King and Mr. Barnes of $339,300 and $201,600, respectively, for
1998, such payments would amount to approximately $1.0 million and $605,000,
respectively. The Employment Agreements also provide for continued medical
insurance for the benefit of Messrs. King and Barnes and their spouses until Mr.
King and Mr. Barnes have reached the age of 70 and continued participation in
certain other employee benefit plans for the remaining term of such agreements.
In addition, Mr. King will remain a consultant to FCC for a period of time from
the Effective Time through the 2001 annual meeting of shareholders of FCC and
during such period shall receive monthly compensation of $10,000 and be entitled
to appropriate office facilities and payment of the club dues and car allowance
that Mr. King receives from HFNC as of the date of the Agreement. Mr. Barnes
will remain a full-time employee of FCC and be entitled to a base salary for the
year following the Effective Time equal to the base salary Mr. Barnes receives
as of the date of the Agreement.
Stock Options. HFNC has granted stock options to certain officers and
directors pursuant to the HFNC Stock Option Plan. Pursuant to the Agreement,
each HFNC Option issued under an HFNC Stock Option Plan that is outstanding at
the Effective Time (whether or not exercisable) will be converted into and
become an option to purchase that number of whole shares of FCC Common Stock
(and cash in lieu of fractional shares as previously described herein) equal to
the number of shares of HFNC Common Stock subject to such option, multiplied by
the Exchange Ratio. The per share exercise price under each such option shall be
adjusted by dividing the per share exercise price under each such option by the
Exchange Ratio and rounding up to the nearest cent. As a result of the change of
control of HFNC, which is defined in the HFNC Stock Option Plan to include the
approval by HFNC stockholders of a merger or consolidation of HFNC with any
other corporation, all participants will become fully vested in all options
granted to them pursuant to the provisions of the HFNC Stock Option Plan.
The following table sets forth, with respect to (i) each executive officer
of HFNC (the "HFNC Executive Officers"), (ii) a group consisting of all of the
HFNC Executive Officers as a group (the "HFNC Executive Officer Group"), and
(iii) the HFNC Board as a group (other than the HFNC Executive Officers who are
also HFNC Board members) (the "HFNC Non-Executive Officer Director Group"), the
number of shares of HFNC Common Stock covered by outstanding HFNC Options held
by such persons as of the
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<PAGE> 54
HFNC Record Date and the aggregate value of such options based on the closing
price of HFNC Common Stock as of August , 1998, and the weighted average
exercise price.
<TABLE>
<CAPTION>
OPTIONS TO WEIGHTED
BECOME AVERAGE
OPTIONS EXERCISABLE EXERCISE AGGREGATE
OPTIONS CURRENTLY UPON MERGER PRICE VALUE OF
HELD EXERCISABLE CONSUMMATION PER OPTION OPTIONS
------- ----------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
H. Joe King, Jr. ................. 429,812 286,541 43,271 $13.67
J. Harold Barnes, Jr. ............ 257,887 171,925 85,962 13.67
A. Burton Mackey, Jr. ............ 85,962 57,308 28,654 13.67
------- ------- ------- --------
HFNC Executive Officer Group (3
persons)........................ 773,661 515,774 257,887
======= ======= =======
HFNC Non-Executive Officer
Director Group (5 persons)...... 429,810 286,540 143,270 $13.67
======= ======= =======
</TABLE>
Restricted Stock Awards. HFNC has previously granted shares of HFNC Common
Stock pursuant to the HFNC MRRP to various directors and executive officers. The
HFNC MRRP provides for the immediate vesting of such shares upon a change of
control of HFNC. As a result of the change of control of HFNC, which is defined
in the HFNC MRRP to include the approval by HFNC stockholders of a merger or
consolidation of HFNC with any other corporation, directors and executive
officers will become immediately vested in the shares awarded to them pursuant
to the HFNC MRRP.
The following table sets forth, with respect to (i) each HFNC Executive
Officer, (ii) the HFNC Executive Officer Group, and (iii) the HFNC Non-Executive
Officer Director Group, the number of shares of restricted HFNC Common Stock
held by such persons as of the HFNC Record Date and the aggregate value of such
awards based on the closing price of HFNC Common Stock as of August, 1998.
<TABLE>
<CAPTION>
TOTAL
RESTRICTED SHARES SHARES TO AGGREGATE
SHARES CURRENTLY VEST AT VALUE
GRANTED VESTED MERGER OF SHARES
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
H. Joe King, Jr................................... 171,925 68,770 103,155
J. Harold Barnes, Jr.............................. 103,455 41,382 62,073
A. Burton Mackey, Jr.............................. 34,385 13,754 20,631
------- ------- -------
HFNC Executive Officer Group (3 persons).......... 309,765 123,906 185,859
======= ======= =======
HFNC Non-Executive Officer Director Group (5
persons)........................................ 171,925 68,770 103,155
======= ======= =======
</TABLE>
Indemnification; Directors and Officers Insurance. The Agreement provides
that FCC will, subject to the conditions set forth therein, indemnify the
present and former directors, officers, employees, and agents of HFNC and its
subsidiaries against all Liabilities (as defined in the Agreement) arising out
of actions or omissions occurring at or prior to the Effective Time (including
the transactions contemplated by the Agreement) to the full extent permitted
under any of North Carolina law, the HFNC Articles, and the HFNC Bylaws, and any
indemnity agreements previously entered into by HFNC or any of its subsidiaries
and any director, officer, employee, or agent of HFNC or any of its
subsidiaries. This provision of the Agreement is not intended to broaden in any
manner the scope of indemnification to which the present and former directors,
officers, employees, and agents of HFNC and its subsidiaries are entitled, but
serves to ratify the legal obligations of HFNC and its subsidiaries (to be
assumed by FCC upon consummation of the Merger) to provide indemnification in
accordance with North Carolina law, the HFNC Articles, and the HFNC Bylaws, and
any indemnification agreements to which HFNC or its subsidiaries is a party with
an indemnified person. The indemnification provided under the provisions of such
instruments will be subject to the same standards that are currently applicable
for determining whether indemnified parties are entitled to indemnification
under such instruments. The Agreement also provides that FCC will maintain,
subject to certain limitations,
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<PAGE> 55
HFNC's existing directors' and officers' liability insurance policy (or a
comparable policy) in effect for a period of three years after the Effective
Time.
INTERESTS OF CERTAIN FCC PERSONS IN THE MERGER
Upon consummation of the Merger, the former shareholders of HFNC may hold
in excess of 50% of the outstanding shares of FCC Common Stock and as a result,
a change of control provision that is included in each of the FCC Stock Plans,
will automatically cause any outstanding unvested FCC Options to vest, including
FCC Options held by certain executive officers and directors of FCC.
The following table sets forth, with respect to (i) each executive officer
of FCC (the "FCC Executive Officers"), (ii) a group consisting of all of the FCC
Executive Officers as a group (the "FCC Executive Officer Group"), and (iii) the
FCC Board as a group (other than FCC Executive Officers who are also FCC Board
Members) (the "FCC Non-Executive Officer Director Group"), the number of shares
of FCC Common Stock covered by outstanding FCC Options held by such persons as
of the FCC Record Date and the aggregate value of such options based on the
closing price of FCC Common Stock as of August , 1998.
<TABLE>
<CAPTION>
OPTIONS TO WEIGHTED
BECOME AVERAGE
OPTIONS EXERCISABLE EXERCISE AGGREGATE
OPTIONS CURRENTLY UPON MERGER PRICE VALUE OF
HELD EXERCISABLE CONSUMMATION PER OPTION OPTIONS
------- ----------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
Lawrence M. Kimbrough............. 26,220 11,524 9,736 $15.6340
Robert O. Bratton................. 22,009 13,000 6,000 12.5014
Robert G. Fox..................... 22,954 12,592 9,304 14.1175
H. Clark Goodwin.................. 24,758 12,660 11,040 18.1517
Edward B. McConnell............... 11,258 5,016 5,184 16.2261
------- ------ ------
FCC Executive Officer Group (5
persons)........................ 107,199 54,792 41,264 15.1788
======= ====== ======
FCC Non-Executive Officer Director
Group (11 persons).............. 25,400 8,253 17,147 20.8139
======= ====== ======
</TABLE>
In addition to the vesting of the unvested FCC Options, FCC has made
various stock grants to certain FCC Executive Officers that upon consummation of
the Merger would immediately vest. However, since these stock grants were made
concurrent with FCC's negotiations with HFNC for the Merger, each FCC Executive
Officer that has been awarded restricted stock grants has waived the accelerated
vesting of such stock grants. As a result, such restricted stock awards will
vest in accordance with their original schedule.
Under the change in control agreements that FCC entered into with the FCC
Executive Officers (other than H. Clark Goodwin), consummation of the Merger may
constitute a change in control of FCC and if such officer's employment is
terminated by FCC without cause or by the officer for good reason during the one
year following the Effective Time, such officer will be entitled to a payment
from FCC in an amount determined under such officer's change of control
agreement. It is not anticipated that the employment of any of the FCC Executive
Officers who is a party to a change in control agreement will be terminated by
FCC or by the FCC Executive Officer.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
THE FOLLOWING IS A DISCUSSION OF THE MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER TO HOLDERS OF HFNC COMMON STOCK. THE DISCUSSION MAY
NOT APPLY TO SPECIAL SITUATIONS, SUCH AS HFNC SHAREHOLDERS, IF ANY, WHO HOLD
HFNC COMMON STOCK OTHER THAN AS A CAPITAL ASSET WHO RECEIVED HFNC COMMON STOCK
UPON THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, WHO
HOLD HFNC COMMON STOCK AS PART OF A "STRADDLE" OR "CONVERSION TRANSACTION," OR
WHO ARE INSURANCE COMPANIES, SECURITIES DEALERS, FINANCIAL INSTITUTIONS OR
FOREIGN PERSONS, AND DOES NOT DISCUSS ANY ASPECTS OF STATE, LOCAL, OR FOREIGN
TAXATION. THIS DISCUSSION IS BASED UPON LAWS, REGULATIONS, RULINGS AND DECISIONS
NOW IN EFFECT AND ON PROPOSED
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<PAGE> 56
REGULATIONS, ALL OF WHICH ARE SUBJECT TO CHANGE (POSSIBLY WITH RETROACTIVE
EFFECT) BY LEGISLATION, ADMINISTRATIVE ACTION, OR JUDICIAL DECISION. NO RULING
HAS BEEN OR WILL BE REQUESTED FROM THE INTERNAL REVENUE SERVICE ON ANY MATTER
RELATING TO THE TAX CONSEQUENCES OF THE MERGER.
Consummation of the Merger is conditioned upon receipt by FCC of an opinion
of Alston & Bird LLP, special counsel to FCC, and by HFNC of an opinion of
Elias, Matz, Tiernan & Herrick L.L.P., special counsel to HFNC, concerning the
material federal income tax consequences of the Merger. As of the date of the
filing of the Registration Statement and based upon the assumption that the
Merger is consummated in accordance with the Agreement, and upon the factual
statements and factual representations made by HFNC and FCC, it is the opinion
of the firms that:
(a) The Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code;
(b) No gain or loss will be recognized by holders of HFNC Common Stock
who exchange all of their HFNC Common Stock solely for FCC Common Stock
pursuant to the Merger (except with respect to any cash received in lieu of
a fractional share interest in FCC Common Stock);
(c) The aggregate tax basis of the FCC Common Stock received by
holders of HFNC Common Stock who exchange all of their HFNC Common Stock
solely for FCC Common Stock in the Merger will be the same as the aggregate
tax basis of the HFNC Common Stock surrendered in exchange for the FCC
Common Stock (reduced by the basis allocable to a fractional share interest
in FCC Common Stock for which cash is received);
(d) The holding period of the FCC Common Stock received by holders who
exchange all of their HFNC Common Stock solely for FCC Common Stock in the
Merger will include the holding period of the HFNC Common Stock surrendered
in exchange therefor, provided that such HFNC Common Stock is held as a
capital asset at the Effective Time.
(e) The payment of cash to the holders of HFNC Common Stock in lieu of
fractional share interests of FCC Common Stock will be treated for federal
income tax purposes as if the fractional shares were distributed as part of
the exchange and then were redeemed by FCC. These cash payments will be
treated as having been received as distributions in full payment in
exchange for the stock redeemed, as provided in Section 302(a) of the Code.
Holders of HFNC Common Stock who sell HFNC Common Stock to FCC pursuant to
FCC's repurchase of up to 750,000 shares of FCC Common Stock including purchases
on an equivalent basis of HFNC Common Stock, may have different treatment. For
example, if cash received in any such sale is determined to be consideration in
addition to the FCC Common Stock issued pursuant to the Merger, no loss will be
recognized by holders of HFNC Common Stock who participate in such sales.
However, gain, if any, will be recognized by such holders of HFNC Common Stock
in an amount equal to the excess of the fair market value of the FCC Common
Stock received (including any fractional share interest) and the cash received
pursuant to such sales over such holder's tax basis in the HFNC Common Stock
exchanged therefor, but not in excess of the total cash received. Any such gain
may be characterized as ordinary income and not capital gain pursuant to the
provisions of Section 302 of the Code.
THE TAX OPINIONS DO NOT ADDRESS ANY STATE, LOCAL, FOREIGN, OR OTHER TAX
CONSEQUENCES OF THE MERGER. HOLDERS OF HFNC COMMON STOCK SHOULD CONSULT THEIR
OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF THE PROPOSED TRANSACTION
TO THEM INDIVIDUALLY, INCLUDING TAX REPORTING REQUIREMENTS AND TAX CONSEQUENCES
UNDER STATE, LOCAL AND FOREIGN LAW.
Because certain tax consequences of the Merger may vary depending upon the
particular circumstances of each holder of HFNC Common Stock and other factors,
each such holder is urged to consult such holder's own tax advisor to determine
the particular tax consequences of the Merger to such holder (including the
application and effect of state, local and foreign tax laws).
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<PAGE> 57
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a pooling of
interests, and FCC will not consummate the Merger if such accounting treatment
is not available. Under the pooling-of-interests method of accounting, the
recorded amounts of the assets and liabilities of HFNC will be carried forward
at their previously recorded amounts, and current and prior period financial
statements will be restated for all periods as though HFNC and FCC had been
combined at the beginning of the earliest period presented.
There are certain other criteria that must be satisfied in order for the
Merger to qualify as a pooling of interests, some of which criteria cannot be
satisfied until after the Effective Time. In addition, it is a condition to
closing that each party receive a letter, dated as of the Effective Time, from
KPMG Peat Marwick LLP to the effect that the Merger will qualify for
pooling-of-interests accounting treatment. Deloitte & Touche LLP will provide an
opinion as to the ability of HFNC to participate in a transaction accounted for
as a pooling-of-interests.
For information concerning certain conditions to be imposed on the exchange
of HFNC Common Stock for FCC Common Stock in the Merger by affiliates of HFNC
and certain restrictions to be imposed on the transferability of the FCC Common
Stock held by affiliates of FCC or received by affiliates of HFNC in the Merger
in order, among other things, to ensure the availability of pooling-of-interests
accounting treatment, see "-- Resales of FCC Common Stock."
EXPENSES AND FEES
The Agreement provides that each of the parties will bear and pay its own
expenses in connection with the transactions contemplated by the Agreement,
including filing, negotiation, and application fees, printing fees, and fees and
expenses of its own financial or other consultants, investment bankers,
accountants, and counsel. All expenses associated with the fees for filing the
Registration Statement with the SEC and expenses related to the printing and
mailing of this Joint Proxy Statement will be shared by FCC and HFNC as provided
in the Agreement.
RESALES OF FCC COMMON STOCK
FCC Common Stock to be issued to shareholders of HFNC in connection with
the Merger will be registered under the Securities Act. All shares of FCC Common
Stock received by holders of HFNC Common Stock and all shares of FCC Common
Stock issued and outstanding immediately prior to the Effective Time will be
freely transferable upon consummation of the Merger by those shareholders of
HFNC not deemed to be "Affiliates" of HFNC. "Affiliates" generally are defined
as persons or entities who control, are controlled by, or are under common
control with HFNC at the time of the respective Meetings (generally, executive
officers, directors, and 10% or greater shareholders).
Rule 145 promulgated under the Securities Act restricts the sale of FCC
Common Stock received in the Merger by Affiliates of HFNC and certain of their
family members and related interests. Under the rule, during the one-year period
following the Effective Time, Affiliates of HFNC may resell publicly the FCC
Common Stock received by them in the Merger within certain limitations as to the
amount of FCC Common Stock sold in any three-month period and as to the manner
of sale. After the one-year period, such Affiliates of HFNC who are not
Affiliates of FCC may resell their shares without restriction. The ability of
Affiliates to resell shares of FCC Common Stock received in the Merger under
Rule 145 will be subject to FCC having satisfied its Exchange Act reporting
requirements for specified periods prior to the time of sale. Affiliates will
receive additional information regarding the effect of Rule 145 on their ability
to resell FCC Common Stock received in the Merger. Affiliates also would be
permitted to resell FCC Common Stock received in the Merger pursuant to an
effective registration statement under the Securities Act or an available
exemption from the Securities Act registration requirements. This Joint Proxy
Statement does not cover any resales of FCC Common Stock received by persons who
may be deemed to be Affiliates of HFNC.
Each of HFNC and FCC has agreed to use its reasonable efforts to cause each
person who may be deemed to be an Affiliate of such party to execute and deliver
to FCC not later than 30 days prior to the
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Effective Time, an agreement (each, an "Affiliate Agreement") providing that
such Affiliate will not sell, pledge, transfer, or otherwise dispose of any HFNC
Common Stock or FCC Common Stock held by such Affiliate except as contemplated
by the Agreement or the Affiliate Agreement, and will not sell, pledge, transfer
or otherwise dispose of any FCC Common Stock received by such Affiliate upon
consummation of the Merger (i) except in compliance with the Securities Act and
the rules and regulations thereunder and (ii) until such time as financial
results covering 30 days of combined operations of FCC and HFNC have been
published. Shares of FCC Common Stock issued to such Affiliates of HFNC in
exchange for shares of HFNC Common Stock will not be transferable until such
time as financial results covering at least 30 days of combined operations of
FCC and HFNC have been published, regardless of whether each such Affiliate has
provided an Affiliate Agreement (and FCC shall be entitled to place restrictive
legends upon certificates for shares of FCC Common Stock issued to Affiliates of
HFNC). Certificates representing shares of HFNC Common Stock surrendered for
exchange by any person who is an Affiliate of HFNC for purposes of Rule 145(c)
under the Securities Act shall not be exchanged for certificates representing
shares of FCC Common Stock until such time as financial results covering at
least 30 days of combined operations of FCC and HFNC have been published,
regardless of whether FCC has received such a written agreement from such
person. Prior to publication of such results, FCC will not transfer on its books
any shares of FCC Common Stock received by an Affiliate pursuant to the Merger.
The stock certificates representing FCC Common Stock issued to Affiliates in the
Merger may bear a legend summarizing the foregoing restrictions. See
"-- Conditions to Consummation of the Merger."
OPTION AGREEMENTS
As an inducement and a condition to HFNC and FCC entering into the
Agreement, HFNC and FCC entered into the reciprocal Option Agreements, pursuant
to which (i) HFNC granted FCC an option to purchase, under certain circumstances
and subject to certain adjustments and limitation, up to 3,421,300 shares, or
approximately 19.9% of the outstanding shares, of HFNC Common Stock at a price
of $13.625 per share (the "HFNC Option Agreement") and (ii) FCC granted HFNC an
option to purchase, under certain circumstances, and subject to certain
adjustments and limitations, up to 1,859,970 shares, or approximately 19.9% of
the outstanding shares, of FCC Common Stock at a price of $28.00 per share (the
"FCC Option Agreement").
The Option Agreements are exerciseable upon the occurrence of certain
events that create the potential for another party to acquire control of the
issuer. To the best knowledge of HFNC and FCC, no such event which would permit
exercise of either of the Option Agreements has occurred as of the date of this
Joint Proxy Statement. The Option Agreements were granted by HFNC and FCC as a
condition of and in consideration for the other party entering into the
Agreement and are intended to increase the likelihood that the Merger will be
effected by making it more difficult and more expensive for a third party to
acquire control of either HFNC or FCC. This description of the Option Agreements
does not purport to be complete and is qualified in its entirety by reference to
the Option Agreements, which are filed as exhibits to the Registration Statement
and incorporated herein by reference.
For purposes of the following descriptions, the term "issuer" shall mean
HFNC in the case of the HFNC Option Agreement, and FCC in the case of the FCC
Option Agreement, "holder" shall mean FCC or any successor holder in the case of
the HFNC Option Agreement and HFNC or any successor holder in the case of the
FCC Option Agreement, and "Option" shall refer to the HFNC Option in the case of
the HFNC Option Agreement and to the FCC Option in the case of the FCC Option
Agreement.
Notwithstanding anything to the contrary contained in the Option
Agreements, in no event shall the Total Profit (as defined below) of the holder
exceed $7.5 million and, if it otherwise would exceed such amount, the holder,
at its sole election, shall either (i) reduce the number of shares of the issuer
common stock subject to the Option, (ii) deliver to the issuer for cancellation,
without consideration, the shares of the issuer common stock previously
purchased pursuant to the Option, (iii) pay cash to the issuer, or (iv) any
combination thereof so that the holder will not actually realize Total Profit
(together with the Total Profit realized by all other holders) in excess of $7.5
million after taking into account the foregoing actions. In addition, the Option
may not be exercised for a number of shares of the issuer common stock as would,
as of the date of exercise,
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result in the holder's (taking into account all other holders) Notional Total
Profit (as defined below) exceeding $7.5 million; provided, however, that this
limitation will not restrict any exercise of the Option permitted by the Option
Agreement on any subsequent date.
"Total Profit" means the aggregate sum (prior to payment of taxes) of the
following: (i) the amount received by the holder pursuant to the issuer's
repurchase of the Option (or any portion thereof) (ii)(1) the amount received by
the holder pursuant to the issuer's repurchase of shares of the issuer common
stock purchased pursuant to the Option Agreement, less (2) the holder's purchase
price for such shares; (iii)(1) the net cash amounts received by the holder
pursuant to the sale of the issuer common stock purchased pursuant to the Option
(or any other securities into which such shares may be converted or exchanged)
to any unaffiliated party, less (2) the holder's purchase price of such shares;
and (iv) any amounts received by the holder on the transfer of the Option (or
any portion thereof) to any unaffiliated party.
"Notional Total Profit" means the Total Profit determined as of the date of
such proposed exercise, assuming that the Option were exercised on such date for
such number of shares and assuming that such shares, together with all other
issuer common stock purchased pursuant to the Option held by the holder and its
affiliates as of such date, were sold for cash at the closing sale price per
share of the issuer common stock as quoted on the Nasdaq NMS (or, if the issuer
common stock is not then quoted on the Nasdaq NMS, the highest bid per share as
quoted on the principal trading market or securities exchange on which such
shares are traded as reported by a recognized source selected by the holder) as
of the close of business on the preceding trading day (less customary brokerage
commissions).
Provided no preliminary or permanent injunction or other order against the
delivery of the shares of issuer common stock covered by the Option issued by
any court of competent jurisdiction shall be in effect, the holder may exercise
the Option, in whole or in part, at any time, from time to time, if, but only
if, a Purchase Event (as defined below) occurs prior to the Option's
termination; provided that the holder, at the time, is not in material breach of
the Option Agreement or the Agreement. As defined in the Option Agreement,
"Purchase Event" means either of the following events:
(a) without the holder's prior written consent, the issuer authorizes,
recommends, publicly proposes, or publicly announces an intention to
authorize, recommend or propose or enter into an agreement with any third
party to effect (i) a merger, consolidation, or similar transaction
involving the issuer or any of its subsidiaries (other than transactions
solely between the issuer's subsidiaries and transactions involving the
issuer or any of the issuer's subsidiaries in which the voting securities
outstanding immediately prior thereto continue to represent (by either
remaining outstanding or being converted into securities of the surviving
entity or the parent thereof) at least 75% of the combined voting power of
the voting securities of the issuer or the surviving entity or the parent
thereof outstanding immediately after the consummation of the
transaction)), (ii) the disposition, by sale, lease, exchange, or
otherwise, of 15% or more of the consolidated assets of the issuer and its
subsidiaries or (iii) the issuance, sale, or other disposition (including
by way of merger, consolidation, share exchange, or any similar
transaction) of securities representing 15% or more of the voting power of
the issuer or any of its subsidiaries; or
(b) any person (other than the holder or any subsidiary of the holder)
acquires beneficial ownership (as such term is defined in Rule 13d-3
promulgated under the Exchange Act), or the right to acquire beneficial
ownership of, or the formation of any "group" (as defined under the
Exchange Act), other than a group of which the holder or any holder
subsidiary is a member, that beneficially owns or has the right to acquire
beneficial ownership of, 25% or more of the outstanding shares of the
issuer common stock.
The Option will terminate upon the earliest of the following:
(a) the Effective Time;
(b) termination of the Agreement in accordance with the terms thereof
prior to the occurrence of a Purchase Event or a Preliminary Purchase Event
(as defined below) (other than a termination of the Agreement under certain
circumstances involving generally a willful breach by the issuer of a
representation or warranty contained in the Agreement or a breach by the
issuer of a covenant contained in the Agreement) (a "Default Termination");
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(c) 12 months after termination of the Agreement by the holder
pursuant to a Default Termination; and
(d) 12 months after termination of the Agreement following the
occurrence of a Purchase Event or a Preliminary Purchase Event.
As defined in the Option Agreement, "Preliminary Purchase Event" includes
either of the following events:
(a) commencement or filing of a registration statement under the
Securities Act by any third party of a tender offer or exchange offer to
purchase any shares of the issuer common stock such that, upon consummation
of such offer, such person would own or control 15% or more of the
then-outstanding shares of the issuer common stock (a "Tender Offer" or an
"Exchange Offer," respectively); or
(b) failure of the holders of the issuer common stock to approve the
Agreement at the Meeting, the failure to have the Meeting or another such
meeting held for the purpose of voting on the Agreement, or the
cancellation of such meeting prior to termination of the Agreement, or the
withdrawal or modification by the issuer Board in a manner adverse to the
holder of the recommendation of the issuer Board with respect to the
Agreement, in each case, after public announcement that a third party (i)
made a proposal to engage in an acquisition transaction, (ii) commenced a
Tender Offer or filed a registration statement under the Securities Act
with respect to an Exchange Offer or (iii) filed an application or given a
notice under any federal or state statute or regulation for approval or
consent to engage in an acquisition transaction.
In the event of any change in the issuer common stock by reason of a stock
dividend, stock split, split-up, recapitalization, combination, exchange of
shares, or similar transaction, the type and number of securities subject to the
Option, and the purchase price therefor shall be adjusted appropriately. In the
event that any additional shares of the issuer common stock are issued after May
17, 1998 (other than pursuant to an event described in the preceding sentence),
the number of shares of the issuer common stock subject to the Option will be
adjusted so that, after such issuance, it, together with any shares of the
issuer common stock previously issued pursuant to the Option Agreement, equals
the lesser of (i) 19.9% of the number of shares then issued and outstanding,
without giving effect to any shares subject to or issued pursuant to the Option
and (ii) that minimum number of shares of the issuer common stock which, when
aggregated with any other shares of the issuer common stock, beneficially owned
by the holder or any affiliate of the holder, would cause the provisions of any
North Carolina takeover laws to be applicable to the Merger.
Upon the occurrence of a Repurchase Event (as defined below) that occurs
prior to the exercise or termination of the Option, at the request of the
holder, delivered within 12 months of the Repurchase Event, the issuer will,
subject to regulatory restrictions, be obligated to repurchase the Option and
any shares of the issuer common stock therefor purchased pursuant to the Option
Agreement at a specified price.
As defined in the Option Agreement, "Repurchase Event" shall occur if (i)
any person (other than the holder or any subsidiary of the holder) shall have
acquired beneficial ownership (as such term is defined in Rule 13d-3 promulgated
under the Exchange Act), or the right to acquire beneficial ownership, or any
"group" (as such term is defined under the Exchange Act) shall have been formed
which beneficially owns or has the right to acquire beneficial ownership of 50%
or more of the then-outstanding shares of the issuer common stock, or (ii) any
of the following transactions is consummated: (a) the issuer consolidates with
or merges into any person, other than the holder or one of the holder's
subsidiaries, and is not the continuing or surviving corporation of such
consolidation or merger; (b) the issuer permits any person, other than the
holder or one of the holder's subsidiaries, to merge into the issuer and the
issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then-outstanding shares of the issuer common stock shall be
changed into or exchanged for stock or other securities of the issuer or any
other person or cash or any other property or the outstanding shares of the
issuer common stock immediately prior to such merger shall after such merger
represent less than 50% of the outstanding shares and share equivalents of the
merged company; or (c) the issuer sells or otherwise transfers all or
substantially all of its assets to any person, other than the holder or one of
the holder's subsidiaries.
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In the event that prior to the exercise or termination of the Option, the
issuer enters into an agreement to engage in any of the transactions described
in clause (ii) of the definition of Repurchase Event above, the agreement
governing such transaction must make proper provision so that the holder will
receive for each share of the issuer common stock subject to the option an
amount of consideration that would be received by a holder of the issuer common
stock in such transaction less the purchase price of the Option.
After the occurrence of a Purchase Event, the holder may assign the Option
Agreement and its rights thereunder in whole or in part.
Upon the occurrence of certain events, the issuer has agreed to file with
the SEC and to cause to become effective certain registration statements under
the Securities Act with respect to dispositions by the holder and its assigns of
all or part of the Option and/or any shares of the issuer common stock into
which the Option is exercisable.
EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS
As a result of the Merger, holders of HFNC Common Stock will be exchanging
their shares of a North Carolina corporation governed by the NCBCA, the HFNC
Articles, and the HFNC Bylaws, for shares of FCC, a North Carolina corporation
governed by the NCBCA, the FCC Articles, and the FCC Bylaws. Certain significant
differences exist between the rights of HFNC shareholders and those of FCC
shareholders. In particular, the FCC Articles and the FCC Bylaws contain several
provisions that may be deemed to have an anti-takeover effect in that they could
impede or prevent an acquisition of FCC unless the potential acquirer has
obtained the approval of the FCC Board. The following discussion is necessarily
general; it is not intended to be a complete statement of all differences
affecting the rights of shareholders and their respective entities, and it is
qualified in its entirety by reference to the NCBCA as well as to the FCC
Articles and the FCC Bylaws and the HFNC Articles and the HFNC Bylaws.
ANTI-TAKEOVER PROVISIONS GENERALLY
The provisions of the FCC Articles and the FCC Bylaws described below under
the headings, "-- Authorized Capital Stock," "-- Amendment of Charter and
Bylaws," "-- Classified Board of Directors and Absence of Cumulative Voting,"
"-- Director Removal and Vacancies," "-- Limitations on Director Liability,"
"-- Indemnification," "-- Special Meeting of Shareholders," "-- Actions by
Shareholders Without a Meeting," "-- Shareholder Nominations and Proposals" and
"-- Business Combinations" are referred to herein as the "Protective
Provisions." In general, one purpose of the Protective Provisions is to assist
the FCC Board in playing a role if any group or person attempts to acquire
control of FCC, so that the FCC Board can further protect the interests of FCC
and its shareholders as appropriate under the circumstances, including, if the
FCC Board determines that a sale of control is in the best interests of FCC's
shareholder, by enhancing the FCC Board's ability to maximize the value to be
received by the shareholders upon such a sale.
Although FCC's management believes the Protective Provisions are,
therefore, beneficial to FCC shareholders, the Protective Provisions also may
tend to discourage some takeover bids. As a result, FCC shareholders may be
deprived of opportunities to sell some or all of their shares at prices that
represent a premium over prevailing market prices. On the other hand, defeating
undesirable acquisition offers can be a very expensive and time-consuming
process. To the extent that the Protective Provisions discourage undesirable
proposals, FCC may be able to avoid those expenditures of time and money.
The Protective Provisions also may discourage open market purchases by a
potential acquirer. Such purchases may increase the market price of FCC Common
Stock temporarily, enabling shareholders to sell their shares at a price higher
than that which otherwise would prevail. In addition, the Protective Provisions
may decrease the market price of FCC Common Stock by making the stock less
attractive to persons who invest in securities in anticipation of price
increases from potential acquisition attempts. The Protective Provisions also
may make it more difficult and time consuming for a potential acquirer to obtain
control of FCC through replacing the FCC Board and management. Furthermore, the
Protective Provisions may make it more difficult for FCC shareholders to replace
the FCC Board or management, even if a majority of the
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shareholders believe such replacement is in the best interests of FCC. As a
result, the Protective Provisions may tend to perpetuate the incumbent FCC Board
and management.
The provisions of the North Carolina Shareholder Protection Act and the
Control Share Acquisition Act are not applicable to FCC. The Shareholder
Protection Act generally requires that, unless certain "fair price" and
procedural requirements are satisfied, the affirmative vote of 95% of a
corporation's voting shares is required to approve certain business combination
transactions with another entity that is a beneficial owner, directly or
indirectly, of more than 20% of the corporation's voting shares or which is an
affiliate of the corporation and previously has been a 20% beneficial holder of
such assets.
The Control Share Acquisition Act generally states that, except as provided
below, "Control Shares" will not have any voting rights. Control Shares are
shares acquired by a person under circumstances which, when added to other
shares owned, would give such person effective control over one-fifth, one-third
or a majority of all voting power in the election of the corporation's
directors. However, voting rights are restored to Control Shares by resolution
approved by the affirmative vote of the holders of a majority of the
corporation's voting stock (other than the shares held by the owner of the
Control Shares, officers of the corporation, and directors employed by the
corporation). If voting rights are granted to Control Shares which give the
holder a majority of all voting power in the election of the corporation's
directors, then the corporation's other shareholders may require the corporation
to redeem their shares at their fair value.
AUTHORIZED CAPITAL STOCK
FCC. The FCC Articles currently authorizes the issuance of up to
25,000,000 shares of FCC Common Stock, of which shares were
outstanding as of the FCC Record Date. As of the FCC Record Date,
shares of FCC Common Stock were reserved in issuance under
various employee and director benefit plans of FCC, shares were
reserved for issuance under FCC's Dividend Reinvestment Plan, and up to
shares were reserved for issuance in connection with the Merger.
After taking into account the shares reserved as described above, the number of
authorized shares of FCC Common Stock available for other corporate purposes as
of the FCC Record Date was .
As described further under "AMENDMENT OF FCC'S ARTICLES," at the FCC
Special Meeting, the shareholders of FCC will be asked to consider and vote upon
a proposal to approve an amendment to the FCC Articles to increase the number of
authorized shares of FCC Common Stock from 25,000,000 to 50,000,000.
The FCC Board may authorize the issuance of additional authorized shares of
FCC Common Stock without further action by FCC shareholders, unless such action
is required in a particular case by applicable laws or regulations or by any
stock exchange upon which FCC Common Stock may be listed.
The authority to issue additional authorized shares of FCC Common Stock
provides FCC with the flexibility necessary to meet its future needs without the
delay resulting from seeking shareholder approval. The authorized but unissued
shares of FCC Common Stock will be issuable from time to time for any corporate
purpose, including, without limitation, stock splits, stock dividends, employee
benefit and compensation plans, acquisitions, and public or private sales for
cash as a means of raising capital. Such shares could be used to dilute the
stock ownership of persons seeking to obtain control of FCC. In addition, the
sale of a substantial number of shares of FCC voting stock to persons who have
an understanding with FCC concerning the voting of such shares, or the
distribution or declaration of a dividend of shares of FCC voting stock (or the
right to receive FCC voting stock) to FCC shareholders, may have the effect of
discouraging or increasing the cost of unsolicited attempts to acquire control
of FCC.
HFNC. The HFNC Articles authorize the issuance of 25,000,000 shares of
HFNC Common Stock, of which 17,192,500 shares were outstanding as of the HFNC
Record Date. In addition, the HFNC Articles authorize the issuance of 5,000,000
shares of serial preferred stock, none of which were outstanding as of the HFNC
Record Date. Except to the extent required by governing law, rule or regulation,
shares of capital stock of HFNC may be issued from time to time by the HFNC
Board without further approval of shareholders.
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AMENDMENT OF CHARTER AND BYLAWS
FCC. In general, (i) amendments to the FCC Articles must be approved by
each voting group entitled to vote separately thereon by a majority of the votes
cast by that voting group, unless the amendment creates dissenters' rights for a
particular voting group, in which case such amendment must be approved by a
majority of the votes entitled to be cast by such voting group; and (ii) the
dissolution of FCC must be approved by a majority of all votes entitled to be
cast thereon. An amendment, however, to the provision of the FCC Articles
setting forth the voting requirements for mergers or consolidations involving
FCC and for the disposition of all or substantially all of FCC's assets or the
stock or assets of one of its major subsidiaries, as described above, must be
approved by the vote required to effect such merger, consolidation, or transfer
of assets.
Except as otherwise required in the NCBCA, the FCC Articles or a bylaw
adopted by the shareholders of FCC, generally the FCC Bylaws adopted by the
shareholders of FCC may be amended or repealed by a majority of the FCC Board or
by the shareholders of FCC, except that a bylaw adopted, amended, or repealed by
the shareholders of FCC may not be modified or repealed by the FCC Board if
neither the articles of incorporation nor bylaw adopted by the shareholders
authorize the FCC Board to so act.
The FCC Bylaws provide that all corporate powers of FCC shall be exercised
by the FCC Board except as otherwise provided by law. The FCC Board may create
one or more committees, which may include an executive committee, consisting of
two or more directors and may authorize such committee to exercise all of the
authority of the FCC Board. This authority does not include the authority to
adopt, amend, and repeal the FCC Bylaws, to authorize distributions, to propose
actions to shareholders that are required by law to be approved by the
shareholders, to fill vacancies on the FCC Board or any committee, or to declare
dividends or other corporate distributions.
HFNC. Article 11 of the HFNC Articles generally provides that any
amendment of the HFNC Articles must be first approved by a majority of the HFNC
Board and then by the holders of a majority of the shares of HFNC entitled to
vote in an election of directors, except that the approval of 75% of the shares
of HFNC entitled to vote in an election of directors is required for any
amendment to Articles 6 (preemptive rights), 7 (directors), 8 (meetings of
shareholders and shareholder proposals), 9 (limitation on liability of
directors), 10 (restrictions on acquisitions) and 11 (amendments).
The HFNC Bylaws may be amended by a majority of the HFNC Board or by the
affirmative vote of a majority of the total shares entitled to vote in an
election of directors, except that the affirmative vote of at least 75% of the
total shares entitled to vote in an election of directors shall be required to
amend, adopt, alter, change or repeal any provision inconsistent with certain
specified provisions of the HFNC Bylaws.
CLASSIFIED BOARD OF DIRECTORS AND ABSENCE OF CUMULATIVE VOTING
FCC. FCC directors are elected by a plurality of the votes cast. The size
of the FCC Board may be established by the shareholders or by at least 75% of
the directors of FCC, provided that the directors of FCC cannot set the number
of directors at less than five nor more than twenty-five, and only the
shareholders have the right to change this range. Generally, a FCC shareholder
has the right to vote each share of FCC Common Stock for as many directors as
there are to be elected, but may cast only one vote per such director. So long
as FCC is a public corporation, its shareholders do not have cumulative voting
rights. With cumulative voting, a shareholder has the right to cast a number of
votes equal to the total number of such holder's shares multiplied by the number
of directors to be elected. The shareholder has the right to distribute all of
his or her votes in any manner among any number of candidates or to accumulate
such shares in favor of one candidate. Directors are elected by a plurality of
the total votes cast by all shareholders. With cumulative voting, it may be
possible for minority shareholders to obtain representation on the FCC Board.
Without cumulative voting, the holders of more than 50% of the shares of FCC
Common Stock generally have the ability to elect 100% of the FCC Board. As a
result, the holders of the remaining FCC Common Stock effectively may not be
able to elect any person to the FCC Board.
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Therefore, a shareholder or group of shareholders controlling a majority of
the voting stock can elect all of the directors, and it will be difficult for
shareholders owning a minority of stock to effect a change in the composite of
the Board of Directors of FCC.
The FCC Bylaws provide that the FCC Board is divided into three classes,
with each class to be as nearly equal in number as possible. The directors in
each class serve three-year terms of office. The effect of FCC having a
classified Board of Directors is that approximately one-third of the members of
the FCC Board are elected each year, which effectively requires two annual
meetings for FCC shareholders to change a majority of the members of the FCC
Board. The purpose of dividing the FCC Board into classes is to facilitate
continuity and stability of leadership of FCC by ensuring that experienced
personnel familiar with FCC will be represented on the FCC Board at all times,
and to permit FCC's management to plan for the future for a reasonable amount of
time. However, by potentially delaying the time within which an acquirer could
obtain working control of the FCC Board, this provision may discourage some
potential mergers, tender offers, or takeover attempts.
HFNC. HFNC directors are elected by a plurality of the votes cast. The
HFNC Bylaws provide that the number of directors may at any time be increased or
decreased by a vote of a majority of the HFNC Board, provided that the number of
directors may not be less than seven nor more than 15. The HFNC Articles provide
that the HFNC directors shall be elected annually for a term of one year.
Generally, a HFNC shareholder has the right to vote each share of HFNC Common
Stock for as many directors as there are to be elected, but may cast only one
vote per such director. The HFNC Articles and HFNC Bylaws do not authorize
cumulative voting in elections of directors.
DIRECTOR REMOVAL AND VACANCIES
FCC. Generally, directors of FCC may be removed by the shareholders with
or without cause by the affirmative vote of a majority of the votes cast, unless
the FCC Articles are amended to provide otherwise. Vacancies occurring on the
FCC Board may be filed by the FCC Board or shareholders.
HFNC. The HFNC Articles provide that a director of HFNC will not be
personally liable for monetary damages for any action taken, or any failure to
take any action, as a director to the fullest extent permitted by the NCBCA as
it exists on the date of effectiveness of the HFNC Articles or as such law may
thereafter be in effect.
