SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. ___)
Filed by the Registrant [ X ]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2)
[ X ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FIRST CHARTER CORPORATION
(Name of Registrant as Specified in Its Charter)
FIRST CHARTER CORPORATION
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total Fee Paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
FIRST CHARTER CORPORATION
22 Union Street, North
Concord, North Carolina 28025
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held on April 28, 1998
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of First Charter
Corporation will be held at the Cabarrus Country Club, located on
Weddington Road NW, Concord, North Carolina on Tuesday, April 28,
1998, at 5:00 p.m., for the following purposes:
1. To elect four directors for three-year terms expiring
in 2001, one director for a two-year term expiring in
2000 and two directors for one-year terms expiring in
1999;
2. To consider and vote upon a proposal to approve the
Corporation's 1999 Employee Stock Purchase Plan;
3. To ratify the action of the Board of Directors in
selecting KPMG Peat Marwick LLP as independent public
accountants to audit the books of the Corporation for
the current year; and
4. To transact such other business as may properly come
before the meeting or any adjournment or adjournments
thereof.
Pursuant to the provisions of the North Carolina Business
Corporation Act, February 20, 1998 has been fixed as the record
date for the determination of shareholders entitled to notice of
and to vote at such Annual Meeting and, accordingly, only holders
of Common Stock of record at the close of business on that date
will be entitled to notice of and to vote at such meeting and at
any adjournment or adjournments thereof.
You are cordially invited to attend the Annual Meeting.
Whether or not you plan to attend, please sign, date and return
the accompanying proxy promptly, so that your shares may be
represented and voted at the Annual Meeting. A return envelope
is enclosed for your convenience.
By order of the Board of Directors,
/s/ JAMES W. TOWNSEND, JR.
James W. Townsend, Jr.
Secretary
March 17, 1998
<PAGE>
FIRST CHARTER CORPORATION
22 Union Street, North
Concord, North Carolina 28025
______________________________
PROXY STATEMENT
______________________________
1998 Annual Meeting of Shareholders
to be held on April 28, 1998
The following proxy statement, first mailed or delivered to
security holders on or about March 17, 1998, is furnished in
connection with the solicitation by the Board of Directors of
First Charter Corporation (the "Corporation") of proxies for the
Annual Meeting of Shareholders of the Corporation to be held on
April 28, 1998 at 5:00 p.m. at the Cabarrus Country Club, located
on Weddington Road NW, Concord, North Carolina, and at any
adjournment or adjournments thereof (the "Annual Meeting"). The
principal executive offices of the Corporation are located at 22
Union Street, North, Concord, North Carolina 28025. The
Corporation's telephone number is (704) 786-3300. The Corporation
owns all of the outstanding capital stock of First Charter
National Bank, a national banking association ("FCNB"), and Bank
of Union, a North Carolina state-chartered commercial bank
("Union").
The accompanying form of proxy is for use at the Annual
Meeting if a shareholder either will be unable to attend in
person or will attend but wishes to vote by proxy. The proxy may
be revoked in writing by the person giving it at any time before
it is exercised by notice to the Secretary of the Corporation or
by submitting a proxy having a later date, or it may be revoked
by such person appearing at the Annual Meeting and electing to
vote in person. All shares of the Corporation's common stock
(the "Common Stock") represented by valid proxies received
pursuant to this solicitation, and not revoked before they are
exercised, will be voted in the manner specified therein. Where
specifications are not made, proxies will be voted in favor of
(i) electing as directors of the Corporation the seven nominees
named in this Proxy Statement, to serve for the periods specified
herein, (ii) approving the Corporation's 1999 Employee Stock
Purchase Plan and (iii) ratifying the action of the Board of
Directors in selecting KPMG Peat Marwick LLP to audit the books
of the Corporation for the current year, and will be voted in the
discretion of the proxy holders on any other matters presented at
the Annual Meeting.
The entire cost of soliciting these proxies will be borne by
the Corporation. In following up the original solicitation of
the proxies by mail, the Corporation will request brokers and
others to send proxies and proxy material to the beneficial
owners of the Common Stock and will reimburse them for their
expenses in so doing. If necessary, the Corporation may also use
one or more of its regular employees, who will not be specially
compensated therefor, to solicit proxies from the shareholders,
either in person, by telephone or by mail.
2
Pursuant to the provisions of the North Carolina Business
Corporation Act, as amended, February 20, 1998 has been fixed as
the record date in connection with the Annual Meeting and,
accordingly, only holders of the 9,310,419 shares of Common Stock
of record and outstanding at the close of business on that date
will be entitled to notice of and to vote at the Annual Meeting.
Each share of Common Stock is entitled to one vote on each of the
matters to be voted upon at the Annual Meeting, except that
shares held by FCNB, whether or not held in a fiduciary capacity,
may not be voted by FCNB in the election of directors. The
holders of a majority of the outstanding shares entitled to be
cast on a matter must be present in person or represented by
proxy at the Annual Meeting in order to constitute a quorum for
the transaction of business on that matter. In accordance with
North Carolina law, votes withheld from director nominees and
abstentions from voting will be counted for purposes of
determining whether a quorum has been reached at the Annual
Meeting. Furthermore, pursuant to the rules of certain national
securities exchanges or associations, a broker holding shares of
Common Stock in nominee or "street" name must in certain
circumstances obtain specific voting instructions from beneficial
owners of such shares in order to vote such shares. Any such
shares represented by a duly executed proxy returned by a broker
will be counted for purposes of determining whether a quorum
exists, even if such shares are not voted in certain matters
where voting instructions were not received ("broker non-votes").
PRINCIPAL SHAREHOLDERS
The following table sets forth each shareholder known to the
Corporation to beneficially own more than 5% of the outstanding
shares of the Common Stock as of December 31, 1997.
Shares
Beneficially Owned (1)
----------------------------
Name and Address Number Percent of Class
- ------------------ -------- ----------------
First Union National Bank
of North Carolina
Capital Management Group
401 South Tryon Street
Charlotte, North Carolina 28202 489,669 (2) 5.3%
First Charter National Bank
Post Office Box 228
Concord, North Carolina 28025 964,883 (3) 10.4%
________________________________
(1) Unless otherwise noted, all shares of Common Stock set forth
in the table are directly owned, with sole voting and
investment power, by such shareholder. The Corporation has
obtained certain of the information from schedules filed
with the Securities and Exchange Commission pursuant to
Section 13(g) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(2) Includes 381,964 shares held in various fiduciary capacities
with respect to which First Union National Bank has shared
voting power and 107,705 shares held in various fiduciary
capacities with respect to which it has sole voting power.
First Union National Bank has shared investment power with
regard to 455,521 shares and sole investment power with
respect to 33,898 shares.
(3) Includes 873,485 shares held in various fiduciary capacities
with respect to which FCNB has sole voting power and 91,398
shares held in various fiduciary capacities with respect to
which it has shared voting power. FCNB has sole investment
power with respect to 155,159 shares and shared investment
power with respect to 98,032 shares.
3
ELECTION OF DIRECTORS
Under the Corporation's Articles of Incorporation and
Bylaws, the Board of Directors of the Corporation shall have not
fewer than five nor more than twenty-five members as determined
from time to time by not less than 75% of the members of the
Board of Directors or by the shareholders of the Corporation, and
the directors shall be divided into three classes having
staggered three-year terms. The Corporation's Bylaws provide
that the term of a director shall expire at the first
shareholders' meeting following the date on which such director
reaches age 70.
In July 1997, in connection with a reorganization of the
Boards of Directors of the Corporation and its subsidiaries, each
of Jane B. Brown, Grady S. Carpenter, Robert F. Lowrance, T.
David Propst, Robert L. Wall and James B. Widenhouse resigned
from, and Thomas R. Revels was elected as a member of, the Board
of Directors of the Corporation. Furthermore, in December 1997,
T. Carl Dedmon, John J. Godbold and Charles F. Harry III were
elected to the Board of Directors in connection with the merger
of Carolina State Bank ("CSB") into FCNB (the "CSB/FCNB Merger").
As a result of these events, currently there are fifteen
directors of the Corporation. The terms of eight of these
directors expire at the Annual Meeting. In accordance with the
Corporation's mandatory retirement age bylaw, Branson C. Jones,
whose term expires at the Annual Meeting, is retiring from the
Board and is not standing for re-election at the Annual Meeting.
The Board of Directors has determined not to fill the vacancy
created by Mr. Jones' retirement and, pursuant to the Bylaws, has
decreased the number of directors from fifteen to fourteen.
The Board has nominated for re-election the seven remaining
members of the Board of Directors whose terms expire at the
Annual Meeting. It is intended that the persons named in the
accompanying form of proxy will vote to elect the seven nominees
listed below, each to serve until the annual meeting of
shareholders in the year indicated or until such person's earlier
resignation or retirement or until his successor shall be elected
and shall qualify to serve, in each case unless authority to so
vote is withheld. Although the Board of Directors expects that
each of the nominees will be available for election, if a vacancy
in the slate of nominees is caused by death or other unexpected
occurrence, it is intended that shares represented by proxies in
the accompanying form will be voted for the election of a
substitute nominee selected by the persons named in the proxy.
Directors will be elected by a plurality of the votes cast.
Accordingly, neither votes withheld from director nominees nor
broker non-votes, if any, will have the effect of a "negative"
vote with respect to the election of directors. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE NOMINEES FOR ELECTION
AS DIRECTORS.
4
The names of the nominees for election to the Board of
Directors and of the continuing directors, their ages, their
principal occupations or employment for the past five years, and
certain other information with respect to such persons is set
forth below.
Nominees for Terms Expiring in 2001
J. KNOX HILLMAN, JR., age 56, is the principal owner and Chief
Executive Officer of Shuford Insurance Agency, Inc., a general
insurance agency. He has been a director since 1984.
LAWRENCE M. KIMBROUGH, age 57, is the President and Chief
Executive Officer of the Corporation and FCNB. He has been a
director since 1986.
DR. JERRY E. McGEE, age 55, is President of Wingate University.
Prior to being President of Wingate University, Dr. McGee served
as Vice President for Development at Furman University. Dr.
McGee has been a director since 1995.
THOMAS R. REVELS, age 45, has been President and Chief Executive
Officer of Novant Health, Inc., Southern Piedmont
Region/Presbyterian Healthcare ("Novant"), a healthcare services
company, since January 1998. Prior to being President and Chief
Executive Officer of Novant, Mr. Revels served as President and
Chief Executive Officer of Northeast Medical Center, a healthcare
services company, from April 1997 to December 1997. Prior to
that time, from May 1994 to April 1997, he served as President
and Chief Executive Officer of Cabarrus Memorial Hospital, a
healthcare services company. From October 1989 to May 1994, Mr.
Revels served as Executive Vice President and Chief Operating
Officer of McLeod Regional Medical Center, a healthcare services
company. Mr. Revels has been a director since July 1997.
Nominee for Term Expiring in 2000
CHARLES F. HARRY III, age 61, is President of Grover Industries,
Inc., a textile company. Prior to the CSB/FCNB Merger, Mr. Harry
served as Chairman of the Board of CSB. Mr. Harry has been a
director since December 1997.
Nominees for Terms Expiring in 1999
T. CARL DEDMON, age 69, is President of N/S Carolina Storage
Systems, Inc., a municipal and industrial storage systems sales
company. Prior to the CSB/FCNB Merger, Mr. Dedmon served as a
director of CSB. Mr. Dedmon has been a director since December
1997.
JOHN J. GODBOLD, JR., age 56, is the Executive Vice President of
FCNB. Prior to the CSB/FCNB Merger, Mr. Godbold served as
President and Chief Executive Officer and a director of CSB. Mr.
Godbold has been a director since December 1997.
5
Continuing Directors with Terms Expiring in 2000
MICHAEL R. COLTRANE, age 51, is the President and Chief Executive
Officer of CT Communications, Inc., a North Carolina
telecommunications company. Mr. Coltrane also serves as the Vice
Chairman of the Corporation and of FCNB. He served as director
of the Corporation from 1983 until 1985 and has currently served
as a director since 1988. Mr. Coltrane also serves as a director
of CT Communications, Inc.
