<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 20, 2000.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
FIRST CHARTER CORPORATION
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
NORTH CAROLINA 6711 56-1355866
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation) Classification Code No.) Identification No.)
</TABLE>
22 UNION STREET NORTH
CONCORD, NORTH CAROLINA 28025
(704) 786-3300
(Address, including ZIP Code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
LAWRENCE M. KIMBROUGH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
FIRST CHARTER CORPORATION
22 UNION STREET NORTH
CONCORD, NORTH CAROLINA 28025
(704) 786-3300
(Name, address, including ZIP Code, and telephone number, including area code,
of agent for service)
WITH COPIES TO:
<TABLE>
<S> <C>
ROBERT M. DONLON, ESQ. RALPH F. MACDONALD, III, ESQ.
SMITH HELMS MULLISS & MOORE, LLP ALSTON & BIRD LLP
201 NORTH TRYON STREET ONE ATLANTIC CENTER
CHARLOTTE, NORTH CAROLINA 28202 1201 WEST PEACHTREE STREET
(704) 343-2000 ATLANTA, GEORGIA 30309-3424
(404) 881-7000
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable after this registration statement becomes
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT MAXIMUM MAXIMUM AMOUNT OF
OF SECURITIES TO TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE(3)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock...................... 13,942,050 shares $13.45 $187,575,000 $10,308
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The number of shares of First Charter common stock to be registered pursuant
to this registration statement is based upon an estimate of the maximum
number of shares of Carolina First common stock presently outstanding or
reserved for issuance under various plans or otherwise expected to be issued
or to become issuable upon the consummation of the proposed transaction to
which this registration statement relates, multiplied by the exchange ratio
of 2.267 shares of First Charter common stock per share of Carolina First
stock.
(2) Calculated in accordance with Rules 457(f) and 457(c) under the Securities
Act of 1933, as amended, the proposed maximum offering price per share is
computed by dividing (i) the product of (A) the average of the high and low
prices of Carolina First common stock as reported on the Nasdaq National
Market on January 14, 2000 ($30.50) and (B) 6,150,000, representing the
maximum number of shares of Carolina First expected to be exchanged for the
First Charter common stock being registered, by (ii) 13,942,050,
representing the maximum number of shares of First Charter common stock to
be issued in connection with this registration statement.
(3) The registration fee of $10,308 calculated pursuant to Rules 457(f) and
457(b) under the Securities Act of 1933, as amended, is the difference
between (i) $49,520, the product of .000264 and the proposed maximum
aggregate offering price, and (ii) $39,212, the amount paid to the SEC on
December 23, 1999 with respect to this transaction.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
[LOGO OF CAROLINA FIRST BANCSHARES, INC.] [LOGO OF FIRST CHARTER CORPORATION]
CAROLINA FIRST BANCSHARES, INC. FIRST CHARTER CORPORATION
PROXY STATEMENT PROXY STATEMENT AND PROSPECTUS
------------------------
Carolina First has entered into a merger agreement with First Charter. If
the merger is completed, Carolina First shareholders will receive 2.267 shares
of First Charter common stock for each share of Carolina First common stock that
they own. This represents a value of $ per share based on the January
, 2000 price of First Charter common stock. The market price of First Charter
common stock will, however, fluctuate prior to the merger.
Following the merger, existing First Charter shareholders initially will
own approximately %, and the former Carolina First shareholders initially
will own approximately % of First Charter's outstanding common stock.
<TABLE>
<S> <C>
CAROLINA FIRST SHAREHOLDERS FIRST CHARTER SHAREHOLDERS
This document is being furnished to This document is being furnished to First
Carolina First shareholders in connection Charter shareholders in connection with
with the solicitation of proxies by the solicitation of proxies by First
Carolina First's board of directors for Charter's board of directors for use at
use at the special meeting of shareholders the special meeting of shareholders to be
to be held at The Lincoln Cultural Center, held at , at
403 E. Main Street, Lincolnton, North p.m., local time on March , 2000.
Carolina, at 2:00 p.m., local time, on At the special meeting you will be asked
March , 2000. At the special meeting you to consider and to vote to approve the
will be asked to consider and to vote to merger agreement.
approve the merger agreement.
First Charter's board of directors has
Carolina First's board of directors unanimously approved the merger agreement.
has unanimously approved the merger First Charter's board of directors
agreement. Carolina First's board of believes that the merger is fair to, and
directors believes that the merger is fair in the best interests of, First Charter
to, and in the best interests of, Carolina and its shareholders and strongly
First and its shareholders and strongly encourages you to vote "FOR" the proposal.
encourages you to vote "FOR" the proposal. Wheat First Securities, a division of
The Robinson-Humphrey Company, LLC, an First Union Securities, Inc., an
investment banking firm, has issued its investment banking firm, has issued its
opinion to Carolina First's board of opinion to First Charter's board of
directors that the consideration to be directors that the consideration to be
paid by First Charter pursuant to the paid by First Charter pursuant to the
merger agreement is fair, from a financial merger agreement is fair, from a financial
point of view, to Carolina First and its point of view, to First Charter and its
shareholders. shareholders.