LIMITATIONS ON DIRECTOR LIABILITY
FCC. The FCC Articles provide that, to the extent permitted by the NCBCA,
a director of FCC shall not be personally liable to the corporation, its
shareholders, or otherwise for monetary damages for breach of his or her duty as
a director.
HFNC. The HFNC Articles provide that a director of HFNC will not be
personally liable for monetary damages for any action taken, or any failure to
take any action, as a director to the fullest extent permitted by the NCBCA as
it exists on the date of effectiveness of the HFNC Articles or as such law may
thereafter be in effect.
INDEMNIFICATION
FCC. Under the NCBCA, subject to certain exceptions, a North Carolina
corporation may indemnify an individual made a party to a proceeding, because he
or she is or was a director, against liability incurred in the proceeding if (i)
he or she conducted himself or herself in good faith, (ii) he or she reasonably
believed (a) in the case of conduct in his or her official capacity with the
corporation, that his or her conduct was in the best interest of the
corporation, and (b) in all other cases, that his or her conduct was at least
not opposed to the corporation's best interests, and (iii) in the case of any
criminal proceeding, he or she had no reasonable cause to believe his or her
conduct was unlawful (the "Standard of Conduct"). Moreover, unless limited by
its articles of incorporation, a North Carolina corporation must indemnify a
director who was wholly successful, on the merits or otherwise, in the defense
of any proceeding to which he or she was a party because he or she is
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or was a director of the corporation, against reasonable expenses incurred by
him or her in connection with the proceeding. Expenses incurred by a director in
defending a proceeding may be paid by the corporation in advance of the final
disposition of such proceeding upon receipt of a written affirmation by the
director of his or her good faith belief that he or she has met the Standard of
Conduct and a written undertaking by or on behalf of the director to repay such
amount if it shall ultimately be determined that he or she is not entitled to be
indemnified by the corporation against such expenses and a determination is made
that the facts known to those making the determination would preclude
indemnification. Before any such indemnification is made, it must be determined
that such indemnification would not be precluded by the NCBCA.
A director of a North Carolina corporation may also apply for court-ordered
indemnification under certain circumstances. Unless a North Carolina
corporation's articles of incorporation provide otherwise, (i) an officer of a
corporation is entitled to mandatory indemnification and is entitled to apply
for court-ordered indemnification to the same extent as a director; (ii) the
corporation may indemnify and advance expenses to an officer, employee, or agent
of the corporation to the same extent as to a director; and (iii) a corporation
may also indemnify and advance expenses to an officer, employee, or agent who is
not a director to the extent, consistent with public policy, that may be
provided by its articles of incorporation, bylaws, general or specific action of
its board of directors, or contract.
The FCC Articles and the FCC Bylaws provide for the indemnification of its
directors and officers to the fullest extent permitted by North Carolina law.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, or persons controlling FCC pursuant to
the foregoing provisions, FCC has been informed that, in the opinion of the SEC,
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
HFNC. The HFNC Articles and the HFNC Bylaws provide for the
indemnification of its directors and officers to the fullest extent permitted by
North Carolina law.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, or persons controlling HFNC pursuant to
the foregoing provisions, HFNC has been informed that, in the opinion of the
SEC, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
SPECIAL MEETINGS OF SHAREHOLDERS
FCC. The FCC Bylaws provide that special meetings of FCC shareholders may
be called, unless otherwise prescribed by law, for any purpose or purposes
whatever at any time by the FCC Board, by FCC's chief executive officer or by
the Secretary acting under instructions of the chief executive officer. So long
as FCC is a public corporation (that is, has a class of stock registered under
the Exchange Act), however, shareholders of FCC are not entitled to call a
special meeting.
HFNC. The HFNC Articles provide that special meetings of HFNC shareholders
may only be called by a majority of the HFNC Board except as required by law
otherwise, and subject to the rights of the holders of any class or series of
preferred stock.
ACTIONS BY SHAREHOLDERS WITHOUT A MEETING
FCC. The FCC Bylaws provide that any action required or permitted to be
taken by FCC shareholders at a duly called meeting of FCC shareholders may be
effected without a meeting by the unanimous written consent of the shareholders
entitled to vote on such action.
HFNC. The HFNC Articles provide that no action required to be taken by the
NCBCA at a meeting of shareholders may be taken without a meeting, without prior
notice and without a vote of such shareholders.
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<PAGE> 66
SHAREHOLDER NOMINATIONS AND PROPOSALS
FCC. The FCC Bylaws provide that nominations of persons for election to
the FCC Board may be made at an annual meeting of shareholders by any
shareholder of the corporation who was a shareholder of record at the time of
giving of proper notice to the secretary of the corporation, who is entitled to
vote at the meeting and who complies with the notice procedures set forth in the
FCC Bylaws.
HFNC. Article 7.D of the HFNC Articles governs nominations for election to
the HFNC Board, and requires all nominations for election to the HFNC Board,
other than those made by the HFNC Board, to be made by a shareholder eligible to
vote at an annual meeting of shareholders who has complied with the notice
provisions in that section.
BUSINESS COMBINATIONS
FCC. The FCC Articles provide that a plan for FCC to consolidate with, or
merge with or into, any other corporation or convey to any corporation or other
person or otherwise dispose of all or substantially all of its assets or to
dispose of by any means of all or substantially all of its assets or to dispose
of by any means all or substantially all the stock or assets of any major
subsidiary will not be submitted to the shareholders for approval unless such
plan is approved by the affirmative vote of 75% of the directors. The FCC
Articles further provide that the FCC Board, in its evaluation of such a plan,
shall consider all relevant factors, including the social and economic effects
on employees, customers, communities and others. If submitted to the
shareholders, such plan may be approved only by (i) the affirmative vote of not
less than 75% of the aggregate voting power of the outstanding stock entitled to
vote thereon, and (ii) the affirmative vote of at least 50% of the voting power
of the outstanding stock of shareholders, if (x) any shareholder entitled to
vote thereon is a person who, including affiliates of such person, is the
beneficial owner of more than 20% of the voting power of FCC (a "controlling
shareholder"), provided that shares held, voted or otherwise controlled by a
person as a trustee, plan administrator, officer of FCC or otherwise pursuant to
an employee benefit plan of FCC or of an affiliate of FCC shall not be deemed to
be beneficially owned by a person for the purposes of determining whether such
person is a controlling shareholder, and (y) prior to the acquisition of 20% of
the voting power of FCC by a shareholder, the FCC Board has not unanimously
approved such transaction. This provision of the FCC Articles can be amended
only by the vote required to approve such a transaction, if there is a
controlling shareholder.
As the Merger has been unanimously approved by the FCC Board, these
supermajority voting requirements do not apply to the Merger.
The requirement of a supermajority vote of FCC's shareholders to approve
certain business transactions, as described above, may discourage a change in
control of FCC by allowing a minority of FCC shareholders to prevent a
transaction favored by the majority of the shareholders. Also, in some
circumstances, the FCC Board could cause a supermajority vote to be required to
approve a transaction thereby enabling management to retain control over the
affairs of FCC and their positions with FCC. The primary purpose of the
supermajority vote requirement, however, is to encourage negotiations with FCC's
management by groups or corporations interested in acquiring control of FCC and
to reduce the danger of a forced merger or sale of assets.
The acts described above along with the provisions of the FCC Articles
regarding business combinations might be deemed to make FCC less attractive as a
candidate for acquisition by another company than would otherwise be the case in
the absence of such provisions. For example, if another company should seek to
acquire a controlling interest of less than 75% of the outstanding shares of FCC
Common Stock, the acquirer would not thereby obtain the ability to replace a
majority of the FCC Board until at least the second annual meeting of
shareholders following the acquisition. Furthermore, the acquirer would not
obtain the ability to immediately effect a merger, consolidation, or other
similar business combination unless the described conditions were met.
As a result, FCC shareholders may be deprived of opportunities to sell some
or all of their shares at prices that represent a premium over prevailing market
prices in a takeover context. The provisions described above
53
<PAGE> 67
also may make it more difficult for FCC shareholders to replace the FCC Board or
management, even if the holders of a majority of the FCC Common Stock should
believe that such replacement is in the interest of FCC. As a result, such
provisions may tend to perpetuate the incumbent FCC Board and management.
In the event of liquidation, holders of FCC Common Stock would be entitled
to receive pro rata any assets legally available for distribution to
shareholders with respect to shares held by them. All of the outstanding shares
of FCC Common Stock are, and upon issuance of the shares of FCC Common Stock to
be issued to shareholders of HFNC will be, validly issued, fully paid, and
nonassessable.
First Charter National Bank acts as transfer agent and registrar for FCC
Common Stock.
As a North Carolina corporation, FCC is or could be subject to various
legislative acts set forth in Chapter 55 of the General Statutes of State of
North Carolina, which impose certain restrictions on business combinations,
including, but not limited to, combinations with interested shareholders similar
to those described above.
HFNC. The HFNC Articles provide that until December 28, 2000, no person
shall directly or indirectly offer to acquire or acquire the beneficial
ownership of (i) more than 10% of the issued and outstanding shares of any class
of an equity security of HFNC or, (ii) any securities convertible into, or
exercisable for, any equity securities of HFNC if, assuming conversion or
exercise by such person of all securities of which such person is the beneficial
owner which are convertible into, or exercisable for, such equity securities,
such person would be the beneficial owner of more than 10% of any class of an
equity security of HFNC. The term "person" is broadly defined to prevent
circumvention of this restriction.
The foregoing restrictions do not apply to (i) any offer with a view toward
public resale made exclusively to HFNC by underwriters or a selling group acting
on its behalf, (ii) any tax-qualified employee benefit plan or arrangement
established by HFNC or Home Federal and any trustee of such a plan or
arrangement, and (iii) any other offer or acquisition approved in advance by the
affirmative vote of two-thirds of the HFNC Board. In the event that shares are
acquired in violation of these provisions, all shares beneficially owned by any
person in excess of 10% shall be considered "Excess Shares" and shall not be
counted as shares entitled to vote and shall not be voted by any person or
counted as voting shares in connection with any matters submitted to
shareholders for a vote, and the HFNC Board may cause such Excess Shares to be
transferred to an independent trustee for sale on the open market or otherwise,
with the expenses of such trustee to be paid out of the proceeds of sale. As the
Merger has been unanimously approved in advance by the HFNC Board, these voting
provisions do not apply to the Merger.
LIMITATIONS ON ABILITY TO VOTE STOCK
FCC. The FCC Articles and the FCC Bylaws do not contain any provision
restricting a shareholder's ability to vote shares of FCC voting stock.
HFNC. The HFNC Articles and the HFNC Bylaws do not contain any provision
restricting a shareholder's ability to vote shares of HFNC voting stock.
SHAREHOLDERS' RIGHTS TO EXAMINE BOOKS AND RECORDS
FCC. The NCBCA provides that a shareholder of a North Carolina corporation
may inspect and copy books and records of the corporation during regular
business hours, if he or she gives the corporation written notice of his or her
demand at least five business days before the date of the inspection. In order
to inspect certain records, written demand must also be made in good faith and
for a proper purpose, must describe with reasonable particularity the purpose of
the request and the records the shareholder desires to inspect, and the records
requested must be directly connected with his or her purpose.
HFNC. The foregoing provisions regarding shareholders' rights to examine
books and records also apply to HFNC as a North Carolina corporation.
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<PAGE> 68
DIVIDENDS
FCC. The holders of FCC Common Stock are entitled to receive such
dividends or distributions as the Board of Directors of FCC may declare out of
funds legally available for such payments. The payments of distributions by FCC
is subject to the restrictions of North Carolina law applicable to the
declaration of distributions by a business corporation. A corporation generally
may not authorize and make distributions if, after giving effect thereto, it
would be unable to meet its debts as they become due in the usual course of
business or if the corporation's total assets would be less than the sum of its
total liabilities plus the amount that would be needed, if it were to be
dissolved at the time of distribution, to satisfy claims of shareholders who
have preferential rights superior to the rights of the holders receiving the
distribution. Share dividends, if any are declared, may be paid from FCC's
authorized but unissued shares.
The payment of distributions to holders of FCC Common Stock is subject to
the provisions of the NCBCA and the ability of the FCC Banking Subsidiaries and
any other subsidiary of FCC to pay dividends to FCC, as restricted by various
bank regulatory agencies. See "Certain Regulatory Considerations."
HFNC. The holders of HFNC Common Stock are entitled to receive such
dividends or distributions as the Board of Directors of HFNC may declare out of
funds legally available for such payments. The payments of distributions by HFNC
is subject to the restrictions of North Carolina law applicable to the
declaration of distributions by a business corporation. A corporation generally
may not authorize and make distributions if, after giving effect thereto, it
would be unable to meet its debts as they become due in the usual course of
business or if the corporation's total assets would be less than the sum of its
total liabilities plus the amount that would be needed, if it were to be
dissolved at the time of distribution, to satisfy claims of shareholders who
have preferential rights superior to the rights of the holders receiving the
distribution. Share dividends, if any are declared, may be paid from HFNC's
authorized but unissued shares.
The payment of distributions to holders of HFNC Common Stock is subject to
the provisions of the NCBCA and the ability of Home Federal and any other
subsidiary of HFNC to pay dividends to HFNC, as restricted, with respect to Home
Federal, by the OTS. See "Certain Regulatory Considerations."
55
<PAGE> 69
COMPARATIVE MARKET PRICES AND DIVIDENDS
FCC Common Stock is traded on the Nasdaq NMS under the symbol "FCTR," and
HFNC Common Stock is traded on the Nasdaq NMS under the symbol "HFNC." The
following table sets forth, for the indicated periods, the high and low closing
sale prices for the FCC Common Stock and HFNC Common Stock as reported by the
Nasdaq NMS, and the cash dividends declared per share of FCC Common Stock and
HFNC Common Stock for the indicated periods. The stock prices do not include
retail mark-ups, mark-downs or commissions.
<TABLE>
<CAPTION>
FCC HFNC
----------------------------- -----------------------------
CASH CASH
DIVIDENDS DIVIDENDS
PRICE RANGE DECLARED PRICE RANGE DECLARED
---------------- PER ---------------- PER
HIGH LOW SHARE HIGH LOW SHARE
------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
1998
First Quarter..................... $26.00 $23.50 0.140 $15.38 $13.13 $0.080
Second Quarter.................... 27.00 20.13 0.150 13.81 11.25 0.080
Third Quarter (through August ,
1998)...........................
1997
First Quarter..................... 18.54 17.71 0.125 22.06 16.75 5.070
Second Quarter.................... 24.25 18.13 0.125 18.88 15.88 0.070
Third Quarter..................... 24.25 21.00 0.140 16.82 14.88 0.070
Fourth Quarter.................... 25.75 23.13 0.140 16.63 13.94 0.070
------ ------
Total................... $0.530 $5.280
====== ======
1996
First Quarter..................... 18.03 16.25 0.125 15.00 13.13 --
Second Quarter.................... 17.08 14.79 0.125 16.63 13.81 --
Third Quarter..................... 16.04 15.21 0.125 18.25 15.88 0.050
Fourth Quarter.................... 18.75 15.21 0.125 18.00 17.25 0.070
------ ------
Total................... $0.500 $0.120
====== ======
1995
First Quarter..................... 12.71 12.08 0.108 n/a n/a n/a
Second Quarter.................... 16.04 12.08 0.108 n/a n/a n/a
Third Quarter..................... 17.71 15.42 0.108 n/a n/a n/a
Fourth Quarter.................... 18.75 17.08 0.108 13.13 13.13 n/a
------ ------
Total................... $0.433 n/a
====== ======
</TABLE>
On August , 1998, the last sale prices of FCC Common Stock and HFNC
Common Stock as reported on the Nasdaq NMS were $ and $ per share,
respectively. On May 15, 1998, the last business day prior to public
announcement of the Merger, the last sale prices of FCC Common Stock and HFNC
Common Stock as reported by the Nasdaq NMS were $24.50 and $13.625 per share,
respectively.
The holders of FCC Common Stock are entitled to receive dividends when and
if declared by the Board of Directors out of funds legally available therefor.
Although FCC currently intends to continue to pay quarterly cash dividends on
the FCC Common Stock, there can be no assurance that FCC's dividend policy will
remain unchanged after completion of the Merger. The declaration and payment of
dividends thereafter will depend upon business conditions, operating results,
capital and reserve requirements, and the FCC Board's consideration of other
relevant factors. The Agreement provides that prior to the Effective Time HFNC
may not declare and pay cash dividends, other than regular quarterly cash
dividends on the shares of HFNC Common Stock in an amount not to exceed $.08 per
share, and that FCC may not declare and pay
56
<PAGE> 70
cash dividends, other than regular quarterly cash dividends on shares of FCC
Common Stock in an amount not to exceed $.15 per share. There is no assurance
that HFNC and FCC will pay any dividends at any time, or if it does, the amount
of dividends it would declare.
FCC and HFNC are each legal entities separate and distinct from their
subsidiaries and their revenues depend in significant part on the payment of
dividends and management fees from their respective subsidiary depository
institutions. FCC's and HFNC's subsidiary depository institutions are subject to
certain legal restrictions on the amount of dividends they are permitted to pay.
See "CERTAIN REGULATORY CONSIDERATIONS -- Payment of Dividends."
BUSINESS OF HFNC
GENERAL
HFNC, a North Carolina corporation, is a savings and loan holding company
which was organized in August 1995 in connection with the conversion of Home
Federal from mutual to stock form. The Conversion was effected on December 28,
1995, at which time Home Federal converted to a federal stock savings and loan
association and became a wholly-owned subsidiary of HFNC. As of March 31, 1998,
HFNC had total consolidated assets of approximately $979.6 million, total
consolidated loans of approximately $790.3 million, total consolidated deposits
of approximately $432.1 million, and total consolidated shareholders' equity of
approximately $168.9 million.
Home Federal is a community oriented savings institution which has
traditionally offered a wide variety of savings products to its retail customers
while concentrating its lending activities on the origination of loans secured
by one- to four-family residential dwellings. Home Federal conducts its business
from its main office, eight branch offices, and a loan origination office, all
located in Mecklenburg County, North Carolina.
The principal executive offices of HFNC are located at 139 South Tryon
Street, Charlotte, North Carolina 28202 and its telephone number at such address
is (704) 373-0400. Additional information with respect to HFNC and its
subsidiaries is included elsewhere herein and in documents incorporated by
reference in this Joint Proxy Statement. See "AVAILABLE INFORMATION" AND
"DOCUMENTS INCORPORATED BY REFERENCE."
RECENT DEVELOPMENTS
EARNINGS RELEASE. On July 13, 1998, HFNC announced consolidated earnings
for the fiscal year ended June 30, 1998. Net income for fiscal 1998 amounted to
$13.5 million, or $0.82 per diluted share, compared to $7.4 million, or $0.45
per diluted share, for fiscal 1997. The results for fiscal 1998 include gains on
sales of securities of $6.6 million and the results for fiscal 1997 include a
one time cost of $3.1 million pertaining to a special assessment by the FDIC to
recapitalize the SAIF.
Total assets increased to $1.0 billion at June 30, 1998 compared to $892.9
million at June 30, 1997, an increase of 12.9%. The growth in assets occurred
primarily in the loan portfolio, which increased 22.5% during fiscal 1998 to
$806.4 million at June 30, 1998 from $658.3 million at June 30, 1997.
Shareholders' equity increased to $170.9 million, or 17.0% of assets, at June
30, 1998, representing a book value per share of $9.94. The return on assets and
return on shareholders' equity were 1.45% and 8.11%, respectively, for fiscal
1998 compared to 0.86% and 3.46%, respectively, for fiscal 1997.
BUSINESS OF FCC
GENERAL
FCC, a North Carolina corporation, is a bank holding company registered
with the Federal Reserve under the BHC Act. As of March 31, 1998, FCC had total
consolidated assets of approximately $776 million,
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<PAGE> 71
total consolidated loans of approximately $549 million, total consolidated
deposits of approximately $636 million, and total consolidated shareholders'
equity of approximately $81 million.
FCC conducts its business activities through its two banking subsidiaries,
First Charter National Bank, a national banking association, and Bank of Union,
a state-chartered commercial bank. The FCC Banking Subsidiaries provide a wide
variety of retail and commercial banking services through 21 branch offices, two
limited service facilities, and 43 ATMs located in Cabarrus, Mecklenburg, Rowan,
Cleveland, Rutherford, and Union Counties, North Carolina.
The principal executive offices of FCC are located at 22 Union Street
North, Concord, North Carolina 28025, and its telephone number at such address
is (704) 786-3300. Additional information with respect to FCC and its
subsidiaries is included in documents incorporated by reference in this Joint
Proxy Statement. See "AVAILABLE INFORMATION" AND "DOCUMENTS INCORPORATED BY
REFERENCE."
RECENT DEVELOPMENTS
Earnings Release. On July 6, 1998, FCC announced record earnings for both
the six-month and three-month periods ended June 30, 1998. Net income was
$6,200,520, up 12.7% over the $5,500,182 reported for the same six-month period
in 1997. Diluted earnings per share for the first six months of 1998 were $0.66
compared to $0.59 reported for the same period in 1997.
Net income for the three-month period ended June 30, 1998, was $3,189,864
versus $2,814,083 for the comparable period in 1997, representing a 13.4%
increase. Diluted earnings per share for the quarter were $0.34 compared to
$0.30 for the second quarter of 1997.
On an annualized basis, year to date results represent a return on average
assets of 1.64% and a return on average equity of 15.28%. Comparable figures for
the six-month period ended June 30, 1997, were 1.63% and 15.01%, respectively.
Total assets at June 30, 1998, were $793,052,223, up 4.1% from December 31,
1997. Gross loans increased 8.7% to $569,842,470, and total deposits increased
4.6% to $650,212,526 from December 31, 1997. Total shareholders' equity was
$83,650,601 at June 30, 1998, which represents a book value per share of $8.94
and an equity/asset ratio of 10.55%.
Stock Repurchases. In connection with the Merger, FCC intends to
repurchase, from time to time in open market purchases or in privately
negotiated transactions, up to 750,000 shares of FCC Common Stock. FCC may
effect such repurchases on an equivalent basis in shares of HFNC Common Stock.
Such repurchases will be effected in accordance with Regulation M and may be
discontinued at any time. As of the date of this Joint Proxy Statement, FCC has
repurchased shares of FCC Common Stock and shares
of HFNC Common Stock. No additional repurchases will be made until after
adjournment of the Special Meetings.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following tables contain unaudited pro forma condensed consolidated
financial statements including a balance sheet as of March 31, 1998 and
statements of earnings for the three months ended March 31, 1998, and 1997 and
the years ended December 31, 1997, 1996, and 1995. These statements present on a
pro forma basis historical results for FCC and HFNC as though the Merger had
been consummated as of January 1, 1995.
For purposes of preparing the Pro Forma Condensed Consolidated Financial
Information and per share data, for the years ended December 31, 1997, 1996, and
1995 the historical operating results of HFNC have been reported on a calendar
year basis rather than on a June 30 fiscal year basis as originally reported.
Such calendar year financial statements and per share information for HFNC have
not been audited.
The Merger is expected to be accounted for using the pooling-of-interests
method of accounting. Pro forma financial information are presented for
information purposes only and are not necessarily indicative of
58
<PAGE> 72
the results of operations or combined financial position that would have
resulted had the Merger been consummated at the dates or during the periods
indicated, nor are they necessarily indicative of future results of operations
or combined financial position.
The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the consolidated historical financial statements of
FCC and HFNC which are incorporated by reference herein. Pro forma results are
not necessarily indicative of future operating results.
59
<PAGE> 73
FIRST CHARTER CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1998
<TABLE>
<CAPTION>
FCC
PRO FORMA AND
FCC HFNC ADJUSTMENTS HFNC
-------- -------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks............................ $ 32,963 $ 7,550 $ 5,612(2) $ 46,125
Interest-bearing bank deposits..................... 7,870 12,168 20,038
Securities available for sale:
U.S. government obligations...................... 13,811 -- 13,811
U.S. government agency obligations............... 45,313 82,584 127,897
Mortgage-backed securities....................... 8,736 46,777 55,513
State and municipal obligations, nontaxable...... 86,189 -- 86,189
Other............................................ 13,211 16,543 29,754
-------- -------- -------- ----------
Total securities available for sale............ 167,260 145,904 313,164
-------- -------- -------- ----------
Loans.............................................. 548,920 797,339 1,346,259
Less: Unearned income............................ (204) -- (204)
Allowance for loan losses.................... (8,088) (7,085) (15,173)
-------- -------- -------- ----------
Loans, net....................................... 540,628 790,254 1,330,882
-------- -------- -------- ----------
Premises and equipment, net........................ 16,071 9,989 26,060
Other assets....................................... 10,991 13,689 2,581(2) 27,261
-------- -------- -------- ----------
Total assets.............................. $775,783 $979,554 $ 8,193 $1,763,530
======== ======== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits, domestic:
Noninterest-bearing.............................. $ 93,875 $ 9,480 $ $ 103,355
Interest-bearing:
NOW accounts................................... 96,326 76,677 173,003
Time........................................... 373,291 259,527 632,818
Certificates of deposit greater than
$100,000..................................... 72,342 86,370 158,712
-------- -------- -------- ----------
Total deposits................................. 635,834 432,054 1,067,888
Other borrowings................................. 53,017 368,800 421,817
Other liabilities................................ 5,759 9,780 5,086(2)(3) 20,625
-------- -------- -------- ----------
Total liabilities.............................. 694,610 810,634 5,086 1,510,330
SHAREHOLDERS' EQUITY
FCC Common Stock -- no par value; authorized,
25,000,000 shares; issued and outstanding,
9,328,545 shares (pro forma-authorized,
50,000,000 shares; issued and outstanding
19,128,270 shares)(4)............................ 50,516 -- 89,857(1)(2) 140,373
HFNC Common Stock -- $.01 par value; authorized,
25,000,000 shares; issued and outstanding,
17,192,500 shares................................ -- 172 (172)(1) --
Additional paid-in capital......................... -- 89,971 (89,971)(1) --
ESOP loan and unvested restricted stock............ -- (19,742) 19,742(2) --
Unrealized gain on securities available for sale... 3,850 1,824 5,674
Retained earnings.................................. 26,807 96,695 (16,349)(2)(3) 107,153
-------- -------- -------- ----------
Total shareholders' equity................ 81,173 168,920 3,107 253,200
-------- -------- -------- ----------
Total liabilities and shareholders'
equity.................................. $775,783 $979,554 $ 8,193 $1,763,530
======== ======== ======== ==========
</TABLE>
See notes to pro forma condensed financial information.
60
<PAGE> 74
FIRST CHARTER CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31, FOR THE YEARS ENDED DECEMBER 31,
------------------------- --------------------------------------
1998 1997 1997 1996 1995
----------- ----------- ----------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Interest and fees on loans............. $ 28,076 $ 23,289 $ 100,712 $ 84,944 $ 75,860
Interest on investments and
securities........................... 4,964 6,230 21,762 25,870 16,275
Other interest......................... 51 87 593 726 1,076
----------- ----------- ----------- ----------- ----------
Total interest income................ 33,091 29,606 123,067 111,540 93,211
----------- ----------- ----------- ----------- ----------
Interest on deposits................... 11,410 11,117 46,334 45,589 45,022
Interest on borrowings................. 5,370 3,398 16,494 6,721 2,761
----------- ----------- ----------- ----------- ----------
Total interest expense............... 16,780 14,515 62,828 52,310 47,783
----------- ----------- ----------- ----------- ----------
Net interest income.................. 16,311 15,091 60,239 59,230 45,428
Provision for loan losses.............. 662 648 2,684 1,873 2,331
----------- ----------- ----------- ----------- ----------
Net interest income after provision
for loans losses................... 15,649 14,443 57,555 57,357 43,097
Noninterest income..................... 3,737 2,527 15,327 8,537 8,242
Noninterest expense.................... 9,941 10,081 42,947 36,568 31,850
----------- ----------- ----------- ----------- ----------
Income before income taxes........... 9,445 6,889 29,935 29,326 19,489
Income taxes........................... 3,275 2,334 10,765 9,723 5,631
----------- ----------- ----------- ----------- ----------
Income from continuing operations
before nonrecurring charges
directly attributable to the
transaction and before cumulative
effect of change in accounting
principle.......................... 6,170 4,555 19,170 19,603 13,858
Cumulative effect of change in
accounting principle............... -- -- -- -- (1,050)
----------- ----------- ----------- ----------- ----------
Income from continuing operations
before nonrecurring charges
directly attributable to the
transaction........................ $ 6,170 $ 4,555 $ 19,170 $ 19,603 $ 12,808
=========== =========== =========== =========== ==========
BASIC INCOME PER SHARE:
Income from continuing operations
before nonrecurring charges
directly attributable to the
transaction
FCC -- historical.................. $ 0.32 $ 0.29 $ 0.91 $ 1.10 $ 0.95
HFNC -- historical................. 0.20 0.12 0.69 0.58 n/a
FCC/HFNC -- pro forma combined..... 0.34 0.25 1.06 1.06 1.46
Average common equivalent shares
FCC -- historical.................. 9,310,298 9,205,381 9,236,786 9,183,738 8,779,066
HFNC -- historical................. 15,718,872 15,785,575 15,644,465 16,322,582 n/a
FCC/HFNC -- pro forma combined..... 18,270,055 18,203,159 18,154,131 18,487,610 8,779,066
INCOME DILUTED PER SHARE:
Income from continuing operations
before nonrecurring charges
directly attributable to the
transaction
FCC -- historical.................. $ 0.32 $ 0.29 $ 0.90 $ 1.09 $ 0.94
HFNC -- historical................. 0.20 0.11 0.66 0.58 n/a
FCC/HFNC -- pro forma combined..... 0.33 0.24 1.03 1.06 1.45
Average common equivalent shares
FCC -- historical.................. 9,460,050 9,272,252 9,339,060 9,234,946 8,846,355
HFNC -- historical................. 16,193,264 16,470,636 16,418,224 16,322,582 n/a
FCC/HFNC -- pro forma combined..... 18,690,210 18,660,515 18,697,448 18,538,818 8,846,355
</TABLE>
See notes to pro forma condensed financial information.
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NOTES TO THE UNAUDITED MARCH 31, 1998
PRO FORMA CONDENSED FINANCIAL INFORMATION
The unaudited FCC and HFNC Pro Forma Condensed Financial Information is
based upon the following adjustments, reflecting the consummation of the Merger
using the pooling-of-interest method of accounting. Actual amounts may differ
from those reflected in the unaudited Pro Forma Condensed Financial Information.
NOTE 1
FCC will exchange 0.57 of a share of FCC Common Stock for each share of
HFNC Common Stock outstanding immediately prior to the Effective Time (except
for shares of HFNC Common Stock held by FCC or HFNC or their respective
subsidiaries, other than in a fiduciary capacity or as a result of debts
previously contracted, which shall be canceled). The pro forma issued number of
shares of FCC Common Stock does not reflect the exercise of options to acquire
sharers of HFNC Common Stock. Options to acquire 1,545,510 shares of HFNC Common
Stock were outstanding at March 31, 1998.
<TABLE>
<S> <C> <C>
Shares of HFNC Common Stock................................. 17,192,500
Exchange Ratio.............................................. 0.57
Shares of FCC Common Stock issued........................... 9,799,725
</TABLE>
The following adjusting entry was made to the unaudited Pro Forma Condensed
Balance Sheet to reflect this transaction:
<TABLE>
<S> <C> <C>
Common Stock -- HFNC........................................ 171,925
Additional paid-in Capital.................................. 89,971,485
Common Stock -- FCC.................................... 90,143,410
</TABLE>
NOTE 2
At March 31, 1998, HFNC had a $7.7 million loan balance related to the
internally leveraged HFNC ESOP. Pursuant to the terms of ESOP FCC will sell
enough common stock shares to repay this inter-company debt. All additional
shares remaining in the HFNC ESOP will be allocated to employees' individual
accounts. FCC will incur a one-time charge related to this allocation of
remaining shares, which is reflected in the pro forma condensed balance sheet as
a reduction of retained earnings of $5,319,048 (see Note 3). At March 31, 1998,
the HFNC ESOP had 935,314 shares of stock not allocated to employees' individual
accounts. FCC will exchange 0.57 of a share of FCC Common Stock for each
unallocated share used to pay off the inter-company debt and allocate remaining
shares to HFNC employees' individual accounts. The following adjusting entry was
made to the unaudited Pro Forma Condensed Balance Sheet to reflect this
transaction:
<TABLE>
<S> <C> <C>
Cash........................................................ $7,742,584
Retained Earnings........................................... 5,319,048
ESOP Loan and Unvested Restricted Stock................ 11,021,320
Common Stock -- FCC.................................... 2,040,312
</TABLE>
Upon consummation of the Merger approximately 371,000 shares of unvested
restricted stock grants will vest immediately under the HFNC MRRP. This
accelerated vesting will result in a one-time charge to HFNC's income statement
upon consummation, which is reflected in the pro forma condensed balance sheet
as a reduction of retained earnings of $5,227,642, net of tax (see Note 3). FCC
will exchange 0.57 of a share of FCC Common Stock for each vested share of
restricted stock outstanding. All ungranted shares will be
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retired. The following adjusting entry was made to the unaudited Pro Forma
Condensed Balance Sheet to reflect this transaction:
<TABLE>
<S> <C> <C>
Retained Earnings........................................... $5,227,642
Accrued Liabilities......................................... 715,722
Deferred Tax Asset.......................................... 2,581,413
Common Stock -- FCC......................................... 2,326,513
HFNC ESOP Loan and Unvested Restricted Stock.............. 8,720,639
Cash...................................................... 2,130,651
</TABLE>
NOTE 3
FCC anticipates one-time merger and related charges of $19.7 million ($16.3
million, net of tax effects) in connection with the Merger. Dissolution of the
HFNC ESOP and the HFNC MRRP (representing $10.5 million of the $19.7 million)
along with professional fees associated with the transaction (including fixed
financial advisor fees as well as attorneys' and accountants' fees) are expected
to represent the largest portion of the expenses and charges, as well as
estimated expenses associated with various severance-related obligations. The
impact of these adjustments, net of tax effects, has been reflected in the
Unaudited Pro Forma Condensed Balance Sheet as of March 31, 1998, but has not
been reflected in the Unaudited Pro Forma Condensed Statement of Earnings.
NOTE 4
In connection with the Merger, FCC intends to repurchase, from time to time
in open market purchases or in privately negotiated transactions, up to 750,000
shares of FCC Common Stock. FCC may effect such repurchases on an equivalent
basis in shares of HFNC Common Stock. The impact of the stock repurchase is not
reflected in the Pro Forma Condensed Consolidated Financial Information.
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CERTAIN REGULATORY CONSIDERATIONS
The following discussion sets forth certain of the material elements of the
regulatory framework applicable to banks and bank holding companies and provides
certain specific information related to FCC. A more complete discussion is
included in the FCC 1997 Form 10-K. Information relating to HFNC is included in
the HFNC 1997 Form 10-K. See "AVAILABLE INFORMATION" and "DOCUMENTS INCORPORATED
BY REFERENCE."
GENERAL
FCC is a bank holding company registered with the Federal Reserve under the
BHC Act. As such, FCC and its non-bank subsidiaries are subject to the
supervision, examination, and reporting requirements of the BHC Act and the
regulations of the Federal Reserve.
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before: (i) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or control
more than 5% of the voting shares of the bank; (ii) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all of the
assets of any bank; or (iii) it may merge or consolidate with any other bank
holding company.
The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business of
banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to consider
the financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the community to
be served. Consideration of financial resources generally focuses on capital
adequacy which is discussed below, and consideration of convenience and needs
issues includes the parties' performance under the Community Reinvestment Act of
1977.
The BHC Act, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ("Interstate
Banking Act"), which became effective in September 1995, repealed the prior
statutory restrictions on interstate acquisitions of banks by bank holding
companies, such that FCC and any other bank holding company located in North
Carolina may now acquire a bank located in any other state, and any bank holding
company located outside North Carolina may lawfully acquire any North
Carolina-based bank, regardless of state law to the contrary, in either case
subject to certain deposit-percentage limitations, aging requirements, and other
restrictions. The Interstate Banking Act also generally provides that, after
June 1, 1997, national and state-chartered banks may branch interstate through
acquisitions of banks in other states.
The BHC Act generally prohibits FCC from engaging in activities other than
banking or managing or controlling banks or other permissible subsidiaries and
from acquiring or retaining direct or indirect control of any company engaged in
any activities other than those activities determined by the Federal Reserve to
be so closely related to banking or managing or controlling banks as to be a
proper incident thereto. In determining whether a particular activity is
permissible, the Federal Reserve must consider whether the performance of such
an activity reasonably can be expected to produce benefits to the public, such
as greater convenience, increased competition, or gains in efficiency, that
outweigh possible adverse effects, such as undue concentration of resources,
decreased or unfair competition, conflicts of interest, or unsound banking
practices. For example, factoring accounts receivable, acquiring or servicing
loans, leasing personal property, conducting discount securities brokerage
activities, performing certain data processing services, acting as agent or
broker in selling credit life insurance and certain other types of insurance in
connection with credit transactions, and performing certain insurance
underwriting activities all have been determined by the Federal Reserve to be
permissible activities of bank holding companies. The BHC Act does not place
territorial limitations on permissible nonbanking activities of bank holding
companies. Despite prior approval, the Federal Reserve has
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the power to order a holding company or its subsidiaries to terminate any
activity or to terminate its ownership or control of any subsidiary when it has
reasonable cause to believe that continuation of such activity or such ownership
or control constitutes a serious risk to the financial safety, soundness, or
stability of any bank subsidiary of that bank holding company.
Each of the FCC Banking Subsidiaries is a member of the Federal Deposit
Insurance Corporation ("FDIC"), and as such, its deposits are insured by the
FDIC to the extent provided by law. Each such subsidiary is also subject to
numerous state and federal statutes and regulations that affect is business,
activities, and operations, and each is supervised and examined by one or more
state or federal bank regulatory agencies.
The regulatory agencies having supervisory jurisdiction over the respective
subsidiary institutions of FCC and HFNC (the FDIC and the applicable state
authority in the case of state-chartered nonmember banks such as the Bank of
Union, the Office of Thrift Supervision ("OTS") in the case of federally
chartered thrift institutions such as Home Federal, and the Office of the
Comptroller of the Currency ("OCC") in the case of national banks such as First
Charter National Bank) regularly examine the operations of such institutions and
have authority to approve or disapprove mergers, consolidations, the
establishment of branches, and similar corporate actions. The federal and state
banking regulators also have the power to prevent the continuance or development
of unsafe or unsound banking practices or other violations of law.
PAYMENT OF DIVIDENDS
FCC is a legal entity separate and distinct from its banking and other
subsidiaries. The principal sources of cash flow of FCC, including cash flow to
pay dividends to its shareholders, are dividends from its subsidiary depository
institutions. There are statutory and regulatory limitations on the payment of
dividends by these subsidiary depository institutions to FCC and HFNC, as well
as by FCC and HFNC to their shareholders.
As to the payment of dividends, Bank of Union is subject to the respective
laws and regulations of the state of North Carolina, and to the regulations of
the FDIC. First Charter National Bank is subject to the regulations of the OCC.
If, in the opinion of the federal banking regulator, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such agency may
require, after notice and hearing, that such institution cease and desist from
such practice. The federal banking agencies have indicated that paying dividends
that deplete a depository institution's capital base to an inadequate level
would be an unsafe and unsound banking practice. Under the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), a depository
institution may not pay any dividend if payment would cause it to become
undercapitalized or if it already is undercapitalized. See "-- Prompt Corrective
Action." Moreover, the federal agencies have issued policy statements that
provide that bank holding companies and insured banks should generally only pay
dividends out of current operating earnings.
At March 31, 1998, under dividend restrictions imposed under federal and
state laws, the FCC Banking Subsidiaries, without obtaining governmental
approvals, could declare aggregate dividends to FCC of approximately $12.5
million.
The payment of dividends by FCC and the FCC Banking Subsidiaries may also
be affected or limited by other factors, such as the requirement to maintain
adequate capital above regulatory guidelines.
CAPITAL ADEQUACY
FCC and the FCC Banking Subsidiaries are required to comply with the
capital adequacy standards established by the Federal Reserve in the case of
FCC, and the appropriate federal banking regulator in the case of each of the
FCC Banking Subsidiaries. There are two basic measures of capital adequacy for
bank holding companies and their subsidiary depository institutions that have
been promulgated by the Federal Reserve and each of the federal bank regulatory
agencies: a risk-based measure and a leverage measure. All applicable capital
standards must be satisfied for a bank holding company to be considered in
compliance.
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The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among depository
institutions and bank holding companies, to account for off-balance-sheet
exposure, and to minimize disincentives for holding liquid assets. Assets and
off-balance-sheet items are assigned to broad risk categories, each with
appropriate weights. The resulting capital ratios represent capital as a
percentage of total risk-weighted assets and off-balance-sheet items.
The minimum guideline for the ratio ("Total Capital Ratio") of total
capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8.0%. At least
half of Total Capital must be composed of common equity, undivided profits,
minority interests in the equity accounts of consolidated subsidiaries,
noncumulative perpetual preferred stock, and a limited amount of cumulative
perpetual preferred stock, less goodwill and certain other intangible assets
("Tier 1 Capital"). The remainder may consist of subordinated debt, other
preferred stock, and a limited amount of loan loss reserves ("Tier 2 Capital").
At March 31, 1998, FCC's consolidated Total Capital Ratio and its Tier 1 Capital
Ratio (i.e., the ratio of Tier 1 Capital to risk-weighted assets) were 14.27%
and 13.03%, respectively.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less goodwill
and certain other intangible assets, of 3.0% for bank holding companies that
meet certain specified criteria, including having the highest regulatory rating.
All other bank holding companies generally are required to maintain a Leverage
Ratio of at least 3.0%, plus an additional cushion of 100 to 200 basis points.
FCC's Leverage Ratio at March 31, 1998, was 10.25%. The guidelines also provide
that bank holding companies experiencing internal growth or making acquisitions
will be expected to maintain strong capital positions substantially above the
minimum supervisory levels without significant reliance on intangible assets.