J. ROY DAVIS, JR., age 64, is the principal owner and Chief
Executive Officer of S&D Coffee, Inc., a coffee roasting and
beverage distribution firm. He also serves as the Chairman of
the Board of the Corporation and FCNB. Mr. Davis has been a
director since 1983.
JAMES B. FINCHER, age 68, is the owner and President of Mineral
Springs Milling and Farm Supplies, Inc., a provider of wholesale
and retail agricultural supplies. He is also the owner and Vice
President of Frontier Meat Processing, Inc., a provider of
wholesale and retail meat processing services, and Vice President
of FAFCO, Inc., a real estate development and rental company.
Mr. Fincher has been a director since 1995.
HUGH H. MORRISON, age 50, is the President of E. L. Morrison Co.,
Inc., a retail building supply company. He has been a director
since 1985.
Continuing Directors With Terms Expiring in 1999
WILLIAM R. BLACK, age 49, is a medical doctor specializing in
oncology. He has been a director since 1990.
H. CLARK GOODWIN, age 63, is the President and Chief Executive
Officer of Union. Mr. Goodwin has been a director since 1995.
FRANK H. HAWFIELD, JR., age 64, is the owner of Firestone Home
and Auto Supply Store, a retail home and auto supply company. He
is also the Chairman of the Board of Union. Mr. Hawfield has
been a director since 1995.
J. Knox Hillman, Jr.'s daughter, Frances H. Brown, is
married to Jane B. Brown's son, Michael B. Brown. No other
director has a family relationship as close as first cousin with
any other director, nominee for director or executive officer of
the Corporation.
Compensation of Directors
During 1997, each director of the Corporation who was not
employed by the Corporation or its subsidiaries (an "outside
director") was paid $400 for each meeting of the Board of
Directors of the Corporation which such director attended and
$200 for each Corporation committee meeting such director
attended. In addition, effective as of the third quarter of
1997, each such outside director of the Corporation is paid $250
per quarter for his or her services as a director. The
Corporation also maintains the Deferred Compensation Plan for
Non-Employee Directors (the "Deferred
6
Compensation Plan"), pursuant to which outside directors may elect to
defer all or a portion of such director fees. Such deferred fees may be
invested in a cash account, which is credited with interest at an
annual rate equal to FCNB's Prime Rate, or in a stock-based
account, in which the participant will be credited with units
based on the value of shares of Common Stock of the Corporation.
Amounts invested in the stock account are credited with
additional amounts representing the value of dividends declared
from time to time by the Corporation. Under the Deferred
Compensation Plan, a participant may elect to receive amounts
(payable in cash only) in a lump sum or in equal installments
over five years, following the participant's death, disability,
retirement from the Board of Directors or any other date selected
by the participant which is at least six months following the
participant's election date.
The Corporation also maintains the Stock Option Plan for
Non-Employee Directors ("the Director Option Plan"), pursuant to
which the Compensation Committee from time to time may grant
non-qualified options to purchase the Common Stock to outside
directors of the Corporation or a subsidiary. The terms and
provisions of any such options, including the termination and/or
vesting or accelerated exercise of the options, upon death,
disability, retirement or otherwise, is subject to the discretion
of the Compensation Committee. The exercise price of any option,
however, shall be equal to the fair market value of the Common
Stock on the date of grant. In February 1997 and in May 1997,
the Compensation Committee granted an option to purchase 600
shares of Common Stock and an option to purchase 1,200 shares of
Common Stock, respectively (each as adjusted for the 6-for-5
stock split declared in the second quarter of 1997), to each of
the outside directors of the Corporation and its subsidiaries at
that time, including Messrs. Black, Coltrane, Davis, Fincher,
Jones, Hawfield, Hillman, McGee, and Morrison, as well as Ms.
Brown and Messrs. Carpenter, Lowrance, Propst, Wall and
Widenhouse. Generally, the options granted to these persons have
terms of ten years and are exercisable in cumulative installments
of 20% per year over five years, at an exercise price of $17.71
per share and $25.50 per share, respectively (the fair market
value on the respective date of grant, as adjusted), except (i)
Mr. Fincher's option to purchase 600 shares has a term of five
years and is exercisable in cumulative installments of 33 1/3%
over three years and will remain exercisable for two years
following his retirement from the Board of Directors, (ii) each
of Messrs. Jones' and Widenhouse's option to purchase 600 shares
has a term of three years and is exercisable in full one year
from the date of grant and will remain exercisable for two years
following his retirement from the Board of Directors, and (iii)
Mr. Carpenter's option to purchase 600 shares has a term of four
years and is exercisable in cumulative installments of 50% over
two years and will remain exercisable for two years following his
retirement from the Board of Directors.
Attendance of Directors
During 1997, each member of the Board of Directors of the
Corporation attended at least 75% of the total number of meetings
of the Board of Directors and any committee or committees on
which such director served, except for Mr. Revels. The Board of
Directors met 11 times during 1997.
7
Committees of the Board of Directors
The Corporation has Executive, Audit, Compensation and
Asset/Liability Management Committees. The Executive Committee
reviews the regularly scheduled Board of Directors meeting
agendas. This Committee receives various reports from management
and makes recommendations based on management reports to the
directors at the regularly scheduled Board of Directors meetings.
Pursuant to the Corporation's Bylaws, the Executive Committee
also serves as the nominating committee. In such capacity, the
Executive Committee determines the nominees for director in a
given year and may consider written nominations of candidates for
election to the Board of Directors submitted by shareholders to
the Secretary of the Corporation that are accompanied by certain
information regarding such nominees. See "Election of Directors
- -- Nominations for Director."
The Audit Committee reviews the work and reports of the
Corporation's internal auditors and, on an annual basis, reviews
reports of the Corporation's independent auditors and any
examinations of regulatory agencies. The Audit Committee also
establishes the scope and detail of the audit program, which is
conducted by the internal auditors to protect against improper
and unsound practices and to furnish adequate protection of all
assets and records. It also reviews proposals from the
independent public accountants and makes recommendations to the
full Board of Directors.
The Compensation Committee annually reviews and recommends
to the Board of Directors salary grade ranges and merit increase
guidelines for employees of the Corporation and its subsidiaries.
In addition, it recommends to the Board of Directors the annual
budget request for all salaries and overtime and specifically
recommends to the Board of Directors all executive officers'
salaries. It reviews recommendations from management regarding
major benefit plans and recommends to the Board of Directors
annually the formula for matching contributions to the First
Charter Retirement Savings Plan as well as the formula for
funding and payments under the Corporation's Executive Incentive
Bonus Plan. The Compensation Committee also grants options under
and administers the Corporation's Comprehensive Stock Option
Plan, the 1998 Employee Stock Purchase Plan and the Stock Option
Plan for Non-Employee Directors and will grant options under and
administer the Corporation's 1999 Employee Stock Purchase Plan.
In order to comply with certain restrictions under Rule 16b-3,
the Compensation Committee generally will be composed solely of
directors who qualify as "non-employee directors," as that term
is defined under Section 16 of the Exchange Act.
The Asset/Liability Management Committee monitors the
financial condition of the Corporation and makes adjustments in
policies affecting lending, pricing of services, investment
securities and liability positions with a view to current and
anticipated interest rates and other economic conditions.
8
The current members of each Committee are, and the number of
meetings held by each Committee during 1997 were, as follows:
EXECUTIVE (12 meetings) COMPENSATION COMMITTEE (7 meetings)
Michael R. Coltrane Michael R. Coltrane
J. Roy Davis, Jr., Chairman J. Roy Davis, Jr.
H. Clark Goodwin Frank H. Hawfield, Jr.
J. Knox Hillman, Jr. J. Knox Hillman, Jr., Chairman
Branson C. Jones Jerry E. McGee
Lawrence M. Kimbrough
Hugh H. Morrison
AUDIT (2 meetings) ASSET/LIABILITY MANAGEMENT COMMITTEE
Michael R. Coltrane (2 meetings)
James B. Fincher William R. Black
Branson C. Jones, Chairman Michael R. Coltrane
J. Roy Davis, Jr.
H. Clark Goodwin
Lawrence M. Kimbrough
Jerry E. McGee, Chairman
Thomas R. Revels
Nominations for Director
The Corporation's Bylaws set forth the procedures for a
shareholder to follow in order to nominate persons for election
to the Board of Directors. Pursuant to these procedures, a
shareholder generally may properly bring a nomination before the
annual meeting of shareholders in a given year if the shareholder
provides written notice to the Corporation's Secretary at least
50 but not more than 75 days prior to the anniversary date of the
shareholders' meeting held in the prior year. This notice must
set forth certain biographical information relating to each
person so nominated by the shareholder. In addition, the notice
must set forth such shareholder's beneficial ownership of the
Common Stock. In its discretion, the Executive Committee of the
Board of Directors may consider such nomination for the Board of
Directors' slate of nominees for that year. The Bylaws also set
forth the time by which nominations shall be submitted in the
event that the annual meeting is held more than 30 days before or
60 days after the anniversary date of the previous year's annual
meeting. Finally, the Bylaws set forth under what circumstances
a shareholder may bring a nomination for director before a
special meeting of shareholders and the time within which such
nomination must be submitted. Unless nominations are presented
in accordance with these provisions of the Bylaws, they will be
disregarded as invalid. Shareholders may obtain a copy of the
Corporation's Bylaws from the Corporation, upon written request
to First Charter Corporation, Post Office Box 228, Concord, North
Carolina, 28026-0228, Attention: Robert O. Bratton, and upon
payment of $25.00 to cover the costs of reproduction and mailing.
9
MANAGEMENT OWNERSHIP OF COMMON STOCK
The following table presents information regarding the
beneficial ownership of the Common Stock as of December 31, 1997
of (i) all current directors and nominees for director, (ii) each
executive officer of the Corporation named in the Summary
Compensation Table contained elsewhere herein and (iii) all
directors, nominees for director and executive officers as a
group.
Shares Beneficially Owned (1)
--------------------------------
Name Number Percent of Class
----- ---------- ----------------
William R. Black 1,813 (2) *
Robert O. Bratton 81,629 (3) *
Michael R. Coltrane 74,639 (4) *
J. Roy Davis, Jr. 30,453 (2) *
T. Carl Dedmon 131,162 1.42%
James B. Fincher 39,578 (5) *
Robert G. Fox 18,744 (6) *
John J. Godbold, Jr. 85,957 (7) *
H. Clark Goodwin 52,695 (8) *
Charles F. Harry III 69,067 *
Frank H. Hawfield, Jr. 16,225 (2) *
J. Knox Hillman, Jr. 6,769 (2) *
Branson C. Jones 37,320 (9) *
Lawrence M. Kimbrough 58,524 (10) *
Edward B. McConnell 5,616 (11) *
Jerry E. McGee 10,514 (2) *
Hugh H. Morrison 32,405 (12) *
Thomas R. Revels 1,870 *
All directors, nominees and
executive officers of the
Corporation as a group
(18 persons) 754,980 8.05%
_______________
*Less than 1%.
(1) Unless otherwise noted, the persons named in the table have
sole voting and investment power over shares included in the
table.
(2) Includes 480 shares represented by options that are
currently exercisable or exercisable within 60 days.
(3) Includes 14,632 shares represented by options that are
currently exercisable or exercisable within 60 days.
(4) Includes 8,647 shares owned by Mr. Coltrane's spouse as to
which he disclaims beneficial ownership and 480 shares
represented by options that are currently exercisable or
exercisable within 60 days.
(5) Includes 800 shares represented by options that are
currently exercisable or exercisable within 60 days.
(6) Includes 12,112 shares represented by options that are
currently exercisable or exercisable within 60 days.
(7) Includes 37,544 shares represented by options that are
currently exercisable or exercisable within 60 days.
(8) Includes 12,240 shares represented by options that are
currently exercisable or exercisable within 60 days.
(9) Includes 1,800 shares represented by options that are
currently exercisable or exercisable within 60 days.