</TABLE>
First Charter common stock is listed on the Nasdaq National Market under
the symbol "FCTR." Carolina First common stock is listed on the Nasdaq National
Market under the symbol "CFBI."
Neither the Securities and Exchange Commission nor any state securities
commission has approved the First Charter common stock to be issued under this
proxy statement/prospectus or determined if this proxy statement/prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
The shares of First Charter common stock are not savings or deposit accounts or
other obligations of any bank or savings association, and are not insured by the
Federal Deposit Insurance Corporation or any other governmental agency.
The date of this proxy statement/prospectus is February , 2000, and it is
being mailed to First Charter shareholders and Carolina First shareholders on or
about February , 2000.
<PAGE> 3
FIRST CHARTER CORPORATION
22 UNION STREET NORTH
CONCORD, NORTH CAROLINA 28025
(704) 786-3300
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF FIRST CHARTER CORPORATION:
First Charter Corporation will hold a special meeting of shareholders
at at p.m., local time, on March , 2000, to vote on:
1. A proposal to approve the Agreement and Plan of Merger, dated as of
November 7, 1999, by and between Carolina First BancShares, Inc. and First
Charter Corporation and the transactions described in that agreement. Those
transactions include the issuance of approximately 13,942,050 shares of
First Charter common stock to Carolina First shareholders as provided in
the merger agreement.
2. Any other matters that may properly come before the special
meeting, or any adjournments or postponements of the special meeting.
Only shareholders of record at the close of business on , 2000
are entitled to receive notice of and to vote at the special meeting. Approval
of the merger agreement requires the affirmative vote of a majority of the
issued and outstanding shares of First Charter common stock entitled to vote at
the meeting.
All shareholders are cordially invited to attend the special meeting. To
ensure your representation at the special meeting, please complete, sign, date
and promptly mail your proxy in the return envelope enclosed. Please carefully
read the proxy statement/prospectus accompanying this notice for a more complete
description of the matters proposed to be acted upon at the special meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
Lawrence M. Kimbrough
President and Chief Executive Officer
February , 2000
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" APPROVAL
OF THE MERGER AGREEMENT, INCLUDING THE ISSUANCE OF FIRST CHARTER COMMON STOCK IN
THE MERGER.
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY CARD PROMPTLY, WHETHER OR NOT
YOU PLAN TO ATTEND THE SPECIAL MEETING.
<PAGE> 4
CAROLINA FIRST BANCSHARES, INC.
236 E. MAIN STREET
LINCOLNTON, NORTH CAROLINA 28092
(704) 732-2222
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF CAROLINA FIRST BANCSHARES, INC.:
Carolina First BancShares, Inc. will hold a special meeting of shareholders
at The Lincoln Cultural Center, 403 E. Main Street, Lincolnton, North Carolina
at 2:00 p.m., local time, on March , 2000, to vote on:
1. A proposal to approve the Agreement and Plan of Merger, dated as of
November 7, 1999, by and between Carolina First BancShares, Inc. and First
Charter Corporation and the transactions contemplated in that agreement,
including the merger of Carolina First with and into First Charter.
2. Any other matters that may properly come before the special meeting
or any adjournments or postponements of the special meeting.
Only shareholders of record at the close of business on , 2000,
are entitled to notice of and to vote at the special meeting. Approval of the
merger agreement and the merger requires the affirmative vote of a majority of
the issued and outstanding shares of Carolina First common stock entitled to
vote at the special meeting.
All shareholders are cordially invited to attend the special meeting. To
ensure your representation at the special meeting, please complete, sign, date
and promptly mail your proxy in the return envelope enclosed. Please carefully
read the proxy statement/prospectus accompanying this notice for a more complete
description of the matters proposed to be acted upon at the special meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
James E. Burt, III,
President and Chief Executive Officer
February , 2000
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" APPROVAL
OF THE MERGER AGREEMENT AND THE MERGER.
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY CARD PROMPTLY, WHETHER OR NOT
YOU PLAN TO ATTEND THE SPECIAL MEETING.
<PAGE> 5
ADDITIONAL INFORMATION (SEE PAGE 72)
This document incorporates important business and financial information
about First Charter and Carolina First from documents that are not included in
or delivered with this document. You can obtain, without charge, documents
incorporated by reference in this document (other than certain exhibits to those
documents) by requesting them in writing or by telephone from the appropriate
company at the following addresses:
<TABLE>
<S> <C>
First Charter Corporation Carolina First BancShares, Inc.