Furthermore, the Federal Reserve has indicated that it will consider a "tangible
Tier 1 Capital Leverage Ratio" (deducting all intangibles) and other indicia of
capital strength in evaluating proposals for expansion or new activities.
Each of the FCC Banking Subsidiaries is subject to risk-based and leverage
capital requirements adopted by its federal banking regulatory which are
substantially similar to those adopted by the Federal Reserve for bank holding
companies. Each of the FCC Banking Subsidiaries was in compliance with
applicable minimum capital requirements as of March 31, 1998. Neither FCC nor
any of the FCC Banking Subsidiaries has been advised by any federal banking
agency of any specific minimum capital ratio requirement applicable to it.
Failure to meet capital guidelines could subject a bank or thrift to a
variety of enforcement remedies, including issuance of a capital directive, the
termination of deposit insurance by the FDIC, a prohibition on the taking of
brokered deposits, and certain other restrictions on its business. As described
below, substantial additional restrictions can be imposed upon FDIC-insured
depository institutions that fail to meet applicable capital requirements. See
"-- Prompt Corrective Action."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the Federal Reserve, the FDIC, and the OCC have,
pursuant to FDICIA, proposed an amendment to the risk-based capital standards
that would calculate the change in an institution's net economic value
attributable to increases and decreases in market interest rates and would
require banks with excessive interest rate risk exposure to hold additional
amounts of capital against such exposures. The OTS has already included an
interest-rate risk component in its risk-based capital guidelines for savings
associations that it regulates.
SUPPORT OF SUBSIDIARY INSTITUTIONS
Under Federal Reserve policy, FCC is expected to act as a source of
financial strength for, and to commit resources to support, each of the FCC
Banking Subsidiaries. This support may be required at times when, absent such
Federal Reserve policy, FCC may not be inclined to provide it. In addition, any
capital loans by a bank holding company to any of its banking subsidiaries are
subordinate in right of payment to deposits and to certain other indebtedness of
such banks. In the event of a bank holding company's bankruptcy, any commitment
by the bank holding company to a federal bank regulatory agency to maintain the
capital of a banking subsidiary will be assumed by the bankruptcy trustee and
entitled to a priority of payment.
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Under the Federal Deposit Insurance Act (the "FDIA"), a depository
institution insured by the FDIC can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC after August 9, 1989, in
connection with (i) the default of a commonly controlled FDIC-insured depository
institution or (ii) any assistance provided by the FDIC to any commonly
controlled FDIC-insured depository institution "in danger of default." "Default"
is defined generally as the appointment of a conservator or receiver, and "in
danger of default" is defined generally as the existence of certain conditions
indicating that a default is likely to occur in the absence of regulatory
assistance. The FDIC's claim for damages is superior to claims of shareholders
of the insured depository institution or its holding company, but is subordinate
to claims of depositors, secured creditors, and holders of subordinated debt
(other than affiliates) of the commonly controlled insured depository
institution. The FCC Banking Subsidiaries are subject to these cross-guarantee
provisions. As a result, any loss suffered by the FDIC in respect of any of
these subsidiaries would likely result in assertion of the cross-guarantee
provisions, the assessment of such estimated losses against the depository
institution's banking or thrift affiliates, and a potential loss of FCC's
respective investments in such other subsidiary depository institutions.
PROMPT CORRECTIVE ACTION
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions in
the three undercapitalized categories, the severity of which will depend upon
the capital category in which the institution is placed. Generally, subject to a
narrow exception, FDICIA requires the banking regulator to appoint a receiver or
conservator for an institution that is critically undercapitalized. The federal
banking agencies have specified by regulation the relevant capital level for
each category.
Under the final agency rules implementing the prompt corrective action
provisions, an institution that (i) has a Total Capital Ratio of 10% or greater,
a Tier 1 Capital Ratio of 6.0% or greater, and a Leverage Ratio of 5.0% or
greater and (ii) is not subject to any written agreement, order, capital
directive, or prompt corrective action directive issued by the appropriate
federal banking agency is deemed to be well capitalized. An institution with a
Total Capital Ratio of 8.0% or greater, a Tier 1 Capital Ratio of 4.0% or
greater, and a Leverage Ratio of 4.0% or greater is considered to be adequately
capitalized. A depository institution that has a Total Capital Ratio of less
than 8.0%, a Tier 1 Capital Ratio of less than 4.0%, or a Leverage Ratio of less
than 4.0% is considered to be undercapitalized. A depository institution that
has a Total Capital Ratio of less than 6.0%, a Tier 1 Capital Ratio of less than
3.0%, or a Leverage Ratio of less than 3.0% is considered to be significantly
undercapitalized, and an institution that has a tangible equity capital to
assets ratio equal to or less than 2.0% is deemed to be critically
undercapitalized. For purposes of the regulation, the term "tangible equity"
includes core capital elements counted as Tier 1 Capital for purposes of the
risk-based capital standards, plus the amount of outstanding cumulative
perpetual preferred stock (including related surplus), minus all intangible
assets with certain exceptions. A depository institution may be deemed to be in
a capitalization category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary depository
institution meet its capital restoration plan, subject to certain limitations.
The obligation of a controlling bank holding company under FDICIA to fund a
capital restoration plan is limited to the lesser of 5.0% of an undercapitalized
subsidiary's assets or the amount required to meet regulatory capital
requirements. An undercapitalized institution is also generally prohibited from
increasing its average total assets, making acquisitions, establishing any
branches, or engaging in any new line of business, except in accordance with an
accepted capital restoration plan or with the approval of the FDIC. In addition,
the appropriate federal banking agency is given authority with respect to any
undercapitalized depository institution to take any of the actions it is
required to
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or may take with respect to a significantly undercapitalized institution as
described below if it determines "that those actions are necessary to carry out
the purpose" of FDICIA.
For those institutions that are significantly undercapitalized or
undercapitalized and either fail to submit an acceptable capital restoration
plan or fail to implement an approved capital restoration plan, the appropriate
federal banking agency must require the institution to take one or more of the
following actions: (i) sell enough shares, including voting shares, to become
adequately capitalized; (ii) merge with (or be sold to) another institution (or
holding company), but only if grounds exist for appointing a conservator or
receiver; (iii) restrict certain transactions with banking affiliates as if the
"sister bank" exception to the requirements of Section 23A of the Federal
Reserve Act did not exist; (iv) otherwise restrict transactions with bank or
non-bank affiliates; (v) restrict interest rates that the institution pays on
deposits to "prevailing rates" in the institution's "region;" (vi) restrict
asset growth or reduce total assets; (vii) alter, reduce, or terminate
activities; (viii) hold a new election of directors; (ix) dismiss any director
or senior executive officer who held office for more than 180 days immediately
before the institution became undercapitalized, provided that in requiring
dismissal of a director or senior officer, the agency must comply with certain
procedural requirements, including the opportunity for an appeal in which the
director or officer will have the burden of proving his or her value to the
institution; (x) employ "qualified" senior executive officers; (xi) cease
accepting deposits from correspondent depository institutions; (xii) divest
certain nondepository affiliates which pose a danger to the institution; or
(xiii) be divested by a parent holding company. In addition, without the prior
approval of the appropriate federal banking agency, a significantly
undercapitalized institution may not pay any bonus to any senior executive
officer or increase the rate of compensation for such an officer.
At March 31, 1998, all of the FCC Banking Subsidiaries had the requisite
capital levels to qualify as well capitalized. An institution's capital category
is determined solely for the purposes of applying the prompt corrective action
law and it may not constitute an accurate representation of an institution's
overall financial condition or prospects.
DESCRIPTION OF FCC COMMON STOCK
The FCC Articles currently authorizes the issuance of 25,000,000 shares of
FCC Common Stock. As of the FCC Record Date, shares of FCC Common
Stock were outstanding and approximately shares were reserved for
issuance. As described further under "AMENDMENT OF FCC'S ARTICLES," at the FCC
Special Meeting, the shareholders of FCC will be asked to consider and vote upon
a proposal to approve an amendment to the FCC Articles to increase the number of
authorized shares of FCC Common Stock from 25,000,000 to 50,000,000. THE CAPITAL
STOCK OF FCC DOES NOT REPRESENT OR CONSTITUTE A DEPOSIT ACCOUNT AND IS NOT
INSURED BY THE FDIC, THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE
FUND, OR ANY GOVERNMENTAL AGENCY.
Shares of FCC Common Stock may be issued at such time or times and for such
consideration as the FCC Board may deem advisable, subject to such limitations
as may be set forth in the laws of the State of North Carolina, the FCC
Articles, or the FCC Bylaws, or the rules of the Nasdaq NMS.
The holders of FCC Common Stock are entitled to receive, to the extent
permitted by law, only such dividends as may be declared from time to time by
the FCC Board.
In the event of the voluntary or involuntary liquidation, dissolution,
distribution of assets, or winding-up of FCC, the holders of FCC Common Stock
will be entitled to receive all of the remaining assets of FCC, of whatever
kind, available for distribution to shareholders ratably in proportion to the
number of shares of FCC Common Stock held. The FCC Board may distribute in kind
to the holders of FCC Common Stock such remaining assets of FCC or may sell,
transfer, or otherwise dispose of all or any part of such remaining assets to
any other person or entity and receive payment therefor in cash, stock, or
obligations of such other person or entity, and may sell all or any part of the
consideration so received and distribute any balance thereof in kind to holders
of FCC Common Stock. Neither the merger or consolidation of FCC into or with any
other corporation, nor the merger of any other corporation into FCC, nor any
purchase or redemption of shares of
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stock of FCC of any class, shall be deemed to be a dissolution, liquidation, or
winding-up of FCC for purposes of this paragraph.
Because FCC is a holding company, its right and the rights of its creditors
and shareholders, including the holders of FCC Common Stock, to participate in
the distribution of assets of a subsidiary on its liquidation or
recapitalization may be subject to prior claims of such subsidiary's creditors
except to the extent that FCC itself may be a creditor having recognized claims
against such subsidiary.
For a further description of FCC Common Stock, see "EFFECT OF THE MERGER ON
RIGHTS OF SHAREHOLDERS."
AMENDMENT OF FCC'S ARTICLES
GENERAL
The FCC Board has approved an amendment to the FCC Articles to increase the
number of authorized shares of FCC Common Stock from 25,000,000 to 50,000,000.
The proposed amendment to the FCC Articles would delete the existing Article 4
and replace it with a new Article 4 as follows:
"ARTICLE 4 -- The aggregate number of shares the Corporation is authorized
to issue is fifty million (50,000,000) shares of Common Stock, without par
value."
FCC currently is authorized to issue up to 25,000,000 shares of FCC Common
Stock. As of the FCC Record Date, of such authorized shares were
outstanding and of such authorized shares were reserved for issuance,
leaving shares of FCC Common Stock available for issuance for other
corporate purposes as of such date. While approval of the proposed FCC Articles
Amendment is not a condition precedent to consummation of the Merger, the FCC
Board believes that the increase in the number of authorized shares of FCC
Common Stock will provide FCC with increased flexibility to meet various
corporate objectives and is in the best interest of FCC and its shareholders.
The FCC Articles Amendment will, if approved by the requisite vote of FCC
shareholders, be adopted by FCC regardless of whether the Merger is consummated.
After the FCC Special Meeting, the officers of FCC intend to make the
appropriate filings in the State of North Carolina and to take any other action
necessary to implement the FCC Articles Amendment.
It is FCC's intention to finance its operations through, among other
things, the issuance from time to time of various equity securities, to consider
the acquisition of financial service businesses (possibly using FCC Common Stock
as consideration in some instances) and to consider the issuance of additional
shares of FCC Common Stock through stock splits and stock dividends in
appropriate circumstances. Accordingly, the continued availability of shares of
FCC Common Stock is necessary to provide FCC with the flexibility to take
advantage of opportunities in such situations. There are, at present, no plans,
understandings, agreements or arrangements concerning the issuance of additional
shares of FCC Common Stock, except for (i) the shares to be issued pursuant to
the Merger and (ii) shares currently reserved for issuance under employee and
director benefit plans and FCC's Dividend Reinvestment Plan.
Pursuant to North Carolina law, authorized and unissued shares of FCC
Common Stock (other than those shares reserved for certain purposes) are
available for issuance by FCC to such persons and for such consideration as the
FCC Board may determine from time to time. Shareholders may not be given the
opportunity to vote on such matters, unless shareholder approval is required by
applicable law or the rules and policies of the Nasdaq NMS or unless the FCC
Board in its judgment recommends shareholder approval. Shareholders generally
will have no preemptive rights to subscribe to newly issued shares.
CERTAIN EFFECTS OF FCC ARTICLES AMENDMENT
If the shareholders of FCC approve the FCC Articles Amendment, the increase
in the amount of authorized FCC Common Stock could have certain anti-takeover
effects with respect to FCC. As noted above, FCC will have the authority to
issue shares of authorized but unissued and unreserved shares of FCC
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Common Stock in its discretion, which could dilute the stock ownership of
persons seeking to acquire control of FCC through the purchase of a large block
of stock.
In addition, the FCC Articles currently contain other provisions which may
have anti-takeover effects. For example, the FCC Board is composed of three
classes with the directors in each such class serving staggered terms. The
staggered terms may make it more difficult to obtain control of FCC by changing
the composition of the FCC Board. The FCC Articles also impose certain
supermajority voting requirements in connection with certain business
combinations of FCC or sales of all or substantially all of its assets or the
stock of its subsidiaries, and also requires the vote of 75% of the FCC Board
for the approval of a plan of merger or plan of consolidation or similar plan of
FCC with any other corporation or entity in which FCC is the acquired
corporation or for adopting a resolution recommending a sale, lease or exchange
of all or substantially all the property of FCC. See "EFFECT OF THE MERGER ON
RIGHTS OF SHAREHOLDERS."
All of the above-described provisions could have certain anti-takeover
effects with respect to FCC. Such provisions could make FCC a less attractive
target for a hostile takeover bid or render more difficult or discourage a
merger proposal, the assumption of control through the acquisition of a large
block of FCC Common Stock or the removal of incumbent management, even if the
consummation of a given transaction might be favorable to the shareholders of
FCC. In addition, such provisions may inhibit or impede fluctuations in the
market price of FCC Common Stock that might otherwise result from actual or
potential takeover attempts.
FCC is not aware of any pending or threatened effort to acquire control of
FCC, and the proposal to increase the number of authorized shares of FCC Common
Stock is not in response to any indication that any other company, person or
group is interested in acquiring control of FCC. Furthermore, the existing
provisions in the FCC Articles are not a part of a plan by management to adopt a
series of provisions with an anti-takeover purpose, and FCC currently does not
intend to propose other anti-takeover measures in future proxy solicitations.
Rather, the principal purpose of the increase in authorized capital is to
provide FCC with flexibility for considering stock splits and dividends and
effecting acquisitions and financings.
RECOMMENDATION OF THE FCC BOARD
The FCC Board believes that the FCC Articles Amendment will provide
flexibility needed to meet corporate objectives and is in the best interests of
FCC and its shareholders. The FCC Articles Amendment will, if approved by the
requisite vote of FCC shareholders, be adopted by FCC regardless of whether the
Merger is consummated. Therefore, if the proposal is approved, officers of FCC
will promptly make appropriate filings in the State of North Carolina and take
any other action necessary to implement the amendment.
THE FCC BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF FCC VOTE FOR THE
PROPOSAL TO APPROVE THE FCC ARTICLES AMENDMENT.
OTHER MATTERS
As of the date of this Joint Proxy Statement, the HFNC Board knows of no
matters that will be presented for consideration at the HFNC Special Meeting
other than as described in this Joint Proxy Statement, and the FCC Board knows
of no matters that will be presented for consideration at the FCC Special
Meeting other than as described in this Joint Proxy Statement. However, if any
other matters shall properly come before the HFNC Special Meeting or FCC Special
Meeting and be voted upon, the enclosed proxy shall be deemed to confer
discretionary authority to the individuals named as proxies therein to vote the
shares represented by such proxy as to any such matters.
SHAREHOLDER PROPOSALS
FCC expects to hold its next annual meeting of shareholders after the
Merger in April 1999. Under SEC rules, proposals of FCC shareholders intended to
be presented at that meeting must be received by FCC at its
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principal executive offices no later than the date specified in FCC's 1998
Annual Meeting Proxy Statement. In the event the Merger is not consummated,
proposals of HFNC shareholders intended to be presented at the 1999 annual
meeting of shareholders of HFNC must be received by HFNC at its principal
executive offices no later than the date specified in HFNC's 1997 Annual Meeting
Proxy Statement, 1998.
EXPERTS
The consolidated financial statements of FCC and subsidiaries as of
December 31, 1997 and 1996, and for each of the years in the three-year period
ended December 31, 1997, have been incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of HFNC incorporated in this Joint
Proxy Statement by reference to the HFNC 1997 Form 10-K have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which
expressed an unqualified opinion and included an explanatory paragraph referring
to certain litigation discussed at Note 11, which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
OPINIONS
The legality of the shares of FCC Common Stock to be issued in the Merger
will be passed upon by Alston & Bird LLP.
Certain tax consequences of the transaction have been passed upon by Alston
& Bird LLP, Washington, D.C. and Elias, Matz, Tiernan & Herrick L.L.P.,
Washington, D.C.
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APPENDIX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
HFNC FINANCIAL CORP.
AND
FIRST CHARTER CORPORATION
DATED AS OF JULY 29, 1998
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Parties.............................................................. A-6
Preamble............................................................. A-6
ARTICLE 1 -- TRANSACTIONS AND TERMS OF MERGER........................ A-6
1.1 Merger...................................................... A-6
1.2 Bank Merger................................................. A-7
1.3 Time and Place of Closing................................... A-7
1.4 Effective Time.............................................. A-7
1.5 Execution of Stock Option Agreements........................ A-7
ARTICLE 2 -- TERMS OF MERGER......................................... A-7
2.1 Articles of Incorporation................................... A-7
2.2 Bylaws...................................................... A-7
2.3 Directors and Officers...................................... A-7
ARTICLE 3 -- MANNER OF CONVERTING SHARES............................. A-7
3.1 Conversion of Shares........................................ A-7
3.2 Anti-Dilution Provisions.................................... A-8
3.3 Shares Held by HFNC or FCC.................................. A-8
3.4 Fractional Shares........................................... A-8
3.5 Conversion of Stock Rights.................................. A-8
ARTICLE 4 -- EXCHANGE OF SHARES...................................... A-9
4.1 Exchange Procedures......................................... A-9
4.2 Rights of Former HFNC Stockholders.......................... A-10
ARTICLE 5 -- REPRESENTATIONS AND WARRANTIES OF HFNC.................. A-10
5.1 Organization, Standing, and Power........................... A-10
5.2 Authority; No Breach By Agreement........................... A-10
5.3 Capital Stock............................................... A-11
5.4 HFNC Subsidiaries........................................... A-11
5.5 SEC Filings; Financial Statements........................... A-12
5.6 Absence of Undisclosed Liabilities.......................... A-12
5.7 Absence of Certain Changes or Events........................ A-12
5.8 Tax Matters................................................. A-13
5.9 Assets...................................................... A-13
5.10 Environmental Matters....................................... A-14
5.11 Compliance with Laws........................................ A-14
5.12 Labor Relations............................................. A-15
5.13 Employee Benefit Plans...................................... A-15
5.14 Material Contracts.......................................... A-17
5.15 Legal Proceedings........................................... A-17
5.16 Reports..................................................... A-17
5.17 Statements True and Correct................................. A-18
5.18 Accounting, Tax, and Regulatory Matters..................... A-18
5.19 State Takeover Laws......................................... A-18
5.20 Charter Provisions.......................................... A-18
5.21 Derivatives................................................. A-18
5.22 Year 2000................................................... A-18
5.23 Fairness Opinion............................................ A-18
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE 6 -- REPRESENTATIONS AND WARRANTIES OF FCC................... A-19
6.1 Organization, Standing, and Power........................... A-19
6.2 Authority; No Breach By Agreement........................... A-19
6.3 Capital Stock............................................... A-20
6.4 FCC Subsidiaries............................................ A-20
6.5 SEC Filings; Financial Statements........................... A-20
6.6 Absence of Undisclosed Liabilities.......................... A-21
6.7 Absence of Certain Changes or Events........................ A-21
6.8 Tax Matters................................................. A-21
6.9 Assets...................................................... A-22
6.10 Environmental Matters....................................... A-22
6.11 Compliance with Laws........................................ A-23
6.12 Labor Relations............................................. A-23
6.13 Legal Proceedings........................................... A-24
6.14 Reports..................................................... A-24
6.15 Statements True and Correct................................. A-24
6.16 Accounting, Tax, and Regulatory Matters..................... A-24
6.17 State Takeover Laws......................................... A-24
6.18 Charter Provisions.......................................... A-24
6.19 Employee Benefit Plans...................................... A-24
6.20 Derivatives................................................. A-25
6.21 Year 2000................................................... A-25
6.22 Fairness Opinion............................................ A-25
ARTICLE 7 -- CONDUCT OF BUSINESS PENDING CONSUMMATION................ A-25
7.1 Affirmative Covenants of Both Parties....................... A-25
7.2 Negative Covenants of HFNC.................................. A-25
7.3 Negative Covenants of FCC................................... A-27
7.4 Adverse Changes in Condition................................ A-27
7.5 Reports..................................................... A-28
ARTICLE 8 -- ADDITIONAL AGREEMENTS................................... A-28
8.1 Registration Statement; Joint Proxy Statement; Stockholder A-28
Approvals...................................................
8.2 Exchange Listing............................................ A-28
8.3 Applications................................................ A-28
8.4 Filings with State Offices.................................. A-29
8.5 Agreement as to Efforts to Consummate....................... A-29
8.6 Investigation and Confidentiality........................... A-29
8.7 Press Releases.............................................. A-29
8.8 Certain Actions............................................. A-29
8.9 Accounting and Tax Treatment................................ A-30
8.10 State Takeover Laws......................................... A-30
8.11 Charter Provisions.......................................... A-30
8.12 Agreement of Affiliates..................................... A-30
8.13 Employee Benefits and Contracts............................. A-30
8.14 Indemnification............................................. A-33
8.15 Board and Management Matters................................ A-34
8.16 Certain Modifications....................................... A-34
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE 9 -- CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE....... A-35
9.1 Conditions to Obligations of Each Party..................... A-35
9.2 Conditions to Obligations of FCC............................ A-36
9.3 Conditions to Obligations of HFNC........................... A-37
ARTICLE 10 -- TERMINATION............................................ A-37
10.1 Termination................................................. A-37
10.2 Effect of Termination....................................... A-40
10.3 Non-Survival of Representations and Covenants............... A-40
ARTICLE 11 -- MISCELLANEOUS.......................................... A-40
11.1 Definitions................................................. A-40
11.2 Expenses.................................................... A-46
11.3 Brokers and Finders......................................... A-47
11.4 Entire Agreement............................................ A-47
11.5 Amendments.................................................. A-47
11.6 Waivers..................................................... A-47
11.7 Assignment.................................................. A-48
11.8 Notices..................................................... A-48
11.9 Governing Law............................................... A-48
11.10 Counterparts................................................ A-49
11.11 Captions.................................................... A-49
11.12 Interpretations............................................. A-49
11.13 Enforcement of Agreement.................................... A-49
11.14 Severability................................................ A-49
Signatures........................................................... A-50
</TABLE>
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LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1. Form of HFNC Stock Option Agreement.
2. Form of FCC Stock Option Agreement.
3. Form of Bank Plan Merger.
4. Form of HFNC Affiliate Agreement.
5. Form of FCC Affiliate Agreement.
</TABLE>
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AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this "Agreement")
is made and entered into as of May 17, 1998, and amended and restated as of
, 1998, by and between HFNC FINANCIAL CORP. ("HFNC"), a corporation
organized and existing under the Laws of the State of North Carolina, with its
principal office located in Charlotte, North Carolina; and FIRST CHARTER
CORPORATION ("FCC"), a corporation organized and existing under the Laws of the
State of North Carolina, with its principal office located in Concord, North
Carolina.
PREAMBLE
The Boards of Directors of HFNC and FCC are of the opinion that the
transactions described herein are in the best interests of the parties to this
Agreement and their respective stockholders. This Agreement provides for the
merger (the "Merger") of HFNC with and into FCC. At the effective time of the
Merger, the outstanding shares of the capital stock of HFNC shall be converted
into shares of the common stock of FCC (except as provided herein). As a result,
stockholders of HFNC shall become stockholders of FCC, and each of the
subsidiaries of HFNC shall continue to conduct its business and operations as a
subsidiary of FCC. The transactions described in this Agreement are subject to
the approvals of the stockholders of HFNC, the stockholders of FCC, the Board of
Governors of the Federal Reserve System, and certain state regulatory
authorities, and the satisfaction of certain other conditions described in this
Agreement. It is the intention of the parties to this Agreement that the Merger
(i) for federal income tax purposes shall qualify as a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code, and (ii) for
accounting purposes shall qualify for treatment as a pooling of interests.
Immediately after the execution and delivery of this Agreement, (i) as a
condition and inducement to FCC's willingness to enter into this Agreement, HFNC
and FCC are entering into a stock option agreement (the "HFNC Stock Option
Agreement"), in substantially the form of Exhibit 1, pursuant to which HFNC is
granting to FCC an option to purchase shares of HFNC Common Stock and (ii) as a
condition and inducement to HFNC's willingness to enter into this Agreement,
HFNC and FCC are entering into a stock option agreement (the "FCC Stock Option
Agreement," and, together with the HFNC Stock Option Agreement, the "Stock
Option Agreements"), in substantially the form of Exhibit 2, pursuant to which
FCC is granting to HFNC an option to purchase shares of FCC Common Stock.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the Parties agree
as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, HFNC shall be merged with and into FCC in accordance with the
provisions of Section 55-11-01 of the NCBCA and with the effect provided in
Section 55-11-06 of the NCBCA (the "Merger"). FCC shall be the Surviving
Corporation resulting from the Merger and shall continue to be governed by the
Laws of the State of North Carolina. The Merger shall be consummated pursuant to
the terms of this Agreement, which has been approved and adopted by the
respective Boards of Directors of HFNC and FCC.
1.2 Bank Merger. Subject to the terms and conditions of this Agreement
and the Bank Plan of Merger, in substantially the form of Exhibit 3, at a time
subsequent to the Effective Time designated by FCC, HFNC Bank shall be merged
(the "Bank Merger") with and into FCC Bank pursuant to the provisions provided
in 12 U.S.C. sec.sec. 1815(d) and 1828(c). FCC Bank shall be the Surviving Bank
resulting from the Bank Merger and shall continue to be governed by the Laws of
the United States. The Bank Merger shall be consummated pursuant to the terms of
this Agreement and the Bank Plan of Merger, which will be approved
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and adopted by the respective Boards of Directors of HFNC Bank and FCC Bank at
the first regularly-scheduled meetings of such Boards of Directors following the
date of this Agreement.
1.3 Time and Place of Closing. The closing of the Merger (the "Closing")
shall take place at 9:00 A.M. on the date that the Effective Time occurs (or on
the immediately preceding day if the Effective Time is earlier than 9:00 A.M.),
or at such other time as the Parties, acting through their duly authorized
officers, may mutually agree. The place of Closing shall be at such location as
may be mutually agreed upon by the Parties.
1.4 Effective Time. The Merger and the other transactions contemplated by
this Agreement shall become effective on the date and at the time the Articles
of Merger reflecting the Merger shall become effective with the Secretary of
State of the State of North Carolina (the "Effective Time"). Subject to the
terms and conditions hereof, unless otherwise mutually agreed upon in writing by
the duly authorized officers of each Party, the Parties shall use their
reasonable efforts to cause the Effective Time to occur on or before the 15th
business day (as designated by FCC) following the last to occur of (i) the
effective date (including expiration of any applicable waiting period) of the
last required Consent of any Regulatory Authority having authority over and
approving or exempting the Merger, and (ii) the date on which the stockholders
of FCC and HFNC approve the matters relating to this Agreement required to be
approved by such stockholders by applicable Law.
1.5 Execution of Stock Option Agreements. Immediately after the execution
of this Agreement and as conditions hereto, HFNC is executing and delivering to
FCC the HFNC Stock Option Agreement and FCC is executing and delivering to HFNC
the FCC Stock Option Agreement.
ARTICLE 2
TERMS OF MERGER
2.1 Articles of Incorporation. The Amended and Restated Articles of
Incorporation of FCC in effect immediately prior to the Effective Time shall be
the Amended and Restated Articles of Incorporation of the Surviving Corporation
after the Effective Time until otherwise amended or repealed.
2.2 Bylaws. The Bylaws of FCC in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation after the
Effective Time until otherwise amended or repealed.
2.3 Directors and Officers. The directors of FCC in office immediately
prior to the Effective Time, together with such additional individuals elected
in accordance with the terms of Section 8.15 of this Agreement shall serve as
the directors of the Surviving Corporation from and after the Effective Time in
accordance with the Bylaws of the Surviving Corporation. The officers of FCC in
office immediately prior to the Effective Time, together with such additional
officers of HFNC as thereafter elected, shall serve as the officers of the
Surviving Corporation from and after the Effective Time in accordance with the
Bylaws of the Surviving Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of FCC or HFNC, or the stockholders of either of the foregoing, the shares of
the constituent corporations shall be converted as follows:
(a) each share of FCC Common Stock issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from and
after the Effective Time; and
(b) each share of HFNC Common Stock (excluding shares held by any HFNC
Company or any FCC Company, in each case other than in a fiduciary capacity
or as a result of debts previously contracted) issued
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and outstanding at the Effective Time shall be converted into .57 of a
share of FCC Common Stock (subject to adjustment pursuant to Section
10.1(g) of this Agreement, the "Exchange Ratio").
3.2 Anti-Dilution Provisions. In the event HFNC changes the number of
shares of HFNC Common Stock issued and outstanding prior to the Effective Time
as a result of a stock split, stock dividend, recapitalization,
reclassification, exchange of shares, or similar transaction with respect to
such stock, the Exchange Ratio shall be proportionately adjusted. In the event
FCC changes the number of shares of FCC Common Stock issued and outstanding
prior to the Effective Time as a result of a stock split, stock dividend,
recapitalization, reclassification, exchange of shares, or similar transaction
with respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split,
reclassification, exchange of shares, or similar recapitalization for which a
record date is not established) shall be prior to the Effective Time, the
Exchange Ratio shall be proportionately adjusted.
3.3 Shares Held by HFNC or FCC. Each of the shares of HFNC Common Stock
held by any HFNC Company or by any FCC Company, in each case other than 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.
3.4 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of HFNC Common Stock exchanged pursuant to the
Merger who would otherwise have been entitled to receive a fraction of a share
of FCC 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 FCC Common Stock multiplied
by the market value of one share of FCC Common Stock at the Effective Time. The
market value of one share of FCC Common Stock at the Effective Time shall be the
last sale price of FCC Common Stock on the Nasdaq NMS (as reported by The Wall
Street Journal or, if not reported thereby, any other authoritative source
selected by FCC) on the last trading day preceding the Effective Time. No such
holder will be entitled to dividends, voting rights, or any other rights as a
stockholder in respect of any fractional shares.
3.5 Conversion of Stock Rights.
(a) At the Effective Time, each award, option, or other right to purchase
or acquire shares of HFNC Common Stock pursuant to stock options, stock
appreciation rights, or stock awards ("HFNC Rights") granted by HFNC under the
HFNC Stock Plans, which are outstanding at the Effective Time, whether or not
exercisable, shall be converted into and become Rights with respect to FCC
Common Stock, and FCC shall assume each HFNC Right, in accordance with the terms
of the HFNC Stock Plan and stock option agreement by which it is evidenced,
except that from and after the Effective Time, (i) FCC and its Compensation
Committee shall be substituted for HFNC and the Committee of HFNC's Board of
Directors (including, if applicable, the entire Board of Directors of HFNC)
administering such HFNC Stock Plan, (ii) each HFNC Right assumed by FCC may be
exercised solely for shares of FCC Common Stock (or cash in the case of stock
appreciation rights), (iii) the number of shares of FCC Common Stock subject to
such HFNC Right shall be equal to the number of shares of HFNC Common Stock
subject to such HFNC Right immediately prior to the Effective Time multiplied by
the Exchange Ratio, and (iv) the per share exercise price (or similar threshold
price, in the case of stock awards) under each such HFNC Right shall be adjusted
by dividing the per share exercise (or threshold) price under each such HFNC
Right by the Exchange Ratio and rounding up to the nearest cent. Notwithstanding
the provisions of clause (iii) of the preceding sentence, FCC shall not be
obligated to issue any fraction of a share of FCC Common Stock upon exercise of
HFNC Rights and any fraction of a share of FCC Common Stock that otherwise would
be subject to a converted HFNC Right shall represent the right to receive a cash
payment equal to the product of such fraction and the difference between the
market value of one share of FCC Common Stock and the adjusted per share
exercise price of such Right. The market value of one share of FCC Common Stock
shall be the last sale price of FCC Common Stock on the Nasdaq NMS (as reported
by The Wall Street Journal or, if not reported thereby, any other authoritative
source selected by FCC) on the last trading day preceding the Effective Time. In
addition, notwithstanding the provisions of clauses (iii) and (iv) of the first
sentence and the second sentence of this Section 3.5(a), each HFNC Right which
is an "incentive stock option" shall be adjusted as required by
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Section 424 of the Internal Revenue Code, so as not to constitute a
modification, extension, or renewal of the option, within the meaning of Section
424(h) of the Internal Revenue Code. FCC agrees to take all necessary steps to
effectuate the foregoing provisions of this Section 3.5(a).
(b) Within 30 days after the Effective Time, FCC shall deliver to the
participants in each HFNC Stock Plan an appropriate notice setting forth such
participant's rights pursuant thereto and the grants pursuant to such HFNC Stock
Plan shall continue in effect on the same terms and conditions (subject to the
adjustments required by Section 3.5(a) after giving effect to the Merger), and
FCC shall comply with the terms of each HFNC Stock Plan to ensure, to the extent
required by, and subject to the provisions of, such HFNC Stock Plan, that HFNC
Rights which qualified as incentive stock options prior to the Effective Time
continue to qualify as incentive stock options after the Effective Time. At or
prior to the Effective Time, FCC shall take all corporate action necessary to
reserve for issuance sufficient shares of FCC Common Stock for delivery upon
exercise of HFNC Rights assumed by it in accordance with this Section 3.5.
Within 30 days after the Effective Time, FCC shall file a registration statement
on Form S-3 or Form S-8, as the case may be (or any successor or other
appropriate forms), with respect to the shares of FCC Common Stock subject to
the HFNC Rights assumed by FCC in accordance with this Section 3.5 and shall use
its reasonable efforts to maintain the effectiveness of such registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein), as well as comply with any applicable state securities or
"blue sky" laws, for so long as such options remain outstanding. With respect to
those individuals who subsequent to the Merger will be subject to the reporting
requirements under Section 16(a) of the 1934 Act, where applicable, FCC shall
administer the HFNC Stock Plan assumed pursuant to this Section 3.5 in a manner
that complies with Rule 16b-3 promulgated under the 1934 Act.
(c) All restrictions or limitations on transfer with respect to HFNC Common
Stock awarded under the HFNC Stock Plans or any other plan, program, or
arrangement of any HFNC Company, to the extent that such restrictions or
limitations shall not have already lapsed, and except as otherwise expressly
provided in such plan, program, or arrangement, shall remain in full force and
effect with respect to shares of FCC Common Stock into which such restricted
stock is converted pursuant to Section 3.1 of this Agreement.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time, FCC and HFNC
shall cause the exchange agent selected by FCC (the "Exchange Agent") to mail to
the former stockholders of HFNC appropriate transmittal materials (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of HFNC Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange Agent). After the
Effective Time, each holder of shares of HFNC Common Stock (other than shares to
be canceled pursuant to Section 3.3 of this Agreement) issued and outstanding at
the Effective Time shall surrender the certificate or certificates representing
such shares to the Exchange Agent and shall promptly upon surrender thereof
receive in exchange therefor the consideration provided in Section 3.1 of this
Agreement, together with all undelivered dividends or distributions in respect
of such shares (without interest thereon) pursuant to Section 4.2 of this
Agreement. To the extent required by Section 3.4 of this Agreement, each holder
of shares of HFNC 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 share of FCC Common Stock to which
such holder may be otherwise entitled (without interest). FCC shall not be
obligated to deliver the consideration to which any former holder of HFNC Common
Stock is entitled as a result of the Merger until such holder surrenders such
holder's certificate or certificates representing the shares of HFNC Common
Stock for exchange as provided in this Section 4.1. The certificate or
certificates of HFNC Common Stock so surrendered shall be duly endorsed as the
Exchange Agent may require. Any other provision of this Agreement
notwithstanding, neither the Surviving Corporation nor the Exchange Agent shall
be liable to a holder of HFNC Common Stock for any amounts paid or property
delivered in good faith to a public official pursuant to any applicable
abandoned property Law.
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4.2 Rights of Former HFNC Stockholders. At the Effective Time, the stock
transfer books of HFNC shall be closed as to holders of HFNC Common Stock
immediately prior to the Effective Time and no transfer of HFNC Common Stock by
any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 4.1 of this Agreement,
each certificate theretofore representing shares of HFNC Common Stock (other
than shares to be canceled pursuant to Section 3.3 of this Agreement) shall from
and after the Effective Time represent for all purposes only the right to
receive the consideration provided in Sections 3.1 and 3.5 of this Agreement in
exchange therefor, subject, however, to the Surviving Corporation's obligation
to pay any dividends or make any other distributions with a record date prior to
the Effective Time which have been declared or made by HFNC in respect of such
shares of HFNC Common Stock in accordance with the terms of this Agreement and
which remain unpaid at the Effective Time. To the extent permitted by Law,
former stockholders of record of HFNC shall be entitled to vote after the
Effective Time at any meeting of FCC stockholders the number of whole shares of
FCC Common Stock into which their respective shares of HFNC Common Stock are
converted, regardless of whether such holders have exchanged their certificates
representing HFNC Common Stock for certificates representing FCC Common Stock in
accordance with the provisions of this Agreement. Whenever a dividend or other
distribution is declared by FCC on the FCC Common Stock, the record date for
which is at or after the Effective Time, the declaration shall include dividends
or other distributions on all shares issuable pursuant to this Agreement, but
beginning 30 days after the Effective Time no dividend or other distribution
payable to the holders of record of FCC Common Stock as of any time subsequent
to the Effective Time shall be delivered to the holder of any certificate
representing shares of HFNC Common Stock issued and outstanding at the Effective
Time until such holder surrenders such certificate for exchange as provided in
Section 4.1 of this Agreement. However, upon surrender of such HFNC Common Stock
certificate, the FCC Common Stock certificate, together with all undelivered
dividends or other distributions (without interest) and any cash payments to be
paid for fractional share interests (without interest), shall be delivered and
paid with respect to each share represented by such certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF HFNC
Except as set forth in the HFNC Disclosure Memorandum, HFNC hereby
represents and warrants to FCC as follows:
5.1 Organization, Standing, and Power. HFNC is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
North Carolina, and has the corporate power and authority to carry on its
business as now conducted and to own, lease, and operate its Material Assets.
HFNC is duly qualified or licensed to transact business as a foreign corporation
in good standing in the States of the United States and foreign jurisdictions
where the character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on HFNC.
5.2 Authority; No Breach By Agreement.
(a) HFNC has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery, and performance of
this Agreement, and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of HFNC, subject to the approval
of this Agreement by the holders of a majority of the outstanding shares of HFNC
Common Stock, which is the only stockholder vote required for approval of this
Agreement and consummation of the Merger by HFNC. Subject to such requisite
stockholder approval, this Agreement represents a legal, valid, and binding
obligation of HFNC, enforceable against HFNC in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
moratorium, or similar Laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought).
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(b) Neither the execution and delivery of this Agreement by HFNC, nor the
consummation by HFNC of the transactions contemplated hereby, nor compliance by
HFNC with any of the provisions hereof or thereof, will (i) conflict with or
result in a breach of any provision of HFNC's Articles of Incorporation or
Bylaws, or (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any HFNC
Company under, any Contract or Permit of any HFNC Company, where such Default or
Lien, or any failure to obtain such Consent, is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on HFNC, or (iii)
subject to receipt of the requisite Consents referred to in Section 9.1(b) of
this Agreement, violate any Law or Order applicable to any HFNC Company or any
of their respective Material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
or under the HSR Act, and other than Consents, filings, or notifications which,
if not obtained or made, are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on HFNC, no notice to, filing with, or
Consent of, any public body or authority is necessary for the consummation by
HFNC of the Merger and the other transactions contemplated in this Agreement.
5.3 Capital Stock.
(a) The authorized capital stock of HFNC consists, as of the date of this
Agreement, of (i) 25,000,000 shares of HFNC Common Stock, of which 17,192,500
shares are issued and outstanding as of the date of this Agreement and not more
than 18,738,000 shares will be issued and outstanding at the Effective Time, and
(ii) 5,000,000 shares of HFNC Preferred Stock, of which no shares are issued and
outstanding as of the date of this Agreement and no shares will be issued and
outstanding as of the Effective Time. All of the issued and outstanding shares
of HFNC Common Stock are duly and validly issued and outstanding and are fully
paid and nonassessable under the NCBCA. None of the outstanding shares of HFNC
Common Stock has been issued in violation of any preemptive rights of the
current or past stockholders of HFNC.
(b) Except as set forth in Section 5.3(a) of this Agreement or Section
5.3(b) of the HFNC Disclosure Memorandum, or as provided pursuant to the HFNC
Stock Option Agreement, there are no shares of capital stock or other equity
securities of HFNC outstanding and no outstanding Rights relating to the capital
stock of HFNC.