(10) Includes 23,944 shares represented by options that are
currently exercisable or exercisable within 60 days.
(11) Includes 4,536 shares represented by options that are
currently exercisable or exercisable within 60 days.
(12) Includes 260 shares represented by options that are
currently exercisable or exercisable within 60 days.
10
EXECUTIVE COMPENSATION
Summary Compensation Table
The following Summary Compensation Table indicates for the
past three years the compensation of the Chief Executive Officer
and the four additional most highly compensated executive
officers of the Corporation during fiscal year 1997 (the "named
executive officers").
Long Term
Annual Compensation Compensation
Awards
Other Securities
Annual Underlying All Other
Name and Salary Bonus Compensation Options/SARs Compensation
Principal Year ($) ($) ($) (#)(1) ($)
Position(s)
- ----------- ---- -------- ------- ----------- ------------ ------------
Lawrence M.
Kimbrough 1997 $156,546 $120,900 (2) 3,900 $19,110 (3)
President 1996 155,000 91,760 7,056 17,820
and Chief 1995 138,000 91,080 4,920 16,372
Executive
Officer
Robert O.
Bratton 1997 $116,182 $ 67,275 (2) 2,400 $17,396 (4)
Executive 1996 115,000 61,060 3,360 16,106
Vice 1995 102,000 50,490 3,000 11,675
President,
Chief Operating
Officer and
Chief Financial
Officer
Robert G.
Fox 1997 $115,000 $ 67,275 (2) 8,400 $17,373 (5)
Executive 1996 105,000 46,620 4,200 14,892
Vice 1995 100,000 49,500 2,880 11,442
President
H. Clark 1997 $125,020 $ 73,125 (2) 2,100 $27,378 (8)
Goodwin 1996 125,000 55,500 5,100 26,088
President 1995 106,500 42,700 18,000 (7) 19,989
and Chief
Executive
Officer of
Union (6)
Edward B.
McConnell 1997 $115,000 $ 67,275 (2) 2,400 $15,705 (10)
Executive 1996 96,250 32,745 3,792 8,719
President 1995 N/A N/A N/A N/A
(9)
- -----------------
(1) Share information has been adjusted as applicable for the 6-for-5 stock
split declared in the second quarter of 1997.
(2) Represents amounts paid pursuant to the Corporation's
Executive Incentive Bonus Plan. See "Report of Compensation
Committee on Executive Compensation" for a brief description
of the Executive Incentive Bonus Plan.
(3) Consists of (i) $16,770 contributed by the Corporation under
the Retirement Savings Plan and the Money Purchase Pension
Plan (the "Retirement Plans"), and (ii) $2,340 representing
the dollar value of the premium paid by the Corporation for
term life insurance.
(4) Consists of (i) $16,770 contributed by the Corporation under
the Retirement Plans and (ii) $626 representing the dollar
value of the premium paid by the Corporation for term life
insurance.
(5) Consists of (i) $16,747 contributed by the Corporation under
the Retirement Plans and (ii) $626 representing the dollar
value of the premium paid by the Corporation for term life
insurance.
(6) Mr. Goodwin first became an executive officer of the
Corporation upon consummation of the Corporation's
acquisition of Union, effective December 21, 1995.
Compensation information with respect to periods prior to
that date reflect compensation of Mr. Goodwin from Bank of
Union.
(7) Represents options granted pursuant to the terms of the
acquisition of Union by the Corporation.
(8) Consists of (i) $16,770 contributed by the Corporation under
the Retirement Plans and (ii) $10,608 representing the
dollar value of the premium paid by the Corporation for term
life insurance.
(9) Mr. McConnell first became an executive officer of the
Corporation upon his promotion to Executive Vice President
in November 1996.
(10) Consists of (i) $15,601 contributed by the Corporation under
the Retirement Plans and (ii) $104 representing the dollar
value of the premium paid by the Corporation for term life
insurance.
11
Stock Option Plans
The Corporation has in effect the Comprehensive Stock Option
Plan pursuant to which the Compensation Committee may grant stock
options to officers and other key employees of the Corporation
and its subsidiaries. In addition, at fiscal year end, the
Corporation also had in effect the 1996 Employee Stock Purchase
Plan ("1996 ESPP") and the 1998 Employee Stock Purchase Plan
("1998 ESPP"). Pursuant to the 1996 ESPP, no additional options
may be granted, and all options either were exercised or
terminated at fiscal year end 1997. As of fiscal year end, no
options had been granted under the 1998 ESPP.
The following table indicates option grants pursuant to the
Comprehensive Stock Option Plan during fiscal year 1997 to the
named executive officers, adjusted where applicable to reflect
the 6-for-5 stock split declared in the second quarter of 1997.
Option/SAR Grants In Last Fiscal Year
-------------------------------------
Individual Grants
- -----------------------------------------------------------------------------
Number of Percent of
Securities Total Options/
Underlying SARs Granted Exercise
Options/SARs to Employees or Base Grant Date
Granted in Fiscal Price Expiration Present
Name (#)(1) Year ($/Sh) Date Value(2)
- --------------- ---------- ------------ --------- ---------- ---------
L. M. Kimbrough 3,900 8.3% $25.00 12/01/07 $27,822
R. O. Bratton 2,400 5.1% $25.00 12/01/07 $17,121
R. G. Fox 6,000 12.8% $17.60 01/08/07 $29,257
2,400 5.1% $25.00 12/01/07 $17,121
H. C. Goodwin 2,100 4.5% $25.00 12/01/07 $14,981
E. B. McConnell 2,400 5.1% $25.00 12/01/07 $17,121
(1) Represents shares covered by incentive stock options granted
pursuant to the Comprehensive Stock Option Plan. All such
options granted under the Comprehensive Stock Option Plan in
1997 vest at the rate of 20% per year over five years, based
on the date of grant. Such options have an exercise price
equal to 100% of fair market value of such shares on the
date of grant.
(2) Based on the Black-Scholes option pricing model adapted for
use in valuing executive stock options. The estimated
values under the Black-Scholes model for options granted
under the Comprehensive Stock Option Plan are based on the
following assumptions: exercise price is 100% of the fair
market value at date of grant; exercise term is ten years;
no discounts have been taken for vesting or restrictions;
the risk free rate is 5.88% (6.42% for Mr. Fox's options
expiring on January 8, 2007) (based on the 10-year Treasury
note yield as of the date the options were issued); the
volatility factor is 23.46% (based on the preceding 3
years); and the dividend yield is 3.00% (based on the
preceding 12 months). The actual value, if any, an
executive may realize will depend on the excess of the stock
price over the exercise price on the date the option is
exercised, so that there is no assurance the value realized
by an executive will be at or near the value estimated by
the Black-Scholes model.
12
The following table sets forth a summary of certain
information with respect to the exercise of stock options during
1997 by the named executive officers and the value of such
executive's unexercised stock options held at fiscal year end
(including options outstanding under the Comprehensive Stock
Option Plan and options outstanding under the 1996 ESPP). All of
such information has been adjusted where applicable to reflect
the 6-for-5 stock split declared in the second quarter of 1997.
Aggregated Option/SAR Exercises in Last
Fiscal Year and Fiscal Year-End Option/SAR Values
-------------------------------------------------
Number of
Securities
Shares Underlying Value of Unexercised
Acquired Unexercised In-the-money Options/SARs
on Value Options/SARs at at Fiscal Year-End
Exercise Realized Fiscal Year-End(#) ($)(1)
------------------------- -------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---------- ------- ------- ----------- ------------- ----------- -------------
L. M.
Kimbrough 5,595 $85,469 23,944 10,517 $358,660 $65,352
R. O.
Bratton 0 $ 0 14,632 6,480 $218,640 $40,264
R. G.
Fox 1,200 $11,400 10,912 10,984 $139,068 $77,991
H. C.
Goodwin 1,500 $14,250 12,240 11,460 $ 98,940 $77,760
E. B.
McConnell 1,080 $10,260 4,008 6,192 $ 41,308 $38,992
___________________
(1) Determined based on the closing price of $26.00 of the
Common Stock as reported by the Nasdaq National Market as of
December 31, 1997.
Change in Control and Employment Agreements
The Corporation or its subsidiaries have in effect various
employment, change in control or salary continuation agreements
with certain of its executive officers. In particular, with
respect to the named executive officers, the Corporation has
entered into Change in Control Agreements with Messrs. Kimbrough,
Bratton, Fox and McConnell. These agreements provide for certain
payments to such officers in the event their employment is
terminated following a "change in control" of the Corporation.
For purposes of the Agreements, a "change in control" generally
includes a merger or similar transaction involving the
Corporation in which the Corporation's shareholders receive less
than 50% of the voting stock of the surviving corporation, the
sale or transfer of substantially all the Corporation's assets,
certain acquisitions of more than 20% of the Common Stock by any
person or group other than a person or group who owned more than
5% of the Common Stock as of the date of the agreements unless
prior approval of the Board is received, certain instances in
which the composition of the Corporation's Board of Directors
changes by more than 50% during a two year period, or any other
transaction that would constitute a change in control required to
be reported by the Corporation in a proxy statement or the
acquisition of control of the Corporation under applicable
federal banking laws. To be entitled for payments upon such a
change in control, (a) the officer's employment must be
terminated other than for cause, or (b) the officer must
terminate his employment for good reason, in either case within
one year following the change in control. "Cause"
13
is defined generally as willful misconduct, use of narcotics or alcohol
in a manner that affects the officer's duties, conviction of a felony
or serious misdemeanor involving moral turpitude, embezzlement or
theft or gross inattention or dereliction of duty. "Good reason"
generally means a material reduction in the officer's duties or a
change in title resulting in reduction of the officer's duties, a
material reduction in salary or bonus, or the relocation of the
officer to an area more than 30 miles from their primary
employment location immediately preceding a change in control.
The respective agreements of the named executive officers provide
for continued payment of base salary and average bonus amounts,
as well as certain continued benefits provided to employees
generally, for a period of 24 months (35 months in the case of
Mr. Kimbrough) following an event which would entitle such
officer to payments under his agreement.
In addition, Mr. Goodwin currently has an employment
agreement with Union, which terminates on March 31, 2000.
Pursuant to this agreement, Mr. Goodwin serves as the President
and Chief Executive Officer of Union and receives a base salary
of $125,000 per year. Such base salary is reviewed annually by
the Board of Directors of the Corporation, which may increase
such base salary from time to time. Pursuant to the employment
agreement, generally Mr. Goodwin also is entitled to certain
vacation benefits and to participate in discretionary bonuses
granted by Union's board, to participate in Union's retirement
and medical plans and to receive other fringe benefits applicable
to Union's executives. The agreement generally can be terminated
by the Board of Directors of Union at any time upon 30 days'
notice, provided that upon termination by Union for other than
"just cause," Mr. Goodwin is entitled to receive his salary
through the end of the then-current term of the agreement. "Just
cause" is defined generally as personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful
violations of law and material breach of the agreement.
Furthermore, if Mr. Goodwin dies during the term of the
agreement, the agreement is terminated and his estate shall
receive his salary through the end of the month in which his
death occurs, and in certain instances involving action by the
applicable banking regulators, the agreement will be terminated
and Mr. Goodwin will receive salary only through the date of
termination. Finally, upon Mr. Goodwin's disability (as
defined), generally he is entitled to receive his compensation
for 30 days thereafter.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Recommendations regarding the compensation of the
Corporation's executive officers generally are presented by the
Compensation Committee (the "Compensation Committee") to the
Corporation's entire Board of Directors for approval. Each
member of the Compensation Committee currently is a "non-employee
director," as that term is defined under Rule 16b-3 under Section
16 of the Exchange Act ("Rule 16b-3"). The Senior Management
Personnel Committee prepares recommendations on salary grade
ranges and merit increase guidelines for review and approval by
the Compensation Committee as well as the annual budget request
for salaries and benefits. The Senior Management Personnel
Committee approves salaries for all personnel, with the exception
of executive officers, within the parameters of the annual salary
administration program. The Chief Executive Officer ("CEO")
presents recommendations to the Compensation Committee for the
annual salaries of all executive officers other than the CEO.