Robert O. Bratton Jan H. Hollar
Executive Vice President, Senior Vice President and
Chief Operating Officer and Chief Financial Officer
Chief Financial Officer 236 E. Main Street
P.O. Box 228 Lincolnton, North Carolina 28092
Concord, North Carolina 28026-0228 Phone: (704) 732-2222
Phone: (704) 786-3300
</TABLE>
If you would like to request documents, please do so by March , 2000 in
order to receive them before the special meeting.
i
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
A WARNING ABOUT FORWARD-LOOKING STATEMENTS.................. 3
SUMMARY..................................................... 4
The Companies............................................. 4
The Merger Agreement...................................... 9
Selected Consolidated Financial Data...................... 11
Historical and Pro Forma Comparative Per Share Data....... 14
Selected Pro Forma Consolidated Financial Data............ 16
RECENT DEVELOPMENTS......................................... 18
Recent First Charter Financial Information................ 18
Recent Carolina First Financial Information............... 18
First Charter National Bank Acquisition of J.L. Suttle,
Jr. & Co., Inc. Assets................................. 19
FIRST CHARTER SPECIAL MEETING............................... 20
Matters to Be Considered.................................. 20
Proxies................................................... 20
Solicitation of Proxies................................... 20
Record Date and Voting Rights............................. 21
Recommendation of the First Charter Board of Directors.... 22
CAROLINA FIRST SPECIAL MEETING.............................. 23
Matters to Be Considered.................................. 23
Proxies................................................... 23
Solicitation of Proxies................................... 24
Record Date and Voting Rights............................. 24
Recommendation of the Carolina First Board of Directors... 25
THE MERGER.................................................. 26
General................................................... 26
Stock Option and Incentive Plans.......................... 27
Post-Merger Compensation and Benefits..................... 27
Background of the Merger.................................. 28
Carolina First's Reasons for the Merger; Recommendation of
the Carolina First Board of Directors.................. 30
First Charter's Reasons for the Merger; Recommendation of
the First Charter Board of Directors................... 31
Opinion of Carolina First's Financial Advisor............. 32
Opinion of First Charter's Financial Advisor.............. 39
Interests of Management and Directors in the Merger....... 44
Indemnification and Directors' and Officers'
Insurance............................................. 44
Employment Arrangements................................ 45
The Merger Will Accelerate Existing Carolina First
Stock-Based Rights.................................... 45
Management and Operations of First Charter After the
Merger................................................. 45
Public Trading Markets.................................... 46
Absence of Dissenters' Appraisal Rights................... 46
Resales of First Charter Common Stock..................... 46
THE MERGER AGREEMENT........................................ 47
Conditions to Completion of the Merger.................... 47
Effective Time of the Merger.............................. 48
Conduct of Business Pending the Merger.................... 48
</TABLE>
ii
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Agreement Not to Solicit Other Offers....................... 50
Additional Agreements..................................... 51
Expenses and Fees...................................... 51
Accounting Treatment................................... 51
Listing of First Charter Common Stock on the Nasdaq
National Market........................................ 51
Delivery of First Charter Stock Certificates to Carolina
First Shareholders..................................... 51
Fractional Shares......................................... 52
Federal Income Tax Consequences of the Merger............. 52
Tax Consequences of the Merger Generally............... 52
Exchange of Carolina First Common Stock Solely for
First Charter Common Stock............................ 53
Cash Received Instead of a Fractional Interest of First
Charter Common Stock.................................. 53
Regulatory Approvals Required for the Merger.............. 54
Amendment, Waiver and Termination......................... 54
STOCK OPTION AGREEMENT...................................... 56
General................................................... 56
Purpose of the Option Agreement........................... 56
Exercise; Expiration...................................... 56
DESCRIPTION OF FIRST CHARTER COMMON STOCK................... 60
General................................................... 60
Dividends................................................. 60
CERTAIN DIFFERENCES IN THE RIGHTS OF FIRST CHARTER
SHAREHOLDERS AND CAROLINA FIRST SHAREHOLDERS.............. 60
Authorized Capital Stock.................................. 61
Amendment of Charter and Bylaws........................... 61
Board of Directors........................................ 62
Director Removal and Vacancies............................ 62
Limitations on Director Liability......................... 63
Special Meetings of the Shareholders...................... 63
Actions by Shareholders Without a Meeting................. 63
Shareholder Nominations and Proposals..................... 63
Business Combinations..................................... 64
Dividends................................................. 65
COMPARATIVE MARKET PRICES AND DIVIDENDS..................... 67
First Charter............................................. 67
Carolina First............................................ 68
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION...... 69
EXPERTS..................................................... 74
VALIDITY OF FIRST CHARTER COMMON STOCK...................... 74
WHERE YOU CAN FIND MORE INFORMATION......................... 74
APPENDIX A -- Agreement and Plan of Merger
APPENDIX B -- Option Agreement
APPENDIX C -- Opinion of The Robinson-Humphrey Company, LLC
APPENDIX D -- Opinion of Wheat First Securities, a division
of First Union Securities, Inc.