5.4 HFNC Subsidiaries. HFNC has disclosed in Section 5.4 of the HFNC
Disclosure Memorandum all of the HFNC Subsidiaries as of the date of this
Agreement. HFNC or one of its Subsidiaries owns all of the issued and
outstanding shares of capital stock of each HFNC Subsidiary. No equity
securities of any HFNC Subsidiary are or may become required to be issued (other
than to another HFNC Company) by reason of any Rights, and there are no
Contracts by which any HFNC Subsidiary is bound to issue (other than to another
HFNC Company) additional shares of its capital stock or Rights or by which any
HFNC Company is or may be bound to transfer any shares of the capital stock of
any HFNC Subsidiary (other than to another HFNC Company). There are no Contracts
relating to the rights of any HFNC Company to vote or to dispose of any shares
of the capital stock of any HFNC Subsidiary. All of the shares of capital stock
of each HFNC Subsidiary held by a HFNC Company are duly authorized, validly
issued, and fully paid and, except as provided in statutes pursuant to which
depository institution Subsidiaries are organized, nonassessable under the
applicable corporation Law of the jurisdiction in which such Subsidiary is
incorporated or organized and are owned by the HFNC Company free and clear of
any Lien. Each HFNC Subsidiary is either a bank or a corporation, and is duly
organized, validly existing, and (as to corporations) in good standing under the
Laws of the jurisdiction in which it is incorporated or organized, and has the
corporate power and authority necessary for it to own, lease, and operate its
Assets and to carry on its business as now conducted. Each HFNC Subsidiary is
duly qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material
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Adverse Effect on HFNC. Each HFNC Subsidiary that is a depository institution is
an "insured institution" as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder, and the deposits in which are insured by the
Bank Insurance Fund or Savings Association Insurance Fund.
5.5 SEC Filings; Financial Statements.
(a) HFNC has filed and made available to FCC all forms, reports, and
documents required to be filed by HFNC with the SEC since December 31, 1994
(collectively, the "HFNC SEC Reports"). The HFNC SEC Reports (i) at the time
filed, complied in all Material respects with the applicable requirements of the
1933 Act and the 1934 Act, as the case may be, and (ii) did not at the time they
were filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
Material fact or omit to state a Material fact required to be stated in such
HFNC SEC Reports or necessary in order to make the statements in such HFNC SEC
Reports, in light of the circumstances under which they were made, not
misleading. None of HFNC's Subsidiaries is required to file any forms, reports,
or other documents with the SEC.
(b) Each of the HFNC Financial Statements (including, in each case, any
related notes) contained in the HFNC SEC Reports, including any HFNC SEC Reports
filed after the date of this Agreement until the Effective Time, complied or
will comply as to form in all Material respects with the applicable published
rules and regulations of the SEC with respect thereto, was prepared or will be
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements, or, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC), and fairly presented or will fairly present the consolidated
financial position of HFNC and its Subsidiaries as at the respective dates and
the consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not
expected to be Material in amount or effect.
5.6 Absence of Undisclosed Liabilities. No HFNC Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on HFNC, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of HFNC as of
March 31, 1998, included in the HFNC Financial Statements or reflected in the
notes thereto and except for Liabilities incurred in the ordinary course of
business subsequent to March 31, 1998. No HFNC Company has incurred or paid any
Liability since March 31, 1998, except for such Liabilities incurred or paid in
the ordinary course of business consistent with past business practice and which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on HFNC.
5.7 Absence of Certain Changes or Events. Since March 31, 1998, (i) 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 on
HFNC, and (ii) the HFNC Companies have conducted their respective businesses in
the ordinary and usual course (excluding the incurrence of expenses in
connection with this Agreement and the transactions contemplated hereby).
5.8 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of any of the HFNC
Companies have been timely filed, or requests for extensions have been timely
filed, granted, and have not expired for periods ended on or before December 31,
1997, and, to the Knowledge of HFNC, all Tax Returns filed are complete and
accurate in all Material respects. All Tax Returns for periods ending on or
before the date of the most recent fiscal year end immediately preceding the
Effective Time will be timely filed or requests for extensions will be timely
filed. All Taxes shown on filed Tax Returns have been paid. There is no audit
examination, deficiency, or refund Litigation with respect to any Taxes, that is
reasonably likely to result in a determination that would have, individually or
in the aggregate, a Material Adverse Effect on HFNC, except to the extent
reserved against in the HFNC Financial Statements dated prior to the date of
this Agreement. All Taxes and other Liabilities due with respect to completed
and settled examinations or concluded Litigation have been paid.
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(b) None of the HFNC Companies has executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due (excluding
such statutes that relate to years currently under examination by the Internal
Revenue Service or other applicable taxing authorities) that is currently in
effect.
(c) Adequate provision for any Taxes due or to become due for any of the
HFNC Companies for the period or periods through and including the date of the
respective HFNC Financial Statements has been made and is reflected on such HFNC
Financial Statements.
(d) Each of the HFNC Companies is in compliance with, and its records
contain all information and documents (including properly completed IRS Forms
W-9) necessary to comply with, all applicable information reporting and Tax
withholding requirements under federal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue 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 on HFNC.
(e) None of the HFNC Companies 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 be disallowed as a
deduction under Section 280G or 162(m) of the Internal Revenue Code.
(f) There are no Material Liens with respect to Taxes upon any of the
Assets of the HFNC Companies.
(g) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of the HFNC Companies that occurred during or after any
Taxable Period in which the HFNC Companies incurred a net operating loss that
carries over to any Taxable Period ending after December 31, 1997.
(h) No HFNC Company has filed any consent under Section 341(f) of the
Internal Revenue Code concerning collapsible corporations.
(i) After the date of this Agreement, no Material election with respect to
Taxes will be made without the prior consent of FCC, which consent will not be
unreasonably withheld.
(j) No HFNC Company has or has had a permanent establishment in any foreign
country, as defined in any applicable tax treaty or convention between the
United States and such foreign country.
5.9 Assets. The HFNC Companies have good and marketable title, free and
clear of all Liens, to all of their respective Assets. All tangible properties
used in the businesses of the HFNC Companies are in good condition, reasonable
wear and tear excepted, and are usable in the ordinary course of business
consistent with HFNC's past practices. All Assets which are Material to HFNC's
business on a consolidated basis, held under leases or subleases by any of the
HFNC Companies, are held under valid Contracts enforceable in accordance with
their respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect. The HFNC Companies currently
maintain insurance in amounts, scope, and coverage reasonably necessary for
their operations. None of the HFNC Companies 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. The Assets of the
HFNC Companies include all Assets required to operate the business of the HFNC
Companies as presently conducted.
5.10 Environmental Matters.
(a) To the Knowledge of HFNC, each HFNC Company, its Participation
Facilities, and its Loan Properties are, and have been, in compliance with all
Environmental Laws, except those violations which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on HFNC.
(b) There is no Litigation pending or, to the Knowledge of HFNC, threatened
before any court, governmental agency, or authority, or other forum in which any
HFNC Company or any of its Participation Facilities has been or, with respect to
threatened Litigation, may reasonably be expected to be named as a
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defendant (i) for alleged noncompliance (including by any predecessor) with any
Environmental Law or (ii) relating to the release into the environment of any
Hazardous Material, whether or not occurring at, on, under, or involving a site
owned, leased, or operated by any HFNC Company or any of its Participation
Facilities, except for such Litigation pending or threatened that is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on HFNC.
(c) There is no Litigation pending, or to the Knowledge of HFNC, threatened
before any court, governmental agency, or board, or other forum in which any of
its Loan Properties (or HFNC in respect of such Loan Property) has been or, with
respect to threatened Litigation, may reasonably be expected to be named as a
defendant or potentially responsible party (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating to
the release into the environment of any Hazardous Material, whether or not
occurring at, on, under, or involving a Loan Property, except for such
Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on HFNC.
(d) To the Knowledge of HFNC, there is no reasonable basis for any
Litigation of a type described in subsections (b) or (c), except such as is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on HFNC.
(e) To the Knowledge of HFNC, during the period of (i) any HFNC Company's
ownership or operation of any of their respective current properties, (ii) any
HFNC Company's participation in the management of any Participation Facility, or
(iii) any HFNC Company's holding of a security interest in a Loan Property,
there have been no releases of Hazardous Material in, on, under, or affecting
(or potentially affecting) such properties, except such as are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
HFNC. Prior to the period of (i) any HFNC Company's ownership or operation of
any of their respective current properties, (ii) any HFNC Company's
participation in the management of any Participation Facility, or (iii) any HFNC
Company's holding of a security interest in a Loan Property, to the Knowledge of
HFNC, there were no releases of Hazardous Material in, on, under, or affecting
any such property, Participation Facility, or Loan Property, except such as are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on HFNC.
5.11 Compliance with Laws. HFNC is duly registered as a savings and loan
holding company under the HOLA. Each HFNC Company has in effect all Permits
necessary for it to own, lease, or operate its Material Assets and to carry on
its business as now conducted, except for those Permits the absence of which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on HFNC, and there has occurred no Default under any such Permit,
other than Defaults which are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on HFNC. None of the HFNC Companies:
(a) is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on HFNC; and
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any HFNC Company is not
in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, where such noncompliance is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on HFNC, (ii) threatening to revoke any Permits, the
revocation of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on HFNC, or (iii) requiring any HFNC
Company (x) to enter into or consent to the issuance of a cease and desist
order, formal agreement, directive, commitment, or memorandum of
understanding, or (y) to adopt any Board resolution or similar undertaking,
which restricts materially the conduct of its business, or in any manner
relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends.
5.12 Labor Relations. No HFNC Company is the subject of any Litigation
asserting that it or any other HFNC Company has committed an unfair labor
practice (within the meaning of the National Labor
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Relations Act or comparable state Law) or seeking to compel it or any other HFNC
Company to bargain with any labor organization as to wages or conditions of
employment, nor is any HFNC Company a party to or bound by any collective
bargaining agreement, Contract, or other agreement or understanding with a labor
union or labor organization, nor is there any strike or other labor dispute
involving any HFNC Company, pending or threatened, or to the Knowledge of HFNC,
is there any activity involving any HFNC Company's employees seeking to certify
a collective bargaining unit or engaging in any other organization activity.
5.13 Employee Benefit Plans.
(a) HFNC has disclosed to FCC in writing prior to the execution of the
Agreement and in Section 5.13 of the HFNC Disclosure Memorandum, and has
delivered or made available to FCC prior to the execution of this Agreement
correct and complete copies in each case of, all Material HFNC Benefits Plans.
For purposes of this Agreement, "HFNC Benefit Plans" means all pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus, or other incentive plan, all other
written employee programs or agreements, all medical, vision, dental, or other
health plans, all life insurance plans, and all other employee benefit plans or
fringe benefit plans, including, without limitation, "employee benefit plans" as
that term is defined in Section 3(3) of ERISA maintained by, sponsored in whole
or in part by, or contributed to by, any HFNC Company for the benefit of
employees, retirees, dependents, spouses, directors, independent contractors, or
other beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries are eligible to
participate. Any of the HFNC Benefit Plans which is an "employee welfare benefit
plan," as that term is defined in Section 3(l) of ERISA, or an "employee pension
benefit plan," as that term is defined in Section 3(2) of ERISA, is referred to
herein as a "HFNC ERISA Plan." Any HFNC ERISA Plan which is also a "defined
benefit plan" (as defined in Section 414(j) of the Internal Revenue Code or
Section 3(35) of ERISA) is referred to herein as a "HFNC Pension Plan." Neither
HFNC nor any HFNC Company has an "obligation to contribute" (as defined in ERISA
Section 4212) to a "multiemployer plan" (as defined in ERISA Sections 4001(a)(3)
and 3(37)(A)). Each "employee pension benefit plan," as defined in Section 3(2)
of ERISA, ever maintained by any HFNC Company that was intended to qualify under
Section 401(a) of the Internal Revenue Code and with respect to which any HFNC
Company has any Liability, is disclosed as such in Section 5.13 of the HFNC
Disclosure Memorandum.
(b) HFNC has delivered or made available to FCC prior to the execution of
this Agreement correct and complete copies of the following documents: (i) all
trust agreements or other funding arrangements for such HFNC Benefit Plans
(including insurance contracts), and all amendments thereto, (ii) with respect
to any such HFNC Benefit Plans or amendments, all determination letters,
Material rulings, Material opinion letters, Material information letters, or
Material advisory opinions issued by the Internal Revenue Service, the United
States Department of Labor, or the Pension Benefit Guaranty Corporation after
December 31, 1994, (iii) annual reports or returns, audited or unaudited
financial statements, actuarial valuations and reports, and summary annual
reports prepared for any HFNC Benefit Plan with respect to the most recent plan
year, and (iv) the most recent summary plan descriptions and any Material
modifications thereto.
(c) All HFNC Benefit Plans are in compliance with the applicable terms of
ERISA, the Internal Revenue Code, and any other applicable Laws, the breach or
violation of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on HFNC. Each HFNC ERISA Plan which is
intended to be qualified under Section 401(a) of the Internal Revenue Code has
received a favorable determination letter from the Internal Revenue Service, and
HFNC is not aware of any circumstances which will or could reasonably result in
revocation of any such favorable determination letter. Each trust created under
any HFNC ERISA Plan has been determined to be exempt from Tax under Section
501(a) of the Internal Revenue Code and HFNC is not aware of any circumstance
which will or could reasonably result in revocation of such exemption. With
respect to each HFNC Benefit Plan to the Knowledge of HFNC, no event has
occurred which will or could reasonably give rise to a loss of any intended Tax
consequences under the Internal Revenue Code or to any Tax under Section 511 of
the Internal Revenue Code that is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on HFNC. There is no Material
pending or, to the Knowledge of HFNC, threatened Litigation relating to any HFNC
ERISA Plan.
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(d) No HFNC Company has engaged in a transaction with respect to any HFNC
Benefit Plan that, assuming the Taxable Period of such transaction expired as of
the date of this Agreement, would subject any HFNC Company to a Material tax or
penalty imposed by either Section 4975 of the Internal Revenue Code or Section
502(i) of ERISA in amounts which are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on HFNC. Neither HFNC nor any
administrator or fiduciary of any HFNC Benefit Plan (or any agent of any of the
foregoing) has engaged in any transaction, or acted or failed to act in any
manner which could subject HFNC to any direct or indirect Liability (by
indemnity or otherwise) for breach of any fiduciary, co-fiduciary, or other duty
under ERISA, where such Liability, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on HFNC. No oral or written
representation or communication with respect to any aspect of the HFNC Benefit
Plans has been made to employees of any HFNC Company which is not in accordance
with the written or otherwise preexisting terms and provisions of such plans,
where any Liability with respect to such representation or disclosure is
reasonably likely to have a Material Adverse Effect on HFNC.
(e) Since the date of the most recent actuarial valuation, there has been
(i) no Material change in the financial position or funded status of any HFNC
Pension Plan, (ii) no change in the actuarial assumptions with respect to any
HFNC Pension Plan, and (iii) no increase in benefits under any HFNC Pension Plan
as a result of plan amendments or changes in applicable Law, any of which is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on HFNC. Neither any HFNC Pension Plan nor any "single-employer plan,"
within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any HFNC Company, or the single-employer plan of any entity which
is considered one employer with HFNC under Section 4001 of ERISA or Section 414
of the Internal Revenue Code or Section 302 of ERISA (whether or not waived) (a
"HFNC ERISA Affiliate") has an "accumulated funding deficiency" within the
meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA. All
contributions with respect to a HFNC Pension Plan or any single-employer plan of
a HFNC ERISA Affiliate have or will be timely made and there is no lien or
expected to be a lien under Internal Revenue Code Section 412(n) or ERISA
Section 302(f) or Tax under Internal Revenue Code Section 4971. No HFNC Company
has provided, or is required to provide, security to a HFNC Pension Plan or to
any single-employer plan of a HFNC ERISA Affiliate pursuant to Section
401(a)(29) of the Internal Revenue Code. All premiums required to be paid under
ERISA Section 4006 have been timely paid by HFNC, except to the extent any
failure would not have a Material Adverse Effect on HFNC.
(f) No Liability under Title IV of ERISA has been or is expected to be
incurred by any HFNC Company with respect to any defined benefit plan currently
or formerly maintained by any of them or by any HFNC ERISA Affiliate that has
not been satisfied in full (other than Liability for Pension Benefit Guaranty
Corporation premiums, which have been paid when due, except to the extent any
failure would not have a Material Adverse Effect on HFNC).
(g) No HFNC Company has any obligations for retiree health and retiree life
benefits under any of the HFNC Benefit Plans other than with respect to benefit
coverage mandated by applicable Law.
(h) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, by themselves, (i)
result in any payment (including, without limitation, severance, unemployment
compensation, golden parachute, or otherwise) becoming due to any director or
any employee of any HFNC Company from any HFNC Company under any HFNC Benefit
Plan or otherwise, (ii) increase any benefits otherwise payable under any HFNC
Benefit Plan, or (iii) result in any acceleration of the time of payment or
vesting of any such benefit.
5.14 Material Contracts. None of the HFNC Companies, nor any of their
respective Assets, businesses, or operations, is a party to, or is bound or
affected by, or receives benefits under, (i) any employment, severance,
termination, consulting, or retirement Contract providing for aggregate payments
to any Person in any calendar year in excess of $75,000, (ii) any Contract
relating to the borrowing of money by any HFNC Company or the guarantee by any
HFNC Company of any such obligation (other than Contracts evidencing deposit
liabilities, purchases of federal funds, fully-secured repurchase agreements,
and Federal Home Loan Bank advances of depository institution Subsidiaries,
trade payables, and Contracts relating to
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borrowings or guarantees made in the ordinary course of business), and (iii) any
other Contract or amendment thereto that would be required to be filed as an
exhibit to a Form 10-K filed by HFNC with the SEC as of the date of this
Agreement that has not been filed as an exhibit to HFNC's Form 10-K filed for
the fiscal year ended June 30, 1997, or in another SEC Document and identified
to FCC (together with all Contracts referred to in Sections 5.9 and 5.13(a) of
this Agreement, the "HFNC Contracts"). With respect to each HFNC Contract: (i)
the Contract is in full force and effect; (ii) no HFNC Company is in Default
thereunder, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on HFNC; (iii) no
HFNC Company has repudiated or waived any Material provision of any such
Contract; and (iv) no other party to any such Contract is, to the Knowledge of
HFNC, in Default in any respect, other than Defaults which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
HFNC, or has repudiated or waived any Material provision thereunder. Except for
Federal Home Loan Bank advances, all of the indebtedness of any HFNC Company for
money borrowed is prepayable at any time by such HFNC Company without penalty or
premium.
5.15 Legal Proceedings.
(a) There is no Litigation instituted or pending, or, to the Knowledge of
HFNC, threatened against any HFNC Company, or against any Asset, employee
benefit plan, interest, or right of any of them, that is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on HFNC, nor
are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against any HFNC Company, that are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on HFNC.
(b) Section 5.15(b) of the HFNC Disclosure Memorandum includes a summary
report of all Litigation as of the date of this Agreement to which any HFNC
Company is a party and which names a HFNC Company as a defendant or
cross-defendant and where the maximum exposure is estimated to be $50,000 or
more.
5.16 Reports. Since January 1, 1995, or the date of organization if
later, each HFNC Company has timely filed all reports and statements, together
with any amendments required to be made with respect thereto, that it was
required to file with any Regulatory Authorities, except failures to file which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on HFNC. As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all Material respects with all applicable Laws.
5.17 Statements True and Correct. None of the information supplied or to
be supplied by any HFNC Company or any Affiliate thereof regarding HFNC or such
Affiliate for inclusion in the Registration Statement to be filed by FCC with
the SEC will, when the Registration Statement becomes effective, be false or
misleading with respect to any Material fact, or contain any untrue statement of
a Material fact, or omit to state any Material fact required to be stated
thereunder or necessary to make the statements therein not misleading. None of
the information supplied or to be supplied by any HFNC Company or any Affiliate
thereof for inclusion in the Joint Proxy Statement to be mailed to FCC's and
HFNC's stockholders in connection with the Stockholders' Meetings will, when
first mailed to the stockholders of FCC and HFNC, be false or misleading with
respect to any Material fact, or contain any misstatement of Material fact, or
omit to state any Material fact required to be stated thereunder or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or, in the case of the Joint Proxy Statement or any
amendment thereof or supplement thereto, at the time of the Stockholders'
Meetings, be false or misleading with respect to any Material fact, or omit to
state any Material fact required to be stated thereunder or necessary to correct
any Material statement in any earlier communication with respect to the
solicitation of any proxy for the Stockholders' Meetings. All documents that any
HFNC Company or any Affiliate thereof 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.
5.18 Accounting, Tax, and Regulatory Matters. No HFNC Company or, to
HFNC's Knowledge, any Affiliate thereof has taken or agreed to take any action,
and HFNC has no Knowledge of any fact or circumstance that is reasonably likely
to (i) prevent the transactions contemplated hereby, including the
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Merger, from qualifying for pooling-of-interests accounting treatment or as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) of this Agreement or result in the
imposition of a condition or restriction of the type referred to in the last
sentence of such Section.
5.19 State Takeover Laws. Each HFNC Company has taken all necessary
action to exempt the transactions contemplated by this Agreement from any
applicable "moratorium," "control share," "fair price," "business combination,"
or other anti-takeover laws and regulations of the State of North Carolina
(collectively, "Takeover Laws").
5.20 Charter Provisions. Each HFNC Company has taken all action so that
the entering into of this Agreement and the consummation of the Merger and the
other transactions contemplated by this Agreement do not and will not result in
the grant of any rights to any Person under the Articles of Incorporation,
Bylaws, or other governing instruments of any HFNC Company or restrict or impair
the ability of FCC or any of its Subsidiaries to vote, or otherwise to exercise
the rights of a stockholder with respect to, shares of any HFNC Company that may
be directly or indirectly acquired or controlled by it.
5.21 Derivatives. All interest rate swaps, caps, floors, option
agreements, futures and forward contracts, and other similar risk management
arrangements, whether entered into for HFNC's own account, or for the account of
one or more the HFNC Subsidiaries or their customers, were entered into (i) in
accordance with prudent business practices and all applicable Laws, and (ii)
with counterparties believed to be financially responsible.
5.22 Year 2000. HFNC has disclosed to FCC a complete and accurate copy of
HFNC's plan, including an estimate of the anticipated associated costs, for
implementing modifications to HFNC's hardware, software, and computer systems,
chips, and microprocessors, to ensure proper execution and accurate processing
of all date-related data, whether from years in the same century or in different
centuries. Between the date of this Agreement and the Effective Time, HFNC shall
endeavor to continue its efforts to implement such plan.
5.23 Fairness Opinion. HFNC has received a written opinion of Sandler
O'Neill & Partners L.P. to the effect that, as of the date of this Agreement,
the Exchange Ratio is fair, from a financial point of view, to the holders of
HFNC Common Stock.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF FCC
Except as set forth in the FCC Disclosure Memorandum, FCC hereby represents
and warrants to HFNC as follows:
6.1 Organization, Standing, and Power. FCC is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
North Carolina, and has the corporate power and authority to carry on its
business as now conducted and to own, lease, and operate its Material Assets.
FCC is duly qualified or licensed to transact business as a foreign corporation
in good standing in the States of the United States and foreign jurisdictions
where the character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on FCC.
6.2 Authority; No Breach By Agreement.
(a) FCC has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery, and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of FCC, subject to the approval
of this Agreement and the issuance of the shares of FCC Common Stock pursuant to
the Merger by the holders of a majority of the outstanding shares of FCC Common
Stock, which
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is the only stockholder vote required for the consummation of the Merger by FCC.
Subject to such requisite stockholder approval, this Agreement represents a
legal, valid, and binding obligation of FCC, enforceable against FCC in
accordance with its terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by FCC, nor the
consummation by FCC of the transactions contemplated hereby, nor compliance by
FCC with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of FCC's Amended and Restated Articles of Incorporation
or Bylaws, (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any FCC
Company under, any Contract or Permit of any FCC Company, where such Default or
Lien, or any failure to obtain such Consent, is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FCC, or (iii)
subject to receipt of the requisite Consents referred to in Section 9.1(b) of
this Agreement, violate any Law or Order applicable to any FCC Company or any of
their respective Material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
or under the HSR Act, and other than Consents, filings, or notifications which,
if not obtained or made, are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on FCC, no notice to, filing with, or
Consent of, any public body or authority is necessary for the consummation by
FCC of the Merger and the other transactions contemplated in this Agreement.
6.3 Capital Stock. The authorized capital stock of FCC consists, as of
the date of this Agreement, of 25,000,000 shares of FCC Common Stock, of which
9,346,611 shares were issued and outstanding as of May 15, 1998. All of the
issued and outstanding shares of FCC Common Stock are, and all of the shares of
FCC Common Stock to be issued in exchange for shares of HFNC Common Stock upon
consummation of the Merger, when issued in accordance with the terms of this
Agreement, will be, duly and validly issued and outstanding and fully paid and
nonassessable under the NCBCA. None of the outstanding shares of FCC Common
Stock has been, and none of the shares of FCC Common Stock to be issued in
exchange for shares of HFNC Common Stock upon consummation of the Merger will
be, issued in violation of any preemptive rights of the current or past
stockholders of FCC.
6.4 FCC Subsidiaries. FCC has disclosed in Section 6.4 of the FCC
Disclosure Memorandum all of the FCC Subsidiaries as of the date of this
Agreement. FCC or one of its Subsidiaries owns all of the issued and outstanding
shares of capital stock of each FCC Subsidiary. No equity securities of any FCC
Subsidiary are or may become required to be issued (other than to another FCC
Company) by reason of any Rights, and there are no Contracts by which any FCC
Subsidiary is bound to issue (other than to another FCC Company) additional
shares of its capital stock or Rights or by which any FCC Company is or may be
bound to transfer any shares of the capital stock of any FCC Subsidiary (other
than to another FCC Company). There are no Contracts relating to the rights of
any FCC Company to vote or to dispose of any shares of the capital stock of any
FCC Subsidiary. All of the shares of capital stock of each FCC Subsidiary held
by a FCC Company are fully paid and, except as provided in statutes pursuant to
which depository institution Subsidiaries are organized, nonassessable under the
applicable corporation Law of the jurisdiction in which such Subsidiary is
incorporated or organized and are owned by the FCC Company free and clear of any
Lien. Each FCC Subsidiary is either a bank or a corporation, and is duly
organized, validly existing, and (as to corporations) in good standing under the
Laws of the jurisdiction in which it is incorporated or organized, and has the
corporate power and authority necessary for it to own, lease, and operate its
Assets and to carry on its business as now conducted. Each FCC Subsidiary is
duly qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such
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jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on FCC. Each FCC Subsidiary that is a depository institution is an
"insured institution" as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder, and the deposits in which are insured by the
Bank Insurance Fund or Savings Association Insurance Fund.
6.5 SEC Filings; Financial Statements.
(a) FCC has filed and made available to HFNC all forms, reports, and
documents required to be filed by FCC with the SEC since December 31, 1994
(collectively, the "FCC SEC Reports"). The FCC SEC Reports (i) at the time
filed, complied in all Material respects with the applicable requirements of the
1933 Act and the 1934 Act, as the case may be, and (ii) did not at the time they
were filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
Material fact or omit to state a Material fact required to be stated in such FCC
SEC Reports or necessary in order to make the statements in such FCC SEC
Reports, in light of the circumstances under which they were made, not
misleading. Except for FCC Subsidiaries that are registered as a broker, dealer,
or investment advisor or filings required due to fiduciary holdings of the FCC
Subsidiaries, none of FCC Subsidiaries is required to file any forms, reports,
or other documents with the SEC.
(b) Each of the FCC Financial Statements (including, in each case, any
related notes) contained in the FCC SEC Reports, including any FCC SEC Reports
filed after the date of this Agreement until the Effective Time, complied or
will comply as to form in all Material respects with the applicable published
rules and regulations of the SEC with respect thereto, was or will be prepared
in accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements
or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC),
and fairly presented or will fairly present the consolidated financial position
of FCC and its Subsidiaries as at the respective dates and the consolidated
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be Material
in amount or effect.
6.6 Absence of Undisclosed Liabilities. No FCC Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on FCC, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of FCC as of
March 31, 1998, included in the FCC Financial Statements or reflected in the
notes thereto and except for Liabilities incurred in the ordinary course of
business subsequent to March 31, 1998. No FCC Company has incurred or paid any
Liability since March 31, 1998, except for such Liabilities incurred or paid in
the ordinary course of business consistent with past business practice and which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FCC.
6.7 Absence of Certain Changes or Events. Since March 31, 1998, (i) 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 on
FCC, and (ii) the FCC Companies have conducted their respective businesses in
the ordinary and usual course (excluding the incurrence of expenses in
connection with this Agreement and the transactions contemplated hereby).
6.8 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of any of the FCC
Companies have been timely filed, or requests for extensions have been timely
filed, granted, and have not expired for periods ended on or before December 31,
1997, and, to the Knowledge of FCC, all Tax Returns filed are complete and
accurate in all Material respects. All Tax Returns for periods ending on or
before the date of the most recent fiscal year end immediately preceding the
Effective Time will be timely filed or requests for extensions will be timely
filed. All Taxes shown on filed Tax Returns have been paid. There is no audit
examination, deficiency, or refund Litigation with respect to any Taxes, that is
reasonably likely to result in a determination that would have, individually or
in the aggregate, a Material Adverse Effect on FCC, except to the extent
reserved against in the FCC Financial Statements dated prior to the date of this
Agreement. All Taxes and other Liabilities due with respect to completed and
settled examinations or concluded Litigation have been paid.
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(b) None of the FCC Companies has executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due (excluding
such statutes that relate to years currently under examination by the Internal
Revenue Service or other applicable taxing authorities) that is currently in
effect.
(c) Adequate provision for any Taxes due or to become due for any of the
FCC Companies for the period or periods through and including the date of the
respective FCC Financial Statements has been made and is reflected on such FCC
Financial Statements.
(d) Each of the FCC Companies is in compliance with, and its records
contain all information and documents (including properly completed IRS Forms
W-9) necessary to comply with, all applicable information reporting and Tax
withholding requirements under federal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue 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 on FCC.
(e) None of the FCC Companies 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 be disallowed as a
deduction under Section 280G or 162(m) of the Internal Revenue Code.
(f) There are no Material Liens with respect to Taxes upon any of the
Assets of the FCC Companies.
(g) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of the FCC Companies that occurred during or after any
Taxable Period in which the FCC Companies incurred a net operating loss that
carries over to any Taxable Period ending after December 31, 1997.
(h) No FCC Company has filed any consent under Section 341(f) of the
Internal Revenue Code concerning collapsible corporations.
(i) After the date of this Agreement, no Material election with respect to
Taxes will be made without the prior consent of HFNC, which consent will not be
unreasonably withheld.
(j) No FCC Company has or has had a permanent establishment in any foreign
country, as defined in any applicable tax treaty or convention between the
United States and such foreign country.
6.9 Assets. The FCC Companies have good and marketable title, free and
clear of all Liens, to all of their respective Assets. All tangible properties
used in the businesses of the FCC Companies are in good condition, reasonable
wear and tear excepted, and are usable in the ordinary course of business
consistent with FCC's past practices. All Assets which are Material to FCC's
business on a consolidated basis, held under leases or subleases by any of the
FCC Companies, are held under valid Contracts enforceable in accordance with
their respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect. The FCC Companies currently
maintain insurance similar in amounts, scope, and coverage reasonably necessary
for their operations. None of the FCC Companies 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. The Assets of the
FCC Companies include all Assets required to operate the business of the FCC
Companies as presently conducted.
6.10 Environmental Matters.
(a) To the Knowledge of FCC, each FCC Company, its Participation
Facilities, and its Loan Properties are, and have been, in compliance with all
Environmental Laws, except those violations which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on FCC.
(b) There is no Litigation pending or, to the Knowledge of FCC, threatened
before any court, governmental agency, or authority, or other forum in which any
FCC Company or any of its Participation Facilities has been or, with respect to
threatened Litigation, may reasonably be expected to be named as a
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defendant (i) for alleged noncompliance (including by any predecessor) with any
Environmental Law or (ii) relating to the release into the environment of any
Hazardous Material, whether or not occurring at, on, under, or involving a site
owned, leased, or operated by any FCC Company or any of its Participation
Facilities, except for such Litigation pending or threatened that is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on FCC.
(c) There is no Litigation pending or, to the Knowledge of FCC, threatened
before any court, governmental agency, or board, or other forum in which any of
its Loan Properties (or FCC in respect of such Loan Property) has been or, with
respect to threatened Litigation, may reasonably be expected to be named as a
defendant or potentially responsible party (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating to
the release into the environment of any Hazardous Material, whether or not
occurring at, on, under, or involving a Loan Property, except for such
Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FCC.
(d) To the Knowledge of FCC, there is no reasonable basis for any
Litigation of a type described in subsections (b) or (c), except such as is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on FCC.
(e) To the Knowledge of FCC, during the period of (i) any FCC Company's
ownership or operation of any of their respective current properties, (ii) any
FCC Company's participation in the management of any Participation Facility, or
(iii) any FCC Company's holding of a security interest in a Loan Property, there
have been no releases of Hazardous Material in, on, under, or affecting (or
potentially affecting) such properties, except such as are not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on FCC.
Prior to the period of (i) any FCC Company's ownership or operation of any of
their respective current properties, (ii) any FCC Company's participation in the
management of any Participation Facility, or (iii) any FCC Company's holding of
a security interest in a Loan Property, to the Knowledge of FCC, there were no
releases of Hazardous Material in, on, under, or affecting any such property,
Participation Facility, or Loan Property, except such as are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
FCC.
6.11 Compliance with Laws. FCC is duly registered as a bank holding
company under the BHC Act. Each FCC Company has in effect all Permits necessary
for it to own, lease, or operate its Material Assets and to carry on its
business as now conducted, except for those Permits the absence of which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on FCC, and there has occurred no Default under any such Permit, other
than Defaults which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on FCC. None of the FCC Companies:
(a) is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on FCC; and
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any FCC Company is not in
compliance with any of the Laws or Orders which such governmental authority
or Regulatory Authority enforces, where such noncompliance is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on FCC, (ii) threatening to revoke any Permits, the revocation of which is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FCC, or (iii) requiring any FCC Company (x) to enter into
or consent to the issuance of a cease and desist order, formal agreement,
directive, commitment, or memorandum of understanding, or (y) to adopt any
Board resolution or similar undertaking, which restricts materially the
conduct of its business, or in any manner relates to its capital adequacy,
its credit or reserve policies, its management, or the payment of
dividends.
6.12 Labor Relations. No FCC Company is the subject of any Litigation
asserting that it or any other FCC Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state Law) or seeking to compel it or any other FCC Company to bargain with any
labor
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organization as to wages or conditions of employment, nor is any FCC Company a
party to or bound by any collective bargaining agreement, Contract, or other
agreement or understanding with a labor union or labor organization, nor is
there any strike or other labor dispute involving any FCC Company, pending or
threatened, or to the Knowledge of FCC, is there any activity involving any FCC
Company's employees seeking to certify a collective bargaining unit or engaging
in any other organization activity.
6.13 Legal Proceedings. There is no Litigation instituted or pending, or,
to the Knowledge of FCC, threatened against any FCC Company, or against any
Asset, employee benefit plan, interest, or right of any of them, that is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on FCC, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any FCC Company,
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FCC.
6.14 Reports. Since January 1, 1995, or the date of organization if
later, each FCC Company has timely filed all reports and statements, together
with any amendments required to be made with respect thereto, that it was
required to file with any Regulatory Authorities, except failures to file which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FCC. As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all Material respects with all applicable Laws.
6.15 Statements True and Correct. None of the information supplied or to
be supplied by any FCC Company or any Affiliate thereof regarding FCC or such
Affiliate for inclusion in the Registration Statement to be filed by FCC with
the SEC will, when the Registration Statement becomes effective, be false or
misleading with respect to any Material fact, or contain any untrue statement of
a Material fact, or omit to state any Material fact required to be stated
thereunder or necessary to make the statements therein not misleading. None of
the information supplied or to be supplied by any FCC Company or any Affiliate
thereof for inclusion in the Joint Proxy Statement to be mailed to HFNC's and
FCC's stockholders in connection with the Stockholders' Meetings, will, when
first mailed to the stockholders of HFNC and FCC, be false or misleading with
respect to any Material fact, or contain any misstatement of Material fact, or
omit to state any Material fact required to be stated thereunder or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or, in the case of the Joint Proxy Statement or any
amendment thereof or supplement thereto, at the time of the Stockholders'
Meetings, be false or misleading with respect to any Material fact, or omit to
state any Material fact required to be stated thereunder or necessary to correct
any Material statement in any earlier communication with respect to the
solicitation of any proxy for the Stockholders' Meetings. All documents that any
FCC Company or any Affiliate thereof 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.
6.16 Accounting, Tax, and Regulatory Matters. No FCC Company or, to FCC's
Knowledge, any Affiliate thereof has taken or agreed to take any action, and FCC
has no Knowledge of any fact or circumstance that is reasonably likely to (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(a) of the Internal Revenue Code, or (ii)
materially impede or delay receipt of any Consents of Regulatory Authorities
referred to in Section 9.1(b) of this Agreement or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
6.17 State Takeover Laws. Each FCC Company has taken all necessary action
to exempt the transactions contemplated by this Agreement from any applicable
Takeover Laws.
6.18 Charter Provisions. Each FCC Company has taken all action so that
the entering into of this Agreement and the consummation of the Merger and the
other transactions contemplated by this Agreement do not and will not result in
the grant of any rights to any Person under the Articles of Incorporation,
Bylaws, or other governing instruments of any FCC Company.
6.19 Employee Benefit Plans. All FCC Plans have complied with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
Laws, the breach or violation of which is reasonably likely to
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have, individually or in the aggregate, a Material Adverse Effect on FCC. For
purposes of this Agreement, the term "FCC Plan" means each bonus, incentive
compensation, severance pay, medical or other insurance program, retirement
plan, or other employee benefit plan program, agreement, or arrangement
sponsored, maintained, or contributed to by FCC or any trade or business,
whether or not incorporated, that together with FCC or any of its Subsidiaries
would be deemed a "single employer" under Section 414 of the Internal Revenue
Code (a "FCC ERISA Affiliate") or under which FCC or any FCC ERISA Affiliate has
any Liability or obligation. No Liability under Title IV of ERISA has been
incurred by FCC or any FCC ERISA Affiliate that has not been satisfied in full,
and no condition exists that presents a Material risk to FCC or any FCC ERISA
Affiliate of incurring any such Liability. With respect to any FCC Plan that is
subject to Title IV of ERISA, full payment has been made, or will be made in
accordance with Section 404(a)(6) of the Internal Revenue Code, of all amounts
that FCC or any FCC ERISA Affiliate is required to pay under Section 412 of the
Internal Revenue Code or under the terms of the FCC Plans, and no accumulated
funding deficiency (within the meaning of Section 412 of the Internal Revenue
Code) exists with respect to any FCC Plan. There are no Material actions, suits,
or claims pending, or, to the Knowledge of FCC, threatened or anticipated
relating to any FCC Plan. There has been no Material adverse change in the
financial position or funded status of any FCC Plan that is subject to Title IV
of ERISA since the date of the information relating to the financial position
and funded status of each such plan contained in the most recent FCC Form 10-K
filed with the SEC.
6.20 Derivatives. All interest rate swaps, caps, floors, option
agreements, futures and forward contracts, and other similar risk management
arrangements, whether entered into for FCC's own account, or for the account of
one or more the FCC Subsidiaries or their customers, were entered into (i) in
accordance with prudent business practices and all applicable Laws, and (ii)
with counterparties believed to be financially responsible.
6.21 Year 2000. FCC has disclosed to HFNC a complete and accurate copy of
FCC's plan, including an estimate of the anticipated associated costs, for
implementing modifications to FCC's hardware, software, and computer systems,
chips, and microprocessors, to ensure proper execution and accurate processing
of all date-related data, whether from years in the same century or in different
centuries. Between the date of this Agreement and the Effective Time, FCC shall
endeavor to continue its efforts to implement such plan.
6.22 Fairness Opinion. FCC has received a written opinion of Wheat First
Securities, Inc. to the effect that, as of the date of this Agreement, the
Exchange Ratio is fair, from a financial point of view, to the holders of FCC
Common Stock.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Both Parties. Unless the prior written
consent of the other Party shall have been obtained, and except as otherwise
expressly contemplated herein, each Party shall and shall cause each of its
Subsidiaries to (i) operate its business only in the usual, regular, and
ordinary course, (ii) preserve intact its business organization and Assets and
maintain its rights and franchises, (iii) use its reasonable efforts to maintain
its current employee relationships, and (iv) take no action which would (a)
adversely affect the ability of any Party to obtain any Consents required for
the transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentence of Section 9.1(b) of
this Agreement, or (b) adversely affect the ability of any Party to perform its
covenants and agreements under this Agreement.