The Compensation Committee, in turn, reviews and analyzes all
information submitted to it. Thereafter the Compensation
Committee determines its
14
recommendations to the Board of Directors regarding compensation of all
executive officers of the Corporation, including recommendations regarding
the compensation of the CEO. During 1997, the Board of Directors approved
all recommendations of the Compensation Committee.
Set forth below is a report of the Compensation Committee
regarding executive compensation for fiscal year 1997.
Executive Compensation Policies and Program. The
Corporation's executive compensation program is designed to
* Attract and retain qualified management of the
Corporation;
* Enhance short-term financial gains of the Corporation;
and
* Enhance long-term shareholder value in the Corporation.
The total compensation package for executives of the
Corporation includes cash and equity-based compensation. Annual
compensation may consist of a base salary, a bonus and grants of
stock options. The Corporation's policy is generally to provide
base salary that might fall at or below the median base salary
paid to comparable executives, while focusing more on incentive
compensation that is linked to the performance of the
Corporation. The Corporation strives, however, to provide each
executive officer with total annual cash compensation (base
salary and bonus) in an amount that would be paid on the open
market for a fully qualified officer of that position.
During 1997, the Corporation hired an independent consultant
to review the Corporation's annual compensation package for its
executive officers. This consultant generated a report (the
"Report") that provided information for fiscal years 1994-1996
regarding the annual compensation (including base salaries and
bonus), long-term compensation (including stock options) and
total compensation for each of the chief executive officer, chief
financial officer, chief operating officer and other most highly
compensated persons employed by certain other financial
institutions. The Report also set forth the maximum, minimum,
average and median amounts of each such component of
compensation. In general, the Compensation Committee used the
information provided in the Report, adjusted for inflation, to
maintain levels of total annual cash compensation for 1997
(salary and potential bonus amounts, each as discussed below)
that fell at or slightly below the medians as set forth in the
Report.
The peer financial institutions considered by the consultant
represent the top twenty publicly-traded financial institutions,
measured by reference to return on average assets, with assets
from $400 million to $1 billion. The institutions included in
the Report are not necessarily the same group of institutions
that comprise the Independent Bank Index in the Performance Graph
contained elsewhere in this Proxy Statement.
Base Salaries. Generally, the Compensation Committee
determines the level of base salary for the CEO and the four
other executive officers of the Corporation and salary ranges for
all other personnel, in each case based on competitive norms
derived from periodic reports of consultants, such
15
as that described above, as well as annual surveys published by
several independent banking institutes or private companies
specializing in financial analysis of financial institutions. The
Compensation Committee also considers employment agreements, if
any, pursuant to which such executives may be entitled to certain
salaries and other benefits. Actual salary changes are based
upon a written evaluation of each individual's performance based
on numerous criteria and the weighing of such criteria using a
previously agreed-upon formula. In addition, with respect to
each executive, including the CEO, the Compensation Committee
considers the individual's performance, including such
individual's total level of experience in the banking industry,
his record of performance and contribution to the success of the
Corporation relative to his job responsibilities and his overall
service to the Corporation. During 1997, the Compensation
Committee used the information set forth in the Report to
maintain 1997 base salaries for its executive officers that were
equal to or below the median salaries reported in the surveys.
Bonuses. The Corporation also maintains the Executive
Incentive Bonus Plan (the "Bonus Plan") for executive officers,
from which performance-oriented bonuses may be paid to certain
key executive officers in any given year. The Compensation
Committee annually determines the executive officers eligible to
participate in the Bonus Plan. In general, those executives that
are considered to have major policy input with respect to the
Corporation, or who are in a position to generate a major impact
on the Corporation's earnings, are selected to participate in the
Bonus Plan. Actual bonuses paid pursuant to the Bonus Plan are
based on various return on assets ("ROA") levels of the
Corporation at fiscal year end. No bonuses may be paid unless
the Corporation reaches a minimum ROA, determined at the
beginning of each year.
Pursuant to the Bonus Plan, the Compensation Committee
annually establishes a bonus pool amount for each participating
executive, which is equal to a given percentage of the base
salary of such executive. Such percentages are determined based
on the executive's relative responsibilities and ability to
impact the financial and operating performance of the
Corporation. At year-end, the Compensation Committee applies a
multiple to the bonus pool amounts to determine the actual
amounts available to be awarded to participants. The multiple
used is based on a scale of various ROA amounts as determined by
the Compensation Committee at the beginning of a fiscal year. Of
the amount eligible to be paid to a participant, 50% is paid to
the executive on a non-discretionary basis. The remaining half
of the eligible amount may be paid to the participant, in the
discretion of the Compensation Committee, based on the
participant's individual performance. When evaluating the
performance of a participant, the Compensation Committee
considers the Corporation's actual operating performance (such as
reduced levels of past due loans, reduced levels of non-performing
and restructured loans, improvements in asset quality
and corresponding reductions in provision amounts, increased non-
interest income and continued control of corporate expenses) in
relation to its targeted long range action plan and the
executive's ability to impact the various components thereof.
Other criteria considered include the executive's initiative,
contribution to overall corporate performance and managerial
ability.
The Corporation achieved an ROA of 1.79% with respect to the
1997 fiscal year (excluding the one-time costs associated with
the acquisition of CSB and the 1997 earnings of CSB), which
resulted in a multiple of 1.95 to be applied to each executive's
bonus pool to determine the amount available to be awarded as
bonuses. Fifty percent of each bonus pool was awarded to the
respective
16
executive on a non-discretionary basis. Furthermore, the remainder of
each executive's bonus pool was awarded to him based upon the evaluation
process described above.
Equity Based Compensation. The final component of
executives' core annual compensation consists of stock options.
This equity-based compensation is designed to be a long-term
incentive for executives to enhance shareholder value in the
Corporation. The Corporation maintains the Comprehensive Stock
Option Plan (the "Stock Option Plan") pursuant to which the
Corporation may grant stock options (both statutory and
nonstatutory) to its key employees. The Compensation Committee
administers the Stock Option Plan in its sole discretion,
including the determination of the individuals to whom options
will be granted, the terms on which such options are granted and
the number of shares subject to such options. In general, when
determining the key employees to whom options shall be granted,
the Compensation Committee considers such employees' relative job
responsibilities and abilities to impact the financial and
operating performance of the Corporation.
When granting options, the Compensation Committee considers
a formula whereby the aggregate value of options granted is based
on a multiple of base salary. The multiples of base salaries, in
turn, are determined based on the relative positions of the
executives with the Corporation. When the Compensation Committee
granted options in 1997, it considered several factors, including
the number of stock options currently held by executives and
their terms, the maximum aggregate number of options to be
granted under the Stock Option Plan in 1997, as well as the
cumulative amount outstanding, and the aggregate number of
options to be granted as a percentage of total shares
outstanding. Accordingly, using the scale, the Compensation
Committee determined the applicable multiple of base salary for
each executive and granted options to such executive with an
aggregate value (based on the closing price of the Common Stock
on the date of grant) equal to such amount.
In addition to the Stock Option Plan, the Corporation
maintains an employee stock purchase program pursuant to which
options are granted periodically to all employees of the
Corporation, including executive officers, at an exercise price
equal to 90% of the fair market value of the stock at the date of
grant. The number of shares subject to options granted to each
employee, including executive officers, is determined
automatically based on base salary levels of all employees.
Other. In addition to the above forms of compensation, the
Corporation also provides group term life insurance for its
employees, including its executive officers. Executive officers
generally also participate in the Retirement Savings Plan,
pursuant to which (i) an eligible employee may elect to defer
between 1% and 10% of compensation, (ii) the Corporation
contributes annually a portion of a discretionary matching amount
as determined by the Board of Directors from time to time,
allocated to participants' accounts in proportion to their
elective deferrals up to 6% for such year and (iii) the
Corporation may contribute an additional discretionary amount, as
determined by the Board of Directors from time to time, to the
accounts of participants, based on the level of employee
contributions, allocated to participants' accounts in proportion
to their base compensation for such year. In addition, executive
officers generally participate in the Money Purchase Pension
Plan, pursuant to which the Corporation contributes annually to
each participant's account 3% of the participant's base salary.
Finally, certain of the Corporation's executives, including the
CEO, are parties to change in control agreements that provide for
continued salary, bonus and benefits for a
17
certain period of time upon termination of employment following a change
in control of the Corporation, and certain executive officers may be a
party to employment and/or salary continuation agreements.
Compensation of Chief Executive Officer. The Board of
Directors of the Corporation determines the compensation of the
CEO based upon recommendations of the Compensation Committee.
The CEO's base salary is determined by a review of salaries of
top executives of comparable financial institutions, using the
process previously described. In keeping with the Corporation's
general policy with respect to base salary and bonus, the CEO's
base salary is set at an amount which generally is lower than the
base salaries for comparable executives. The Compensation
Committee instead places more emphasis on available cash bonus,
as a means of directly linking the CEO's total annual
compensation to the performance of the Corporation. Total annual
compensation for the CEO in 1997 was below the median for
comparable executives as set forth in the Report. The
Corporation achieved an ROA of 1.79% with respect to the 1997
fiscal year (excluding the one-time costs associated with the
acquisition of CSB and the 1997 earnings of CSB), which resulted
in a multiple of 1.95 that was applied to the CEO's bonus pool
amount to determine the amount of bonus available to be awarded.
In accordance with the terms of the Bonus Plan, 50% of this
amount was awarded to the CEO on a nondiscretionary basis. The
remainder of the CEO's bonus pool was awarded to him as the
result of an evaluation of (a) the Corporation's overall improved
financial and operating performance in 1997, including record
increases in earnings, increases in trust department income,
decreases in past due and classified loans and containment of
costs in general, (b) the Corporation's strategic position
allowing for, and the growth in the Corporation's franchise value
resulting from, strategic mergers and acquisitions, (c) the
appreciation in the value of the Common Stock, and (d) certain
individual criteria, including initiative, contribution to
corporate performance and managerial ability. The Board of
Directors of the Corporation has approved the CEO's participation
in the Bonus Plan in 1998. Finally, the Compensation Committee
made a stock option grant to the CEO pursuant to the
Corporation's Stock Option Plan in December 1997. In determining
the number of shares subject to options so granted, the
Compensation Committee considered the CEO's responsibilities and
potential contribution to the performance of the Corporation
relative to that of the other executives, and the actual number
of shares subject to such options was determined using the scale
previously described.
Submitted by the Compensation Committee of the Board of
Directors:
Michael R. Coltrane J. Knox Hillman, Jr.
J. Roy Davis, Jr. Jerry E. McGee
Frank H. Hawfield, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
In addition to the persons identified above, Jane B. Brown, T.
David Propst and Robert L. Wall, none of whom is or has been an
officer or employee of the Corporation, served as members of the
Compensation Committee during 1997. Michael R. Coltrane, a member
of the Compensation Committee, served as Executive Vice President
of the Corporation and FCNB until 1988.
18
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative
total shareholder return on the Common Stock with the Independent
Bank Index, a published banking industry index, and the Standard
& Poor's 500 Stock Index, a broad equity market index, assuming
in each case the investment of $100 on December 31, 1992 and the
reinvestment of dividends.
FIRST CHARTER CORPORATION
Five-Year Performance Index
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
First Charter
Corporation 100 155 207 323 329 478
Independent Bank
Index 100 125 153 208 248 358
S&P 500 Index 100 110 111 153 189 251
19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FCNB and Union have had, and expect to have in the future,
banking transactions in the ordinary course of business with
directors, officers and principal shareholders of the Corporation
and its subsidiaries and their associates. All loans and
commitments included in such transactions were made and are
expected to be made on substantially the same terms, including
interest rate and collateral, as those prevailing at the time for
comparable transactions with other borrowers and did not and are
not expected to involve more than the normal risk of
collectibility or present other unfavorable features.