</TABLE>
iii
<PAGE> 8
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY ARE FIRST CHARTER AND CAROLINA FIRST PROPOSING TO MERGE?
A: Our companies are proposing to merge because we believe the resulting
combination will provide our shareholders with substantial benefits and will
enable us to better serve our customers. Our products and markets generally
are complementary. The combined company should be in a better position to
exploit opportunities within its markets. To review the reasons for the
merger in greater detail, see pages 29 through 31.
Q: WHAT SHOULD I DO?
A: First, carefully read this document. Then complete, sign and mail your proxy
card in the enclosed postage paid envelope. The instructions on the
accompanying proxy card give you more information on voting. This will enable
your shares to be represented at the First Charter special meeting or at the
Carolina First special meeting, as applicable. The boards of directors of
both companies have unanimously recommended that their respective
shareholders vote "FOR" approval of the merger agreement.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: No. Your broker will not be able to vote your shares without instructions
from you. You should instruct your broker to vote your shares, following the
directions your broker provides. Your failure to instruct your broker to vote
your shares will result in your shares not being voted which will have the
same effect as a vote against the merger.
Q: CAN I CHANGE MY VOTE AFTER I HAVE SUBMITTED MY PROXY WITH VOTING
INSTRUCTIONS?
A: Yes. There are three ways you can change your vote. First, you may send a
written notice to the person to whom you submitted your proxy stating that
you would like to revoke your proxy. Second, you may complete and submit a
new proxy card by mail and, if received timely, it will revoke any earlier
proxy. Third, you may attend the First Charter special meeting or the
Carolina First special meeting, as applicable, and vote in person by written
ballot. Simply attending the meeting without voting, however, will not revoke
your proxy. If you have instructed a broker to vote your shares, you must
follow the directions you receive from your broker to change or revoke your
proxy.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. Do not send in your stock certificates at this time.
Carolina First shareholders will exchange their Carolina First common stock
certificates for First Charter common stock certificates after we complete
the merger. If the merger is completed, instructions for exchanging Carolina
First common stock certificates will be sent to you promptly after the merger
is completed.
First Charter shareholders will not exchange their certificates in the
merger. The certificates currently representing the shares of First Charter
common stock will continue to represent the same number of shares of First
Charter common stock after the merger.
1
<PAGE> 9
Q: PLEASE EXPLAIN THE EXCHANGE RATIO.
A: Carolina First shareholders will receive 2.267 shares of First Charter common
stock in exchange for each share of Carolina First common stock. We will not
issue fractional shares. Carolina First shareholders who would otherwise be
entitled to receive a fractional share instead will receive cash based on the
market value of the fractional share of First Charter common stock.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We are working to complete the merger as quickly as possible. In addition to
shareholder approvals, we must obtain regulatory approvals. We hope to
complete the merger in the second quarter of 2000.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER?
A: Generally, the exchange of shares by Carolina First shareholders will be tax-
free to Carolina First shareholders for federal income tax purposes, except
for taxes on cash received for fractional shares. The merger will be tax-free
to First Charter shareholders for federal income tax purposes. To review the
federal tax consequences in greater detail, see pages 52 through 53 .
Q: WHAT ABOUT SHARES I HOLD IN THE STOCK PURCHASE AND DIVIDEND REINVESTMENT
PLANS?
A: You will receive proxies and will be able to vote shares held in those plans
as if you held those shares directly in your name. Following the merger, the
Carolina First dividend reinvestment plan will be combined with the First
Charter stock purchase and dividend reinvestment plan. Unless you direct us
in writing that you do not want to participate in the First Charter plan,
shares held in the Carolina First plan will be transferred automatically to
the First Charter plan. You will receive further instructions regarding this
matter with the transmittal materials which will be mailed in relation to the
exchange of shares in the merger.
Q: WHO SHOULD I CALL WITH QUESTIONS?
A: First Charter shareholders should call Robert O. Bratton, Executive Vice
President, Chief Operating Officer and Chief Financial Officer, at (704) 786-
3300 with any questions about the merger and the related transactions.
Carolina First shareholders should call Jan H. Hollar, Senior Vice President
and Chief Financial Officer, at (704) 732-2222, with any questions about the
merger and the related transactions.