7.2 Negative Covenants of HFNC. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, HFNC
covenants and agrees that it will not do or agree or commit to do, or permit any
of its Subsidiaries to do or agree or commit to do, any of the following without
the prior
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written consent of the chief executive officer or chief financial officer of
FCC, which consent shall not be unreasonably withheld:
(a) amend the Articles of Incorporation, Bylaws, or other governing
instruments of any HFNC Company, or
(b) incur, guarantee, or otherwise become responsible for, any
additional debt obligation or other obligation for borrowed money (other
than indebtedness of a HFNC Company to another HFNC Company) in excess of
an aggregate of $500,000 (for the HFNC Companies on a consolidated basis),
except in the ordinary course of the business consistent with past
practices (which shall include, for HFNC Subsidiaries that are depository
institutions, creation of deposit liabilities, purchases of federal funds,
advances from the Federal Reserve Bank or Federal Home Loan Bank, and entry
into repurchase agreements fully secured by U.S. government or agency
securities), or impose, or suffer the imposition, on any Material Asset of
any HFNC Company of any Lien or permit any such Lien to exist (other than
in connection with deposits, repurchase agreements, Federal Home Loan Bank
advances, bankers acceptances, "treasury tax and loan" accounts established
in the ordinary course of business, the satisfaction of legal requirements
in the exercise of trust powers, and Liens in effect as of the date hereof
that are disclosed in the HFNC Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of any HFNC Company, or declare or pay any dividend or
make any other distribution in respect of HFNC's capital stock, provided
that (i) HFNC may (to the extent legally and contractually permitted to do
so), but shall not be obligated to, declare and pay regular quarterly cash
dividends on the shares of HFNC Common Stock at a rate of $.08 per share
with usual and regular record and payment dates in accordance with past
practice as disclosed in Section 7.2(c) of the HFNC Disclosure Memorandum
and such dates may not be changed without the prior written consent of FCC,
and (ii) nothing contained in this Section 7.2(c) shall be deemed to affect
the ability of a HFNC Subsidiary to pay dividends on its capital stock to
HFNC; provided, that, notwithstanding the provisions of Section 1.3 of this
Agreement, the Parties shall cooperate in selecting the Effective Time to
ensure that, with respect to the quarterly period in which the Effective
Time occurs, the holders of HFNC Common Stock do not receive both a
dividend in respect of their HFNC Common Stock and a dividend in respect of
FCC Common Stock or fail to receive any dividend; or
(d) except for this Agreement, or pursuant to the HFNC Stock Option
Agreement or pursuant to the exercise of Rights outstanding as of the date
of this Agreement and pursuant to the terms thereof in existence on the
date of this Agreement, issue, sell, pledge, encumber, authorize the
issuance of, enter into any Contract to issue, sell, pledge, encumber, or
authorize the issuance of, or otherwise permit to become outstanding, any
additional shares of HFNC Common Stock or any other capital stock of any
HFNC Company, or any stock appreciation rights, or any option, warrant,
conversion, or other right to acquire any such stock, or any security
convertible into any such stock; or
(e) adjust, split, combine, or reclassify any capital stock of any
HFNC Company or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of HFNC Common Stock, or sell,
lease, mortgage, or otherwise dispose of or otherwise encumber (i) any
shares of capital stock of any HFNC Subsidiary (unless any such shares of
stock are sold or otherwise transferred to another HFNC Company) or (ii)
any Asset other than in the ordinary course of business for reasonable and
adequate consideration; or
(f) except for purchases of U.S. Treasury securities or U.S.
Government agency securities, which in either case have maturities of three
years or less, purchase any securities or make any Material investment,
either by purchase of stock or securities, contributions to capital, Asset
transfers, or purchase of any Assets, in any Person other than a
wholly-owned HFNC Subsidiary, or otherwise acquire direct or indirect
control over any Person, other than in connection with (i) foreclosures in
the ordinary course of business, (ii) acquisitions of control by a
depository institution Subsidiary in its fiduciary capacity, or
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(iii) the creation of new wholly-owned Subsidiaries organized to conduct or
continue activities otherwise permitted by this Agreement; or
(g) grant any increase in compensation or benefits to the employees or
officers of any HFNC Company, except (i) as required by Law and (ii)
increases in compensation to employees in the ordinary course of business
consistent with past practices, pay any severance or termination pay or any
bonus other than pursuant to written policies or written Contracts in
effect on the date of this Agreement or as set forth in Section 8.13(f) of
this Agreement; enter into or amend any severance agreements with officers
of any HFNC Company; grant any increase in fees or other increases in
compensation or other benefits to directors of any HFNC Company; or
voluntarily accelerate the vesting of any stock options or other
stock-based compensation or employee benefits; or
(h) enter into or amend any employment Contract between any HFNC
Company and any Person (unless such amendment is required by Law) that the
HFNC Company does not have the unconditional right to terminate without
Liability (other than Liability for services already rendered or as
required by Law), at any time on or after the Effective Time; or
(i) adopt any new employee benefit plan of any HFNC Company or make
any Material change in or to any existing employee benefit plans of any
HFNC Company other than any such change that is required by Law or that, in
the opinion of counsel, is necessary or advisable to maintain the tax
qualified status of any such plan; or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or
GAAP; or
(k) commence any Litigation other than as necessary for the prudent
operation of its business or settle any Litigation involving any Liability
of any HFNC Company for Material money damages or restrictions upon the
operations of any HFNC Company; or
(l) except in the ordinary course of business, modify, amend, or
terminate any Material Contract or waive, release, compromise, or assign
any Material rights or claims.
7.3 Negative Covenants of FCC. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, FCC
covenants and agrees that it will not do or agree to commit to do, or permit any
of its Subsidiaries to do or agree or commit to do, any of the following without
the prior written consent of the chief executive officer or chief financial
officer of HFNC, which consent shall not be unreasonably withheld:
(a) declare or pay any dividend or make any other distribution in
respect of the FCC Common Stock, except for regular quarterly cash
dividends at a rate not in excess of $.15 per share of FCC Common Stock,
provided, however, that nothing contained herein shall be deemed to affect
the ability of a FCC Subsidiary to pay dividends on its capital stock to
FCC; or
(b) amend its Amended and Restated Articles of Incorporation or Bylaws
in a manner which would adversely affect in any manner the terms of the FCC
Common Stock or the ability of FCC to consummate the transactions
contemplated hereby; or
(c) make any acquisition (including an acquisition of branch offices
and related deposit liabilities) that could affect the ability of FCC to
consummate the transactions contemplated hereby in a reasonably timely
manner.
7.4 Adverse Changes in Condition. Each Party agrees to give written
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
Material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
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7.5 Reports. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements will
fairly present the consolidated financial position of the entity filing such
statements as of the dates indicated and the consolidated results of operations,
changes in stockholders' equity, and cash flows for the periods then ended in
accordance with GAAP (subject in the case of interim financial statements to
normal recurring year-end adjustments that are not Material). As of their
respective dates, such reports filed with the SEC will comply in all Material
respects with the Securities Laws and will not contain any untrue statement of a
Material fact or omit to state a Material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Any financial statements contained
in any other reports to another Regulatory Authority shall be prepared in
accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Registration Statement; Joint Proxy Statement; Stockholder
Approvals. As soon as reasonably practicable after execution of this Agreement,
FCC shall file the Registration Statement with the SEC, and shall use its
reasonable efforts to cause the Registration Statement to become effective under
the 1933 Act and take any action required to be taken under the applicable state
Blue Sky or securities Laws in connection with the issuance of the shares of FCC
Common Stock upon consummation of the Merger. HFNC shall furnish all information
concerning it and the holders of its capital stock as FCC may reasonably request
in connection with such action. HFNC shall call a Stockholders' Meeting, to be
held as soon as reasonably practicable after the Registration Statement is
declared effective by the SEC, for the purpose of voting upon approval of this
Agreement, the Merger, and such other related matters as it deems appropriate.
FCC shall call a Stockholders' Meeting, to be held as soon as reasonably
practicable after the Registration Statement is declared effective by the SEC,
for the purpose of voting upon approval of this Agreement, the Merger, and the
issuance of shares of FCC Common Stock pursuant to the Merger and such other
related matters as it deems appropriate. In connection with the Stockholders'
Meetings, (i) FCC and HFNC shall prepare and file with the SEC a Joint Proxy
Statement and mail such Joint Proxy Statement to their respective stockholders,
(ii) the Parties shall furnish to each other all information concerning them
that they may reasonably request in connection with such Joint Proxy Statement,
(iii) the Boards of Directors of FCC and HFNC shall recommend to their
respective stockholders the approval of the matters submitted for approval, and
(iv) the Boards of Directors and officers of FCC and HFNC shall use their
reasonable efforts to obtain such stockholders' approvals, provided that each of
FCC and HFNC may withdraw, modify, or change in an adverse manner to the other
Party its recommendations if the Board of Directors of such Party, after having
consulted with and based upon the advice of outside counsel, determines in good
faith that the failure to so withdraw, modify, or change its recommendation
could constitute a breach of the fiduciary duties of such Party's Board of
Directors under applicable Law. In addition, nothing in this Section 8.1 or
elsewhere in this Agreement shall prohibit accurate disclosure by either Party
of information that is required to be disclosed in the Registration Statement or
the Joint Proxy Statement or in any other document required to be filed with the
SEC (including, without limitation, a Solicitation/Recommendation Statement on
Schedule 14D-9) or otherwise required to be publicly disclosed by applicable Law
or regulations or rules of the NASD.
8.2 Exchange Listing. FCC shall use its reasonable efforts to list, prior
to the Effective Time, on the Nasdaq NMS, subject to official notice of
issuance, the shares of FCC Common Stock to be issued to the holders of HFNC
Common Stock pursuant to the Merger.
8.3 Applications. FCC shall promptly prepare and file, and HFNC shall
cooperate in the preparation and, where appropriate, filing of, applications
with all Regulatory Authorities having jurisdiction over the transactions
contemplated by this Agreement seeking the requisite Consents necessary to
consummate the transactions contemplated by this Agreement.
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8.4 Filings with State Offices. Upon the terms and subject to the
conditions of this Agreement, HFNC and FCC shall execute and FCC shall file the
Articles of Merger with the Secretary of State of the State of North Carolina in
connection with the Closing.
8.5 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
reasonably practicable after the date of this Agreement, the transactions
contemplated by this Agreement, including, without limitation, using its
reasonable efforts to lift or rescind any Order adversely affecting its ability
to consummate the transactions contemplated herein and to cause to be satisfied
the conditions referred to in Article 9 of this Agreement; provided, that
nothing herein shall preclude either Party from exercising its rights under this
Agreement. Each Party shall use, and shall cause each of its Subsidiaries to
use, its reasonable efforts to obtain all Consents necessary or desirable for
the consummation of the transactions contemplated by this Agreement.
8.6 Investigation and Confidentiality.
(a) Prior to the Effective Time, each Party shall keep the other Party
advised of all Material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the other
Party reasonably requests, provided that such investigation shall be reasonably
related to the transactions contemplated hereby and shall not interfere
unnecessarily with normal operations. No investigation by a Party shall affect
the representations and warranties of the other Party.
(b) Each Party shall, and shall cause its advisers and agents to, maintain
the confidentiality of all confidential information furnished to it by the other
Party concerning its and its Subsidiaries' businesses, operations, and financial
positions and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time, each Party shall promptly
return or certify the destruction of all documents and copies thereof, and all
work papers containing confidential information received from the other Party.
(c) Each Party agrees to give the other Party written notice as soon as
practicable after any determination by it of any fact or occurrence relating to
the other Party which it has discovered through the course of its investigation
and which represents, or is reasonably likely to represent, a Material breach of
any representation, warranty, covenant, or agreement of the other Party or which
has had or is reasonably likely to have a Material Adverse Effect on the other
Party.
(d) Neither Party nor any of their respective Subsidiaries shall be
required to provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of its customers, jeopardize
the attorney-client or similar privilege with respect to such information or
contravene any Law, rule, regulation, Order, judgment, decree, fiduciary duty,
or agreement entered into prior to the date of this Agreement. The Parties will
use their reasonable efforts to make appropriate substitute disclosure
arrangements, to the extent practicable, in circumstances in which the
restrictions of the preceding sentence apply.
8.7 Press Releases. Prior to the Effective Time, FCC and HFNC shall
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 8.7
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
8.8 Certain Actions. Except with respect to this Agreement and the
transactions contemplated hereby, no Party nor any Affiliate thereof nor any
Representatives thereof retained by a Party shall directly or indirectly solicit
or engage in negotiations concerning any Acquisition Proposal, or provide any
confidential information or assistance to, or have any discussions with, any
Person with respect to an Acquisition Proposal. Notwithstanding the foregoing, a
Party may, and may authorize and permit its Representatives to, provide Persons
with confidential information, have discussions or negotiations with, or
otherwise facilitate an effort or
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attempt by such Person to make or implement an Acquisition Proposal not
solicited in violation of this Agreement if the Party's Board of Directors,
after having consulted with, and based upon the advice of, outside counsel,
determines in good faith that the failure to take such actions could constitute
a breach of the fiduciary duties of the Party's Board of Directors under
applicable Law; provided, that such Party shall promptly advise the other Party
following the receipt of any Acquisition Proposal and the Material details
thereof. Nothing contained in this Section 8.8 shall prohibit the Board of
Directors of a Party from complying with Rule 14e-2, promulgated under the 1934
Act. Each Party shall (i) immediately cease and cause to be terminated any
existing activities, discussions, or negotiations with any Persons conducted
heretofore with respect to any of the foregoing, and (ii) direct and use its
reasonable efforts to cause of all its Representatives not to engage in any of
the foregoing.
8.9 Accounting and Tax Treatment. Each of the Parties undertakes and
agrees to use its reasonable efforts to cause the Merger, and to take no action
which would cause the Merger not, to qualify for treatment as a pooling of
interests for accounting purposes or as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code for federal income tax purposes.
8.10 State Takeover Laws. Each Party shall take all necessary steps to
exempt the transactions contemplated by this Agreement from, or if necessary
challenge the validity or applicability of, any applicable Takeover Laws.
8.11 Charter Provisions. Each Party shall take all necessary action to
ensure that the entering into of this Agreement and the consummation of the
Merger and the other transactions contemplated hereby do not and will not result
in the grant of any rights to any Person under the Articles of Incorporation,
Bylaws, or other governing instruments of the Party or any of its Subsidiaries
or restrict or impair the ability of the Party or any of its Subsidiaries to
vote, or otherwise to exercise the rights of a stockholder with respect to,
shares of the Party or any of its Subsidiaries that may be directly or
indirectly acquired or controlled by it.
8.12 Agreement of Affiliates. Each Party has disclosed in writing to the
other Party each Person whom it reasonably believes may be deemed an "affiliate"
of it for purposes of Rule 145 under the 1933 Act. Each of HFNC and FCC shall
use its reasonable efforts to cause each Person who may be deemed to be such an
affiliate of HFNC and FCC, respectively, to execute and deliver to FCC as soon
as practicable after the date of this Agreement, and in any event prior to the
date of the Stockholders' Meetings, a written agreement in the form of Exhibit 4
and Exhibit 5, respectively. Shares of FCC Common Stock issued to such
affiliates of HFNC in exchange for shares of HFNC Common Stock shall not be
transferable until such time as financial results covering at least 30 days of
combined operations of FCC and HFNC have been published within the meaning of
Section 201.01 of the SEC's Codification of Financial Reporting Policies,
regardless of whether each such affiliate has provided the written agreement
referred to in this Section 8.12 (and FCC shall be entitled to place restrictive
legends upon certificates for shares of FCC Common Stock issued to affiliates of
HFNC pursuant to this Agreement to enforce the provisions of this Section 8.12).
FCC shall not be required to maintain the effectiveness of the Registration
Statement under the 1933 Act for the purposes of resale of FCC Common Stock by
such affiliates.
8.13 Employee Benefits and Contracts.
(a) Following the Effective Time, FCC shall provide to officers and
employees of the HFNC Companies (the "Continuing Employees"), employee benefits
under employee benefit plans on terms and conditions which when taken as a whole
are substantially similar to those currently provided by the FCC Companies to
their similarly situated officers and employees. For purposes of participation,
vesting, and benefit accruals (but not accrual of benefits under FCC's
tax-qualified defined benefit plans) under such employee benefit plans, (i)
service under any qualified defined benefit or contribution plans of HFNC shall
be treated as service under FCC's qualified defined benefit or contribution
plans and (ii) service under any other employee benefit plans of HFNC shall be
treated as service under any similar employee benefit plans maintained by FCC.
FCC shall cause the FCC welfare benefit plans that cover the Continuing
Employees after the Effective Time to (i) waive any waiting period and
restrictions and limitations for preexisting conditions or insurability and (ii)
cause any deductible, co-insurance, or maximum out-of-pocket payments made by
the Continuing Employees under HFNC's welfare benefit plans to be credited to
such Continuing Employees under the FCC
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welfare benefit plans, so as to reduce the amount of any deductible,
co-insurance, or maximum out-of-pocket payments payable by the Continuing
Employees under the FCC welfare benefit plans. Prior to the commencement of the
Continuing Employee's participation in the FCC employee benefit plans and
programs, the benefit coverage of, and participation in benefit plans by, the
Continuing Employees shall continue under the HFNC Benefit Plans, as in effect
immediately prior to the Effective Time. During such transition period, the
coverage under and participation in the HFNC Benefit Plans shall be deemed to
provide the Continuing Employees with benefits that are no less favorable than
those offered to other employees of FCC and its Subsidiaries. HFNC
(b) Following the Effective Time, FCC shall, and shall cause the
appropriate FCC Subsidiaries to, honor in accordance with their terms the
employment agreements and retirement and supplemental income agreements and
plans which have been disclosed in Section 8.13 of the HFNC Disclosure
Memorandum.
(c) Any person with at least one year of full-time service to HFNC who was
serving as an employee of HFNC or any HFNC Subsidiary immediately prior to the
Effective Time (other than those employees covered by a written employment
agreement) whose employment is discontinued by FCC or any of the FCC
Subsidiaries within six months after the Effective Time (unless termination of
such employment is for Cause (as defined below)) shall be entitled to a
severance payment from FCC equal in amount to one week's base pay for each full
year such employee was employed by HFNC or any other HFNC Subsidiary, subject to
a minimum of two weeks' severance and a maximum of 26 weeks' severance, together
with any accrued but unused vacation leave with respect to the calendar year in
which termination occurs. For purposes of this Section 8.13(c), "Cause" shall
mean termination because of the employee's personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties or willful violation of any law,
rule, or regulation (other than traffic violations or similar offenses).
(d) (i) Each participant in the HFNC Employee Stock Ownership Plan ("HFNC
ESOP") not fully vested will, in accordance with the terms of the HFNC ESOP,
become fully vested in his or her HFNC ESOP account as of the Effective Time. As
soon as practicable after the execution of this Agreement, HFNC and FCC will
cooperate to cause the HFNC ESOP to be amended and other action taken, in a
manner reasonably acceptable to HFNC and FCC, to provide that the HFNC ESOP will
terminate upon the Effective Time. Between the date of this Agreement and the
Effective Time, the existing HFNC ESOP indebtedness shall be paid in the
ordinary course of business pursuant to the existing loan amortization schedule
and HFNC or HFNC Bank shall make such contributions to the HFNC ESOP as
necessary to fund such payments. Any indebtedness of the HFNC ESOP remaining as
of the Effective Time shall be repaid from the Trust associated with the HFNC
ESOP through application or sale of the FCC Common Stock received by the HFNC
ESOP; provided, however, that (A) any related sale or distribution of shares by
the HFNC ESOP shall be effected in accordance with the requirements of federal
and any applicable state securities laws and regulations, including any rules of
the NASD, (B) any related sale or distribution of shares by the HFNC ESOP and
any participant shall be effected in such a manner (and with such safeguards as
may be necessary or appropriate) so as to ensure the satisfaction of the
condition included in Section 9.1(h) of this Agreement, and (C) all
distributions from the HFNC ESOP after the Effective Time shall be in shares of
FCC Common Stock. Upon the repayment of the HFNC ESOP loan, the remaining funds
in the HFNC ESOP suspense account will be allocated (to the extent permitted by
Sections 401(a), 415, and 4975 of the Internal Revenue Code and other applicable
laws and regulations, including without limitation the applicable provisions of
ERISA) to HFNC ESOP participants (as determined under the terms of the HFNC
ESOP). HFNC and FCC agree that, subject to the conditions described herein, as
soon as practicable after the Effective Time and repayment of the HFNC ESOP
loan, participants in the HFNC ESOP shall be entitled at their election to have
the amounts in their HFNC ESOP accounts either distributed to them in a lump sum
or rolled over to another tax-qualified plan (including FCC or FCC Subsidiary
plans to the extent permitted by FCC) or individual retirement account.
(ii) The actions relating to termination of the HFNC ESOP will be adopted
conditioned upon the consummation of the Merger and upon receiving a favorable
determination letter from the Internal Revenue Service ("IRS") with regard to
the continued qualification of the HFNC ESOP after any required
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amendments (including the amendment which terminates the HFNC ESOP). HFNC and
FCC will cooperate in submitting appropriate requests for any such determination
letter to the IRS and will use their best efforts to seek the issuance of such
letter as soon as practicable following the date of this Agreement. HFNC and FCC
will adopt such additional amendments to the HFNC ESOP as may be reasonably
required by the IRS as a condition to granting such determination letter,
provided that such amendments do not (A) substantially change the terms outlined
herein, (B) have a Material Adverse Effect on HFNC, or (C) result in an
additional Material Liability to FCC.
(iii) As of and following the Effective Time, FCC shall cause the HFNC ESOP
to be maintained for the exclusive benefit of employees and other persons who
were participants or beneficiaries therein prior to the Effective Time and
proceed with termination of the HFNC ESOP through distribution of its Assets in
accordance with its terms subject to the amendments described herein and as
otherwise may be required to comply with applicable law or to obtain a favorable
determination from the IRS as to the continuing qualified status of the HFNC
ESOP, provided, however, that no such termination distributions of the HFNC ESOP
shall occur after the Effective Time until a favorable termination letter has
been received from the IRS. HFNC shall cause the HFNC ESOP to be amended,
effective as of the Effective Time, to provide that the administrative committee
thereof shall consist of four individuals, two of whom are appointed by the
Board of Directors of HFNC prior to the Effective Time (the appointment of such
individuals will be subject to the prior consent of FCC, and such individuals
after their appointment may not be unreasonably removed or changed by FCC or its
Affiliates for a period of two years after the Effective Time), and two of whom
are appointed by FCC as of the Effective Time).
(e) Each participant in the HFNC Recognition and Retention Plan ("RRP") not
fully vested will, in accordance with the terms of the RRP, become fully vested
in plan shares awards thereunder as of the Effective Time. As soon as
practicable after the execution of this Agreement, HFNC and FCC will cooperate
to cause the RRP to be amended and other action taken, in a manner reasonably
acceptable to HFNC and FCC, to provide that the RRP will terminate upon the
Effective Time; provided, however, that (i) any distribution of shares under the
RRP shall be effected in accordance with the requirements, if any, of federal
and state securities laws and regulations, (ii) any distribution of shares under
the RRP shall be effected in such a manner (and with such safeguards as may be
necessary or appropriate) so as to ensure the satisfaction of the condition
included in Section 9.1(h) of this Agreement, and (iii) all distributions from
the RRP after the Effective Time shall be in shares of FCC Common Stock. No
action shall be taken that would adversely affect the rights of plan
participants who hold outstanding grants or awards of shares of HFNC Common
Stock, whether before or after the Effective Time. No further grants or awards
shall be made under the RRP following the date of this Agreement.
(f) HFNC may continue to administer such bonus programs and arrangements in
accordance with and consistent with past practice as were in effect prior to the
execution of this Agreement through June 30, 1998. Thereafter, the bonuses to
which employees of HFNC may be entitled for the period from June 30, 1998
through and including the Effective Time, shall be determined by mutual
agreement between HFNC and FCC.
(g) Each employee of HFNC and HFNC Bank identified in Section 8.13(g) of
the HFNC Disclosure Memorandum shall be entitled to receive a "retention" bonus
from HFNC or HFNC Bank equal to no more than six months of such employee's
annual base salary as of the date of this Agreement in the event that such
employee remains an employee of HFNC or HFNC Bank, as applicable, until the
Effective Time (or in certain cases, the date the systems conversion occurs
after the Effective Time) and satisfactorily fulfills the duties and
responsibilities of the position of such employee of HFNC or HFNC Bank, as the
case may be, through the Effective Time; provided that retention bonuses, in the
aggregate, shall not exceed $150,000.
8.14 Indemnification.
(a) After the Effective Time, FCC shall indemnify, defend and hold harmless
the present and former directors, officers, employees, and agents of HFNC or any
of HFNC's Subsidiaries (each, a "Indemnified Party") (including any person who
becomes a director, officer, employee, or agent prior to the Effective Time)
against all Liabilities (including reasonable attorneys' fees, and expenses,
judgments, fines and
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amounts paid in settlement) arising out of actions or omissions occurring at or
prior to the Effective Time (including the transactions contemplated by this
Agreement and the HFNC Stock Option Agreement) to the full extent permitted
under North Carolina Law and by HFNC's Articles of Incorporation and Bylaws, as
in effect on the date hereof and any indemnity agreements entered into prior to
the date of this Agreement by any of the HFNC Companies and any director,
officer, employee, or agent of any of the HFNC Companies, including, without
limitation, provisions relating to advances of expenses incurred in the defense
of any Litigation. Without limiting the foregoing, in any case in which approval
by FCC is required to effectuate any indemnification, FCC shall direct, at the
election of the Indemnified Party, that the determination of any such approval
shall be made by independent counsel mutually agreed upon between FCC and the
Indemnified Party.
(b) FCC and the Surviving Corporation shall use their reasonable efforts
(and HFNC shall cooperate prior to the Effective Time in these efforts) to
maintain in effect for a period of three years after the Effective Time, HFNC's
existing directors' and officers' liability insurance policy (provided that FCC
and the Surviving Corporation may substitute therefor (i) policies of at least
the same coverage and amounts containing terms and conditions which are
substantially no less advantageous or (ii) with the consent of HFNC given prior
to the Effective Time, any other policy) with respect to claims arising from
facts or events which occurred prior to the Effective Time and covering persons
who are currently covered by such insurance; provided, that the Surviving
Corporation shall not be obligated to make annual premium payments for any year
in such three-year period in respect of such policy (or coverage replacing such
policy) which exceed, for the portion related to HFNC's directors and officers,
150% of the annual premium payments on HFNC's current policy in effect as of the
date of this Agreement (the "Maximum Amount"). If the amount of the annual
premium necessary to maintain or procure such insurance coverage exceeds the
Maximum Amount, FCC shall use its reasonable efforts to maintain the most
advantageous policies of directors' and officers' liability insurance obtainable
for a premium equal to the Maximum Amount.
(c) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of this Section 8.14, upon learning of any such Liability or Litigation,
shall promptly notify FCC thereof, provided that the failure so to notify shall
not affect the obligations of FCC under this Section 8.14 unless and to the
extent such failure materially increases FCC's Liability under this Section
8.14. In the event of any such Litigation (whether arising before or after the
Effective Time), (i) FCC or the Surviving Corporation shall have the right to
assume the defense thereof and FCC shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with the defense
thereof, except that if FCC or the Surviving Corporation elects not to assume
such defense or counsel for the Indemnified Parties advises that there are
substantive issues which raise conflicts of interest between FCC or the
Surviving Corporation and the Indemnified Parties, the Indemnified Parties may
retain counsel satisfactory to them, and FCC or the Surviving Corporation shall
pay all reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, that FCC shall be
obligated pursuant to this paragraph (c) to pay for only one firm of counsel for
all Indemnified Parties in any jurisdiction, (ii) the Indemnified Parties will
cooperate in the defense of any such Litigation, and (iii) FCC shall not be
liable for any settlement effected without its prior written consent; and
provided further that the Surviving Corporation shall not have any obligation
hereunder to any Indemnified Party when and if a court of competent jurisdiction
shall determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable Law.
(d) The Surviving Corporation shall not be liable for any settlement
effected without its prior written consent which shall not be unreasonably
withheld.
(e) If either FCC or the Surviving Corporation or any of their respective
successors or assigns shall consolidate with or merge into any other Person and
shall not be the continuing or surviving Person of such consolidation or merger
or shall transfer all or substantially all of its Assets to any Person, then and
in each case, proper provision shall be made so that the successors and assigns
of either FCC or the Surviving Corporation shall assume the obligations set
forth in this Section 8.14.
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(f) FCC shall pay all reasonable costs, including attorneys' fees, that may
be incurred by any Indemnified Party in enforcing the indemnity and other
obligations provided for in this Section 8.14.
(g) The provisions of this Section 8.14 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs or
representatives.
8.15 Board and Management Matters.
(a) At the first regularly scheduled meeting of the Board of Directors of
FCC following the Effective Time, FCC shall effect all corporate action
necessary to appoint Ray W. Bradley, Jr., Joe M. Logan, John M. McCaskill, and
Willie E. Royal as directors of FCC to serve until the 1999 annual meeting
stockholders of FCC. At the 1999 annual meeting of stockholders of FCC, FCC
shall nominate for election John H. McCaskill to the Board of Directors of FCC
to serve as a member of such class of the FCC Board of Directors as necessary so
that each class of the FCC Board of Directors is nearly equal in number as
practicable. Those former directors of HFNC who are members of the Board of
Directors of FCC immediately prior to the 1999 annual meeting of stockholders,
but who do not remain on the Board after the 1999 annual meeting of stockholders
and whose age exceeds the retirement age for directors of FCC, shall be
appointed Directors Emeritus and shall receive for the first year following the
1999 annual meeting of stockholders, compensation equal to $8,000 per Director
Emeritus.
(b) At the Effective Time, H. Joe King, Jr. and J. Harold Barnes, Jr. shall
receive the payments and benefits due such individuals for termination in the
event of a change of control of HFNC provided by the respective employment
agreements dated as of December 28, 1995 to which such individuals are parties
with HFNC and HFNC Bank and upon payment of such amounts, such employment
agreements shall terminate and be of no further force and effect. In the case of
H. Joe King, Jr., Mr. King shall remain a consultant to FCC for a period of time
from the Effective Time through the 2001 annual meeting of stockholders of FCC
and during such period shall receive monthly compensation of $10,000 and be
entitled to appropriate office facilities and payment of the club dues and car
allowance that Mr. King receives from HFNC as of the date of this Agreement. In
the case of J. Harold Barnes, Mr. Barnes shall remain a full-time employee of
FCC and be entitled to a base salary for the year following the Effective Time
equal to the base salary Mr. Barnes receives as of the date of this Agreement.
8.16 Certain Modifications. FCC and HFNC shall consult with respect to
their loan, litigation, and real estate valuation policies and practices
(including loan classifications and levels of reserves) and HFNC shall make such
modifications or changes to its policies and practices, if any, prior to the
Effective Time, as may be mutually agreed upon. FCC and HFNC also shall consult
with respect to the character, amount, and timing of restructuring and
Merger-related expense charges to be taken by each of the Parties in connection
with the transactions contemplated by this Agreement and shall take such charges
in accordance with GAAP as may be mutually agreed upon by the Parties. Neither
Party's representations, warranties, and covenants contained in this Agreement
shall be deemed to be inaccurate or breached in any respect as a consequence of
any modifications or charges undertaken solely on account of this Section 8.16.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective obligations
of each Party to perform this Agreement and to consummate the Merger and the
other transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 11.6 of
this Agreement:
(a) Stockholder Approvals. The stockholders of HFNC shall have
approved this Agreement, and the consummation of the transactions
contemplated hereby, including the Merger, as and to the extent required by
Law, by the provisions of any governing instruments, and by the rules of
the NASD. The stockholders of FCC shall have approved this Agreement and
the issuance of shares of FCC Common
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Stock pursuant to the Merger, as and to the extent required by Law, by the
provisions of any governing instruments, and by the rules of the NASD.
(b) Regulatory Approvals. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner (excluding requirements relating to
the raising of additional capital or the disposition of Assets or deposits)
which in the reasonable good faith judgment of the Board of Directors of
FCC would so materially adversely impact the economic or business benefits
of the transactions contemplated by this Agreement so as to render
inadvisable the consummation of the Merger.
(c) Consents and Approvals. Each Party shall have obtained any and
all Consents required for consummation of the Merger (other than those
referred to in Section 9.1(b) of this Agreement) or for the preventing of
any Default under any Contract or Permit of such Party which, if not
obtained or made, is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on such Party.
(d) Legal Proceedings. No court or governmental or Regulatory
Authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced, or entered any Law or Order (whether temporary,
preliminary, or permanent) or taken any other action which prohibits,
restricts, or makes illegal consummation of the transactions contemplated
by this Agreement.
(e) Registration Statement. The Registration Statement shall be
effective under the 1933 Act, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued, no action, suit,
proceeding, or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing, and all necessary
approvals under state securities Laws or the 1933 Act or 1934 Act relating
to the issuance or trading of the shares of FCC Common Stock issuable
pursuant to the Merger shall have been received.
(f) Exchange Listing. The shares of FCC Common Stock issuable
pursuant to the Merger shall have been approved for listing on the Nasdaq
NMS, subject to official notice of issuance.
(g) Tax Matters. HFNC shall have received a written opinion from
Elias Matz Tiernan & Herrick LLP and FCC shall have received a written
opinion from Alston & Bird LLP, in a form reasonably satisfactory to such
Party (the "Tax Opinions"), to the effect that (i) the Merger will
constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, (ii) no gain or loss will be recognized by holders
of HFNC Common Stock who exchange all of their HFNC Common Stock solely for
FCC Common Stock pursuant to the Merger (except with respect to any cash
received in lieu of a fractional share interest in FCC Common Stock), (iii)
the tax basis of the FCC Common Stock received by holders of HFNC Common
Stock who exchange all of their HFNC Common Stock solely for FCC Common
Stock in the Merger will be the same as the tax basis of the HFNC Common
Stock surrendered in exchange for the FCC Common Stock (reduced by an
amount allocable to a fractional share interest in FCC Common Stock for
which cash is received), and (iv) the holding period of the FCC Common
Stock received by holders who exchange all of their HFNC Common Stock
solely for FCC Common Stock in the Merger will be the same as the holding
period of the HFNC Common Stock surrendered in exchange therefor, provided
that such HFNC Common Stock is held as a capital asset at the Effective
Time. In rendering such Tax Opinions, such counsel shall be entitled to
rely upon representations of officers of HFNC and FCC reasonably
satisfactory in form and substance to such counsel.
(h) Pooling Letters. Each Party shall have received a letter, dated
as of the Effective Time, in a form reasonably acceptable to such Party,
from its respective independent public accountants to the effect that the
Merger will qualify for pooling-of-interests accounting treatment.
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9.2 Conditions to Obligations of FCC. The obligations of FCC to perform
this Agreement and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless
waived by FCC pursuant to Section 11.6(a) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
9.2(a), the accuracy of the representations and warranties of HFNC set
forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of HFNC set forth in Section 5.3 of this Agreement shall be true
and correct (except for inaccuracies which are de minimis in amount). The
representations and warranties of HFNC set forth in Sections 5.18, 5.19,
and 5.20 of this Agreement shall be true and correct in all Material
respects. There shall not exist inaccuracies in the representations and
warranties of HFNC set forth in this Agreement (including the
representations and warranties set forth in Sections 5.3, 5.18, 5.19, and
5.20) such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a Material Adverse Effect on HFNC; provided
that, for purposes of this sentence only, those representations and
warranties which are qualified by references to "material," "Material,"
"Material Adverse Effect," or variations thereof, or to the "Knowledge" of
HFNC or to a matter being "known" by HFNC shall be deemed not to include
such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of HFNC to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all
Material respects.
(c) Certificates. HFNC shall have delivered to FCC (i) a certificate,
dated as of the Effective Time and signed on its behalf by its chief
executive officer and chief financial officer, to the effect that the
conditions of its obligations set forth in Section 9.2(a) and 9.2(b) of
this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by HFNC's Board of Directors and stockholders
evidencing the taking of all corporate action necessary to authorize the
execution, delivery, and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such
reasonable detail as FCC and its counsel shall request.
(d) Affiliate Agreements. FCC shall have received from each affiliate
of HFNC and each affiliate of FCC the affiliates agreements referred to in
Section 8.12 of this Agreement, to the extent necessary to ensure in the
reasonable judgment of FCC that the transactions contemplated hereby will
qualify for pooling-of-interests accounting treatment.
9.3 Conditions to Obligations of HFNC. The obligations of HFNC to perform
this Agreement and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless
waived by HFNC pursuant to Section 11.6(b) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
9.3(a), the accuracy of the representations and warranties of FCC set forth
in this Agreement shall be assessed as of the date of this Agreement and as
of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of FCC set forth in Section 6.3 of this Agreement shall be true
and correct (except for inaccuracies which are de minimis in amount). The
representations and warranties of FCC set forth in Sections 6.16, 6.17, and
6.18 of this Agreement shall be true and correct in all Material respects.
There shall not exist inaccuracies in the representations and warranties of
FCC set forth in this Agreement (including the representations and
warranties set forth in Sections 6.3, 6.16, 6.17, and 6.18) such that the
aggregate effect of such inaccuracies has, or is reasonably likely to have,
a Material Adverse Effect on FCC; provided that, for purposes of this
sentence only, those representations and warranties which are qualified by
references to "material," "Material," "Material Adverse Effect," or
variations thereof, or to
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the "Knowledge" of FCC or to a matter being "known" by FCC shall be deemed
not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of FCC to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all
Material respects.
(c) Certificates. FCC shall have delivered to HFNC (i) a certificate,
dated as of the Effective Time and signed on its behalf by its chief
executive officer and chief financial officer, to the effect that the
conditions of its obligations set forth in Section 9.3(a) and 9.3(b) of
this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by FCC's Board of Directors and stockholders
evidencing the taking of all corporate action necessary to authorize the
execution, delivery, and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such
reasonable detail as HFNC and its counsel shall request.
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement by the stockholders of HFNC
or FCC, 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 FCC and the Board
of Directors of HFNC; or
(b) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of HFNC and Section 9.3(a) of
this Agreement in the case of FCC or in Material breach of any covenant or
other agreement contained in this Agreement) in the event of an inaccuracy
of any representation or warranty of the other Party contained in this
Agreement which cannot be or has not been cured within 30 days after the
giving of written notice to the breaching Party of such inaccuracy and
which inaccuracy would provide the terminating Party the ability to refuse
to consummate the Merger under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of HFNC and Section 9.3(a) of this
Agreement in the case of FCC; or
(c) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of HFNC and Section 9.3(a) in
the case of FCC) in the event of a Material breach by the other Party of
any covenant or agreement contained in this Agreement which cannot be or
has not been cured within 30 days after the giving of written notice to the
breaching Party of such breach; or
(d) By the Board of Directors of either Party in the event (i) any
Consent of any Regulatory Authority required for consummation of the Merger
and the other transactions contemplated hereby shall have been denied by
final nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal, or (ii) the
stockholders of FCC or HFNC fail to vote their approval of the matters
submitted for the approval by such stockholders at the Stockholders'
Meetings where the appropriate transactions contemplated by this Agreement
were presented to such stockholders for approval and voted upon; or
(e) By the Board of Directors of either Party in the event that the
Merger shall not have been consummated by April 30, 1999, 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(e); or
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(f) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of HFNC and Section 9.3(a) of
this Agreement in the case of FCC or in Material breach of any covenant or
other agreement contained in this Agreement) in the event that any of the
conditions precedent to the obligations of such Party to consummate the
Merger cannot be satisfied or fulfilled by the date specified in Section
10.1(e) of this Agreement; or
(g) By the Board of Directors of HFNC, if it determines by a vote of a
majority of the members of its entire Board, at any time during the ten-day
period commencing two days after the Determination Date, if both of the
following conditions are satisfied:
(1) the Average Closing Price shall be less than the product of (i)
0.80 and (ii) the Starting Price; and
(2) (i) the quotient obtained by dividing the Average Closing Price
by the Starting Price (such number being referred to herein as the "FCC
Ratio") shall be less than (ii) the quotient obtained by dividing the
Index Price on the Determination Date by the Index Price on the Starting
Date and subtracting 0.15 from the quotient in this clause (2)(ii) (such
number being referred to herein as the "Index Ratio");
subject, however, to the following three sentences. If HFNC refuses to
consummate the Merger pursuant to this Section 10.1(g), it shall give
prompt written notice thereof to FCC; provided, that such notice of
election to terminate may be withdrawn at any time within the
aforementioned ten-day period. During the five-day period commencing with
its receipt of such notice, FCC shall have the option to elect to increase
the Exchange Ratio to equal the lesser of (i) the quotient (rounded to the
nearest one-ten-thousandth) obtained by dividing (1) the product of 0.80,
the Starting Price, and the Exchange Ratio (as then in effect) by (2) the
Average Closing Price, and (ii) the quotient (rounded to the nearest
one-ten-thousandth) obtained by dividing (1) the product of the Index Ratio
and the Exchange Ratio (as then in effect) by (2) the FCC Ratio. If FCC
makes an election contemplated by the preceding sentence, within such
five-day period, it shall give prompt written notice to HFNC of such
election and the revised Exchange Ratio, whereupon no termination shall
have occurred pursuant to this Section 10.1(g) and this Agreement shall
remain in effect in accordance with its terms (except as the Exchange Ratio
shall have been so modified), and any references in this Agreement to
"Exchange Ratio" shall thereafter be deemed to refer to the Exchange Ratio
as adjusted pursuant to this Section 10.1(g).
For purposes of this Section 10.1(g), the following terms shall have the
meanings indicated:
"Average Closing Price" shall mean the average of the daily last sales
prices of FCC Common Stock as reported on the Nasdaq NMS (as reported by The
Wall Street Journal or, if not reported thereby, another authoritative source as
chosen by FCC) for the ten consecutive full trading days in which such shares
are traded on the Nasdaq NMS ending at the close of trading on the Determination
Date.
"Determination Date" shall mean the later of the date on which (i) the
Consent of the federal Regulatory Authority having jurisdiction over the Merger
and the Bank Merger (without regard to any requisite waiting period thereof) to
the Merger and the Bank Merger shall be received and (ii) the HFNC and FCC
stockholders approve the Merger at the Stockholders' Meetings.
"Index Group" shall mean the 21 bank holding companies listed below, the
common stocks of all of which shall be publicly traded and as to which there
shall not have been, since the Starting Date and before the Determination Date,
any public announcement of a proposal for such company to be acquired or for
such company to acquire another company or companies in transactions with a
value exceeding 25% of the acquiror's market capitalization. In the event that
any such company or companies are removed from the Index Group, the weights
(which shall be determined based upon the number of outstanding shares of
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common stock) shall be redistributed proportionately for purposes of determining
the Index Price. The 21 bank holding companies and the weights attributed to
them are as follows:
<TABLE>
<CAPTION>
BANK HOLDING COMPANIES WEIGHTING
- ---------------------- ---------
<S> <C>
Alabama National BanCorp.................................... 2.52%
BancorpSouth Inc. .......................................... 6.51
Carolina First Corp. ....................................... 5.16
Century South Banks Inc. ................................... 3.17
City Holding Co. ........................................... 1.89
F&M National Corp. ......................................... 5.96
First United Bancshares Inc. ............................... 3.69
Hamilton Bancorp Inc. ...................................... 2.90
Hancock Holding Co. ........................................ 3.18
MainStreet BankGroup Inc. .................................. 3.89
National Commerce Bancorp. ................................. 14.58
Peoples Holding Co. ........................................ 1.71
Premier Bancshares Inc. .................................... 7.11
Republic Bancshares Inc. ................................... 2.05
Republic Banking Corp. of FL................................ 6.22
Republic Security Financial................................. 6.68
Seacoast Banking Corp. of FL................................ 1.51
Simmons First National Corp. ............................... 1.67
Triangle Bancorp Inc. ...................................... 4.78
United Bankshares Inc. ..................................... 8.75
WesBanco Inc. .............................................. 6.09
------
Total....................................................... 100.00%
======
</TABLE>
"Index Price" on a given date shall mean the weighted average (weighted in
accordance with the factors listed above) of the last sales prices of the
companies composing the Index Group.