APPROVAL OF THE 1999 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors of the Corporation has adopted the
First Charter Corporation 1999 Employee Stock Purchase Plan (the
"1999 ESPP"), which is subject to the approval of the
shareholders of the Corporation. The text of the 1999 ESPP is
set forth in its entirety as Exhibit A to this Proxy Statement
and the following summary is qualified by reference thereto. The
proposal for approval of the 1999 ESPP will require the
affirmative vote of the holders of a majority of the votes cast
with respect to this matter at the Annual Meeting. Accordingly,
neither abstentions nor broker non-votes, if any, with respect to
this matter will have the effect of a negative vote with respect
to this matter. The Board of Directors recommend the
shareholders vote FOR the adoption of the 1999 ESPP.
General
The Corporation's on-going employee stock purchase program
is designed to provide all employees of the Corporation and its
subsidiaries an increased personal interest in the success and
progress of the Corporation by encouraging them to become owners
or increase their ownership of Common Stock of the Corporation.
Historically, the Corporation has sought shareholder approval for
a new employee stock purchase plan every two years. Consistent
with this practice, the shareholders of the Corporation approved
the 1998 Employee Stock Purchase Plan (the "1998 ESPP") at the
1997 Annual Meeting of Shareholders. The options granted under
the 1998 ESPP in January 1998 currently are outstanding.
The Board of Directors of the Corporation has determined
that it is in the best interests of the Corporation to implement
a new employee stock purchase plan that can continue beyond a
two-year period, to allow more flexibility with the timing of the
grant of, and the exercise periods for, options granted to
employees. The 1999 ESPP proposed by the Board of Directors and
described below allows for multiple grants of options thereunder
and is designed to remain in effect as long as there are shares
available under the 1999 ESPP to be granted. Pursuant to the
terms of the 1999 ESPP, a maximum of 300,000 shares of the
Corporation's Common Stock may be issued to employees under the
1999 ESPP, subject to adjustment generally to protect against
dilution in the event of changes in the capitalization of the
Corporation.
20
The 1999 ESPP will be administered by the Compensation
Committee. The Compensation Committee will be able to prescribe
rules and regulations for such administration and to decide
questions with respect to the interpretation or application of
the 1999 ESPP.
The Corporation intends that options granted under the 1999
ESPP will satisfy the requirements of Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder. The 1999 ESPP, however, is not qualified
under the provisions of Section 401(a) of the Code and is not
subject to any of the provisions of the Employee Retirement
Income Security Act of 1974, as amended. The closing sales price
of the Common Stock on February 27, 1998, as reported by the
Nasdaq National Market, 1998 was $24.00.
Grant of Options; Terms
Generally, under the 1999 ESPP the Compensation Committee
will have the discretion to determine the date or dates, if any,
when options will be granted (each such date is referred to as a
"grant date"). Pursuant to the provisions of the 1999 ESPP, on
each grant date, each "eligible employee" (described below) of
the Corporation and its subsidiaries as of such grant date will
receive an option to purchase up to the largest whole number of
shares of the Corporation's Common Stock obtained by dividing the
eligible employee's "compensation" (described below) at the grant
date by $100, or such other amount as the Compensation Committee
determines at the time the grant date is determined. The
resulting number shall be the maximum number of shares that such
eligible employee may elect to purchase under such option
(referred to as the "maximum number of shares"). Notwithstanding
the foregoing, no eligible employee will be granted an option
under the 1999 ESPP that would permit such employee to purchase,
in any single calendar year, under the 1999 ESPP or any other
Section 423 employee stock purchase plan of the Corporation, a
number of shares of Common Stock that has an aggregate fair
market value (based on the value of stock on the option's
respective grant date) in excess of $25,000. Any option
otherwise granted shall be deemed to be modified to the extent
necessary to comply with this requirement. Furthermore, in the
event that on any grant date the number of shares subject to
options granted as of such grant date exceeds the number of
shares remaining available to be issued under the 1999 ESPP, the
number of shares subject to such options generally shall be
reduced in a nondiscriminatory manner in proportion to the
eligible employees' respective compensation.
For purposes of the 1999 ESPP, "compensation" consists of an
employee's basic annual compensation as of a grant date,
excluding any bonus, overtime payment, sales commission or pre-tax
contributions to medical or retirement plans. Furthermore,
an "eligible employee" for purposes of the 1999 ESPP generally is
any employee of the Corporation or its subsidiaries other than a
part-time employee or temporary employee or an employee who owns,
or would own immediately after the option is granted, five
percent or more of the total voting power or value of all classes
of stock of the Corporation (including for this purpose shares
that are subject to purchase by such employee pursuant to any
outstanding options). A director of the Corporation or one of
its subsidiaries may not be granted an option unless such
director also is employed by the Corporation or a subsidiary and
otherwise qualifies as an "eligible employee." Currently, there
are approximately 264 employees of the Corporation and its
subsidiaries, including officers, who would qualify as "eligible
employees" under the 1999 ESPP.
21
The Compensation Committee also has the discretion generally
to determine the duration (referred to as the "offering period")
and the exercise price (referred to as the "option price") of the
options granted on any grant date. However, (i) the offering
period may not be less than three (3) months or more than twenty-four
(24) months, and (ii) the option price may not be less than
85% of the "fair market value" of the Common Stock on the grant
date. The "fair market value" generally will be determined by
reference to the mean between the high and low sales prices as
reported on the Nasdaq National Market. The terms of the options
on any grant date must be determined in a nondiscriminatory
manner. Except as described below, options can only be exercised
on the last business day of the offering period for such options
(referred to as the "exercise date").
Elected Shares; Purchase Accounts; Exercise of Options
Each eligible employee will be notified of each grant of
options, if any. Following any such notification, the eligible
employee must notify the Corporation whether such employee elects
to participate in the offering of shares pursuant to the option
and, if so, the number of shares the employee wishes to purchase
on the exercise date for such option, up to the maximum number of
shares represented by such option (such elected number of shares
is referred to as the "elected shares"). An employee will not be
able to purchase more than such employee's elected shares under
such option on the applicable exercise date.
Each eligible employee who elects to participate shall sign
an election form authorizing monthly payroll deductions in an
aggregate amount sufficient to accumulate, over the offering
period for such option, the aggregate purchase price for such
eligible employee's elected shares. These payroll deductions
will be credited by the Corporation to a purchase account for
such eligible employee, which purchase account will be credited
at least once during any offering period but no less than
annually with simple interest based on an annual interest rate
equal to FCNB's Prime Rate in effect from time to time, based on
the balance for such employee's account. The balance in an
employee's purchase account at the end of an offering period with
respect to an option generally will be used to purchase such
employee's elected shares upon exercise of the option on the
exercise date. All withheld amounts may be used by the
Corporation for general corporate purposes.
Termination of Options
Each option generally will expire upon the exercise date
with respect to such option, to the extent that the option is not
exercised by the eligible employee. Pursuant to the provisions
of the 1999 ESPP, however, an option is subject to earlier
termination if either (i) an employee's employment terminates
(determined in the discretion of the Compensation Committee) for
any reason (subject to the limited right to exercise an option if
an eligible employee's employment terminates as the result of
retirement with the consent of the Corporation, medical
disability or death, as described below), or (ii) the employee
voluntarily terminates the option at any time at least five
business days prior to the exercise date. Upon the early
termination of an option, all funds then on deposit in the
employee's purchase account with respect to such option,
including interest credited to such time, shall be returned to
the employee and such purchase account will be closed.
Thereafter, the employee will not have any rights with respect to
such option or the shares subject thereto. Such a termination,
however, will not affect the employee's right to participate in
future grants of options under the 1999
22
ESPP, if any, to the extent such employee qualifies as an eligible
employee on any such future grant date.
Exercise of Options; Accelerated Exercisability
Generally, an option may be exercised only on the exercise
date with respect to such option and may be exercised only by the
employee. Pursuant to the provisions of the 1999 ESPP, however,
if an employee retires with the consent of the Corporation (as
described in the 1999 ESPP) during the offering period with
respect to such option, the employee's option may be exercised,
with respect to such employee's elected shares, within thirty
days of his or her date of retirement (but in no event later than
five business days prior to the exercise date with respect to
such option). Furthermore, if an employee becomes medically
disabled (as described in the 1999 ESPP) or dies during the
offering period with respect to such option, such employee (or
his or her estate, personal representative or beneficiary, as
applicable) may exercise the option, with respect to such
employee's elected shares, within one year of death or disability
(but in no event later than five business days prior to the
exercise date of the option).
The 1999 ESPP also provides that options will become
immediately exercisable in full, regardless of their terms, upon
the occurrence of certain events involving a change in control of
the Corporation. Such events include the adoption of a plan of
merger or similar transaction involving the Corporation in which
the Corporation's shareholders would receive less than 50% of the
voting stock of the surviving corporation, the approval by the
Board of Directors of the sale or transfer of a majority of the
stock of a significant subsidiary or substantially all the assets
of the Corporation or a significant subsidiary, certain
acquisitions of more than 20% of the Corporation's stock by any
person or group other than a person or group who beneficially
owned, as of the date the 1999 ESPP is approved by the
shareholders, more than 5% of the Common Stock unless prior
approval of the Board of Directors is received, certain instances
in which the composition of the Corporation's Board of Directors
changes by more than 50% during a two-year period, or any other
transaction that would constitute a change in control generally
required to be reported by the Corporation in its proxy statement
or the acquisition of control of the Corporation under the
applicable federal banking laws. In addition, upon the approval
of the dissolution or liquidation of the Corporation, all options
shall immediately become exercisable in full and shall remain
exercisable until the exercise date with respect to such options.
Upon the occurrence of the dissolution or liquidation of the
Corporation, however, all options not exercised shall terminate.
Miscellaneous
Options will not be transferable by an employee except by
will or by the laws of descent and distribution, and will be
exercisable only by such employee during his or her lifetime, or
by such employee's beneficiary, estate or the person who acquires
the right to exercise such option upon such employee's death by
bequest or inheritance.
The Compensation Committee may set a date or dates for
grants of options under the 1999 ESPP at its discretion.
Accordingly, adoption of the plan by the shareholders will not
result in any grant of options unless and until additional action
is taken by the Board of Directors.
23
The Board of Directors of the Corporation generally may at
any time, without additional action by the shareholders, alter,
amend, suspend or discontinue the 1999 ESPP or any option, or may
terminate the 1999 ESPP. However, the Board of Directors may not
increase the number of shares of Common Stock available to be
issued upon the exercise of options under the 1999 ESPP, increase
the offering period of any option, decrease the minimum option
price, change the class of eligible employees, or make any other
change inconsistent with Section 423 of the Code. Furthermore,
no action taken by the Board of Directors may materially and
adversely affect any outstanding option without the consent of
the holder thereof.
The 1999 ESPP provides that upon certain mergers or other
reorganizations to which the Corporation or any subsidiary is a
party that involves an exchange or conversion or other adjustment
of the Corporation's outstanding Common Stock, each holder of an
option generally shall be entitled upon the exercise of such
option and in lieu of the number of elected shares as to which
the option shall be exercised, to receive at no additional cost
the number and class of securities or other property to which
such holder would have been entitled in the merger or
reorganization if such holder had exercised such option prior to
such merger or reorganization.
Certain Federal Income Tax Consequences
The following is a brief description of the federal income
tax consequences to the employees and the Corporation of the
grant and exercise of options under the 1999 ESPP. All ordinary
income recognized by an employee with respect to options under
the 1999 ESPP shall be subject to both wage withholding and
employment taxes.
The options under the 1999 ESPP are intended to be statutory
stock options of the kind recognized by Section 423 of the Code.
For federal income tax purposes, neither the grant nor the
exercise of the options will be a taxable event to the employees,
and, therefore, no income will result for federal income tax
purposes upon either the grant or the exercise of any such
option. The disposition, however, of the shares acquired through
the exercise of the options will be a taxable event. The tax
consequences of such a disposition will depend upon the
respective holding periods of the options and the option shares.
If the disposition of the shares is made after the
expiration of two years from the date the option was granted and
one year after the date the shares were acquired upon exercise of
the options, or if the employee dies while owning the shares, a
portion of the gain, if any, will be taxed as ordinary income,
which portion will be determined by subtracting the option price
from the lesser of (a) the fair market value of the shares on the
date the option was granted or (b) the fair market value of the
shares on the disposition date. The basis in the shares will be
increased by the amount of the compensation income recognized.