2
<PAGE> 10
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements, within the meaning of
the Private Securities Litigation Act of 1995, with respect to First Charter and
Carolina First. These statements may be made directly in this document or may be
incorporated in this document by reference to other documents, which contain
related warnings. You can find many of these statements by looking for words
such as "believes," "expects," "anticipates," "estimates," "projections" and
similar words. Statements that describe future strategic plans, goals or
objectives are also forward-looking statements, including those regarding the
intent, belief or current expectations of First Charter or Carolina First. These
statements are not guarantees of future performance, results or events and
involve substantial risks and uncertainties. See page 74 for "Where You Can Find
More Information."
The forward-looking statements included in this document, or incorporated
into this document by reference, are made only as of the dates stated. Neither
First Charter nor Carolina First undertakes any obligation to update the
forward-looking statements to reflect subsequent events or circumstances.
Some of the factors that may cause actual results to differ materially from
those contemplated by the forward-looking statements include the following
possibilities:
- combining the businesses of First Charter and Carolina First may cost
more or take longer than we expect;
- integrating the businesses and technologies of First Charter and Carolina
First and retaining key personnel may be more difficult than we expect;
- our revenues after the merger may be lower than we expect, or our
operating costs may be higher than we expect;
- expected cost savings from the merger may not be fully realized or may
not be realized when expected;
- we may lose more business or customers after the merger than we expect or
there may be increases in competitive pressures;
- changes in the interest rate environment may reduce interest margins;
increases in interest rates generally may reduce loan demand and the
values of our assets and assets securing loans; general economic
conditions, either nationally or where the combined company will be doing
business, or conditions in securities markets, may be less favorable than
we currently anticipate;
- legislation or regulatory changes may adversely affect our business; or
- technological changes may increase competitive pressures and increase our
costs of meeting such competition.
3
<PAGE> 11
SUMMARY
This brief summary highlights selected information from this document. It
does not contain all of the information that is important to you. We urge you to
carefully read this entire document including the Appendices and the other
documents to which we refer to fully understand the merger and the related
proposals. See "Where You Can Find More Information" on page 74. Each item in
this summary refers to the page where that subject is discussed in more detail.
THE COMPANIES
First Charter Corporation
22 Union Street North
Concord, North Carolina 28025
(704) 786-3300
First Charter is a bank holding company organized as a corporation under
the laws of North Carolina. As of December 31, 1999, First Charter had total
consolidated assets of approximately $1.9 billion, total consolidated deposits
of approximately $1.1 billion, consolidated shareholders' equity of
approximately $228 million and consolidated net income of approximately $26.1
million for the year ended December 31, 1999.
First Charter National Bank is a national banking association and the
principal subsidiary of First Charter. First Charter National Bank provides a
wide variety of retail and commercial banking services through 33 branch offices
and 71 ATMs located in Cabarrus, Mecklenburg, Rowan, Iredell, Cleveland,
Rutherford and Union Counties, North Carolina.
Registrar and Transfer Company, 10 Commerce Drive, Cranford, New Jersey
acts as transfer agent and registrar for First Charter common stock.
Carolina First BancShares, Inc.
236 E. Main Street
Lincolnton, North Carolina 28092
(704) 732-2222
Carolina First is a bank holding company organized as a corporation under
the laws of North Carolina. As of December 31, 1999, Carolina First had total
consolidated assets of approximately $786 million, total consolidated deposits
of approximately $667 million, consolidated shareholders' equity of
approximately $66 million, and consolidated net income of approximately $8.8
million for the year ended December 31, 1999.
Carolina First owns three North Carolina state bank subsidiaries, Lincoln
Bank of North Carolina, Cabarrus Bank of North Carolina and Community Bank &
Trust Co., and operates 31 branches and 28 ATMs in Lincoln, Mecklenburg,
Cabarrus, McDowell, Rutherford, Avery, Buncombe, Transylvania, Jackson, Catawba,
and Iredell Counties, North Carolina.
First-Citizens Bank & Trust Company, 100 E. Tryon Rd., Raleigh, North
Carolina acts as transfer agent and registrar for Carolina First common stock.
4
<PAGE> 12
THE MERGER (SEE PAGE 23)
The merger agreement is attached as Appendix A to this document. You should
read the merger agreement in its entirety because it is the legal document that
governs the merger of Carolina First and First Charter.
As a result of the merger, Carolina First will be merged with and into
First Charter and Carolina First's shareholders will become shareholders of
First Charter. The 10 directors of First Charter before the merger will continue
to serve as directors of First Charter after the merger. In addition, the board
of directors will be increased by six seats and Messrs. James E. Burt, III,
Harold D. Alexander, Charles A. James, Walter H. Jones, Jr., Samuel C. King, Jr.
and L. D. Warlick, Jr., each of whom was designated by Carolina First, will be
appointed to the First Charter board of directors.
First Charter and Carolina First believe that both companies' shareholders
will benefit from the merger because of anticipated synergies and growth
opportunities resulting from combining the two companies.