"Starting Date" shall mean the last full trading day preceding the
announcement by press release of the Merger.
"Starting Price" shall mean the last sale price per share of FCC Common
Stock as reported on the Nasdaq NMS (as reported by The Wall Street Journal or,
if not reported thereby, another authoritative source as chosen by FCC) on the
Starting Date.
If any company belonging to the Index Group or FCC declares or effects a
stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares, or similar transaction between the date of this Agreement
and the Determination Date, the prices for the common stock of such company or
FCC shall be appropriately adjusted for the purposes of applying this Section
10.1(g).
10.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement shall become void and have no effect, except that (i) the provisions
of this Section 10.2 and Article 11 and Section 8.6(b) of this Agreement shall
survive any such termination and abandonment, and (ii) a termination pursuant to
Sections 10.1(b), 10.1(c), or 10.1(f) of this Agreement shall not relieve the
breaching Party from Liability for an uncured willful breach of a
representation, warranty, covenant, or agreement giving rise to such
termination. The Stock Option Agreements shall be governed by their own terms.
10.3 Non-Survival of Representations and Covenants. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except this Section 10.3 and
Articles 2, 3, 4, and 11 and Sections 8.12, 8.13, 8.14, and 8.15 of this
Agreement.
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ARTICLE 11
MISCELLANEOUS
11.1 Definitions.
(a) Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
"ACQUISITION PROPOSAL" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of
the stock or Assets of, or other business combination involving such Party
or any of its Subsidiaries or the acquisition of a substantial equity
interest in, or a substantial portion of the Assets of, such Party or any
of its Subsidiaries.
"AFFILIATE" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by
or under common control with such Person; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person; or (iii) any other Person
for which a Person described in clause (ii) acts in any such capacity.
"AGREEMENT" shall mean this Amended and Restated Agreement and Plan of
Merger, including the Exhibits (and excepting the Stock Option Agreements)
delivered pursuant hereto and incorporated herein by reference.
"ARTICLES OF MERGER" shall mean the Articles of Merger to be executed
by FCC and filed with the Secretary of State of the State of North Carolina
relating to the Merger as contemplated by Section 1.1 of this Agreement.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses, and rights of such Person of every kind, nature, character, and
description, whether real, personal, or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or
not carried on the books and records of such Person, and whether or not
owned in the name of such Person or any Affiliate of such Person and
wherever located.
"BHC ACT" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"CONFIDENTIALITY AGREEMENTS" shall mean those certain Confidentiality
Agreements, entered into prior to the date of this Agreement, between HFNC
and FCC.
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets, or business.
"DEFAULT" shall mean (i) any breach or violation of or default under
any Contract, Order, or Permit, (ii) any occurrence of any event that with
the passage of time or the giving of notice or both would constitute a
breach or violation of or default under any Contract, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time
or the giving of notice would give rise to a right to terminate or revoke,
change the current terms of, or renegotiate, or to accelerate, increase, or
impose any Liability under, any Contract, Order, or Permit, where, in any
such event, such Default is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on a Party.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface, or subsurface strata) and which
are administered, interpreted, or enforced by the United States
Environmental Protection Agency and state and local agencies with
jurisdiction over, and including common law in respect of, pollution or
protection of the environment, including the Comprehensive Environmental
Response
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Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq.
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42
U.S.C. 6901 et seq. ("RCRA"), and other Laws relating to emissions,
discharges, releases, or threatened releases of any Hazardous Material, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of any Hazardous
Material.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"EXHIBITS" 1 through 5, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or document
without being attached hereto.
"FCC BANK" shall mean First Charter National Bank.
"FCC COMMON STOCK" shall mean the no par value common stock of FCC.
"FCC DISCLOSURE MEMORANDUM" shall mean the written information
entitled "FCC Disclosure Memorandum" delivered prior to the execution of
this Agreement to HFNC describing in reasonable detail the matters
contained therein and, with respect to each disclosure made therein,
specifically referencing each Section or subsection of this Agreement under
which such disclosure is being made. Information disclosed with respect to
one Section or subsection shall not be deemed to be disclosed for all
purposes hereunder. The inclusion of any matter in this document shall not
be deemed an admission or otherwise to imply that any such matter is
Material for purposes of this Agreement.
"FCC COMPANIES" shall mean, collectively, FCC and all FCC
Subsidiaries.
"FCC FINANCIAL STATEMENTS" shall mean (i) the consolidated statements
of condition (including related notes and schedules, if any) of FCC as of
March 31, 1998, and as of December 31, 1997, 1996, and 1995, and the
related statements of income, changes in stockholders' equity, and cash
flows (including related notes and schedules, if any) for the three months
ended March 31, 1998, and for each of the three years ended December 31,
1997, 1996, and 1995, as filed by FCC in SEC Documents, and (ii) the
consolidated statements of condition of FCC (including related notes and
schedules, if any) and related statements of income, changes in
stockholders' equity, and cash flows (including related notes and
schedules, if any) included in SEC Documents filed with respect to periods
ended subsequent to March 31, 1998.
"FCC STOCK OPTION AGREEMENT" shall mean the Stock Option Agreement of
even date herewith issued to HFNC by FCC, in substantially the form of
Exhibit 2.
"FCC SUBSIDIARIES" shall mean the Subsidiaries of FCC and any
corporation, bank, savings association, or other organization acquired as a
Subsidiary of FCC in the future and owned by FCC at the Effective Time.
"HFNC BANK" shall mean Home Federal Savings and Loan Association.
"HFNC COMMON STOCK" shall mean the $.01 par value common stock of
HFNC.
"HFNC COMPANIES" shall mean, collectively, HFNC and all HFNC
Subsidiaries.
"HFNC DISCLOSURE MEMORANDUM" shall mean the written information
entitled "HFNC Disclosure Memorandum" delivered prior to the execution of
this Agreement to FCC describing in reasonable detail the matters contained
therein and, with respect to each disclosure made therein, specifically
referencing each Section or subsection of this Agreement under which such
disclosure is being made. Information disclosed with respect to one Section
or subsection shall not be deemed to be disclosed for all purposes
hereunder. The inclusion of any matter in this document shall not be deemed
an admission or otherwise to imply that any such matter is Material for
purposes of this Agreement.
"HFNC FINANCIAL STATEMENTS" shall mean (i) the consolidated statements
of financial position (including related notes and schedules, if any) of
HFNC as of March 31, 1998 and as of June 30, 1997,
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1996, and 1995, and the related statements of income, changes in
stockholders' equity, and cash flows (including related notes and
schedules, if any) for the nine months ended March 31, 1998, and for each
of the three years ended June 30, 1997, 1996, and 1995, as filed by HFNC in
SEC Documents, and (ii) the consolidated statements of financial position
of HFNC (including related notes and schedules, if any) and related
statements of income, changes in stockholders' equity, and cash flows
(including related notes and schedules, if any) included in SEC Documents
filed with respect to periods ended subsequent to March 31, 1998.
"HFNC PREFERRED STOCK" shall mean the $.01 par value preferred stock
of HFNC.
"HFNC STOCK OPTION AGREEMENT" shall mean the Stock Option Agreement of
even date herewith issued to FCC by HFNC, in substantially the form of
Exhibit 1.
"HFNC STOCK PLANS" shall mean the existing stock option and other
stock-based compensation plans of HFNC.
"HFNC SUBSIDIARIES" shall mean the Subsidiaries of HFNC, which shall
include the HFNC Subsidiaries described in Section 5.4 of this Agreement
and any corporation, bank, savings association, or other organization
acquired as a Subsidiary of HFNC in the future and owned by HFNC at the
Effective Time.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as
those terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil
(and specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and
any polychlorinated biphenyls).
"HOLA" the Home Owners' Loan Act of 1933, as amended.
"HSR ACT" shall mean Section 7A of the Clayton Act, as added by Title
II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"JOINT PROXY STATEMENT" shall mean the joint proxy statement used by
FCC and HFNC to solicit the approval of their respective stockholders of
the transactions contemplated by this Agreement, which shall include the
prospectus of FCC relating to the issuance of the FCC Common Stock to
holders of HFNC Common Stock, as amended or supplemented.
"KNOWLEDGE" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean the personal
knowledge of the chairman, president, chief financial officer, chief
accounting officer, chief credit officer, general counsel, or any executive
vice president of such Person.
"LAW" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its
Assets, Liabilities, or business, including those promulgated, interpreted,
or enforced by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost, or expense (including
costs of investigation, collection, and defense), claim, deficiency,
guaranty, or endorsement of or by any Person (other than endorsements of
notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
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"LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention, or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for property Taxes not
yet due and payable, and (ii) for depository institution Subsidiaries of a
Party, pledges to secure deposits, and other Liens incurred in the ordinary
course of the banking business.
"LITIGATION" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or
other examination or investigation, hearing, inquiry, administrative or
other proceeding, or notice (written or oral) by any Person alleging
potential Liability or requesting information relating to or affecting a
Party, its business, its Assets (including Contracts related to it), or the
transactions contemplated by this Agreement, but shall not include regular,
periodic examinations of depository institutions and their Affiliates by
Regulatory Authorities.
"LOAN PROPERTY" shall mean any property owned, leased, or operated by
the Party in question or by any of its Subsidiaries or in which such Party
or Subsidiary holds a security or other interest (including an interest in
a fiduciary capacity), and, where required by the context, includes the
owner or operator of such property, but only with respect to such property.
"MATERIAL" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change, or
occurrence which, individually or together with any other event, change, or
occurrence, has a Material adverse impact on (i) the financial condition,
results of operations, or business of such Party and its Subsidiaries,
taken as a whole, or (ii) the ability of such Party to perform its
obligations under this Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement, provided that "Material
Adverse Effect" shall not be deemed to include the impact of (a) changes in
banking and similar Laws of general applicability or interpretations
thereof by courts or governmental authorities, (b) changes in GAAP or
regulatory accounting principles generally applicable to banks or savings
associations and their holding companies, (c) actions and omissions of a
Party (or any of its Subsidiaries) taken with the prior informed consent of
the other Party in contemplation of the transactions contemplated hereby,
including without limitation actions taken pursuant to Section 8.16 of this
Agreement, and (d) the Merger (and the reasonable expenses incurred in
connection therewith) and compliance with the provisions of this Agreement
on the operating performance of the Parties.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ NMS" shall mean the National Market System of The Nasdaq Stock
Market.
"NCBCA" shall mean the North Carolina Business Corporation Act.
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local, or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the
management (including, but not limited to, participating in a fiduciary
capacity) and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to such
facility or property.
"PARTY" shall mean either HFNC or FCC, and "Parties" shall mean both
HFNC and FCC.
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"PERMIT" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party
or that is or may be binding upon or inure to the benefit of any Person or
its securities, Assets, or business.
"PERSON" shall mean a natural person or any legal, commercial, or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form
S-4, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the SEC by FCC
under the 1933 Act with respect to the shares of FCC Common Stock to be
issued to the stockholders of HFNC in connection with the transactions
contemplated by this Agreement.
"REGULATORY AUTHORITIES" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the
Governors of the Federal Reserve System, the Office of the Comptroller of
the Currency, the Federal Deposit Insurance Corporation, the Office of
Thrift Supervision, all state regulatory agencies having jurisdiction over
the Parties and their respective Subsidiaries, the NASD, and the SEC.
"REPRESENTATIVE" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative of a Person.
"RIGHTS" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of the capital stock
of a Person or by which a Person is or may be bound to issue additional
shares of its capital stock or other Rights.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to
be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
"STOCK OPTION AGREEMENTS" shall mean the HFNC Stock Option Agreement
and the FCC Stock Option Agreement.
"STOCKHOLDERS' MEETINGS" shall mean the respective meetings of the
stockholders of FCC and HFNC to be held pursuant to Section 8.1 of this
Agreement, including any adjournment or adjournments thereof.
"SUBSIDIARIES" shall mean all those corporations, banks, associations,
or other entities of which the entity in question owns or controls 50% or
more of the outstanding equity securities either directly or through an
unbroken chain of entities as to each of which 50% or more of the
outstanding equity securities is owned directly or indirectly by its
parent; provided, there shall not be included any such entity acquired
through foreclosure or any such entity the equity securities of which are
owned or controlled in a fiduciary capacity.
"SURVIVING BANK" shall mean FCC Bank as the surviving bank resulting
from the Bank Merger.
"SURVIVING CORPORATION" shall mean FCC as the surviving corporation
resulting from the Merger.
"TAX" OR "TAXES" shall mean all federal, state, local, and foreign
taxes, charges, fees, levies, imposts, duties, or other assessments,
including 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,
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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, or foreign government or subdivision or agency thereof,
including any interest, penalties, or additions thereto.
"TAXABLE PERIOD" shall mean any period prescribed by any governmental
authority, including the United States or any state, local, or 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 any return of an affiliated or combined or
unitary group that includes a Party or its Subsidiaries.
(b) The terms set forth below shall have the meanings ascribed thereto in
the referenced sections:
<TABLE>
<S> <C>
Average Closing Price.................................... Section 10.1(g)
Bank Merger.............................................. Section 1.2
Cause.................................................... Section 8.13(c)
Closing.................................................. Section 1.3
Continuing Employee...................................... Section 8.13
Determination Date....................................... Section 10.1(g)
Effective Time........................................... Section 1.4
Exchange Agent........................................... Section 4.1
Exchange Ratio........................................... Section 3.1(b)
FCC ERISA Affiliate...................................... Section 6.17
FCC Ratio................................................ Section 10.1(g)
FCC SEC Reports.......................................... Section 6.5(a)
HFNC Benefit Plans....................................... Section 5.13(a)
HFNC Contracts........................................... Section 5.14
HFNC ERISA Affiliate..................................... Section 5.13(e)
HFNC ERISA Plan.......................................... Section 5.13(a)
HFNC ESOP................................................ Section 8.13(d)(i)
HFNC Rights.............................................. Section 3.6(a)
HFNC Pension Plan........................................ Section 5.13(a)
HFNC SEC Reports......................................... Section 5.5(a)
Indemnified Party........................................ Section 8.14
Index Group.............................................. Section 10.1(g)
Index Price.............................................. Section 10.1(g)
Index Ratio.............................................. Section 10.1(g)
IRS...................................................... Section 8.13(d)(ii)
Maximum Amount........................................... Section 8.14(b)
Merger................................................... Section 1.1
RRP...................................................... Section 8.13(e)
Starting Date............................................ Section 10.1(g)
Starting Price........................................... Section 10.1(g)
Takeover Laws............................................ Section 5.19
Tax Opinion.............................................. Section 9.1(g)
</TABLE>
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
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11.2 Expenses.
(a) Except as otherwise provided in this Section 11.2, each of the Parties
shall bear and pay all direct costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including filing,
registration, and application fees, printing fees, and fees and expenses of its
own financial or other consultants, investment bankers, accountants, and
counsel, except that each of the Parties shall bear and pay one-half of the
printing costs incurred in connection with the printing of the Registration
Statement and the Joint Proxy Statement and the SEC fees related thereto.
(b) Nothing contained in this Section 11.2 shall constitute or shall 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 nonbreaching Party.
11.3 Brokers and Finders. Except for Sandler O'Neill & Partners, L.P. as
to HFNC and except for Wheat First Securities, Inc. as to FCC, each of the
Parties represents and warrants that neither it nor any of its officers,
directors, employees, or Affiliates has employed any broker or finder or
incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby. In the event of a claim by
any broker or finder based upon his, her, or its representing or being retained
by or allegedly representing or being retained by HFNC or FCC, each of HFNC and
FCC, as the case may be, agrees to indemnify and hold the other Party harmless
of and from any Liability in respect of any such claim.
11.4 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 with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral (including any provision of
the Confidentiality Agreements which would act to preclude FCC or HFNC (or any
Holder as defined in the Stock Option Agreements from exercising its rights
under the Stock Option Agreements) to the extent that the Stock Option
Agreements are in force and effect). Nothing in this Agreement expressed or
implied, is intended to confer upon any Person, other than the Parties or their
respective successors, any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, other than as provided in Sections 8.12,
8.13(b), 8.14, and 8.15(b) of this Agreement.
11.5 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties, whether before or after
stockholder approval of this Agreement has been obtained; provided, that the
provisions of this Agreement relating to the manner or basis in which shares of
HFNC Common Stock will be exchanged for FCC Common Stock shall not be amended
(except in accordance with Section 10.1(g) of this Agreement) after the
Stockholders' Meetings without the requisite approval of the holders of the
issued and outstanding shares of FCC Common Stock and HFNC Common Stock, as the
case may be, entitled to vote thereon.
11.6 Waivers.
(a) Prior to or at the Effective Time, FCC, acting through its Board of
Directors, chief executive officer, chief financial officer, or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by HFNC, to waive or extend the time for the compliance
or fulfillment by HFNC of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of FCC
under this Agreement, except any condition which, if not satisfied, would result
in the violation of any Law. No such waiver shall be effective unless in writing
signed by a duly authorized officer of FCC.
(b) Prior to or at the Effective Time, HFNC, acting through its Board of
Directors, chief executive officer, chief financial officer, or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by FCC, to waive or extend the time for the compliance or
fulfillment by FCC of any and all of its obligations under this Agreement, and
to waive any or all of the conditions precedent to the obligations of HFNC under
this Agreement, except any condition which, if not
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satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of HFNC.
(c) 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.
11.7 Assignment. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests, or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by the Parties and their respective successors and assigns.
11.8 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, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
<TABLE>
<S> <C>
HFNC: HFNC Financial Corp.
139 South Tryon Street
Charlotte, North Carolina 28202
Telecopy Number: (704) 332-9360
Attention: H. Joe King, Jr.
Chairman of the Board, President, and
Chief Executive Officer
Copy to
Counsel: Elias Matz Tiernan & Herrick LLP
734 15th Street, NW
Washington, D.C. 20005
Telecopy Number: (202) 347-2172
Attention: Raymond A. Tiernan
FCC: First Charter Corporation
22 Union Street North
Concord, North Carolina 28025
Telecopy Number: (704) 788-0445
Attention: Lawrence M. Kimbrough
President and Chief Executive Officer
Copy to
Counsel: Alston & Bird LLP
601 Pennsylvania Avenue, N.W.
North Building, 11th Floor
Washington, D.C. 20004
Telecopy Number: (202) 756-3333
Attention: Frank M. Conner III
</TABLE>
11.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of North Carolina, without regard to any
applicable conflicts of Laws.
11.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
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11.12 Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any Party, whether under
any rule of construction or otherwise. No Party to this Agreement shall be
considered the draftsman. The Parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all Parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of the
Parties.
11.13 Enforcement of Agreement. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
11.14 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. 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 enforceable.
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
<TABLE>
<S> <C>
ATTEST: HFNC FINANCIAL CORP.
By: /s/ ANN G. BENTON By: /s/ H. JOE KING, JR.
--------------------------------------------------- --------------------------------------------------
Ann G. Benton H. Joe King, Jr.
Secretary Chairman of the Board, President, and
Chief Executive Officer
[CORPORATE SEAL]
ATTEST: FIRST CHARTER CORPORATION
By: /s/ JAMES W. TOWNSEND, JR. By: /s/ LAWRENCE M. KIMBROUGH
-------------------------------------------------- --------------------------------------------------
James W. Townsend, Jr. Lawrence M. Kimbrough
Secretary President and Chief Executive Officer
[CORPORATE SEAL]
</TABLE>
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APPENDIX B
[LETTERHEAD OF SANDLER O'NEILL & PARTNERS, L.P.,
INVESTMENT BANKING GROUP]
May 17, 1998
Board of Directors
HFNC Financial Corp.
139 South Tryon Street
Charlotte, North Carolina 28202
Ladies and Gentlemen:
HFNC Financial Corp. ("HFNC") and First Charter Corporation ("First
Charter") have entered into an Agreement and Plan of Merger, dated as of May 17,
1998 (the "Agreement"), pursuant to which HFNC will be merged with and into
First Charter (the "Merger"). Upon consummation of the Merger, each share of
HFNC common stock, par value $.01 per share, issued and outstanding immediately
prior to the effective time of the Merger (the "HFNC Shares"), other than
certain shares specified in the Agreement, will be converted into 0.57 (the
"Exchange Ratio") of a share of common stock of First Charter, no par value. The
terms and conditions of the Merger are more fully set forth in the Agreement.
You have requested our opinion as to the fairness, from a financial point of
view, of the Exchange Ratio to the holders of the HFNC Shares.
Sandler O'Neill & Partners, L.P., as part of its investment banking
business, is regularly engaged in the valuation of financial institutions and
their securities in connection with mergers and acquisitions and other corporate
transactions. In connection with this opinion, we have reviewed, among other
things: (i) the Agreement and exhibits thereto; (ii) the Stock Option
Agreements, dated as of May 17, 1998, by and between HFNC and First Charter;
(iii) certain publicly available financial statements of HFNC and other
historical financial information provided by HFNC that we deemed relevant; (iv)
certain publicly available financial statements of First Charter and other
historical financial information provided by First Charter that we deemed
relevant; (v) certain financial analyses and forecasts of HFNC prepared by and
reviewed with management of HFNC and the views of senior management of HFNC
regarding HFNC's past and current business, operations, results thereof,
financial condition and future prospects; (vi) certain financial analyses and
forecasts of First Charter prepared by and reviewed with management of First
Charter and the views of senior management of First Charter regarding First
Charter's past and current business, operations, results thereof, financial
condition and future prospects; (vii) the pro forma impact of the Merger; (viii)
the publicly reported historical price and trading activity for HFNC's common
stock, including a comparison of certain financial and stock market information
for HFNC with similar publicly available information for certain other companies
the securities of which are publicly traded; (ix) the financial terms of recent
business combinations in the savings institution industry, to the extent
publicly available; (x) the current market environment generally and the banking
environment in particular; and (xi) such other information, financial studies,
analyses and investigations and financial, economic and market criteria as we
considered relevant.
In performing our review, we have assumed and relied upon, without
independent verification, the accuracy and completeness of all the financial
information, analyses and other information that was publicly available or
otherwise furnished to, reviewed by or discussed with us, and we do not assume
any responsibility or liability therefor. We did not make an independent
evaluation or appraisal of the specific assets, the collateral securing assets
or the liabilities (contingent or otherwise) of HFNC or First Charter or any of
their subsidiaries, or the collectibility of any such assets, nor have we been
furnished with any such evaluations or appraisals (relying, where relevant, on
the analyses and estimates of HFNC and First Charter). With respect to the
financial projections reviewed with management, we have assumed that they have
been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the respective managements of the respective future
financial performances of HFNC and First Charter and that such performances will
be achieved, and we express no opinion as to such financial projections or the
assumptions on which they are based. We have also assumed that there has been no
material change in HFNC's or First Charter's assets,
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financial condition, results of operations, business or prospects since the
dates of the last publicly reported financial statements made available to us.
We have assumed in all respects material to our analysis that HFNC and First
Charter will remain as going concerns for all periods relevant to our analyses,
that all of the representations and warranties contained in the Agreement and
all related agreements are true and correct, that each party to such agreements
will perform all of the covenants required to be performed by such party under
such agreements, that the Merger will be accounted for as a pooling of interests
and that the conditions precedent in the Agreement are not waived.
Our opinion is necessarily based on financial, economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof. Events occurring after the date hereof could materially affect this
opinion. We have not undertaken to update, revise or reaffirm this opinion or
otherwise comment upon events occurring after the date hereof. We are expressing
no opinion herein as to what the value of First Charter common stock will be
when issued to HFNC's shareholders pursuant to the Agreement or the prices at
which First Charter's or HFNC's common stock will trade at any time.
We have acted as HFNC's financial advisor in connection with the Merger and
will receive a fee for our services, a significant portion of which is
contingent upon consummation of the Merger. We have also received a fee for
rendering this opinion. In the past, we have also provided certain other
investment banking services for HFNC and have received compensation for such
services.
In the ordinary course of our business, we may actively trade the equity
securities of HFNC and First Charter for our own account and for the accounts of
our customers and, accordingly, may at any time hold a long or short position in
such securities.
Our opinion is directed to the Board of Directors of HFNC in connection
with its consideration of the Merger and does not constitute a recommendation to
any stockholder of HFNC as to how such stockholder should vote at any meeting of
stockholders called to consider and vote upon the Merger. Our opinion is not to
be quoted or referred to, in whole or in part, in a registration statement,
prospectus, proxy statement or in any other document, nor shall this opinion be
used for any other purposes, without Sandler O'Neill's prior written consent.
Based upon and subject to the foregoing, it is our opinion, as of the date
hereof, that the Exchange Ratio is fair, from a financial point of view, to the
holders of HFNC Shares.
Very truly yours,
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<PAGE> 135
APPENDIX C
[LETTERHEAD OF WHEAT FIRST UNION]
May 17, 1998
Board of Directors
First Charter Corporation
22 Union Street North
Concord, North Carolina 28026
Members of the Board:
First Charter Corporation ("First Charter") and HFNC Financial Corporation
("HFNC") have entered into an Agreement and Plan of Merger, dated as of May 17,
1998 (the "Agreement"), pursuant to which HFNC will combine with First Charter
by means of the merger (the "Merger") of HFNC with and into First Charter. Upon
consummation of the Merger, each of the outstanding shares of the $0.01 par
value common stock of HFNC ("HFNC Stock") will be converted into 0.57 of a share
of the no par value common stock of First Charter ("First Charter Stock"), as
adjusted in accordance with the terms of the Agreement (the "Exchange Ratio").
The terms of the Merger are more fully set forth in the Agreement.
Wheat First Securities, Inc. ("Wheat First") as part of its investment
banking business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. In the ordinary course of our business as a broker-dealer, we
may, from time to time, have a long or short position in, and buy or sell, debt
or equity securities of First Charter or HFNC for our own account or for the
accounts of our customers. Wheat First is acting as First Charter's exclusive
financial advisor in this transaction and will receive a fee from First Charter
for its services, which include the rendering of this opinion.
You have asked us whether, in our opinion, the Exchange Ratio is fair, from
a financial point of view, to the holders of First Charter Stock. We understand
that the Merger is conditioned upon the occurrence of a number of contingencies
as set forth in the Agreement.
In arriving at the opinion set forth below, we have conducted discussions
with members of senior management of First Charter and HFNC concerning their
businesses and prospects and have reviewed and relied upon certain publicly
available business and financial information and certain other information
prepared or provided to us in connection with the Merger, including, among other
things, the following:
(1) First Charter's Annual Reports to Stockholders, Annual Reports on
Form 10-K and related financial information for the three fiscal years
ended December 31, 1997;
(2) First Charter's quarterly report on Form 10-Q and related
financial information for the period ended March 31, 1998;
(3) HFNC's Annual Reports to Stockholders, Annual Reports on Form 10-K
and related financial information for the two fiscal years ended June 30,
1997;
(4) HFNC's Quarterly Reports on Form 10-Q and related financial
information for the periods ended September 30, 1997, December 31, 1997,
and March 31, 1998;
(5) Certain publicly available information with respect to historical
market prices and trading activities for First Charter Stock and HFNC Stock
and for certain publicly traded financial institutions which Wheat First
deemed relevant;
(6) Certain publicly available information with respect to banking
companies and the financial terms of certain other mergers and acquisitions
which Wheat First deemed relevant;
(7) The Agreement;
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(8) Certain estimates of the cost savings and revenue enhancements
projected by First Charter and HFNC for the combined company;
(9) Other financial information concerning the business and operations
of First Charter and HFNC, and certain internal financial analyses and
forecasts for First Charter and HFNC prepared by the senior managements of
these companies; and
(10) Such financial studies, analyses, inquiries and other matters as
we deemed necessary.
In preparing our opinion, as contemplated under the terms of our
engagement, we have relied on and assumed the accuracy and completeness of all
information provided to us or publicly available, including the representations
and warranties of First Charter and HFNC included in the Agreement, and we have
not assumed any responsibility for the accuracy, completeness or reasonableness
of, or any obligation to verify, the same or to conduct any appraisal of assets
or liabilities. We have relied upon the managements of First Charter and HFNC as
to the reasonableness and achievability of their financial and operational
forecasts and projections, including the estimates of cost savings and revenue
enhancements expected to result from the Merger, and the assumptions and bases
therefor, provided to us, and, with your consent, we have assumed that such
forecasts and projections reflect the best currently available estimates and
judgments of such managements, and that such forecasts and projections will be
realized in the amounts and in the time periods currently estimated by such
managements. We also assumed, without independent verification, that the
aggregate allowances for loan losses and other contingencies for First Charter
and HFNC are adequate to cover such losses. Wheat First did not review any
individual credit files of First Charter and HFNC, nor did it make an
independent evaluation or appraisal of the assets or liabilities of First
Charter and HFNC. We also assumed that, in the course of obtaining the necessary
regulatory approvals for the Merger, no conditions will be imposed that will
have a material adverse effect on the contemplated benefits of the Merger, on a
pro forma basis, to First Charter.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on the date hereof and the information made
available to us through the date hereof. Events occurring after the date could
materially affect the assumptions and conclusions contained in our opinion. We
have not undertaken to reaffirm or revise this opinion or otherwise comment on
any events occurring after the date hereof. Wheat First's opinion is directed
only to the fairness, from a financial point of view, of the Exchange Ratio to
the holders of First Charter Stock and does not address any other aspect of the
Merger, nor does it constitute a recommendation to any shareholder of First
Charter as to how such shareholder should vote with respect to the Merger, and
it is understood that this letter is solely for the information of the Board of
Directors of First Charter. Wheat First's opinion does not address the relative
merits of the Merger as compared to any alternative business strategies that
might exist for First Charter, nor does it address the effect of any other
business combination in which First Charter might engage.
It is understood that this opinion may be included in its entirety in the
Joint Proxy Statement/Prospectus. This opinion may not, however, be summarized,
excerpted from or otherwise publicly referred to without our prior written
consent.
On the basis of and subject to the foregoing, we are of the opinion that as
of the date hereof the Exchange Ratio is fair, from a financial point of view,
to the holders of First Charter Stock.
Very truly yours,
WHEAT FIRST SECURITIES, INC.
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<PAGE> 137
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
In accordance with the provisions of the NCBCA, the Registrant's Amended
and Restated Articles of Incorporation (the "Registrant's Articles") and the
Registrant's Bylaws provide that, in addition to the indemnification of
directors and officers otherwise provided by the North Carolina Business
Corporation Act (the "NCBCA"), the Registrant shall, under certain
circumstances, indemnify its directors, executive officers and certain other
designated officers against any and all liability and expenses, including
reasonable attorneys' fees, in any proceeding (including without limitation a
proceeding brought by or on behalf of the Registrant itself) arising out of
their status or activities as directors and officers, except for liability or
litigation expense incurred on account of activities of such person which at the
time taken were known or believed by such person to be clearly in conflict with
the best interests of the Registrant. The Registrant's Bylaws further provide
that the Registrant shall also indemnify such person for reasonable costs,
expenses and attorneys' fees incurred in connection with the enforcement of the
rights to indemnification granted in the Bylaws, if it is determined in
accordance with the procedures set forth in the Bylaws that such person is
entitled to indemnification thereunder. Pursuant to such bylaw and as authorized
by statute, the Registrant maintains insurance on behalf of its directors and
officers against liability asserted against such persons in such capacity
whether or not such directors or officers have the right to indemnification
pursuant to the bylaw or otherwise. In addition, the Registrant's Articles
prevent the recovery by the Registrant or any of its shareholders of monetary
damages against its directors to the fullest extent permitted by the NCBCA.
In addition to the above-described provisions, Sections 55-8-50 through
55-8-58 of the NCBCA contain provisions prescribing the extent to which
directors and officers shall or may be indemnified. Section 55-8-51 of the NCBCA
permits a corporation, with certain exceptions, to indemnify a current or former
director against liability if (i) he conducted himself in good faith, (ii) he
reasonably believed (x) in the case of conduct in his official capacity with the
corporation, that his conduct was in the best interests of the corporation and
(y) in all other cases his conduct was at least not opposed to the corporation's
best interests, and (iii) in the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful. A corporation may not
indemnify a director in connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation or in
connection with a proceeding charging improper personal benefit to him, whether
or not involving action in his official capacity, in which he was adjudged
liable on basis that personal benefit was improperly received by him. The above
standard of conduct is determined by the Board of Directors or a committee
thereof or special legal counsel or the shareholders as prescribed in Section
55-8-55.
Sections 55-8-52 and 55-8-56 of the NCBCA require a corporation to
indemnify a director or officer in the defense of any proceeding to which he was
a party because of his capacity as a director or officer against reasonable
expenses when he is wholly successful, on the merits or otherwise, in his
defense, unless the articles of incorporation provide otherwise. Upon
application, the court may order indemnification of the director or officer if
the court determines that he is entitled to mandatory indemnification under
Section 55-8-52, in which case the court shall also order the corporation to pay
the reasonable expenses incurred to obtain court-ordered indemnification or if
he is adjudged fairly and reasonably so entitled in view of all relevant
circumstances under Section 55-8-54. Section 55-8-56 allows a corporation to
indemnify and advance expenses to an officer, employee or agent who is not a
director to the same extent, consistent with public policy, as a director or as
otherwise set forth in the Corporation's articles of incorporation or bylaws or
by resolution of the Board of Directors or contact.
In addition, Section 55-8-57 permits a corporation to provide for
indemnification of directors, officers, employees or agents, in its articles of
incorporation or bylaws or by contract or resolution, against liability in
various proceedings and to purchase and maintain insurance policies on behalf of
these individuals.
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<PAGE> 138
ITEM 21. EXHIBITS.
The following exhibits are filed herein or have been, as noted, previously
filed:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
2.1 Amended and Restated Agreement and Plan of Merger, dated as
of May 17, 1998, by and between HFNC Financial Corp. and
First Charter Corporation (Included as Appendix A to the
Joint Proxy Statement/Prospectus included as part of this
Registration Statement.)
2.2 Stock Option Agreement, dated as of May 17, 1998, issued by
First Charter Corporation to HFNC Financial Corp.
2.3 Stock Option Agreement, dated as of May 17, 1998, issued by
HFNC Financial Corp. to First Charter Corporation.
4.1 Amended and Restated Articles of Incorporation of First
Charter Corporation. (Incorporated by reference to Exhibit
3.1 to the Annual Report on Form 10-K of First Charter
Corporation for the fiscal year ended December 31, 1997.)
4.2 Bylaws of First Charter Corporation, as amended.
(Incorporated by reference to exhibit 3.2 to the Annual
Report on Form 10-K of First Charter Corporation for the
fiscal year ended December 31, 1995.)
5.1 Opinion of Alston & Bird LLP, as to the validity of the
shares of FCC Common Stock.
8.1 Opinion of Alston & Bird LLP as to federal income tax
consequences.
8.2 Opinion of Elias, Matz, Tiernan & Herrick, L.L.P. as to
federal income tax consequences.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Deloitte & Touch LLP.
23.3 Consent of Alston & Bird LLP (included in Exhibit 8.1).
23.4 Consent of Elias, Matz, Tiernan & Herrick L.L.P. (included
in Exhibit 8.2).
23.5 Consent of Sandler O'Neill & Partners, L.P.
23.6 Consent of Wheat First Securities, Inc.
23.7 Consent of directors of HFNC Financial Corp. to be elected
directors of First Charter Corporation.
24.1 Power of Attorney (contained on the signature page hereof).
99.1 Form of Proxy of HFNC Financial Corp.
99.2 Form of Proxy of First Charter Corporation.
</TABLE>
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(2) That for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(3) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration
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<PAGE> 139
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(5) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form S-4, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed subsequent to
the effective date of the registration statement through the date of
responding to the request.
(6) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(7) That prior to any public reoffering of the securities registered
hereunder through the use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes that
such reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons who may
be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(8) That every prospectus: (i) that is filed pursuant to Paragraph (7)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
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<PAGE> 140
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Concord, State of North
Carolina on this the 31st day of July , 1998.
REGISTRANT
FIRST CHARTER CORPORATION
By: /s/ LAWRENCE M. KIMBROUGH
------------------------------------
Lawrence M. Kimbrough
President and Chief Executive
Officer
We, the undersigned directors and officers of First Charter Corporation do
hereby constitute and appoint Lawrence M. Kimbrough and Robert O. Bratton, and
each of them, our true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for us and in our name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, and we do
hereby ratify and confirm all that said attorneys-in-fact and agents, or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons in
the capacities and at the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ LAWRENCE M. KIMBROUGH President, Chief Executive July 31, 1998
- ----------------------------------------------------- Officer, and Director
Lawrence M. Kimbrough (Principal Executive
Officer)
/s/ ROBERT O. BRATTON Executive Vice President July 31, 1998
- ----------------------------------------------------- (Principal Financial and
Robert O. Bratton Principal Accounting
Officer)
Director July 31, 1998
- -----------------------------------------------------
William R. Black
/s/ MICHAEL R. COLTRANE Director July 31, 1998
- -----------------------------------------------------
Michael R. Coltrane
/s/ J. ROY DAVIS, JR. Director July 31, 1998
- -----------------------------------------------------
J. Roy Davis, Jr.
/s/ T. CARL DEDMON Director July 31, 1998
- -----------------------------------------------------
T. Carl Dedmon
Director July 31, 1998
- -----------------------------------------------------
James B. Fincher
/s/ JOHN J. GODBOLD, JR. Director July 31, 1998
- -----------------------------------------------------
John J. Godbold, Jr.
Director July 31, 1998
- -----------------------------------------------------
H. Clark Goodwin
/s/ CHARLES F. HARRY III Director July 31, 1998
- -----------------------------------------------------
Charles F. Harry III
Director July 31, 1998
- -----------------------------------------------------
Frank H. Hawfield, Jr.
</TABLE>
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<PAGE> 141
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ J. KNOX HILLMAN, JR. Director July 31, 1998
- -----------------------------------------------------
J. Knox Hillman, Jr.
Director July 31, 1998
- -----------------------------------------------------
Jerry E. McGee
/s/ HUGH H. MORRISON Director July 31, 1998
- -----------------------------------------------------
Hugh H. Morrison
Director July 31, 1998
- -----------------------------------------------------
Thomas R. Revels
</TABLE>
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<PAGE> 142
EXHIBIT INDEX
The following exhibits are filed herein or have been, as noted, previously
filed:
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<C> <S> <C>
2.1 Amended and Restated Agreement and Plan of Merger, dated as
of May 17, 1998, by and between HFNC Financial Corp. and
First Charter Corporation (Included as Appendix A to the
Joint Proxy Statement/Prospectus included as part of this
Registration Statement.)
2.2 Stock Option Agreement, dated as of May 17, 1998, issued by
First Charter Corporation to HFNC Financial Corp.
2.3 Stock Option Agreement, dated as of May 17, 1998, issued by
HFNC Financial Corp. to First Charter Corporation.
5.1 Opinion of Alston & Bird LLP, as to the validity of the
shares of FCC Common Stock.
8.1 Opinion of Alston & Bird LLP as to federal income tax
consequences.
8.2 Opinion of Elias, Matz, Tiernan & Herrick L.L.P. as to
federal income tax consequences.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Deloitte & Touch LLP.
23.3 Consent of Alston & Bird LLP (included in Exhibit 8.1).
23.4 Consent of Elias, Matz, Tiernan & Herrick L.L.P. (included
in Exhibit 8.2).
23.5 Consent of Sandler O'Neill & Partners, L.P.
23.6 Consent of Wheat First Securities, Inc.
23.7 Consent of directors of HFNC Financial Corp. to be elected
directors of First Charter Corporation.
99.1 Form of Proxy of HFNC Financial Corp.
99.2 Form of Proxy of First Charter Corporation.
</TABLE>
<PAGE> 1
EXHIBIT 2.2
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into
as of May 17, 1998, by and between First Charter Corporation, a North Carolina
corporation ("Issuer"), and HFNC Financial Corp., a North Carolina corporation
("Grantee").
WHEREAS, Grantee and Issuer have entered into that certain Agreement and
Plan of Merger, dated as of May 17, 1998 (the "Merger Agreement"), providing
for, among other things, the merger of Grantee with and into Issuer, with Issuer
as the surviving entity; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Merger Agreement, Grantee has required that Issuer agree, and Issuer has agreed,
to grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. DEFINED TERMS. Capitalized terms which are used but not
defined herein shall have the meanings ascribed to such terms in the Merger
Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 1,859,970 shares (as adjusted as set forth herein, the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares) of common stock, no par value per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (subject to adjustment
as set forth herein, the "Purchase Price") equal to $28.00; provided, however,
that in no event shall the number of shares of Issuer Common Stock for which
this Option is exercisable exceed the lesser of (i) 19.9% of the Issuer's issued
and outstanding shares of Issuer Common Stock without giving effect to any
shares subject to or issued pursuant to the Option and (ii) that minimum number
of shares of Issuer Common Stock which when aggregated with any other shares of
Issuer Common Stock beneficially owned by Grantee or any Affiliate thereof would
cause the provisions of any Takeover Laws of the NCBCA to be applicable to the
Merger.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter defined),
as applicable, shall not be in material breach of its agreements or covenants
contained in this Agreement or the Merger Agreement, and (ii) no preliminary or
permanent injunction or other order against the delivery of shares covered by
the Option issued by any court of competent jurisdiction in the United States
shall be in effect, Holder may exercise the Option, in whole or in part, at any
time and from time to time following the occurrence of a Purchase Event (as
hereinafter defined) and prior to the termination of the Option. The Option
shall terminate and be of no further force and effect upon the earliest to occur
of (A) the Effective Time, (B) termination of the Merger
<PAGE> 2
Agreement in accordance with the terms thereof prior to the occurrence of a
Purchase Event or a Preliminary Purchase Event (as hereinafter defined) (other
than a termination of the Merger Agreement by Grantee pursuant to (i) Section
10.1(b) thereof (but only if such termination was a result of a willful breach
by Issuer) or (ii) Section 10.1(c) thereof (each a "Default Termination")), (C)
12 months after a Default Termination, and (D) 12 months after any termination
of the Merger Agreement following the occurrence of a Purchase Event or a
Preliminary Purchase Event. Any purchase of shares upon exercise of the Option
shall be subject to compliance with applicable law, including, without
limitation, the Bank Holding Company Act of 1956, as amended (the "BHC Act").