The remaining portion of the gain, if any, will be taxed as
capital gain for federal income tax purposes. When the holding
periods described above are met, the Corporation is not allowed
to deduct any amount for federal income tax purposes with respect
to the issuance or exercise of the options or the sale of the
underlying shares.
If the disposition of the shares is made within two years of
the date the option was granted or one year of the date the
shares were acquired upon exercise of the options, the amount of
the gain,
24
if any, which will be taxed as ordinary income will be
determined by subtracting the option price from the fair market
value of the shares on the date on which the option was
exercised. The amount treated as ordinary income would be added
to the employee's basis in calculating whether any capital gain
or loss is to be recognized on the disposition. In the year of
such early disposition, generally the Corporation will be
entitled to a business deduction for federal income tax purposes
in an amount equal to the ordinary income.
As described above, upon certain events involving a change
in control of the Corporation, all options will immediately
become exercisable. In general, if the total amount of payments
in the nature of compensation that are contingent upon a "change
in control" of the Corporation (as defined in Section 280G of the
Code) equals or exceeds three times a recipient's "base amount"
(typically such recipient's average annual compensation for the
five years preceding the change in control), then, subject to
certain exceptions, the payments may be treated as parachute
payments under Section 280G of the Code. In such event, a
portion of the payments would be nondeductible to the Corporation
and the recipient would be subject to a 20% excise tax on such
portion of the payments under Section 4999 of the Code.
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed KPMG Peat Marwick LLP,
independent public accountants, as its auditors for the fiscal
year 1998. KPMG Peat Marwick LLP has acted in this capacity
since 1983. The Corporation has been advised by KPMG Peat
Marwick LLP that neither the firm nor any of its members or
associates has any direct financial interest or material indirect
financial interest in the Corporation or its subsidiaries other
than as its auditors. Although the selection and appointment of
the independent auditors are not required to be submitted to a
vote of the shareholders, the Board of Directors deems it
advisable to obtain the shareholders' ratification of this
appointment. The Board of Directors understands that a
representative from KPMG Peat Marwick LLP will be present at the
shareholders' meeting, will have the opportunity to make a
statement if he desires to do so and will be available to respond
to appropriate questions. The Board of Directors recommends a
vote FOR ratification of the appointment of this firm as
independent auditors of the Corporation for the 1998 fiscal year.
Should the shareholders not ratify the appointment of KPMG Peat
Marwick LLP, the Board of Directors will consider a change in
auditors for the next fiscal year.
ANNUAL REPORT
The 1997 Annual Report of the Corporation, including
financial statements, accompanies this Proxy Statement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16 of the Exchange Act, directors and
officers of the Corporation are required to file reports with the
Securities and Exchange Commission indicating their holdings of
and transactions in the Common Stock. To the Corporation's
knowledge, based solely on its review of the copies of such
reports furnished to the Corporation and written representations
that no other
25
reports were required, insiders of the Corporation complied with all
filing requirements on a timely basis, except for H. Clark Goodwin and
Jerry E. McGee (each a director of the Corporation), each of whom failed
to report on a timely basis the conversion of CSB stock into Common Stock
of the Corporation in connection with the CSB/FCNB Merger.
SHAREHOLDER PROPOSALS FOR CONSIDERATION
AT THE 1999 ANNUAL MEETING
Written shareholder proposals for consideration for the 1999
Annual Meeting of Shareholders should be addressed to the
Corporate Secretary, Post Office Box 228, Concord, North Carolina
28026-0228, and received by the Corporation no later than
November 17, 1998.
FORM 10-K
COPIES OF THE CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1997, AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION, EXCLUDING EXHIBITS, ARE AVAILABLE
WITHOUT CHARGE UPON WRITTEN REQUEST TO FIRST CHARTER CORPORATION,
POST OFFICE BOX 228, CONCORD, NORTH CAROLINA 28026-0228,
ATTENTION: ROBERT O. BRATTON, CHIEF FINANCIAL OFFICER. COPIES OF
EXHIBITS ARE AVAILABLE UPON PAYMENT OF $25.00 TO COVER THE COSTS
OF REPRODUCTION.
OTHER BUSINESS
The Board of Directors knows of no other matter to come before
the meeting. However, if any other matter requiring a vote of the
shareholders should arise, it is the intention of the persons named
in the enclosed proxy to vote such proxy in accordance with their
best judgment.
By Order of the Board of Directors,
James W. Townsend, Jr.
Secretary
DATED: March 17, 1998
26
EXHIBIT A
FIRST CHARTER CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
First Charter Corporation (the "Corporation") desires to
implement the 1999 Employee Stock Purchase Plan (the "Plan") for
the purpose of granting Eligible Employees of the Corporation and
its Subsidiaries the opportunity to purchase Common Stock of the
Corporation from time to time.
NOW, THEREFORE, the Corporation hereby establishes the Plan,
the terms of which are as follows:
1. Purpose.
The purpose of this Plan is to give Eligible Employees of
the Corporation and its Subsidiaries an opportunity to acquire
shares of the Corporation's Common Stock in order to increase
their proprietary interest in the Corporation's success, to
encourage them to remain in the employ of the Corporation, and to
continue to promote the Corporation's best interests and enhance
its long-term performance.
2. Definitions.
Wherever used herein, the following words and phrases shall
have the meanings stated below unless a different meaning is
plainly required by the context:
(a) "Available Shares" means the aggregate number of shares
of Common Stock which may be purchased by Eligible Employees
under the Plan, as described in Section 5 hereof.
(b) "Board" means the Board of Directors of the
Corporation.
(c) "Code" means the Internal Revenue Code of 1986, as now
in effect or as hereafter amended.
(d) "Committee" means the Compensation Committee of the
Board. To the extent that the Board deems necessary or as may be
required from time to time under Section 16 of the Exchange Act,
the Committee shall be composed solely of two or more "non-employee directors"
within the meaning of Rule 16b-3 under the
Exchange Act or such other persons as shall be required pursuant
to the Section 16 rules in effect from time to time.
(e) "Common Stock" means authorized but unissued shares of
the common stock, no par value, of the Corporation.
(f) "Compensation" means an Eligible Employee's regular
fixed basic annual compensation at the rate in effect on the
applicable Offering Date, but excludes any bonus, overtime
payment, sales commission or contributions to any employee
benefit plan, including pre-tax contributions to any medical or
retirement plans qualified under Section 125 or Section 401(k) of
the Code.
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(g) "Corporation" means First Charter Corporation, a North Carolina
corporation.
(h) "Elected Shares" means the number of shares of Common
Stock which an Eligible Employee elects to purchase during an
applicable Offering Period, as described in Section 3(d) hereof.
(i) "Eligible Employee" means, with respect to any Offering
Date, any individual who on such Offering Date is employed by the
Corporation or a Subsidiary on a regular full-time basis. A
person shall be considered employed on a regular full-time basis
if he or she is customarily employed by the Corporation or a
Subsidiary at least twenty (20) hours per week and is customarily
employed for more than five (5) months per calendar year.
"Eligible Employee" shall not include any person who would own,
immediately after an Option is granted, stock possessing five
percent (5%) or more of the total combined voting power or value
of all classes of stock of the Corporation or any Subsidiary.
For purposes of determining stock ownership of an employee under
the preceding sentence, the rules of Section 424(d) of the Code and
Section 1.423-2(d) of the Treasury Regulations thereunder shall apply,
and Common Stock that the employee may purchase under any
outstanding options shall be treated as owned by the employee.
(j) "Exchange Act" means the Securities Exchange Act of
1934, as now in effect or as hereafter amended.
(k) "Exercise Date" means, with respect to an Option and
related Offering Period, the last business day of such Offering
Period.
(l) "Fair Market Value" of the Common Stock as of any date
means, for so long as shares of the Common Stock are listed on a
national securities exchange or reported on the Nasdaq Stock
Market as a National Market security, the closing price of a
share of Common Stock; or if no sales prices are quoted for such
date, or if the Common Stock is not listed on a national
securities exchange or reported on the Nasdaq Stock Market as a
National Market security, "fair market value" shall mean the
average of the closing bid and asked prices for a share of Common
Stock in the over-the-counter market as reported by the Nasdaq
Stock Market. If the Common Stock is not quoted in the over-the-counter
market, "fair market value" shall be the fair value
thereof determined in good faith by the Board. In making such
determination, the Board shall consider the financial condition
of the Corporation and its recent operating results, values of
publicly-traded securities of other financial institutions giving
effect to the relative book values and earnings of such
institutions and the lack of liquidity of the Corporation's
shares, and such other factors as the Board in its discretion
deems relevant. Notwithstanding any provision of the Plan to the
contrary, no determination made with respect to the Fair Market
Value of Common Stock subject to an Option shall be inconsistent
with Section 423 of the Code or regulations thereunder.
(m) "Offering Date" means a date determined by the
Committee on which Options are to be granted hereunder to
Eligible Employees as of such date. The Committee may determine
one or more Offering Dates from time to time under the Plan.
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(n) "Offering Period" means, with respect to Options
granted on any Offering Date, the term of such Options, which
shall be a period of time determined by the Committee at the time
the Offering Date is determined and which shall commence on such
Offering Date and shall end not less than three (3) months nor
more than twenty-four (24) months thereafter.
(o) "Option" means an option granted hereunder on an
Offering Date that will entitle an Eligible Employee to purchase
shares of Common Stock in the manner described herein.
(p) "Option Price" means, with respect to Options granted
on any Offering date, the exercise price per share of Common
Stock determined by the Committee at the time the Offering Date
is determined and which shall be a price not less than 85% of the
Fair Market Value of the Common Stock on such Offering Date.
(q) "Plan" means the First Charter Corporation 1999
Employee Stock Purchase Plan as set forth herein, as hereafter
amended from time to time.
(r) "Purchase Account" means the book entry account
maintained by the Corporation to record the amounts withheld from
each Eligible Employee's payroll for the purchase of Common Stock
as described in Section 4(b).
(s) "Securities Act" means the Securities Act of 1933, as
now in effect or as hereafter amended.
(t) "Subsidiary" or "Subsidiaries" means any corporation or
corporations meeting the requirements of Section 424(f) of the
Code and which the Board designates as a participant in the Plan.
3. Basis of Participation and Granting of Options; Elected
Shares.
(a) Subject to the express provisions of this Plan, on any
Offering Date, each Eligible Employee as of such Offering Date
shall be granted an Option hereunder that will entitle such
Eligible Employee to purchase on the Exercise Date of such
Offering Period, at the Option Price per share applicable to such
Option, up to the largest whole number of shares of Common Stock
obtained by dividing the Eligible Employee's Compensation by One
Hundred Dollars ($100.00) or such other amount as shall be
determined by the Committee at the time the Offering Date is
determined. The resulting number shall be the maximum number of
shares which an Eligible Employee may designate as Elected Shares
in an Offering Period pursuant to Section 3(d) hereof, subject to
the limitations contained in Sections 3(b), 4(b), 5 and 13(b)
hereof.
(b) Notwithstanding any provision of this Plan to the
contrary, if the number of shares of Common Stock for which
Options are granted pursuant to Section 3(a) hereof exceeds the
remaining Available Shares on any Offering Date, then the Options
granted on such Offering Date to all Eligible
A-3
Employees shall, in a nondiscriminatory manner which shall be consistent
with Section 13(c) hereof, be reduced in proportion to their respective
amounts of Compensation; provided, however, that if such an
adjustment would result in the grant of any Option to purchase
less than one whole share of Common Stock, then in such event no
Options shall be granted hereunder on such Offering Date.
(c) Each Option under the Plan shall be granted on the
condition that (i) a registration statement under the Securities
Act with respect to the Common Stock subject to such Option has
become effective and (ii) a copy of the Prospectus has been
delivered to the Eligible Employee.