THE MERGER CONSIDERATION WILL BE 2.267 SHARES OF FIRST CHARTER COMMON STOCK FOR
EACH SHARE OF CAROLINA FIRST COMMON STOCK (SEE PAGE 23)
When the merger is complete, each share of Carolina First common stock will
be converted into 2.267 shares of First Charter common stock. The exchange ratio
is fixed. However, the market price of First Charter common stock may change and
consequently the value of the First Charter common stock that Carolina First's
shareholders will receive as a result of the merger may be significantly higher
or lower than its current value or its value at the date of the special meetings
of shareholders.
Cash payments will be made instead of issuing fractional shares. For
example, if you hold 100 shares of Carolina First common stock, you will receive
226 shares of First Charter common stock (100 x 2.267 = 226.7), plus a cash
payment equal to the value of 0.70 of a share of First Charter common stock
based upon the market value of First Charter common stock at the effective time
of the merger.
SHARE INFORMATION AND MARKET PRICES (SEE PAGE 65)
First Charter common stock is traded on the Nasdaq National Market under
the symbol "FCTR." Carolina First common stock is traded on the Nasdaq National
Market under the symbol "CFBI." The following table sets forth the sale prices
of First Charter and Carolina First common stock and the equivalent merger
consideration per share of Carolina First common stock at the close of the
Nasdaq National Market on November 5, 1999, the last trading day before we
announced the merger, and on , 2000, the latest practicable date prior
to the mailing of this document. These prices do not reflect after-hours trading
activity.
<TABLE>
<CAPTION>
VALUE OF MERGER
FIRST CAROLINA CONSIDERATION
CHARTER FIRST PER SHARE OF
COMMON COMMON CAROLINA FIRST
STOCK STOCK COMMON STOCK
------- -------- -----------------
<S> <C> <C> <C>
November 5, 1999................................ $18.75 $26.00 $42.51
, 2000................................ $ $ $
</TABLE>
5
<PAGE> 13
THE MARKET PRICES OF BOTH FIRST CHARTER AND CAROLINA FIRST COMMON STOCK
FLUCTUATE. YOU SHOULD OBTAIN CURRENT MARKET QUOTATIONS FOR FIRST CHARTER COMMON
STOCK AND CAROLINA FIRST COMMON STOCK.
First Charter will list the shares of its common stock to be issuable in
the merger on the Nasdaq National Market.
The holders of First Charter common stock received a dividend of $0.17 per
share in the fourth quarter of 1999. Although First Charter expects to continue
paying cash dividends on its common stock, it cannot be certain that its
dividend policy will remain unchanged after completion of the merger.
GENERALLY, THE MERGER WILL BE A TAX-FREE TRANSACTION FOR CAROLINA FIRST
SHAREHOLDERS (SEE PAGE 50)
Carolina First and First Charter have each received tax opinions from their
counsel to the effect that, based on certain facts, representations and
assumptions, the merger will be treated as a "reorganization" for federal income
tax purposes. It is a condition to completing the merger that each party
receives an updated legal opinion to this effect at closing.
Therefore, we expect that for United States federal income tax purposes,
Carolina First shareholders generally will not recognize any gain or loss on the
conversion of shares of Carolina First common stock into shares of First Charter
common stock, except in connection with any cash received instead of a
fractional share. We also expect the merger will not cause any of Carolina
First, First Charter or First Charter's shareholders to recognize any gain or
loss for federal income tax purposes.
This federal income tax treatment may not apply to certain Carolina First
shareholders. Determining the actual tax consequences of the merger to you may
be complex, depending on your specific situation and factors outside our
control. You should consult your own tax advisor for a full understanding of the
merger's tax consequences to you.
CAROLINA FIRST'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS SHAREHOLDER APPROVAL
OF THE MERGER AGREEMENT (SEE PAGE 23)
Carolina First's board of directors believes that the merger is in the best
interests of Carolina First and its shareholders and has unanimously approved
the merger agreement. Carolina First's board of directors unanimously recommends
that Carolina First shareholders vote "FOR" approval of the merger agreement and
the merger.
FIRST CHARTER'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS SHAREHOLDER APPROVAL
OF THE MERGER AGREEMENT (SEE PAGE 20)
First Charter's board of directors believes that the merger and the
issuance of First Charter common stock in the merger are in the best interests
of First Charter and its shareholders and has unanimously approved the merger
agreement. First Charter's board of directors unanimously recommends that First
Charter shareholders vote "FOR" approval of the merger agreement, including the
issuance of shares of First Charter common stock in the merger.
6
<PAGE> 14
INVESTMENT BANK SAYS THE MERGER CONSIDERATION IS FAIR TO CAROLINA FIRST
SHAREHOLDERS (SEE PAGE 35 AND APPENDIX C)
The Robinson-Humphrey Company, LLC has served as financial advisor to
Carolina First in connection with the merger and has given an opinion to
Carolina First's board of directors that the consideration First Charter will
pay for the Carolina First common stock is fair to Carolina First shareholders
from a financial point of view.