The term "Holder" shall mean the holder or holders of the Option from time to
time, and which initially is the Grantee. The rights set forth in Section 8
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) As used herein, a "Purchase Event" means any of the following
events subsequent to the date of this Agreement:
(i) without Grantee's prior written consent, Issuer shall have
authorized, recommended, publicly proposed or publicly announced an
intention to authorize, recommend or propose, or entered into an
agreement with any person (other than Grantee or any Subsidiary of
Grantee) to effect an Acquisition Transaction (as defined below). As used
herein, the term Acquisition Transaction shall mean (A) a merger,
consolidation or similar transaction involving Issuer or any of its
Subsidiaries (other than transactions solely between Issuer's
Subsidiaries and transactions involving Issuer or any Subsidiary in which
the voting securities of Issuer outstanding immediately prior thereto
continue to represent (by either remaining outstanding or being converted
into securities of the surviving entity or the parent thereof) at least
75% of the combined voting power of the voting securities of the Issuer
or the surviving entity or the parent thereof outstanding immediately
after the consummation of the transaction), (B) except as permitted
pursuant to Article 7 of the Merger Agreement, the disposition, by sale,
lease, exchange or otherwise, of Assets of Issuer or any of its
Subsidiaries representing in either case 15% or more of the consolidated
assets of Issuer and its Subsidiaries, or (C) the issuance, sale or other
disposition of (including by way of merger, consolidation, share exchange
or any similar transaction) securities representing 15% or more of the
voting power of Issuer or any of its Subsidiaries (any of the foregoing,
an "Acquisition Transaction"); or
(ii) any person (other than Grantee or any Subsidiary of
Grantee) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), of or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under
the Exchange Act), other than a group of which Grantee or any of its
Subsidiaries is a member, shall have been formed which beneficially owns
or has the right to acquire beneficial ownership of, 25% or more of the
then-outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of
the following events:
-2-
<PAGE> 3
(i) any person (other than Grantee or any Subsidiary of
Grantee) shall have commenced (as such term is defined in Rule 14d-2
under the Exchange Act), or shall have filed a registration statement
under the Securities Act of 1933, as amended (the "Securities Act") with
respect to, a tender offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such offer, such
person would own or control 15% or more of the then-outstanding shares of
Issuer Common Stock (such an offer being referred to herein as a "Tender
Offer" or an "Exchange Offer," respectively); or
(ii) the holders of Issuer Common Stock shall not have
approved the Merger Agreement at the meeting of such stockholders held
for the purpose of voting on the Merger Agreement, such meeting shall not
have been held or shall have been canceled prior to termination of the
Merger Agreement, or Issuer's Board of Directors shall have withdrawn or
modified in a manner adverse to Grantee the recommendation of Issuer's
Board of Directors with respect to the Merger Agreement, in each case
after it shall have been publicly announced that any person (other than
Grantee or any Subsidiary of Grantee) shall have (A) made a proposal to
engage in an Acquisition Transaction, (B) commenced a Tender Offer or
filed a registration statement under the Securities Act with respect to
an Exchange Offer, or (C) filed an application (or given a notice),
whether in draft or final form, under any federal or state statute or
regulation (including a notice filed under the HSR Act and an application
or notice filed under the BHC Act, the Bank Merger Act, or the Change in
Bank Control Act of 1978) seeking the Consent to an Acquisition
Transaction from any federal or state governmental or regulatory
authority or agency.
As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
(d) In the event Holder wishes to exercise the Option, it shall
send to Issuer a written notice (the date of which being herein referred to as
the "Notice Date") specifying (i) the total number of Option Shares it intends
to purchase pursuant to such exercise and (ii) a place and date not earlier than
three business days nor later than 30 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior Consent
of any governmental or regulatory agency or authority is required in connection
with such purchase, Issuer shall cooperate with Holder in the filing of the
required notice or application for such Consent and the obtaining of such
Consent and the Closing shall occur not earlier than three business days nor
later than 15 business days immediately following receipt of such Consents (and
expiration of any mandatory waiting periods).
(e) Notwithstanding any other provision of this Agreement to the
contrary, in no event shall:
(i) Holder's (taking into account all other Holders) Total
Profit (as defined below) exceed $7.5 million and, if it otherwise would
exceed such amount, Holder, at its sole election, shall either (A) reduce
the number of shares of Issuer Common Stock subject to the Option, (B)
deliver to Issuer for cancellation without consideration Option Shares
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<PAGE> 4
previously purchased by Holder, (C) pay cash to Issuer, or (D) any
combination of the foregoing, so that Holder's actually realized Total
Profit (together with the Total Profit realized by all other Holders)
shall not exceed $7.5 million after taking into account the foregoing
actions; and
(ii) the Option be exercised for a number of shares of Issuer
Common Stock as would, as of the date of exercise, result in Holder's
(taking into account all other Holders) Notional Total Profit (as defined
below) of more than $7.5 million; provided, that nothing in this clause
(ii) shall restrict any exercise of the Option permitted hereby on any
subsequent date.
As used in this Agreement, the term "Total Profit" shall mean the aggregate sum
(prior to the payment of taxes) of the following: (i) the amount received by
Holder pursuant to Issuer's repurchase of the Option (or any portion thereof)
pursuant to Section 8; (ii) (x) the amount received by Holder pursuant to
Issuer's repurchase of Option Shares pursuant to Section 8, less (y) Holder's
purchase price for such Option Shares; (iii) (x) the net cash amounts received
by Holder pursuant to the sale of Option Shares (or any other securities into
which such Option Shares shall be converted or exchanged) to any unaffiliated
person, less (y) Holder's purchase price of such Option Shares; and (iv) any
amounts received by Grantee on the transfer of the Option (or any portion
thereof) to any unaffiliated person.
As used in this Agreement, the term "Notional Total Profit" with respect to any
number of shares of Issuer Common Stock as to which Holder may propose to
exercise the Option shall be the Total Profit determined as of the date of such
proposed exercise, assuming that the Option were exercised on such date for such
number of shares and assuming that such shares, together with all other Option
Shares held by Holder and its affiliates as of such date, were sold for cash at
the closing sale price per share of Issuer Common Stock as quoted on the Nasdaq
National Market (or, if Issuer Common Stock is not then quoted on the Nasdaq
National Market, the highest bid price per share as quoted on the principal
trading market or securities exchange on which such shares are traded as
reported by a recognized source chosen by Holder) as of the close of business on
the preceding trading day (less customary brokerage commissions).
The provisions of this Section 3(e) shall apply to any Substitute
Option (as defined below).
(f) Grantee agrees, promptly following any exercise of all or any
portion of the Option, and subject to its rights under Section 8, to use
commercially reasonable efforts promptly to maximize the value of Option Shares
purchased, taking into account market conditions, the number of Option Shares,
the potential negative impact of substantial sales on the market price for
Issuer Common Stock, and availability of an effective registration statement to
permit public sale of Option Shares.
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<PAGE> 5
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated by
Issuer, an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased on such Closing Date, and (ii) present and surrender this
Agreement to the Issuer at the address of the Issuer specified in Section 12(f)
hereof.
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as provided in
Section 4(a), (i) Issuer shall deliver to Holder (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
which Option Shares shall be free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever and subject to no pre-emptive rights, and
(B) if the Option is exercised in part only, an executed new agreement with the
same terms as this Agreement evidencing the right to purchase the balance of the
shares of Issuer Common Stock purchasable hereunder, and (ii) Holder shall
deliver to Issuer a letter agreeing that Holder shall not offer to sell or
otherwise dispose of such Option Shares in violation of applicable federal and
state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by applicable
law, certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF MAY 17,
1998. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that: (i) the references in the above legend to
resale restrictions of the Securities Act shall be removed by delivery of
substitute certificate(s) without such reference if 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 reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act; (ii)
the references in the above legend to the provisions of this Agreement 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 preceding clauses (i) and (ii) are both satisfied.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents and
warrants to Grantee as follows:
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<PAGE> 6
(a) Issuer has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals referred to herein, to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Issuer. This Agreement has been duly executed and
delivered by Issuer.
(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
until the obligation to deliver Issuer Common Stock upon the exercise of
the Option terminates, will have reserved for issuance, upon exercise of
the Option, the number of shares of Issuer Common Stock necessary for
Holder to exercise the Option, and Issuer will take all necessary
corporate action to authorize and reserve for issuance all additional
shares of Issuer Common Stock or other securities which may be issued
pursuant to Section 7 upon exercise of the Option. The shares of Issuer
Common Stock to be issued upon due exercise of the Option, including all
additional shares of Issuer Common Stock or other securities which may be
issuable pursuant to Section 7, upon issuance pursuant hereto, shall be
duly and validly issued, fully paid, and nonassessable, and shall be
delivered free and clear of all liens, claims, charges, and encumbrances
of any kind or nature whatsoever, including any preemptive rights of any
stockholder of Issuer.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby represents
and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Grantee. This Agreement has been duly executed and
delivered by Grantee.
(b) This Option is not being, and any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered
or exempt from registration under the Securities Laws, provided that with
respect to any transfer or other disposition proposed to be made in
reliance upon an exemption from registration, such transfer or other
disposition shall not be made unless Issuer first receives an opinion of
counsel in form and substance reasonably acceptable to it regarding the
availability of such exemption.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock by reason of
a stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase
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Price therefor, shall be adjusted appropriately, and proper provision shall be
made in the agreements governing such transaction, if any, so that Holder shall
receive, upon exercise of the Option, the number and class of shares or other
securities or property that Holder would have received in respect of Issuer
Common Stock if the Option had been exercised immediately prior to such event,
or the record date therefor, as applicable. If any additional shares of Issuer
Common Stock are issued after the date of this Agreement (other than pursuant to
an event described in the first sentence of this Section 7(a) or pursuant to
this Option), the number of shares of Issuer Common Stock subject to the Option
shall be adjusted so that, after such issuance, it, together with any shares of
Issuer Common Stock previously issued pursuant hereto, shall not exceed the
lesser of (i) 19.9% of the number of shares of Issuer Common Stock then issued
and outstanding, without giving effect to any shares subject to or issued
pursuant to the Option and (ii) that minimum number of shares of Issuer Common
Stock which when aggregated with any other shares of Issuer Common Stock
beneficially owned by Grantee or any Affiliate thereof would cause the
provisions of any Takeover Laws of the NCBCA to be applicable to the Merger.
(b) In the event that Issuer shall enter in an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger; (ii) to permit any person, other than Grantee or one of
its Subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Issuer Common Stock shall be changed into or exchanged for stock or
other securities of Issuer or any other person or cash or any other property or
the outstanding shares of Issuer Common Stock immediately prior to such merger
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 Assets to any person, other than Grantee or one
of its Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provisions 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 Grantee, of either (x) the Acquiring Corporation
(as defined below) or (y) any person that controls the Acquiring Corporation (in
each case, such person being referred to as the "Substitute Option Issuer").
(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 Grantee. The Substitute Option Issuer shall also
enter into an agreement with the then-holder or holders of the Substitute Option
in substantially the same form as this Agreement, which shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of the Substitute Common Stock (as hereinafter defined) as is equal to
the Assigned Value (as hereinafter defined) multiplied by the number of shares
of the Issuer Common Stock for which the Option was theretofore exercisable,
divided by the Average Price (as hereinafter defined). The exercise price of the
Substitute Option per share of the Substitute Common Stock (the
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<PAGE> 8
"Substitute Purchase Price") shall then be equal to the Purchase Price
multiplied by a fraction in which the numerator is the number of shares of the
Issuer Common Stock for which the Option was theretofore exercisable and the
denominator is the number of shares for which the Substitute Option is
exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (y) Issuer in a merger in which Issuer is the continuing or
surviving person, and (z) the transferee of all or any substantial part
of the Issuer's assets (or the assets of its Subsidiaries).
(ii) "Substitute Common Stock" shall mean the common stock
issued by the Substitute Option Issuer upon exercise of the Substitute
Option.
(iii) "Assigned Value" shall mean the highest of (x) the price
per share of the Issuer Common Stock at which a Tender Offer or Exchange
Offer therefor has been made by any person (other than Grantee), (y) the
price per share of the Issuer Common Stock to be paid by any person
(other than the Grantee) pursuant to an agreement with Issuer, and (z)
the highest last sale price per share of Issuer Common Stock quoted on
the Nasdaq NMS (or if Issuer Common Stock is not quoted on the Nasdaq
NMS, the highest bid price per share on any day as quoted on the
principal trading market or securities exchange on which such shares are
traded as reported by a recognized source chosen by Grantee) within the
six-month period immediately preceding the agreement; provided, that in
the event of a sale of less than all of Issuer's assets, the Assigned
Value shall be the sum of the price paid in such sale for such assets and
the current market value of the remaining assets of Issuer as determined
by a nationally recognized investment banking firm selected by Grantee
(or by a majority in interest of the Grantees if there shall be more than
one Grantee (a "Grantee Majority")) and reasonably acceptable to Issuer,
divided by the number of shares of the Issuer Common Stock outstanding at
the time of such sale. In the event that an exchange offer is made for
the Issuer Common Stock or an agreement is entered into for a merger or
consolidation involving consideration other than cash, the value of the
securities or other property issuable or deliverable in exchange for the
Issuer Common Stock shall be determined by a nationally recognized
investment banking firm selected by Grantee and reasonably acceptable to
Issuer (or if applicable, Acquiring Corporation). (If there shall be more
than one Grantee, any such selection shall be made by a Grantee
Majority.)
(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 last sale price of the shares of the 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
Issuer, the person merging into Issuer or by any company which controls
or is controlled by such merger person, as Grantee may elect.
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<PAGE> 9
(f) In no event pursuant to any of the foregoing paragraphs shall
the Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
but for this clause (f), the Substitute Option Issuer shall make a cash payment
to Grantee equal to the excess of (i) the value of the Substitute Option without
giving effect to the limitation in this clause (f) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (f). This
difference in value shall be determined by a nationally recognized investment
banking firm selected by Grantee (or a Grantee Majority) and reasonably
acceptable to the Acquiring Corporation.
(g) Issuer shall not enter into any transaction described in
subsection (b) of this Section 7 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder and take all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the shares of Substitute
Common Stock are in no way distinguishable from or have lesser economic value
than other shares of common stock issued by the Substitute Option Issuer).
(h) The provisions of Sections 8, 9, 10, and 11 shall apply, with
appropriate adjustments, to any securities for which the Option becomes
exercisable pursuant to this Section 7 and, as applicable, references in such
sections to "Issuer," "Option," "Purchase Price" and "Issuer Common Stock" shall
be deemed to be references to "Substitute Option Issuer," "Substitute Option,"
"Substitute Purchase Price" and "Substitute Common Stock," respectively.
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a) and Section 3(e),
at the request of Holder at any time commencing upon the first occurrence of a
Repurchase Event (as defined in Section 8(d)) and ending 12 months immediately
thereafter, Issuer shall repurchase from Holder the Option and all shares of
Issuer Common Stock purchased by Holder pursuant hereto with respect to which
Holder then has beneficial ownership. The date on which Holder exercises its
rights under this Section 8 is referred to as the "Request Date." Such
repurchase shall be at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares
of Issuer Common Stock acquired by Holder pursuant to the Option with
respect to which Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as
defined below) for each share of Issuer Common Stock over (y) the
Purchase Price (subject to adjustment pursuant to Section 7), multiplied
by the number of shares of Issuer Common Stock with respect to which the
Option has not been exercised; and
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(iii) the excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7) paid (or, in
the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Holder for
each share of Issuer Common Stock with respect to which the Option has
been exercised and with respect to which Holder then has beneficial
ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer
shall, within ten business days after the Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment Holder shall surrender to Issuer the Option
and the certificates evidencing the shares of Issuer Common Stock purchased
thereunder with respect to which Holder then has beneficial ownership, and
Holder shall warrant that it has sole record and beneficial ownership of such
shares and that the same are then free and clear of all liens, claims, charges
and encumbrances of any kind whatsoever. Notwithstanding the foregoing, to the
extent that prior notification to or Consent of any governmental or regulatory
agency or authority is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to Section 8, in whole or
in part, or to require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited from paying
and promptly file the required notice or application for Consent and
expeditiously process the same (and each party shall cooperate with the other in
the filing of any such notice or application and the obtaining of any such
Consent). If any governmental or regulatory agency or authority disapproves of
any part of Issuer's proposed repurchase pursuant to this Section 8, Issuer
shall promptly give notice of such fact to Holder. If any governmental or
regulatory agency or authority prohibits the repurchase in part but not in
whole, then Holder shall have the right (i) to revoke the repurchase request or
(ii) to the extent permitted by such agency or authority, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent to
each, and Holder shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Request Date
less the sum of the number of shares covered by the Option in respect of which
payment has been made pursuant to Section 8(a)(ii) and the number of shares
covered by the portion of the Option (if any) that has been repurchased. Holder
shall notify Issuer of its determination under the preceding sentence within
five business days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of
Holder's rights under this Section 8 shall terminate on the date of termination
of this Option pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price" means
the highest of (i) the highest price per share of Issuer Common Stock paid for
any such share by the person or groups described in Section 8(d)(i), (ii) the
price per share of Issuer Common Stock received by holders of Issuer Common
Stock in connection with any merger or other business combination transaction
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest last
sale price per share of Issuer Common Stock quoted on the Nasdaq NMS (or if
Issuer Common Stock is not quoted on the Nasdaq NMS, the highest bid price per
share as quoted on the principal trading
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market or securities exchange on which such shares are traded as reported by a
recognized source chosen by Holder) during the 60 business days preceding the
Request Date; provided, however, that in the event of a sale of less than all of
Issuer's Assets, the Applicable Price shall be the sum of the price paid in such
sale for such assets and the current market value of the remaining assets of
Issuer as determined by an independent nationally recognized investment banking
firm selected by Holder and reasonably acceptable to Issuer (which determination
shall be conclusive for all purposes of this Agreement), divided by the number
of shares of the Issuer Common Stock outstanding at the time of such sale. If
the consideration to be offered, paid or received pursuant to either of the
foregoing clauses (i) or (ii) shall be other than in cash, the value of such
consideration shall be determined in good faith by an independent nationally
recognized investment banking firm selected by Holder and reasonably acceptable
to Issuer, which determination shall be conclusive for all purposes of this
Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any
person (other than Grantee or any Subsidiary of Grantee shall have acquired
beneficial ownership (as such term is defined in Rule 13d-3 promulgated under
the Exchange Act), or the right to acquire beneficial ownership, or any "group"
(as such term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of 50% or
more of the then-outstanding shares of Issuer Common Stock, or (ii) any of the
transactions described in Section 7(b)(i), 7(b)(ii) or 7(iii) shall be
consummated.
9. REGISTRATION RIGHTS.
(a) Issuer shall, subject to the conditions of subparagraph (c)
below, if requested by any Holder, including Grantee and any permitted
transferee ("Selling Holder"), as expeditiously as possible prepare and file a
registration statement under the Securities Laws if necessary in order to permit
the sale or other disposition of any or all shares of Issuer Common Stock or
other securities that have been acquired by or are issuable to Selling Holder
upon exercise of the Option in accordance with the intended method of sale or
other disposition stated by Holder in such request (it being understood and
agreed that any such sale or other disposition shall be effected on a widely
distributed basis so that, upon consummation thereof, no purchaser or transferee
shall beneficially own more than 5% of the shares of Issuer Common Stock then
outstanding), including, without limitation, a "shelf" registration statement
under Rule 415 under the Securities Act or any successor provision, and Issuer
shall use its best efforts to qualify such shares or other securities for sale
under any applicable state securities laws. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder.
(b) If Issuer at any time after the exercise of the Option, but
prior to the termination of the Option, proposes to register any shares of
Issuer Common Stock under the Securities Laws in connection with an underwritten
public offering of such Issuer Common Stock, Issuer will promptly give written
notice to Holder of its intention to do so and, upon the written request of
Holder given within 30 days after receipt of any such notice (which request
shall specify the number of shares of Issuer Common Stock intended to be
included in such underwritten public offering by Selling Holder), Issuer will
use all reasonable efforts to cause all such shares, the
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holders of which shall have requested participation in such registration, to be
so registered and included in such underwritten public offering; provided, that
Issuer may elect to not cause any such shares to be so registered (i) if the
underwriters in good faith determine that the inclusion of such shares would
interfere with the successful marketing of the shares of Issuer Common Stock for
the account of Issuer, or (ii) in the case of a registration solely to implement
a dividend reinvestment or similar plan, an employee benefit plan or a
registration filed on Form S-4 or any successor form, or a registration filed on
a form which does not permit registrations of resales; provided, further, that
such election pursuant to clause (i) may only be made once. If some but not all
the shares of Issuer Common Stock, with respect to which Issuer shall have
received requests for registration pursuant to this subparagraph (b), shall be
excluded from such registration, Issuer shall make appropriate allocation of
shares to be registered among Selling Holders and any other person (other than
Issuer or any person exercising demand registration rights in connection with
such registration) who or which is permitted to register their shares of Issuer
Common Stock in connection with such registration pro rata in the proportion
that the number of shares requested to be registered by each Selling Holder
bears to the total number of shares requested to be registered by all persons
then desiring to have Issuer Common Stock registered for sale (other than Issuer
or any person exercising demand registration rights in connection with such
registration).
(c) Issuer shall use all reasonable efforts to cause the
registration statement referred to in subparagraph (a) above to become effective
and to obtain all consents or waivers of other parties which are required
therefor and to keep such registration statement effective, provided, that
Issuer may delay any registration of Option Shares required pursuant to
subparagraph (a) above for a period not exceeding 90 days, provided Issuer shall
in good faith determine that any such registration would adversely affect an
offering or contemplated offering of other securities by Issuer. Notwithstanding
anything to the contrary contained herein, Issuer shall not be required to
register Option Shares under the Securities Laws pursuant to subparagraph (a)
above:
(i) prior to the occurrence of a Purchase Event or
following the termination of the Option;
(ii) more than twice in total or more than once in any
calendar year;
(iii) within 90 days after the effective date of a
registration referred to in subparagraph (b) above pursuant to which the
Selling Holders concerned were afforded the opportunity to register such
shares under the Securities Laws and such shares were registered as
requested; and
(iv) unless a request therefor is made to Issuer by Selling
Holders holding at least 15% or more of the aggregate number of Option
Shares then outstanding or the right to acquire at least 15% of the
Option Shares.
In addition to the foregoing, Issuer shall not be required
to maintain the effectiveness of any registration statement after the expiration
of 120 days from the effective date of such registration statement. Issuer shall
use all reasonable efforts to make any filings, and
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<PAGE> 13
take all steps, under all applicable state securities laws to the extent
necessary to permit the sale or other disposition of the Option Shares so
registered in accordance with the intended method of distribution for such
shares, provided, that Issuer shall not be required to consent to general
jurisdiction or qualify to do business in any state where it is not otherwise
required to so consent to such jurisdiction or to so qualify to do business.
(d) Except where applicable state law prohibits such payments,
Issuer will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and expenses
of Issuer's counsel), accounting expenses, printing expenses, expenses of
underwriters, excluding discounts and commissions but including liability
insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each registration pursuant to subparagraph (a) or (b) above (including the
related offerings and sales by Selling Holders) and all other qualifications,
notifications or exemptions pursuant to subparagraph (a) or (b) above.
Underwriting discounts and commissions relating to Option Shares and any other
expenses incurred by such Selling Holders in connection with any such
registration (including expenses of Selling Holders' counsel) shall be borne by
such Selling Holders.
(e) In connection with any registration under subparagraph (a) or
(b) above Issuer hereby agrees to indemnify the Selling Holders, and each
underwriter thereof, including each person, if any, who controls such holder or
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, losses, claims, damages and liabilities caused by any untrue statement
of a material fact contained in any registration statement or prospectus
(including any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as such
expenses, losses, claims, damages or liabilities of such indemnified party are
caused by any untrue statement or alleged untrue statement or any omission or
alleged omission made in reliance upon and in conformity with, information
furnished in writing to Issuer by such indemnified party expressly for use
therein, and Issuer and each officer, director and controlling person of Issuer
shall be indemnified by such Selling Holder, or by such underwriter, as the case
may be, for all such expenses, losses, claims, damages and liabilities caused by
any untrue, or alleged untrue, statement or omission made in reliance upon, and
in conformity with, information furnished in writing to Issuer by such holder or
such underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this
subparagraph (e) of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be sought
against any indemnifying party under this subparagraph (e), such indemnified
party shall notify the indemnifying party in writing of the commencement of such
action, but the failure so to notify the indemnifying party shall not relieve it
of any liability which it may otherwise have to any indemnified party under this
subparagraph (e), except to the extent such failure to notify materially
prejudices the indemnifying party. In case notice of commencement of any such
action shall be given to the indemnifying party as above provided, the
indemnifying party shall be entitled to participate in
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<PAGE> 14
and, to the extent it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense of such action at its own expense,
with counsel chosen by it and reasonably satisfactory to such indemnified party.
The indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel (other than reasonable costs of investigation) shall be paid by the
indemnified party unless (i) the indemnifying party either agrees to pay the
same, (ii) the indemnifying party falls to assume the defense of such action
with counsel satisfactory to the indemnified party, or (iii) the indemnified
party has been advised by counsel that one or more legal defenses may be
available to the indemnifying party that may be contrary to the interest of the
indemnified party, in which case the indemnifying party shall be entitled to
assume the defense of such action notwithstanding its obligation to bear fees
and expenses of such counsel; provided, however, that the indemnifying party
shall not be liable for the expenses of more than one firm of counsel for all
indemnified parties in any jurisdiction. No indemnifying party shall be liable
for any settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this subparagraph (e)
is unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or liabilities
in such proportion as is appropriate to reflect the relative benefits received
by Issuer, all Selling Holders and the underwriters from the offering of the
securities and also the relative fault of Issuer, all Selling Holders and the
underwriters in connection with the statements or omissions which resulted in
such expenses, losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The amount paid or payable by a party as a
result of the expenses, losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim; provided, that in no case shall any Selling Holder be responsible, in
the aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any obligation by any holder to
indemnify shall be several and not joint with other holders.
In connection with any registration pursuant to subparagraph
(a) or (b) above, Issuer and each Selling Holder (other than Grantee) shall
enter into an agreement containing the indemnification provisions of this
subparagraph (e).
(f) Issuer shall use its best efforts to comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by Holder in accordance with
and to the extent permitted by any rule or regulation promulgated by the SEC
from time to time, including, without limitation, Rules 144 and 144A.
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<PAGE> 15
(g) Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. QUOTATION; LISTING. If Issuer Common Stock or any other securities to
be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on the Nasdaq NMS or any other securities exchange or any
automated quotations system maintained by a self-regulatory organization,
Issuer, upon the request of Holder, will promptly file an application, if
required, to authorize for quotation or trading or listing the shares of Issuer
Common Stock or other securities to be acquired upon exercise of the Option on
the Nasdaq NMS or any other securities exchange or any automated quotations
system maintained by a self-regulatory organization and will use its best
efforts to obtain approval, if required, of such quotation or listing as soon as
practicable.
11. DIVISION OF OPTION. This Agreement (and the Option granted hereby)
are exchangeable, without expense, at the option of 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 in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other 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. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. MISCELLANEOUS.
(a) EXPENSES. Except as otherwise provided in Section 9, 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.
(b) WAIVER AND AMENDMENT. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(c) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARY; SEVERABILITY.
This Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between Grantee and Issuer (a)
constitutes the entire agreement and supersedes all
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<PAGE> 16
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof and (b) is not intended to confer upon
any person other than the parties hereto (other than any transferees of the
Option Shares or any permitted transferee of this Agreement pursuant to Section
12(h) and other than as provided in the Merger Agreement) any rights or remedies
hereunder. If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or a federal or state governmental or
regulatory agency or authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of 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 Option does not permit Holder to acquire, or does not require Issuer to
repurchase, the full number of shares of Issuer Common Stock as provided in
Sections 3 and 8 (as adjusted pursuant to Section 7), it is the express
intention of Issuer to allow Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible without any
amendment or modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of North Carolina without regard to any
applicable conflicts of law rules.
(e) DESCRIPTIVE HEADINGS. The descriptive headings contained
herein are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(with confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the addresses set forth in the Merger Agreement(or
at such other address for a party as shall be specified by like notice).
(g) COUNTERPARTS. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Grantee may assign this
Agreement to a wholly owned Subsidiary of Grantee and Grantee may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(i) FURTHER ASSURANCES. In the event of any exercise of the Option
by Holder, Issuer and Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
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<PAGE> 17
(j) SPECIFIC PERFORMANCE. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
(k) CONFIDENTIALITY AGREEMENTS. The parties hereto agree that this
Agreement supersedes any provision of the Confidentiality Agreements that could
be interpreted to preclude the exercise of any rights or the fulfillment of any
obligations under this Agreement, and that none of the provisions included in
the Confidentiality Agreements will act to preclude Holder from exercising the
Option or exercising any other rights under this Agreement or act to preclude
Issuer from fulfilling any of its obligations under this Agreement.
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<PAGE> 18
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
ATTEST: FIRST CHARTER CORPORATION
By:/s/ JAMES W. TOWNSEND, JR. By:/s/ LAWRENCE M. KIMBROUGH
----------------------------- -----------------------------
James W. Townsend, Jr. Lawrence M. Kimbrough
Secretary President and Chief Executive
Officer
[CORPORATE SEAL]
ATTEST: HFNC FINANCIAL CORP.
By:/s/ ANN G. BENTON By:/s/ H. JOE KING, JR.
------------------------ -----------------------------
Ann G. Benton H. Joe King, Jr.
Secretary Chairman of the Board,
President, and Chief Executive
Officer
[CORPORATE SEAL]
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<PAGE> 1
EXHIBIT 2.3
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into as
of May 17, 1998, by and between HFNC Financial Corp., a North Carolina
corporation ("Issuer"), and First Charter Corporation, a North Carolina
corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into that certain Agreement and
Plan of Merger, dated as of May 17, 1998 (the "Merger Agreement"), providing
for, among other things, the merger of Issuer with and into Grantee, with
Grantee as the surviving entity; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Merger Agreement, Grantee has required that Issuer agree, and Issuer has agreed,
to grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Merger Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 3,421,300 shares (as adjusted as set forth herein, the "Option Shares,"
which shall include the Option Shares before and after any transfer of such
Option Shares) of common stock, $.01 par value per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (subject to adjustment
as set forth herein, the "Purchase Price") equal to $13.625; provided, however,
that in no event shall the number of shares of Issuer Common Stock for which
this Option is exercisable exceed the lesser of (i) 19.9% of the Issuer's issued
and outstanding shares of Issuer Common Stock without giving effect to any
shares subject to or issued pursuant to the Option and (ii) that minimum number
of shares of Issuer Common Stock which when aggregated with any other shares of
Issuer Common Stock beneficially owned by Grantee or any Affiliate thereof would
cause the provisions of any Takeover Laws of the NCBCA to be applicable to the
Merger.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of its agreements or covenants
contained in this Agreement or the Merger Agreement, and (ii) no preliminary or
permanent injunction or other order against the delivery of shares covered by
the Option issued by any court of competent jurisdiction in the United States
shall be in effect, Holder may exercise the Option, in whole or in part, at any
time and from time to time following the occurrence of a Purchase Event (as
hereinafter defined) and prior to the termination of the Option. The Option
shall terminate and be of no further force and effect upon the earliest to occur
of (A) the Effective Time, (B) termination of the Merger Agreement in accordance
with the terms thereof prior to the occurrence of a Purchase Event or a
<PAGE> 2
Preliminary Purchase Event (as hereinafter defined) (other than a termination of
the Merger Agreement by Grantee pursuant to (i) Section 10.1(b) thereof (but
only if such termination was a result of a willful breach by Issuer) or (ii)
Section 10.1(c) thereof (each a "Default Termination")), (C) 12 months after a
Default Termination, and (D) 12 months after any termination of the Merger
Agreement following the occurrence of a Purchase Event or a Preliminary Purchase
Event. Any purchase of shares upon exercise of the Option shall be subject to
compliance with applicable law, including, without limitation, the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). The term "Holder" shall mean
the holder or holders of the Option from time to time, and which initially is
the Grantee. The rights set forth in Section 8 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) As used herein, a "Purchase Event" means any of the following
events subsequent to the date of this Agreement:
(i) without Grantee's prior written consent, Issuer shall have
authorized, recommended, publicly proposed or publicly announced an
intention to authorize, recommend or propose, or entered into an agreement
with any person (other than Grantee or any Subsidiary of Grantee) to
effect an Acquisition Transaction (as defined below). As used herein, the
term Acquisition Transaction shall mean (A) a merger, consolidation or
similar transaction involving Issuer or any of its Subsidiaries (other
than transactions solely between Issuer's Subsidiaries and transactions
involving Issuer or any Subsidiary in which the voting securities of
Issuer outstanding immediately prior thereto continue to represent (by
either remaining outstanding or being converted into securities of the
surviving entity or the parent thereof) at least 75% of the combined
voting power of the voting securities of the Issuer or the surviving
entity or the parent thereof outstanding immediately after the
consummation of the transaction), (B) except as permitted pursuant to
Article 7 of the Merger Agreement, the disposition, by sale, lease,
exchange or otherwise, of Assets of Issuer or any of its Subsidiaries
representing in either case 15% or more of the consolidated assets of
Issuer and its Subsidiaries, or (C) the issuance, sale or other
disposition of (including by way of merger, consolidation, share exchange
or any similar transaction) securities representing 15% or more of the
voting power of Issuer or any of its Subsidiaries (any of the foregoing,
an "Acquisition Transaction"); or
(ii) any person (other than Grantee or any Subsidiary of
Grantee) shall have acquired beneficial ownership (as such term is defined
in Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), of or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under the Exchange
Act), other than a group of which Grantee or any of its Subsidiaries is a
member, shall have been formed which beneficially owns or has the right to
acquire beneficial ownership of, 25% or more of the then-outstanding
shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
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<PAGE> 3
(i) any person (other than Grantee or any Subsidiary of
Grantee) shall have commenced (as such term is defined in Rule 14d-2 under
the Exchange Act), or shall have filed a registration statement under the
Securities Act of 1933, as amended (the "Securities Act") with respect to,
a tender offer or exchange offer to purchase any shares of Issuer Common
Stock such that, upon consummation of such offer, such person would own or
control 15% or more of the then-outstanding shares of Issuer Common Stock
(such an offer being referred to herein as a "Tender Offer" or an
"Exchange Offer," respectively); or
(ii) the holders of Issuer Common Stock shall not have approved
the Merger Agreement at the meeting of such stockholders held for the
purpose of voting on the Merger Agreement, such meeting shall not have
been held or shall have been canceled prior to termination of the Merger
Agreement, or Issuer's Board of Directors shall have withdrawn or modified
in a manner adverse to Grantee the recommendation of Issuer's Board of
Directors with respect to the Merger Agreement, in each case after it
shall have been publicly announced that any person (other than Grantee or
any Subsidiary of Grantee) shall have (A) made a proposal to engage in an
Acquisition Transaction, (B) commenced a Tender Offer or filed a
registration statement under the Securities Act with respect to an
Exchange Offer, or (C) filed an application (or given a notice), whether
in draft or final form, under any federal or state statute or regulation
(including a notice filed under the HSR Act and an application or notice
filed under the BHC Act, the Bank Merger Act, or the Change in Bank
Control Act of 1978) seeking the Consent to an Acquisition Transaction
from any federal or state governmental or regulatory authority or agency.
As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
(d) In the event Holder wishes to exercise the Option, it shall send
to Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
three business days nor later than 30 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior Consent
of any governmental or regulatory agency or authority is required in connection
with such purchase, Issuer shall cooperate with Holder in the filing of the
required notice or application for such Consent and the obtaining of such
Consent and the Closing shall occur not earlier than three business days nor
later than 15 business days immediately following receipt of such Consents (and
expiration of any mandatory waiting periods).
(e) Notwithstanding any other provision of this Agreement to the
contrary, in no event shall:
(i) Holder's (taking into account all other Holders) Total
Profit (as defined below) exceed $7.5 million and, if it otherwise would
exceed such amount, Holder, at its sole election, shall either (A) reduce
the number of shares of Issuer Common Stock subject to the Option, (B)
deliver to Issuer for cancellation without consideration Option Shares
previously purchased by Holder, (C) pay cash to Issuer, or (D) any
combination of the
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<PAGE> 4
foregoing, so that Holder's actually realized Total Profit (together with
the Total Profit realized by all other Holders) shall not exceed $7.5
million after taking into account the foregoing actions; and
(ii) the Option be exercised for a number of shares of Issuer
Common Stock as would, as of the date of exercise, result in Holder's
(taking into account all other Holders) Notional Total Profit (as defined
below) of more than $7.5 million; provided, that nothing in this clause
(ii) shall restrict any exercise of the Option permitted hereby on any
subsequent date.
As used in this Agreement, the term "Total Profit" shall mean the aggregate sum
(prior to the payment of taxes) of the following: (i) the amount received by
Holder pursuant to Issuer's repurchase of the Option (or any portion thereof)
pursuant to Section 8; (ii) (x) the amount received by Holder pursuant to
Issuer's repurchase of Option Shares pursuant to Section 8, less (y) Holder's
purchase price for such Option Shares; (iii) (x) the net cash amounts received
by Holder pursuant to the sale of Option Shares (or any other securities into
which such Option Shares shall be converted or exchanged) to any unaffiliated
person, less (y) Holder's purchase price of such Option Shares; and (iv) any
amounts received by Grantee on the transfer of the Option (or any portion
thereof) to any unaffiliated person.
As used in this Agreement, the term "Notional Total Profit" with respect to any
number of shares of Issuer Common Stock as to which Holder may propose to
exercise the Option shall be the Total Profit determined as of the date of such
proposed exercise, assuming that the Option were exercised on such date for such
number of shares and assuming that such shares, together with all other Option
Shares held by Holder and its affiliates as of such date, were sold for cash at
the closing sale price per share of Issuer Common Stock as quoted on the Nasdaq
National Market (or, if Issuer Common Stock is not then quoted on the Nasdaq
National Market, the highest bid price per share as quoted on the principal
trading market or securities exchange on which such shares are traded as
reported by a recognized source chosen by Holder) as of the close of business on
the preceding trading day (less customary brokerage commissions).
The provisions of this Section 3(e) shall apply to any Substitute
Option (as defined below).
(f) Grantee agrees, promptly following any exercise of all or any
portion of the Option, and subject to its rights under Section 8, to use
commercially reasonable efforts promptly to maximize the value of Option Shares
purchased, taking into account market conditions, the number of Option Shares,
the potential negative impact of substantial sales on the market price for
Issuer Common Stock, and availability of an effective registration statement to
permit public sale of Option Shares.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated by
Issuer, an amount equal to the Purchase
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<PAGE> 5
Price multiplied by the number of Option Shares to be purchased on such Closing
Date, and (ii) present and surrender this Agreement to the Issuer at the address
of the Issuer specified in Section 12(f) hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a), (i)
Issuer shall deliver to Holder (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever and subject to no pre-emptive rights, and (B) if the Option is
exercised in part only, an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the shares of Issuer
Common Stock purchasable hereunder, and (ii) Holder shall deliver to Issuer a
letter agreeing that Holder shall not offer to sell or otherwise dispose of such
Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.
(c) In addition to any other legend that is required by applicable
law, certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF MAY 17,
1998. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that: (i) the references in the above legend to
resale restrictions of the Securities Act shall be removed by delivery of
substitute certificate(s) without such reference if 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 reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act; (ii)
the references in the above legend to the provisions of this Agreement 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 preceding clauses (i) and (ii) are both satisfied.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents and
warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals referred to herein, to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
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<PAGE> 6
corporate action on the part of Issuer. This Agreement has been duly
executed and delivered by Issuer.
(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
until the obligation to deliver Issuer Common Stock upon the exercise of
the Option terminates, will have reserved for issuance, upon exercise of
the Option, the number of shares of Issuer Common Stock necessary for
Holder to exercise the Option, and Issuer will take all necessary
corporate action to authorize and reserve for issuance all additional
shares of Issuer Common Stock or other securities which may be issued
pursuant to Section 7 upon exercise of the Option. The shares of Issuer
Common Stock to be issued upon due exercise of the Option, including all
additional shares of Issuer Common Stock or other securities which may be
issuable pursuant to Section 7, upon issuance pursuant hereto, shall be
duly and validly issued, fully paid, and nonassessable, and shall be
delivered free and clear of all liens, claims, charges, and encumbrances
of any kind or nature whatsoever, including any preemptive rights of any
stockholder of Issuer.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby represents
and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Grantee. This Agreement has been duly executed and
delivered by Grantee.