(d) With respect to each Offering Date hereunder, the
Corporation shall notify each Eligible Employee as of such
Offering Date of the grant of Options on such date, including the
maximum number of shares that may be designated as Elected Shares
by such Eligible Employee as determined in accordance with
Section 3(a) hereof, the Offering Period and Exercise Date with
respect to, and the Option Price and the other terms of, such
Options. Following such notification, each Eligible Employee
shall notify the Corporation, on such forms as shall be provided
by the Corporation and within seven (7) days following actual
receipt by the Eligible Employee of such forms, of the number of
Elected Shares that the Eligible Employee wishes to have the
right to purchase on the applicable Exercise Date with respect to
such Option. An Eligible Employee may not purchase more than his
or her Elected Shares on the Exercise Date with respect to an
Option.
4. Purchase Account.
(a) Except as expressly provided otherwise herein, payment
for Common Stock to be purchased upon exercise of an Option shall
be made only by payroll deduction over the designated Offering
Period.
(b) Each Eligible Employee who, pursuant to Section 3(d)
hereof, elects the right to purchase shares under an Option shall
authorize the Corporation and its Subsidiaries to withhold from
the Eligible Employee's after-tax Compensation, beginning as soon
as practicable following the making of such election and
continuing throughout the duration of the Offering Period unless
terminated sooner under Section 7 hereof, amounts sufficient to
accumulate over such Offering Period (with allowances for
interest as provided for herein) the aggregate purchase price of
the Eligible Employee's Elected Shares. All withheld amounts may
be used by the Corporation for general corporate purposes, but
the Corporation shall maintain a record of the amounts so
withheld in the Eligible Employee's Purchase Account. Such
amounts so credited to the Purchase Account shall be applied
toward the purchase of Common Stock on the Exercise Date or shall
be returned to the Eligible Employee or his or her beneficiary,
as expressly provided in this Plan.
(c) Subject to the provisions of Section 4(d) hereof, the
Corporation shall credit to an Eligible Employee's Purchase
Account simple interest, based on the First Charter National Bank
Prime Rate in effect from time to time and computed on a 365-day
basis, on the amount of after-tax Compensation credited to the
Eligible Employee's Purchase Account from time to time. Such
interest shall be credited at least once in each Offering Period
but no less than annually, on such date or dates
A-4
determined by the Committee. The Eligible Employee is responsible for all
income taxes associated with the interest credited to the Eligible
Employee's Purchase Account.
(d) In the event that under any provision hereof an
Eligible Employee's Purchase Account is to be closed and all or
any portion of the amount then credited to such Purchase Account
is not applied to the purchase of all or any part of such
Eligible Employee's Elected Shares, then such balance shall be
paid to the Eligible Employee or his or her estate or
beneficiary, as applicable, within thirty (30) days following the
date that the right to such payment accrues and shall include
interest credited up to such date. Upon the closing of the
Purchase Account, no additional interest shall accrue, and any
interest accrued but not credited will be forfeited.
5. Maximum Limitations; Available Shares.
The maximum number of Available Shares that may be issued
pursuant to the exercise of Options under the Plan shall be
300,000, subject to adjustment pursuant to Section 10 hereof. In
the event that any Option previously granted expires or is
terminated, surrendered or canceled without being exercised, in
whole or in part, for any reason, the number of shares of Common
Stock not purchased pursuant to such Option shall not reduce the
Available Shares as set forth above and shall again be available
for the granting of Options hereunder.
6. Administration.
The Plan shall be administered by the Committee. Subject to
the express provisions of the Plan, the Committee may interpret
the Plan, prescribe, amend and rescind rules and regulations
relating to the Plan, correct any defect or omission or reconcile
any inconsistency in the Plan, determine the terms and provisions
of the Options granted hereunder, determine the Offering Dates,
Offering Periods, Option Prices and Exercise Dates (except as
otherwise limited herein) and make all other determinations
necessary or advisable for the administration of the Plan. The
determinations of the Committee on all matters regarding the Plan
shall be conclusive. The Committee and any member thereof shall
only be liable for any action taken or determination made in bad
faith.
7. Terms of Options.
(a) Each Option shall expire upon the earlier to occur of
(i) the Exercise Date with respect to such Option, (ii) except as
set forth in Section 7(b) hereof, the date that the employment of
the Eligible Employee with the Corporation and its Subsidiaries
terminates (as determined by the Committee), or (iii) the
termination of the Option by the Eligible Employee pursuant to
Section 7(c) hereof. Upon the expiration or termination of an
Option hereunder, all amounts then credited to the Eligible
Employee's Purchase Account, including interest, shall be paid to
the Eligible Employee and the Eligible Employee's Purchase
Account shall be closed in accordance with then provisions of
Section 4(d) hereof. Upon the closing of the Purchase Account,
all rights and privileges hereunder of the Eligible Employee with
respect to such Option shall be terminated. Any such termination
of an Option shall not affect the right of an individual to be
granted an Option on any other Offering Date determined
hereunder, if such individual is an Eligible Employee as of any
such date.
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(b) If during the term of an Option an Eligible Employee's
employment with the Corporation and its Subsidiaries terminates
due to retirement with the consent of the Corporation, the
Eligible Employee shall have the right, within thirty (30) days
thereafter but not later than five (5) business days prior to the
Exercise Date, to exercise such Option to purchase all or any
part of the Eligible Employee's Elected Shares. If during the
term of an Option the Eligible Employee shall become medically
disabled or shall die while in the employment of the Corporation
or any Subsidiary of the Corporation, the Eligible Employee's
estate, personal representative or beneficiary shall have the
right, within twelve (12) months from the date of the Eligible
Employee's medical disability or death but not later than five
(5) business days prior to the Exercise Date, to exercise such
Option to purchase all or any part of the Eligible Employee's
Elected Shares. Options exercised pursuant to the terms of this
Section 7(b) may be exercised (during the specified times) as to
all or any part of the Elected Shares by written notice delivered
in the manner set forth in Section 14(i) hereof and by tendering
with such notice payment of any or all funds, including amounts
credited to said Eligible Employee's Purchase Account and such
other amounts as may be necessary to aggregate the required
purchase price. Such Option shall be deemed exercised as of the
date such notice is delivered; provided, however, that if such
notice is delivered less than ten (10) business days prior to the
Exercise Date with respect to such Option, such Option shall be
deemed exercised as of such Exercise Date. Failure to deliver
such notice and payment within the time provided shall be deemed
an election not to exercise the Option, upon which the Option
shall terminate and the Eligible Employee's Purchase Account
shall be closed, as set forth in Section 7(a) hereof.
Retirement of an Eligible Employee at the Eligible
Employee's Normal Retirement Date in accordance with the
provisions of any retirement plan adopted by the Corporation or
by any Subsidiary shall be deemed to be a retirement with the
consent of the Corporation. Whether any other termination of
employment (either at any optional retirement date in accordance
with the provision of any such retirement plan or otherwise) is
to be considered retirement with the consent of the Corporation,
and whether authorized leaves of absence or absences on military
or government service or for other reasons shall constitute a
termination of employment for the purposes of the Plan, shall be
determined by the Committee, the determination of which shall be
final and conclusive. Employment by the Corporation or any
Subsidiary shall be deemed to be continuous and not to terminate
during any uninterrupted period in which any employee is in the
employment of the Corporation or any Subsidiary, but only if and
so long, in the case of employment by a Subsidiary, as employment
by such Subsidiary will, under the applicable provisions of the
Code as then in effect, result in the same tax treatment as would
be accorded if such Eligible Employee were an employee of the
Corporation.
(c) An Eligible Employee may at any time at least five (5) business
days prior to the Exercise Date with respect to an Option (or such other
date as may be selected by the Committee) terminate such Option in its
entirety by written notice of such termination delivered in the manner set
forth in Section 14(i) hereof. Such termination shall become effective as
of the date such notice is received by the Corporation; provided, however,
that if such notice is received within ten (10) business days prior to the
Exercise Date with respect to such Option, such termination shall be
A-6
deemed effective as of such Exercise Date. Upon such termination of the
Option, the Eligible Employee's Purchase Account shall be closed, as set
forth in Section 7(a) hereof.
8. Exercise of Options and Payment for Common Stock.
Except as provided otherwise in Section 7(b) or Section 11
hereof, each Option may be exercised only on the Exercise Date at
the end of the Offering Period for such Option and may be
exercised only with respect to an Eligible Employee's Elected
Shares. At least five (5) business days prior to the Exercise Date
with respect to an Option, an Eligible Employee shall, on such forms
as shall be provided by the Corporation, notify the Corporation of the
Eligible Employee's election either to: (i) exercise such Option to
purchase all or any part of the Elected Shares or, in lieu
thereof, (ii) decline to so exercise such Option, which election,
in either event, shall be effective as of said Exercise Date. In
the event the Eligible Employee elects to exercise such Option
with respect to all or a portion of his or her Elected Shares,
the Eligible Employee shall tender to the Corporation all amounts
then credited to the Eligible Employee's Purchase Account,
including interest, along with such other amounts as may be
necessary to purchase such Elected Shares. Any excess of amounts
so tendered over the required purchase price shall be paid to the
Eligible Employee and the Purchase Account shall be closed, in
accordance with the provisions of Section 4(d) hereof. In the
event the Eligible Employee declines to so exercise the Option
with respect to his or her Elected Shares, all amounts then
credited to the Eligible Employee's Purchase Account, including
interest, shall be paid to the Eligible Employee and the Purchase
Account closed, in accordance with the provisions of Section 4(d)
hereof. Should the Eligible Employee fail to deliver the
notification form referred to in this Section 8, such failure
shall be deemed an election by said Eligible Employee to decline
to exercise the Option with respect to all Elected Shares.
9. Transferability and Designation of Beneficiary.
(a) No Option may be transferred, assigned, pledged or
hypothecated (whether by operation of law or otherwise), except
as provided by will or the applicable laws of descent or
distribution, and no Option shall be subject to execution,
attachment or similar process. Any attempted assignment,
transfer, pledge, hypothecation or other disposition of an
Option, or levy of attachment or similar process upon the Option
not specifically permitted herein, shall be null and void and
without effect. An Option may be exercised only by the Eligible
Employee during his or her lifetime, or pursuant to Section 7(b)
hereof, by such Eligible Employee's beneficiary (as described in
Section 9(b) hereof), estate or the person who acquires the right
to exercise such Option upon such Eligible Employee's death by
bequest or inheritance.
(b) Each Eligible Employee may file a written designation
of beneficiary who is to receive any stock or cash in the event
that such Eligible Employee dies after the end of an Offering
Period but before the issuance of the shares or dies during an
Offering Period but before the applicable Exercise Date.
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10. Adjustment Provisions.
The aggregate number of shares of Common Stock with respect
to which Options may be granted, the aggregate number of shares
of Common Stock subject to each outstanding Option, and the
Option Price per share of each outstanding Option shall be
appropriately adjusted for any increase or decrease in the number
of issued and outstanding shares of Common Stock resulting from a
subdivision or consolidation of shares, whether through
reorganization, recapitalization, stock split-up, stock
distribution or combination of shares, or the payment of a share
dividend or other increase or decrease in the number of such
shares outstanding effected without receipt of consideration by
the Corporation. The foregoing adjustments and the manner of
application of the foregoing provisions shall be determined by
the Committee in its sole discretion.
11. Merger and Consolidation; Dissolution.
After (i) the merger of one or more corporations into the
Corporation or any Subsidiary, (ii) any merger of the Corporation
or any Subsidiary into another corporation, (iii) any
consolidation of the Corporation or any Subsidiary and one or
more other corporations, or (iv) any other corporate
reorganization of any form involving the Corporation or any
Subsidiary as a party thereto, which such event involves any
exchange, conversion, adjustment or other modification of the
outstanding shares of the Common Stock, each holder of an Option
at the time of such corporate reorganization shall be entitled to
receive, at no additional cost, upon any exercise of such
Eligible Employee's Option and in lieu of the number of Elected
Shares as to which such Option shall then be so exercised, the
number and class of shares of stock or other securities or such
other property to which such Eligible Employee would have been
entitled pursuant to the terms of the agreement of merger or
reorganization if at the time of such merger or reorganization
such Eligible Employee had been a holder of record of a number of
shares of Common Stock equal to the number of Elected Shares with
respect to which such Option shall then be so exercised.