A copy of Robinson-Humphrey's opinion is attached to this document as
Appendix C. Carolina First shareholders should read the opinion completely to
understand the assumptions made, matters considered and limitations of the
review undertaken by Robinson-Humphrey in providing this opinion.
INVESTMENT BANK SAYS THE MERGER CONSIDERATION IS FAIR TO FIRST CHARTER AND ITS
SHAREHOLDERS (SEE PAGE 30 AND APPENDIX D)
Wheat First Securities, a division of First Union Securities, Inc., has
served as financial advisor to First Charter in connection with the merger and
has given an opinion to First Charter's board of directors that the exchange
ratio of 2.267 shares of First Charter common stock for each share of Carolina
First common stock is fair to First Charter and its shareholders from a
financial point of view.
A copy of the opinion delivered by Wheat First is attached to this document
as Appendix D. First Charter shareholders should read the opinion completely to
understand the assumptions made, matters considered and limitations of the
review undertaken by Wheat First in providing this opinion.
CAROLINA FIRST TO HOLD MEETING ON MARCH , 2000 (SEE PAGE 21)
Carolina First shareholders will hold a special meeting at 2:00 p.m., local
time, on March , 2000, at The Lincoln Cultural Center, 403 E. Main Street,
Lincolnton, North Carolina. Carolina First shareholders will be asked to vote to
approve the merger agreement and the merger of Carolina First with and into
First Charter.
You can vote at the special meeting if you owned Carolina First common
stock at the close of business on , 2000. As of that date, there
were approximately shares of Carolina First common stock
outstanding which were held by approximately shareholders of record.
Approval of the merger agreement requires a favorable vote by a majority of the
outstanding shares of Carolina First common stock.
FIRST CHARTER TO HOLD MEETING ON MARCH , 2000 (SEE PAGE 18)
First Charter shareholders will hold a special meeting at
p.m., local time, on March , 2000, at . First Charter
shareholders will be asked to vote to approve the merger agreement and the
issuance of First Charter common stock in connection with the merger.
You can vote at the special meeting if you owned First Charter common stock
at the close of business on , 2000. As of that date, there were
approximately shares of First Charter common stock outstanding
which were held by approximately shareholders of record. Approval of
the merger agreement requires a favorable vote by a majority of outstanding
shares of First Charter common stock.
7
<PAGE> 15
NO DISSENTERS' APPRAISAL RIGHTS (SEE PAGE 44)
Neither First Charter shareholders nor Carolina First shareholders have
dissenters' appraisal rights in connection with the merger.
POOLING OF INTERESTS ACCOUNTING TREATMENT (SEE PAGE 49)
First Charter will account for the merger as a pooling of interests. This
means that, for accounting and financial reporting purposes, we will treat
Carolina First as if it had always been combined with First Charter. Our
obligations to complete the merger depend on receiving a letter from our
independent accountants that the merger qualifies as a pooling of interests for
financial reporting purposes.
INTERESTS OF OUR MANAGEMENTS AND BOARDS OF DIRECTORS IN THE MERGER (SEE PAGE 42)
In addition to their interests as shareholders, the directors and executive
officers of Carolina First and First Charter each have interests in the merger
that are different from your interests, including:
- First Charter has entered into an employment agreement with James E.
Burt, III, Carolina First's President and Chief Executive Officer. The
employment agreement will become effective only if we complete the
merger.
- James E. Burt, III, Harold D. Alexander, Charles A. James, Walter H.
Jones, Jr., Samuel C. King, Jr. and L.D. Warlick, Jr., all of whom are
Carolina First directors, will be elected as directors of First Charter
and First Charter National Bank.
- some persons are parties to employment agreements with Carolina First or
its subsidiaries which provide for them to receive cash payments if their
employment terminates or if they are relocated or their duties are
changed under specified circumstances following an event like the merger.
In addition, Mr. Burts' current employment agreement with Carolina First
provides for a cash payment of approximately $231,000 upon a change of
control of Carolina First. This amount will become due upon consummation
of the merger. We cannot determine at this time the exact amounts that
may become payable to the Carolina First officers as a group. However,
assuming that we complete the merger in 2000 and that each of the
officers is entitled to receive the cash payments under their existing
employment agreements, the aggregate amount of these cash payments would
be approximately $2,500,000.
- following the merger, First Charter will indemnify and provide liability
insurance to the officers and directors of Carolina First.