(b) This Option is not being, and any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the Securities Laws, provided that with
respect to any transfer or other disposition proposed to be made in
reliance upon an exemption from registration, such transfer or other
disposition shall not be made unless Issuer first receives an opinion of
counsel in form and substance reasonably acceptable to it regarding the
availability of such exemption.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction, if any, so that Holder shall receive, upon exercise of the
Option, the number and class of shares or other securities or property that
Holder would have received in respect of Issuer Common Stock if the Option had
been exercised immediately prior
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to such event, or the record date therefor, as applicable. If any additional
shares of Issuer Common Stock are issued after the date of this Agreement (other
than pursuant to an event described in the first sentence of this Section 7(a)
or pursuant to this Option), the number of shares of Issuer Common Stock subject
to the Option shall be adjusted so that, after such issuance, it, together with
any shares of Issuer Common Stock previously issued pursuant hereto, shall not
exceed the lesser of (i) 19.9% of the number of shares of Issuer Common Stock
then issued and outstanding, without giving effect to any shares subject to or
issued pursuant to the Option and (ii) that minimum number of shares of Issuer
Common Stock which when aggregated with any other shares of Issuer Common Stock
beneficially owned by Grantee or any Affiliate thereof would cause the
provisions of any Takeover Laws of the NCBCA to be applicable to the Merger.
(b) In the event that Issuer shall enter in an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger; (ii) to permit any person, other than Grantee or one of
its Subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Issuer Common Stock shall be changed into or exchanged for stock or
other securities of Issuer or any other person or cash or any other property or
the outstanding shares of Issuer Common Stock immediately prior to such merger
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 Assets to any person, other than Grantee or one
of its Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provisions 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 Grantee, of either (x) the Acquiring Corporation
(as defined below) or (y) any person that controls the Acquiring Corporation (in
each case, such person being referred to as the "Substitute Option Issuer").
(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 Grantee. The Substitute Option Issuer shall also
enter into an agreement with the then-holder or holders of the Substitute Option
in substantially the same form as this Agreement, which shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of the Substitute Common Stock (as hereinafter defined) as is equal to
the Assigned Value (as hereinafter defined) multiplied by the number of shares
of the Issuer Common Stock for which the Option was theretofore exercisable,
divided by the Average Price (as hereinafter defined). The exercise price of the
Substitute Option per share of the Substitute Common Stock (the "Substitute
Purchase Price") shall then be equal to the Purchase Price multiplied by a
fraction in which the numerator is the number of shares of the Issuer Common
Stock for which the Option was theretofore exercisable and the denominator is
the number of shares for which the Substitute Option is exercisable.
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<PAGE> 8
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (y) Issuer in a merger in which Issuer is the continuing or
surviving person, and (z) the transferee of all or any substantial part of
the Issuer's assets (or the assets of its Subsidiaries).
(ii) "Substitute Common Stock" shall mean the common stock
issued by the Substitute Option Issuer upon exercise of the Substitute
Option.
(iii) "Assigned Value" shall mean the highest of (x) the price
per share of the Issuer Common Stock at which a Tender Offer or Exchange
Offer therefor has been made by any person (other than Grantee), (y) the
price per share of the Issuer Common Stock to be paid by any person (other
than the Grantee) pursuant to an agreement with Issuer, and (z) the
highest last sale price per share of Issuer Common Stock quoted on the
Nasdaq NMS (or if Issuer Common Stock is not quoted on the Nasdaq NMS, the
highest bid price per share on any day as quoted on the principal trading
market or securities exchange on which such shares are traded as reported
by a recognized source chosen by Grantee) within the six-month period
immediately preceding the agreement; provided, that in the event of a sale
of less than all of Issuer's assets, the Assigned Value shall be the sum
of the price paid in such sale for such assets and the current market
value of the remaining assets of Issuer as determined by a nationally
recognized investment banking firm selected by Grantee (or by a majority
in interest of the Grantees if there shall be more than one Grantee (a
"Grantee Majority")) and reasonably acceptable to Issuer, divided by the
number of shares of the Issuer Common Stock outstanding at the time of
such sale. In the event that an exchange offer is made for the Issuer
Common Stock or an agreement is entered into for a merger or consolidation
involving consideration other than cash, the value of the securities or
other property issuable or deliverable in exchange for the Issuer Common
Stock shall be determined by a nationally recognized investment banking
firm selected by Grantee and reasonably acceptable to Issuer (or if
applicable, Acquiring Corporation). (If there shall be more than one
Grantee, any such selection shall be made by a Grantee Majority.)
(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 last sale price of the shares of the 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
Issuer, the person merging into Issuer or by any company which controls or
is controlled by such merger person, as Grantee may elect.
(f) In no event pursuant to any of the foregoing paragraphs shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the
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<PAGE> 9
Substitute Option would be exercisable for more than 19.9% of the aggregate of
the shares of Substitute Common Stock but for this clause (f), the Substitute
Option Issuer shall make a cash payment to Grantee equal to the excess of (i)
the value of the Substitute Option without giving effect to the limitation in
this clause (f) over (ii) the value of the Substitute Option after giving effect
to the limitation in this clause (f). This difference in value shall be
determined by a nationally recognized investment banking firm selected by
Grantee (or a Grantee Majority) and reasonably acceptable to the Acquiring
Corporation.
(g) Issuer shall not enter into any transaction described in
subsection (b) of this Section 7 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder and take all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the shares of Substitute
Common Stock are in no way distinguishable from or have lesser economic value
than other shares of common stock issued by the Substitute Option Issuer).
(h) The provisions of Sections 8, 9, 10, and 11 shall apply, with
appropriate adjustments, to any securities for which the Option becomes
exercisable pursuant to this Section 7 and, as applicable, references in such
sections to "Issuer," "Option," "Purchase Price" and "Issuer Common Stock" shall
be deemed to be references to "Substitute Option Issuer," "Substitute Option,"
"Substitute Purchase Price" and "Substitute Common Stock," respectively.
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a) and Section 3(e), at
the request of Holder at any time commencing upon the first occurrence of a
Repurchase Event (as defined in Section 8(d)) and ending 12 months immediately
thereafter, Issuer shall repurchase from Holder the Option and all shares of
Issuer Common Stock purchased by Holder pursuant hereto with respect to which
Holder then has beneficial ownership. The date on which Holder exercises its
rights under this Section 8 is referred to as the "Request Date." Such
repurchase shall be at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares of
Issuer Common Stock acquired by Holder pursuant to the Option with respect
to which Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number of
shares of Issuer Common Stock with respect to which the Option has not
been exercised; and
(iii) the excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7) paid (or, in
the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Holder for
each share of Issuer Common Stock with respect to which the Option has
been
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<PAGE> 10
exercised and with respect to which Holder then has beneficial ownership,
multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within ten business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and Holder shall
warrant that it has sole record and beneficial ownership of such shares and
that the same are then free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever. Notwithstanding the foregoing, to the
extent that prior notification to or Consent of any governmental or regulatory
agency or authority is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the
ongoing option to revoke its request for repurchase pursuant to Section 8, in
whole or in part, or to require that Issuer deliver from time to time that
portion of the Section 8 Repurchase Consideration that it is not then so
prohibited from paying and promptly file the required notice or application for
Consent and expeditiously process the same (and each party shall cooperate with
the other in the filing of any such notice or application and the obtaining of
any such Consent). If any governmental or regulatory agency or authority
disapproves of any part of Issuer's proposed repurchase pursuant to this
Section 8, Issuer shall promptly give notice of such fact to Holder. If any
governmental or regulatory agency or authority prohibits the repurchase in part
but not in whole, then Holder shall have the right (i) to revoke the repurchase
request or (ii) to the extent permitted by such agency or authority, determine
whether the repurchase should apply to the Option and/or Option Shares and to
what extent to each, and Holder shall thereupon have the right to exercise the
Option as to the number of Option Shares for which the Option was exercisable
at the Request Date less the sum of the number of shares covered by the Option
in respect of which payment has been made pursuant to Section 8(a)(ii) and the
number of shares covered by the portion of the Option (if any) that has been
repurchased. Holder shall notify Issuer of its determination under the
preceding sentence within five business days of receipt of notice of
disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Holder's
rights under this Section 8 shall terminate on the date of termination of this
Option pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i), (ii) the price
per share of Issuer Common Stock received by holders of Issuer Common Stock in
connection with any merger or other business combination transaction described
in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest last sale price
per share of Issuer Common Stock quoted on the Nasdaq NMS (or if Issuer Common
Stock is not quoted on the Nasdaq NMS, the highest bid price per share as quoted
on the principal trading market or securities exchange on which such shares are
traded as reported by a recognized source chosen by Holder) during the 60
business days preceding the Request Date; provided, however, that in the event
of a sale of less than all of Issuer's Assets, the Applicable Price shall be the
sum of the price paid in such sale for such assets and the current market value
of the remaining assets
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<PAGE> 11
of Issuer as determined by an independent nationally recognized investment
banking firm selected by Holder and reasonably acceptable to Issuer (which
determination shall be conclusive for all purposes of this Agreement), divided
by the number of shares of the Issuer Common Stock outstanding at the time of
such sale. If the consideration to be offered, paid or received pursuant to
either of the foregoing clauses (i) or (ii) shall be other than in cash, the
value of such consideration shall be determined in good faith by an independent
nationally recognized investment banking firm selected by Holder and reasonably
acceptable to Issuer, which determination shall be conclusive for all purposes
of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any
person (other than Grantee or any Subsidiary of Grantee shall have acquired
beneficial ownership (as such term is defined in Rule 13d-3 promulgated under
the Exchange Act), or the right to acquire beneficial ownership, or any "group"
(as such term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of 50% or
more of the then-outstanding shares of Issuer Common Stock, or (ii) any of the
transactions described in Section 7(b)(i), 7(b)(ii) or 7(iii) shall be
consummated.
9. REGISTRATION RIGHTS.
(a) Issuer shall, subject to the conditions of subparagraph (c)
below, if requested by any Holder, including Grantee and any permitted
transferee ("Selling Holder"), as expeditiously as possible prepare and file a
registration statement under the Securities Laws if necessary in order to permit
the sale or other disposition of any or all shares of Issuer Common Stock or
other securities that have been acquired by or are issuable to Selling Holder
upon exercise of the Option in accordance with the intended method of sale or
other disposition stated by Holder in such request (it being understood and
agreed that any such sale or other disposition shall be effected on a widely
distributed basis so that, upon consummation thereof, no purchaser or transferee
shall beneficially own more than 5% of the shares of Issuer Common Stock then
outstanding), including, without limitation, a "shelf" registration statement
under Rule 415 under the Securities Act or any successor provision, and Issuer
shall use its best efforts to qualify such shares or other securities for sale
under any applicable state securities laws. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder.
(b) If Issuer at any time after the exercise of the Option, but prior
to the termination of the Option, proposes to register any shares of Issuer
Common Stock under the Securities Laws in connection with an underwritten public
offering of such Issuer Common Stock, Issuer will promptly give written notice
to Holder of its intention to do so and, upon the written request of Holder
given within 30 days after receipt of any such notice (which request shall
specify the number of shares of Issuer Common Stock intended to be included in
such underwritten public offering by Selling Holder), Issuer will use all
reasonable efforts to cause all such shares, the holders of which shall have
requested participation in such registration, to be so registered and included
in such underwritten public offering; provided, that Issuer may elect to not
cause any such shares to be so registered (i) if the underwriters in good faith
determine that the inclusion of such shares would interfere with the successful
marketing of the shares of Issuer Common Stock
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<PAGE> 12
for the account of Issuer, or (ii) in the case of a registration solely to
implement a dividend reinvestment or similar plan, an employee benefit plan or a
registration filed on Form S-4 or any successor form, or a registration filed on
a form which does not permit registrations of resales; provided, further, that
such election pursuant to clause (i) may only be made once. If some but not all
the shares of Issuer Common Stock, with respect to which Issuer shall have
received requests for registration pursuant to this subparagraph (b), shall be
excluded from such registration, Issuer shall make appropriate allocation of
shares to be registered among Selling Holders and any other person (other than
Issuer or any person exercising demand registration rights in connection with
such registration) who or which is permitted to register their shares of Issuer
Common Stock in connection with such registration pro rata in the proportion
that the number of shares requested to be registered by each Selling Holder
bears to the total number of shares requested to be registered by all persons
then desiring to have Issuer Common Stock registered for sale (other than Issuer
or any person exercising demand registration rights in connection with such
registration).
(c) Issuer shall use all reasonable efforts to cause the registration
statement referred to in subparagraph (a) above to become effective and to
obtain all consents or waivers of other parties which are required therefor and
to keep such registration statement effective, provided, that Issuer may delay
any registration of Option Shares required pursuant to subparagraph (a) above
for a period not exceeding 90 days, provided Issuer shall in good faith
determine that any such registration would adversely affect an offering or
contemplated offering of other securities by Issuer. Notwithstanding anything to
the contrary contained herein, Issuer shall not be required to register Option
Shares under the Securities Laws pursuant to subparagraph (a) above:
(i) prior to the occurrence of a Purchase Event or
following the termination of the Option;
(ii) more than twice in total or more than once in any calendar
year;
(iii) within 90 days after the effective date of a registration
referred to in subparagraph (b) above pursuant to which the Selling
Holders concerned were afforded the opportunity to register such shares
under the Securities Laws and such shares were registered as requested;
and
(iv) unless a request therefor is made to Issuer by Selling
Holders holding at least 15% or more of the aggregate number of Option
Shares then outstanding or the right to acquire at least 15% of the Option
Shares.
In addition to the foregoing, Issuer shall not be required to
maintain the effectiveness of any registration statement after the expiration of
120 days from the effective date of such registration statement. Issuer shall
use all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares, provided, that Issuer shall not
be required to consent to general
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<PAGE> 13
jurisdiction or qualify to do business in any state where it is not otherwise
required to so consent to such jurisdiction or to so qualify to do business.
(d) Except where applicable state law prohibits such payments, Issuer
will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and expenses
of Issuer's counsel), accounting expenses, printing expenses, expenses of
underwriters, excluding discounts and commissions but including liability
insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each registration pursuant to subparagraph (a) or (b) above (including the
related offerings and sales by Selling Holders) and all other qualifications,
notifications or exemptions pursuant to subparagraph (a) or (b) above.
Underwriting discounts and commissions relating to Option Shares and any other
expenses incurred by such Selling Holders in connection with any such
registration (including expenses of Selling Holders' counsel) shall be borne by
such Selling Holders.
(e) In connection with any registration under subparagraph (a) or (b)
above Issuer hereby agrees to indemnify the Selling Holders, and each
underwriter thereof, including each person, if any, who controls such holder or
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, losses, claims, damages and liabilities caused by any untrue statement
of a material fact contained in any registration statement or prospectus
(including any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as such
expenses, losses, claims, damages or liabilities of such indemnified party are
caused by any untrue statement or alleged untrue statement or any omission or
alleged omission made in reliance upon and in conformity with, information
furnished in writing to Issuer by such indemnified party expressly for use
therein, and Issuer and each officer, director and controlling person of Issuer
shall be indemnified by such Selling Holder, or by such underwriter, as the case
may be, for all such expenses, losses, claims, damages and liabilities caused by
any untrue, or alleged untrue, statement or omission made in reliance upon, and
in conformity with, information furnished in writing to Issuer by such holder or
such underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this
subparagraph (e) of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be sought
against any indemnifying party under this subparagraph (e), such indemnified
party shall notify the indemnifying party in writing of the commencement of such
action, but the failure so to notify the indemnifying party shall not relieve it
of any liability which it may otherwise have to any indemnified party under this
subparagraph (e), except to the extent such failure to notify materially
prejudices the indemnifying party. In case notice of commencement of any such
action shall be given to the indemnifying party as above provided, the
indemnifying party shall be entitled to participate in and, to the extent it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense of such action at its own expense, with counsel chosen by it and
reasonably satisfactory to such indemnified party. The indemnified party shall
have the right to employ
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<PAGE> 14
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party either agrees to pay the same, (ii) the indemnifying party
falls to assume the defense of such action with counsel satisfactory to the
indemnified party, or (iii) the indemnified party has been advised by counsel
that one or more legal defenses may be available to the indemnifying party that
may be contrary to the interest of the indemnified party, in which case the
indemnifying party shall be entitled to assume the defense of such action
notwithstanding its obligation to bear fees and expenses of such counsel;
provided, however, that the indemnifying party shall not be liable for the
expenses of more than one firm of counsel for all indemnified parties in any
jurisdiction. No indemnifying party shall be liable for any settlement entered
into without its consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this subparagraph (e) is
unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or liabilities
in such proportion as is appropriate to reflect the relative benefits received
by Issuer, all Selling Holders and the underwriters from the offering of the
securities and also the relative fault of Issuer, all Selling Holders and the
underwriters in connection with the statements or omissions which resulted in
such expenses, losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The amount paid or payable by a party as a
result of the expenses, losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim; provided, that in no case shall any Selling Holder be responsible, in
the aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any obligation by any holder to
indemnify shall be several and not joint with other holders.
In connection with any registration pursuant to subparagraph
(a) or (b) above, Issuer and each Selling Holder (other than Grantee) shall
enter into an agreement containing the indemnification provisions of this
subparagraph (e).
(f) Issuer shall use its best efforts to comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by Holder in accordance with
and to the extent permitted by any rule or regulation promulgated by the SEC
from time to time, including, without limitation, Rules 144 and 144A.
(g) Issuer will pay all stamp taxes in connection with the issuance
and the sale of the Option Shares and in connection with the exercise of the
Option, and will save Holder harmless, without limitation as to time, against
any and all liabilities, with respect to all such taxes.
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<PAGE> 15
10. QUOTATION; LISTING. If Issuer Common Stock or any other securities to
be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on the Nasdaq NMS or any other securities exchange or any
automated quotations system maintained by a self- regulatory organization,
Issuer, upon the request of Holder, will promptly file an application, if
required, to authorize for quotation or trading or listing the shares of Issuer
Common Stock or other securities to be acquired upon exercise of the Option on
the Nasdaq NMS or any other securities exchange or any automated quotations
system maintained by a self-regulatory organization and will use its best
efforts to obtain approval, if required, of such quotation or listing as soon as
practicable.
11. DIVISION OF OPTION. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of 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 in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other 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. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. MISCELLANEOUS.
(a) EXPENSES. Except as otherwise provided in Section 9, 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.
(b) WAIVER AND AMENDMENT. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(c) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARY; SEVERABILITY. This
Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between Grantee and Issuer (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (b) is not intended to confer upon any person other
than the parties hereto (other than any transferees of the Option Shares or any
permitted transferee of this Agreement pursuant to Section 12(h) and other than
as provided in the Merger Agreement) any
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<PAGE> 16
rights or remedies hereunder. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or a federal or
state governmental or regulatory agency or authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of 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 Option does not permit Holder to acquire,
or does not require Issuer to repurchase, the full number of shares of Issuer
Common Stock as provided in Sections 3 and 8 (as adjusted pursuant to Section
7), it is the express intention of Issuer to allow Holder to acquire or to
require Issuer to repurchase such lesser number of shares as may be permissible
without any amendment or modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of North Carolina without regard to any
applicable conflicts of law rules.
(e) DESCRIPTIVE HEADINGS. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the addresses set forth in the Merger Agreement(or
at such other address for a party as shall be specified by like notice).
(g) COUNTERPARTS. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Grantee may assign this
Agreement to a wholly owned Subsidiary of Grantee and Grantee may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(i) FURTHER ASSURANCES. In the event of any exercise of the Option by
Holder, Issuer and Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) SPECIFIC PERFORMANCE. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in
- 16 -
<PAGE> 17
connection with the obtaining of any such equitable relief and that this
provision is without prejudice to any other rights that the parties hereto may
have for any failure to perform this Agreement.
(k) CONFIDENTIALITY AGREEMENTS. The parties hereto agree that this
Agreement supersedes any provision of the Confidentiality Agreements that could
be interpreted to preclude the exercise of any rights or the fulfillment of any
obligations under this Agreement, and that none of the provisions included in
the Confidentiality Agreements will act to preclude Holder from exercising the
Option or exercising any other rights under this Agreement or act to preclude
Issuer from fulfilling any of its obligations under this Agreement.
- 17 -
<PAGE> 18
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
<TABLE>
<S> <C>
ATTEST: HFNC FINANCIAL CORP.
By: /s/ ANN G. BENTON By: /s/ H. JOE KING, JR.
----------------------- ----------------------------
Ann G. Benton H. Joe King, Jr.
Secretary Chairman of the Board, President, and
Chief Executive Officer
[CORPORATE SEAL]
ATTEST: FIRST CHARTER CORPORATION
By:/s/ James W. Townsend, Jr. By: /s/ LAWRENCE M. KIMBROUGH
-------------------------- ----------------------------
James W. Townsend, Jr. Lawrence M. Kimbrough
Secretary President and Chief Executive Officer
</TABLE>
[CORPORATE SEAL]
- 18 -
<PAGE> 1
EXHIBIT 5.1
[ALSTON & BIRD LLP LETTERHEAD]
July 31, 1998
First Charter National Bank
22 Union Street
Concord, North Carolina 28025
Re: First Charter Corporation
Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as special counsel for First Charter Corporation, a North
Carolina corporation ("FCC"), in connection with the merger between FCC and HFNC
Financial Corp., a North Carolina corporation ("HFNC") (the "Merger"), pursuant
to the Amended and Restated Agreement and Plan of Merger, dated as of
July 29, 1998, by and between FCC and HFNC, and in connection with the
registration of common stock, no par value, of FCC ("FCC Common Stock") on Form
S-4 under the Securities Act of 1933, as amended. The Merger provides for
issuance of up to a maximum 10,680,660 shares of FCC Common Stock upon
consummation of the Merger.
We have examined and are familiar with the registration statement on Form
S-4 of FCC filed with the Securities and Exchange Commission on this date (the
"Registration Statement"). We have examined and are familiar with the Articles
of Incorporation and Bylaws of FCC and the proceedings taken by the FCC Board
of Directors in connection with the Merger, and we have examined such other
documents and records as we have deemed relevant for purposes of rendering this
opinion.
Based on the foregoing it is our opinion that upon satisfaction of the
conditions precedent to consummation of the Merger, or waiver of such
conditions capable of being waived, and upon consummation of the Merger, the
shares of FCC Common Stock issued pursuant to the Merger in accordance with
the Agreement will be duly authorized, validly issued, fully paid, and
non-assessable under the North Carolina Business Corporation Act.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to Alston & Bird LLP under
the caption "Opinions" in the Joint Proxy Statement/Prospectus forming a part
of the Registration Statement.
Very truly yours,
/s/ ALSTON & BIRD LLP
<PAGE> 1
[ALSTON & BIRD LLP LETTERHEAD]
July 31, 1998
First Charter Corporation
22 Union Street North
Concord, North Carolina 28025
Re: Plan of Merger Involving First Charter Corporation and HFNC Financial
Corporation
Ladies and Gentlemen:
We have acted as counsel to First Charter Corporation ("FCC"), a
corporation organized and existing under the laws of North Carolina, in
connection with the planned merger (the "Merger") of HFNC Financial Corporation
("HFNC"), a corporation organized and existing under the laws of North Carolina,
with and into FCC pursuant to the Amended and Restated Agreement and Plan of
Merger by and between HFNC and FCC made and entered into as of July 29, 1998
(the "Agreement"). All capitalized terms used herein without definition shall
have the respective meanings specified in the Agreement, and unless otherwise
specified, all section references herein are to the Internal Revenue Code of
1986, as amended (the "Code"). Pursuant to the Merger, and as more fully
described in the Agreement, each share of HFNC Common Stock issued and
outstanding at the time of the consummation of the Merger (the "Effective Time")
shall cease to be outstanding and shall be converted into and exchanged for the
right to receive 0.57 of a share of FCC Common Stock (subject to possible
adjustment, as set forth in the Agreement). Also, in connection with the Merger,
FCC intends to repurchase, from time to time in open market transactions or in
privately negotiated transactions, up to 750,000 shares of FCC Common Stock,
including purchases on an equivalent basis of shares of HFNC Common Stock.
In our capacity as counsel to FCC, our opinion has been requested with
respect to certain of the federal income tax consequences of the Merger. In
rendering this opinion, we have examined such documents as we deemed
appropriate, including the Agreement; the Registration Statement on Form S-4
filed by FCC with the Securities and Exchange Commission under the Securities
Act of 1933, on July 31, 1998, as amended, including the Joint Proxy Statement
(together the "Registration Statement"); and such additional
<PAGE> 2
First Charter Corporation
July 31, 1998
Page 2
documents as we have considered relevant. In rendering our opinion, we have
assumed that the Agreement and the Registration Statement accurately and
completely describe the Merger and that the Merger will be consummated in
accordance with the Agreement.
In rendering the opinion expressed herein, we have relied, with the consent
of HFNC and FCC, upon the accuracy and completeness of the factual statements
and factual representations (which factual statements and factual
representations we have neither investigated nor verified) contained in the
certificates of HFNC and FCC to us dated July 31, 1998, and July 31, 1998,
respectively, and have assumed that such certificates are complete and accurate
as of the date hereof, and will be complete and accurate as of the Effective
Time. Our opinions cannot be relied upon if any of the facts contained in the
certificate of HFNC or FCC is, or later becomes, inaccurate.
Based on the foregoing, and subject to the assumptions and qualifications
set forth in the Registration Statement under the caption "Description of
Transaction--Federal Income Tax Consequences of the Merger," it is our opinion
under presently applicable federal income tax law that:
(i) the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code;
(ii) no gain or loss will be recognized by holders of HFNC
Common Stock who exchange all of their HFNC Common Stock solely for FCC
Common Stock pursuant to the Merger (except with respect to any cash
received in lieu of a fractional share interest in FCC Common Stock);
(iii) the tax basis of the FCC Common Stock received by holders
of HFNC Common Stock who exchange all of their HFNC Common Stock solely
for FCC Common Stock in the Merger will be the same as the tax basis of
the HFNC Common Stock surrendered in exchange for the FCC Common Stock
(reduced by an amount allocable to a fractional share interest in FCC
Common Stock for which cash is received);
(iv) the holding period of the FCC Common Stock received by
holders who exchange all of their HFNC Common Stock solely for FCC
Common Stock in the Merger will be the same as the holding period of
the HFNC Common Stock surrendered in exchange therefor, provided that
such HFNC Common Stock is held as a capital asset at the Effective
Time; and
<PAGE> 3
First Charter Corporation
July 31, 1998
Page 3
(v) The payment of cash to the holders of HFNC Common Stock in
lieu of fractional share interests of FCC Common Stock will be treated
for federal income tax purposes as if the fractional shares were
distributed as part of the exchange and then were redeemed by FCC.
These cash payments will be treated as having been received as
distributions in full payment in exchange for the stock redeemed, as
provided in Section 302(a) of the Code.
Holders of HFNC Common Stock who sell HFNC Common Stock to FCC pursuant to
FCC's repurchase of up to 750,000 shares of FCC Common Stock, including
purchases on an equivalent basis of shares of HFNC Common Stock, may have
different treatment. For example, if cash received in any such sales is
determined to be consideration in addition to the FCC Common Stock issued
pursuant to the Merger, no loss will be recognized by holders of HFNC Common
Stock who participate in such sales. However, gain, if any, will be recognized
by such holders of HFNC Common Stock in an amount equal to the excess of the
fair market value of the FCC Common Stock received (including any fractional
share interest) and the cash received pursuant to such sales over such holder's
tax basis in the HFNC Common Stock exchanged therefor, but not in excess of the
total cash received. Any such gain may be characterized as ordinary income and
not capital gain pursuant to the provisions of Section 302 of the Code.
Our opinion is based upon existing statutory, regulatory, and judicial
authority, any of which may be changed at any time with retroactive effect. Our
opinion does not address the tax consequences applicable to special classes of
taxpayers including, without limitation, shareholders of HFNC who hold their
stock other than as a capital asset, non-U.S. shareholders, tax exempt entities
and persons who acquired the HFNC stock as compensation. Our opinion is limited
to the tax matters specifically covered herein, and we have not been asked to
address, nor have we addressed, any other tax consequences of the Merger,
including for example, any issues related to intercompany transactions, changes
in accounting methods resulting from the Merger, or the consequences of the
Merger under state, local or foreign law.
This opinion is being provided solely for the benefit of FCC. No other
person or party shall be entitled to rely on this opinion.
We hereby consent to the use of this opinion and to the references made to
Alston & Bird LLP in the Registration Statement under the captions
"Summary--Federal Income Tax Consequences of the Merger" and "Description of
Transaction--Federal Income Tax
<PAGE> 4
First Charter Corporation
July 31, 1998
Page 4
Consequences of the Merger" and to the filing of the opinion as an exhibit to
the Registration Statement.
Very truly yours,
ALSTON & BIRD LLP
By:________________________________________
Terence J. Greene, a partner of the firm
TJG:SA:mlt
[AD982120.040]
<PAGE> 1
EXHIBIT 8.2
July 31, 1998
HFNC Financial Corp.
139 South Tryon Street
Charlotte, North Carolina 28202
Gentlemen:
We have acted as counsel to HFNC Financial Corp., a North
Carolina-chartered corporation ("HFNC"), in connection with the contemplated
merger under the laws of the State of North Carolina and the United States (the
"Merger") of HFNC with and into First Charter Corporation, a North
Carolina-chartered corporation ("FCC"), pursuant to an Agreement and Plan of
Merger, dated as of May 17, 1998, and as amended as of July 29, 1998 (the
"Agreement"), by and among HFNC and FCC. The delivery of this opinion is a
condition to the Merger pursuant to Section 9.1(g) of the Agreement. Each term
capitalized and not defined herein shall have the meaning ascribed to such term
in the Agreement. Also, in connection with the Merger, FCC intends to
repurchase, from time to time in open market transactions or in privately
negotiated transactions, up to 750,000 shares of FCC Common Stock.
In rendering our opinion, we have examined and relied upon the accuracy
and completeness of the facts, information, covenants and representations
contained in originals or copies, certified or otherwise identified to our
satisfaction, of the Agreement, and such other documents as we have deemed
necessary or appropriate as a basis for the opinion set forth below. In
addition, we have relied upon certain statements, representations and agreements
made by FCC and HFNC, including representations set forth in the Certificate of
Representations of FCC dated July 31, 1998, and the Certificate of
Representations of HFNC dated July 31, 1998, (collectively, the
<PAGE> 2
HFNC Financial Corp.
July 31, 1998
Page 2
"Representation Letters"). Our opinion is conditioned on, among other things,
the initial and continuing accuracy of the facts, information, covenants and
representations set forth in the documents referred to above and the statements,
representations and agreements made by FCC and HFNC, including those set forth
in the Representation Letters.
In our examination we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies and the authenticity of the
originals of such documents. We also have assumed that the transactions related
to the Merger or contemplated by the Agreement will be consummated in accordance
with the Agreement, and that the Merger qualifies as a statutory merger under
the laws of the State of North Carolina and the United States.
In rendering our opinion, we have considered the applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations
promulgated thereunder, pertinent judicial authorities, interpretive rulings of
the Internal Revenue Service and such other authorities as we have considered
relevant. It should be noted that statutes, regulations, judicial decisions and
administrative interpretations are subject to change at any time and, in some
circumstances, with retroactive effect. A change in the authorities upon which
our opinion is based could affect our conclusions.
Opinion
Based solely upon the foregoing, we are of the opinion that under current
law the Merger will be treated, for federal income tax purposes, as a
reorganization within the meaning of Section 368(a) of the Code and that,
accordingly, for federal income tax purposes:
(i) no gain or loss will be recognized by holders of HFNC Common
Stock who exchange all of their HFNC Common Stock solely for
FCC Common Stock pursuant to the Merger (except with respect
to any cash received in lieu of a fractional share interest
in FCC Common Stock);
(ii) the tax basis of the FCC Common Stock received by holders of
HFNC Common
<PAGE> 3
HFNC Financial Corp.
July 31, 1998
Page 3
Stock who exchange all of their HFNC Common Stock solely for
FCC Common Stock in the Merger will be the same as the tax
basis of the HFNC Common Stock surrendered in exchange for
the FCC Common Stock (reduced by an amount allocable to a
fractional share interest in FCC Common Stock for which cash
is received);
(iii) the holding period of the FCC Common Stock received by
holders who exchange all of their HFNC Common Stock solely
for FCC Common Stock in the Merger
will be the same as the holding period of the HFNC Common Stock
surrendered in exchange therefor, provided that such HFNC Common Stock is
held as a capital asset at the Effective Time; and
(iv) The payment of cash to the holders of HFNC Common Stock in
lieu of fractional share interests of FCC Common Stock will
be treated for federal income tax purposes as if the
fractional shares were distributed as part of the exchange
and then were redeemed by FCC. These cash payments will be
treated as having been received as distributions in full
payment in exchange for stock redeemed, as provided
in Section 302(a) of the Code.
Holders of HFNC Common Stock who sell HFNC Common Stock to FCC pursuant
to FCC's repurchase of up to 750,000 shares of FCC Common Stock, including
purchases on an equivalent basis of shares of HFNC Common Stock may have
different treatment. For example, if cash received in any such sales is
determined to be consideration in addition to the FCC Common Stock issued
pursuant to the Merger, no loss will be recognized by holders of HFNC Common
Stock who participate in such sales. However, gain, if any, will be recognized
by such holders of HFNC Common Stock in an amount equal to the excess of the
fair market value of the FCC Common Stock received (including any fractional
share interest) and the cash received pursuant to any such sales over such
holder's tax basis in the HFNC Common Stock exchanged therefor, but not in
excess of the total cash received. Any such gain may be characterized as
ordinary income and not capital gain pursuant to the provisions of Section 302
of the Code.
Except as set forth above, we express no opinion to any party as to
the tax consequences, whether federal, state, local or foreign, of the Merger or
of any transactions related to the Merger or contemplated by the Agreement.
This opinion is solely for your benefit and is not to be used, circulated,
quoted or otherwise referred to for any purpose without our express written
permission.
We hereby consent to the use of this opinion and to the references
made to Elias, Matz, Tiernan & Herrick L.L.P. in FCC's Registration Statement on
Form S-4 filed by FCC with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, on July 31, 1998 (the "Registration
Statement") under the captions "Summary - Certain Federal Income Tax
Consequences of the Merger" and "Description of Transaction -Certain Federal
Income Tax Consequences of the Merger" and to the filing of the opinion as an
exhibit to the Registration Statement.
<PAGE> 4
HFNC Financial Corp.
July 31, 1998
Page 4
Very truly yours,
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
By: /s/ KEVIN M. HOULIHAN
------------------------------------
Kevin M. Houlihan, a Partner
<PAGE> 1
EXHIBIT 23.1
The Board of Directors
First Charter Corporation:
We consent to the use of our reports incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Charlotte, North Carolina
July 31, 1998
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
First Charter Corporation on Form S-4 of our report dated August 12, 1997,
appearing in and incorporated by reference in the Annual Report on Form 10-K of
HFNC Financial Corp. for the year ended June 30, 1997 and to the reference to
us under the headings "Experts" and "Description of Transaction - Conditions to
Consummation of the Merger" in the Joint Proxy Statement/Prospectus, which is
part of this Registration Statement.
DELOITTE & TOUCHE LLP
Hickory, North Carolina
July 31, 1998
<PAGE> 1
EXHIBIT 23.5
CONSENT OF SANDLER O'NEILL & PARTNERS, L.P.
We hereby consent to the inclusion of our opinion letter, dated
May 17, 1998, to the Board of Directors of HFNC Financial Corp. (the "Company")
as Appendix B to the Joint Proxy Statement/Prospectus relating to the proposed
merger of the Company with and into First Charter Corporation contained in the
Registration Statement on Form S-4 as filed with the Securities and Exchange
Commission on the date hereof, and to the references to our firm and such
opinion in such Joint Proxy Statement/Prospectus. In giving such consent, we do
not admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended (the "Act"),
or the rules and regulations of the Securities and Exchange Commission
thereunder (the "Regulations"), nor do we admit that we are experts with respect
to any part of such Registration Statement within the meaning of the term
"experts" as used in the Act or the Regulations.
July 31, 1998
<PAGE> 1
EXHIBIT 23.6
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the use in this Registration Statement on Form S-4
of our letter to the Board of Directors of First Charter Corporation, included
as Appendix C to the Joint Proxy Statement/Prospectus that is a part of this
Registration Statement, and to the references to such letter and to our firm in
such Joint Proxy Statement/Prospectus. In giving such consent we do not thereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or the rules and regulations of
the Securities and Exchange Commission thereunder.
WHEAT FIRST SECURITIES, INC.
Richmond, Virginia
Date: July 31, 1998
<PAGE> 1
EXHIBIT 23.7
CONSENT OF DIRECTOR/DESIGNEE
The undersigned hereby consent, pursuant to Rule 438 of the Securities Act
of 1933, as amended, to the reference to him under the caption "DESCRIPTION OF
TRANSACTION -- Interests of Certain HFNC Persons in the Merger," in the Joint
Proxy Statement/Prospectus, which is part of this Registration Statement on Form
S-4.
/s/ RAY W. BRADLEY, JR.
--------------------------------------
Ray W. Bradley, Jr.
/s/ JOE M. LOGAN
--------------------------------------
Joe M. Logan
/s/ JOHN M. MCCASKILL
--------------------------------------
John M. McCaskill
/s/ WILLIE E. ROYAL
--------------------------------------
Willie E. Royal
Charlotte, North Carolina
July 31, 1998
<PAGE> 1
EXHIBIT 99.1
REVOCABLE PROXY
HFNC FINANCIAL CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby constitutes and appoints and
, or either of them, as proxies, each with full power of
substitution, to vote the number of shares of common stock of HFNC Financial
Corp. ("HFNC") which the undersigned would be entitled to vote if personally
present at the Special Meeting of HFNC shareholders to be held at
, at 10:00 a.m., local time, on September 29, 1998, and at any
adjournment or postponement thereof (the "HFNC Special Meeting"), upon the
proposals described in the Joint Proxy Statement/Prospectus and the Notice of
HFNC Special Meeting of Shareholders, both dated August , 1998, the receipt of
which is acknowledged in the manner specified below. The undersigned hereby
revokes all prior proxies given to vote shares of common stock at the HFNC
Special Meeting.
1. MERGER. To consider and vote upon a proposal to approve the Amended
and Restated Agreement and Plan of Merger (the "Agreement"), dated as of May 17,
1998, by and between HFNC and First Charter Corporation, a North Carolina
corporation ("FCC"), pursuant to which (i) HFNC will merge (the "Merger") with
and into FCC, with the effect that FCC will be the surviving corporation
resulting from the Merger, and (ii) each share of the $.01 par value common
stock of HFNC ("HFNC Common Stock") issued and outstanding at the effective time
of the Merger (excluding shares held by HFNC or FCC, or their respective
subsidiaries, in each case other than shares held in a fiduciary capacity or as
a result of debts previously contracted) will be converted into and exchanged
for .57 of a share (subject to possible adjustment as set forth in the
Agreement) of the no par value common stock of FCC, and cash in lieu of issuing
any fractional share. A copy of the Agreement is included in Appendix A to the
accompanying Joint Proxy Statement/Prospectus and is incorporated by reference
therein.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. OTHER BUSINESS. To transact such other business as may come properly
before the HFNC Special Meeting or any adjournments or postponements of the HFNC
Special Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER, IF NO DIRECTION IS MADE THIS PROXY WILL
BE VOTED FOR PROPOSAL 1 ABOVE.
PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS PROXY CARD. WHEN SHARES ARE
HELD BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY-IN-FACT,
EXECUTOR, ADMINISTRATOR, PERSONAL REPRESENTATIVE, TRUSTEE OR GUARDIAN, PLEASE
GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY
PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED PERSON.
Dated:
--------------------------, 1998
--------------------------------------
SIGNATURE
--------------------------------------
SIGNATURE, IF HELD JOINTLY
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
<PAGE> 1
EXHIBIT 99.2
FIRST CHARTER CORPORATION
The undersigned hereby constitutes and appoints and
, or either of them, as proxies, each with full power of
substitution, to vote the number of shares of common stock of First Charter
Corporation ("FCC") which the undersigned would be entitled to vote if
personally present at the Special Meeting of FCC shareholders to be held at
, at 10:00 a.m., local time, on September 29, 1998, and at any
adjournment or postponement thereof (the "FCC Special Meeting"), upon the
proposals described in the Joint Proxy Statement/Prospectus and the Notice of
FCC Special Meeting of Shareholders, both dated August , 1998, the receipt of
which is acknowledged in the manner specified below. The undersigned hereby
revokes all prior proxies given to vote shares of common stock at the FCC
Special Meeting.
1. MERGER. To consider and vote upon a proposal to approve the Amended
and Restated Agreement and Plan of Merger (the "Agreement"), dated as of May 17,
1998, by and between HFNC and First Charter Corporation, a North Carolina
corporation ("FCC"), pursuant to which (i) HFNC will merge (the "Merger") with
and into FCC, with the effect that FCC will be the surviving corporation
resulting from the Merger, and (ii) each share of the $.01 par value common
stock of HFNC ("HFNC Common Stock") issued and outstanding at the effective time
of the Merger (excluding shares held by HFNC or FCC, or their respective
subsidiaries, in each case other than shares held in a fiduciary capacity or as
a result of debts previously contracted) will be converted into and exchanged
for .57 of a share (subject to possible adjustment as set forth in the
Agreement) of the no par value common stock of FCC ("FCC Common Stock"), and
cash in lieu of issuing any fractional share. A copy of the Agreement is
included in Appendix A to the accompanying Joint Proxy Statement/Prospectus and
is incorporated by reference therein.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. FCC ARTICLES AMENDMENT. To consider and vote upon a proposal to
approve an amendment to the Amended and Restated Articles of Incorporation of
FCC (the "FCC Articles Amendment") to increase the number of authorized shares
of FCC Common Stock from 25,000,000 to 50,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. OTHER BUSINESS. To transact such other business as may come properly
before the FCC Special Meeting or any adjournments or postponements of the FCC
Special Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1 ABOVE.
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. WHEN SHARES ARE HELD JOINTLY,
BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE SIGN IN FULL
CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
DATED:
--------------------------, 1998
--------------------------------------
SIGNATURE
--------------------------------------
SIGNATURE IF HELD JOINTLY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
FIRST CHARTER CORPORATION
AND MAY BE REVOKED PRIOR TO ITS EXERCISE.