Comparable rights shall accrue to a holder of an Option in the
event of successive mergers or consolidations of the character
described above. The foregoing adjustments and the manner of
application of the foregoing provisions shall be determined by
the Committee in its sole discretion.
In the event of (i) the adoption of a plan of merger,
consolidation, share exchange or similar transaction of the
Corporation with any other corporation or association as a result
of which the holders of the voting capital stock of the
Corporation as a group would receive less than 50% of the voting
capital stock of the surviving or resulting corporation; (ii) the
approval by the Board of an agreement providing for the sale or
transfer (other than as security for obligations of the
Corporation) by the Corporation of a majority of the stock of a
significant Subsidiary of the Corporation or substantially all of
the assets of the Corporation or of a significant Subsidiary of
the Corporation; (iii) the acquisition of more than 20% of the
Corporation's voting capital stock by any person within the
meaning of Section 13(d)(3) of the Exchange Act, other than a
person, or group including a person, who beneficially owned, as
of the date of approval of this Plan by the Corporation's
shareholders, more than 5% of the Corporation's securities, in
the absence of a prior expression of approval of the Board; (iv)
during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board cease for any
reason to constitute at least a majority thereof unless the
A-8
election, or the nomination for election by the Corporation's
shareholders, of each new director was approved by the vote of at
least two-thirds of the directors then still in office who were
directors at the beginning of the period; or (v) any other change
in control of the Corporation of a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A under the Exchange Act or the acquisition of
control, within the meaning of Section 2(a)(2) of the Bank
Holding Company Act of 1956, as amended, or Section 602 of the
Change in Bank Control Act of 1978, of the Corporation by any
person, company or other entity, then any Option granted
hereunder shall become immediately exercisable as to the Eligible
Employee's Elected Shares, subject to any appropriate adjustments
in the number of such Elected Shares and the Option Price
thereof, and shall remain exercisable through the applicable
Exercise Date, subject to all of the terms of this Plan not
inconsistent with this Section 11.
Anything contained herein to the contrary notwithstanding,
upon the dissolution or liquidation of the Corporation each
Option granted under the Plan shall terminate, but the Eligible
Employee shall have the right, following the adoption of a plan
of dissolution or liquidation and in any event prior to such
dissolution or liquidation, to exercise his or her Option to
purchase his or her Elected Shares, subject to all of the other
terms of this Plan not inconsistent with this Section 11.
12. Conditions Subsequent to Effective Date.
The Plan is subject to the approval of the Plan in
accordance with applicable law by the shareholders of the
Corporation within twelve (12) months before or after the date of
adoption of the Plan by the Board. The Plan shall be null and
void and of no effect if the foregoing condition is not
fulfilled.
13. Limitation on Options. Notwithstanding any other provisions
of the Plan to the contrary:
(a) The Corporation intends that Options granted and Common
Stock issued under the Plan shall be treated for all purposes as
granted and issued under an employee stock purchase plan within
the meaning of Section 423 of the Code and the Treasury
Regulations issued thereunder and that the Plan shall satisfy the
requirements of Rule 16b-3 of the Exchange Act. Any provisions
required to be included in the Plan under Section 423 of the Code
and the Treasury Regulations issued thereunder or under the
Exchange Act are hereby included as fully as though set forth in
the Plan at length.
(b) No Eligible Employee shall be granted an Option under
the Plan which would permit such Eligible Employee to purchase,
in any single calendar year, under this Plan or any other
employee stock purchase plans (as defined in Section 423 of the
Code) of the Corporation and any parent or Subsidiary of the
Corporation, a number of shares of Common Stock that has an
aggregate Fair Market Value (determined in each case as of the
date of the grant of such option) in excess of $25,000. Any
Option granted under the Plan that would otherwise be in
violation of this Section 13(b) shall be deemed to be modified to
the extent necessary to satisfy the requirements hereof. This
Section 13(b) shall not limit the amount of Common Stock that an
Eligible Employee may purchase under any other stock option or
stock bonus plan.
A-9
(c) All Eligible Employees shall have the same rights and
privileges under the Plan, except that the amount of Common Stock
that may be purchased under Options granted pursuant to Section 3
hereof shall bear a uniform relationship to the compensation of
Eligible Employees. All rules and determinations of the
Committee in the administration of the Plan shall be uniformly
and consistently applied to all persons in similar circumstances
and shall be consistent with Section 423 of the Code or regulations
thereunder
(d) The Plan shall terminate when there are no Available
Shares remaining hereunder or upon earlier termination as
provided in Section 14(c) hereof.
14. Miscellaneous.
(a) Legal and Other Requirements. The obligations of the
Corporation to sell and deliver Common Stock under the Plan shall
be subject to all applicable foreign or domestic laws,
regulations, rules and approvals, including, but not by way of
limitation, the effectiveness of a registration statement under
the Securities Act and the requirements of any stock exchange or
securities association upon which the shares of Common Stock may
be included if deemed necessary or appropriate by the
Corporation. Certificates for shares of Common Stock issued
hereunder may be legended as the Committee shall deem
appropriate.
(b) No Obligation To Exercise Options. The granting of an
Option shall impose no obligation upon an Eligible Employee to
purchase any shares covered by such Option unless such Eligible
Employee affirmatively elects to purchase Common Stock as
described in Section 8 hereof.
(c) Termination and Amendment of Plan. The Board, without
further action on the part of the shareholders of the
Corporation, may from time to time alter, amend, suspend or
discontinue the Plan or any Option granted hereunder or may at
any time terminate the Plan, except that the Board may not
(except to the extent provided in Section 10 or Section 11
hereof): (i) increase the total number of Available Shares to
more than 300,000; (ii) increase the Offering Period of any
Option; (iii) decrease the minimum Option Price; (iv) change the
class of Eligible Employees; or (v) effect any other change
inconsistent with Section 423 of the Code or regulations issued
thereunder. No action taken by the Board under this subsection
Section 14(c) may materially and adversely affect any outstanding
Option without the consent of the holder thereof.
(d) Application of Funds. The proceeds received by the
Corporation from the sale of Common Stock pursuant to the
exercise of Options will be used for general corporate purposes.
(e) Withholding Taxes. Upon the exercise of any Option
under the Plan, the Committee shall have the right to require the
Eligible Employee to remit to the Corporation an amount
sufficient to satisfy all federal, state and local withholding
tax requirements prior to the delivery of any certificate or
certificates for shares of Common Stock.
A-10
(f) Right To Terminate Employment. Nothing in the Plan or
in any Option or any agreement entered into pursuant to the Plan
shall confer upon any Eligible Employee the right to continue in
the employment of the Corporation or any Subsidiary or shall
affect in any way any right that the Corporation or any
Subsidiary, as the case may be, may have to terminate the
employment of such Eligible Employee.
(g) Rights as a Shareholder. No Eligible Employee shall
have any right as a shareholder with respect to shares purchased
pursuant to the Options granted hereunder until full payment has
been made for such shares and until certificates for such shares
are actually issued to such Eligible Employee. No adjustment
will be made for dividends or other rights for which the record
date occurs prior to the date of such issuance.
(h) Gender and Headings. Throughout the Plan, whenever the
context requires or permits, the masculine gender shall include
the feminine and vise versa. The headings to the sections of the
Plan are for convenience only and shall not limit, modify, define
or expand express provisions of the Plan.
(i) Notices. Every direction, revocation or notice
authorized or required by the Plan shall be in writing and shall
be deemed given when delivered personally or deposited in the
U.S. Mail, first class postage prepaid, addressed as follows:
Chief Financial Officer, First Charter Corporation, Post Office
Box 228, Concord, North Carolina 28026-0228, or at such other
address as the Corporation, by notice to the Eligible Employee,
may designate in writing from time to time; and to the Eligible
Employee, at the address shown on the records of the Corporation,
or at such other address as the Eligible Employee, by notice to
the Corporation, may designate in writing from time to time.
(j) Applicable Law. All questions pertaining to the
validity, construction and administration of the Plan and Options
granted hereunder shall be determined in conformity with the laws
of the state of North Carolina, to the extent not inconsistent
with Section 423 of the Code and regulations thereunder.
(k) Elimination of Fractional Shares. If under any
provision of the Plan which requires a computation or adjustment
of the number of shares of Common Stock subject to an Option, the
number so computed is not a whole number of shares of Common
Stock, such number of shares of Common Stock shall be rounded
down to the next whole number.
(l) Rights of Corporation. The grant of an Option pursuant
to this Plan shall not affect in any way the right or power of
the Corporation to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure,
or to merge or consolidate, or to dissolve, liquidate or sell, or
transfer all or any part of the business or assets.
A-11
15. Effectiveness of the Plan:
The Plan shall become effective only if:
(a) The Plan shall have been adopted by the Board; and
(b) The Plan shall have been approved by the affirmative
vote of at least a majority of the votes cast with respect to
approval of the Plan at the shareholders' meeting at which the
Plan is considered.
A-12
PROXY THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
FIRST CHARTER CORPORATION
Annual Meeting of Shareholders, April 28, 1998
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
Shareholder of First Charter Corporation, a North Carolina
corporation (the "Corporation"), hereby constitutes and appoints
Robert O. Bratton, David E. Keul, and Anne C. Forrest, and each
or any of them, severally as attorneys and proxies for the
undersigned, with full power of substitution, for and on behalf
of the undersigned to act and vote as indicated below, according
to the number of shares of the Corporation's Common Stock held of
record by the undersigned on April 28, 1998, and as fully as the
undersigned would be entitled to act and vote if personally
present at the Annual Meeting of Shareholders to be held at the
Cabarrus Country Club, Weddington Road N.W., Concord, North
Carolina at 5:00 p.m., April 28, 1998, and any adjournment or
adjournments thereof (the "Annual Meeting"), as follows:
(1) ELECTION OF DIRECTORS
[ ] FOR electing the seven nominees listed below for the
terms indicated.
[ ] WITHHOLD AUTHORITY to vote for election of all nominees
listed below.
(Instruction: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name in the list
below.)
Term Expiring 2001 Term Expiring 2000 Term Expiring 1999
------------------ ------------------ ------------------
J. Knox Hillman, Jr. Charles F. Harry III T. Carl Dedmon
Lawrence M. Kimbrough John J. Godbold, Jr.
Dr. Jerry E. McGee
Thomas R. Revels
(2) APPROVAL OF THE ADOPTION OF THE FIRST CHARTER CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) RATIFICATION OF SELECTION OF KPMG PEAT MARWICK LLP AS
INDEPENDENT PUBLIC ACCOUNTANTS FOR 1998
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) In their discretion, the proxies are authorized to act and
vote upon any other business which may properly be brought
before said meeting or any adjournment or adjournments
thereof.
The undersigned hereby ratifies and confirms all that said
attorneys and proxies or any of them lawfully do or cause to be
done by virtue hereof. A majority of said attorneys and proxies
who shall be present and acting as such at the Annual Meeting of
Shareholders or any adjournment thereof, or if only one such
attorney or proxy be present and acting, then that one, shall
have and may exercise all powers hereby conferred.
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 IN FAVOR OF PROPOSALS 1, 2, AND
3.
The undersigned hereby
acknowledges receipt of the Notice
of Annual Meeting of Shareholders,
dated March 17, 1998, the Proxy
Statement and the 1997 Annual Report
to Shareholders furnished therewith.
Dated this __ day of___________, 1998.
________________________________ (SEAL)
________________________________ (SEAL)
NOTE: Signature should agree with
name on stock certificate as printed
thereon. When shares are held by joint
tenants, both should sign. Executors,
administrators, trustees and other
fiduciaries, and persons signing on
behalf of corporations or
partnerships, should so indicate when
signing.
PLEASE MARK, DATE, SIGN AND RETURN THIS
PROXY PROMPTLY. THANK YOU.