- executive officers and directors of Carolina First have rights pursuant
to the terms of benefit and compensation plans maintained by Carolina
First that provide for stock-based awards to be vested, exercisable or
distributable on an accelerated basis as a result of the merger. The
aggregate number of Carolina First options that will become vested and/or
subject to exercise or become distributable as a result of the merger is
79,210 shares of Carolina First common stock or 179,569 shares of First
Charter common stock.
The boards of directors of First Charter and Carolina First were aware of
these interests and took them into account in their decision to approve the
merger agreement.
8
<PAGE> 16
THE MERGER AGREEMENT
CONDITIONS THAT MUST BE SATISFIED FOR THE MERGER TO OCCUR (SEE PAGE 45)
Completion of the merger is subject to various conditions, including:
- approval of the merger agreement by Carolina First's shareholders;
- approval of the merger agreement and the issuance of First Charter common
stock in the merger by First Charter's shareholders; and
- receipt of all necessary regulatory and other consents and approvals.
Other conditions to the merger may be waived by First Charter or Carolina
First, as applicable.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 52)
First Charter and Carolina First can agree to abandon the merger (and
terminate the merger agreement) at any time before the merger is completed, even
after obtaining shareholder approval. Also, either Carolina First or First
Charter can decide, without the consent of the other, to abandon the merger if
any of the following occurs:
- the other party materially breaches a provision contained in the merger
agreement and does not (or cannot) correct the breach within 30 days.
- the merger has not been completed by June 30, 2000.
- any regulatory authority fails to grant an approval we need to complete
the merger or issues an order preventing the merger.
- Carolina First's board of directors has determined in good faith and as
permitted by the merger agreement to enter into an alternative
acquisition proposal.
Carolina First can also terminate the merger agreement if the average
closing price of First Charter common stock for the 20 trading days preceding
Federal Reserve approval of the merger is less than $13.60 (0.80 times the
closing price of First Charter common stock on November 8, 1999), and reflects a
decline of more than 15% below the weighted average closing price of an index
group of 11 regional bank holding companies that the parties and their financial
advisors deemed reasonably similar to First Charter.
MERGER EXPECTED TO OCCUR IN SECOND QUARTER OF 2000 (SEE PAGE 46)
The merger will occur shortly after all of the conditions to its completion
have been satisfied or waived. Currently, we anticipate that the merger will
occur in the second quarter of 2000.
REGULATORY APPROVALS WE MUST OBTAIN FOR THE MERGER (SEE PAGE 52)
We cannot complete the merger unless it is approved by the Board of
Governors of the Federal Reserve System. First Charter filed an application with
the Federal Reserve Board on January , 2000 seeking its approval.
9
<PAGE> 17
Although we do not know of any reason why we will not obtain Federal
Reserve approval in a timely manner, we cannot be certain that we will obtain
it, or when it will be obtained.
Neither First Charter nor Carolina First is aware of any other material
governmental approvals or actions that are required for consummation of the
merger. Should any other approval or action be required it is presently
contemplated that the approval or action would be sought.
OPTION GRANTED BY CAROLINA FIRST (SEE PAGE 54 AND APPENDIX B)
In connection with the merger agreement, Carolina First granted First
Charter an option to purchase shares of Carolina First common stock. Under this
option, First Charter may purchase up to 19.9% of the outstanding shares of
Carolina First common stock (including the shares of Carolina First already
owned by First Charter) at an exercise price of $36.00 per share. Under certain
circumstances, instead of purchasing the shares, First Charter may choose to
surrender the option to Carolina First for a cash payment equal to the
difference between the market price of the underlying shares and the exercise
price. Carolina First may be required to repurchase the option (and/or any
shares purchased under the option) under certain circumstances at a
predetermined price. The option limits First Charter's profit in all cases to
$10 million.
First Charter cannot exercise the option unless certain events occur within
a specified time period. These events can generally be described as business
combinations or acquisition transactions relating to Carolina First and certain
related events (other than the merger we are proposing in this document). We do
not know of any event that has occurred as of the date of this document that
would allow First Charter to exercise the option.
Carolina First agreed to grant the option to First Charter in order to
induce First Charter to enter into the merger agreement. The option could have
the effect of discouraging other companies from trying to acquire Carolina First
and if exercised will prevent Carolina First from entering into another pooling
of interests transaction for a period of up to two years.
10
<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables present selected consolidated financial data for First
Charter and Carolina First as of and for the respective interim periods ended
September 30, 1999 and 1998, and as of and for each of the years in the
five-year period ended December 31, 1998. The information for First Charter has
been derived from the consolidated financial statements of First Charter,
including the unaudited consolidated financial statements of First Charter
incorporated in this document by reference to the First Charter September 30,
1999 Form 10-Q and audited consolidated financial statements of First Charter
incorporated in this document by reference to the First Charter 1998 Form 10-K,
and should be read in conjunction with those documents and the accompanying
notes. See "Where You Can Find More Information" and "Additional Information."
The information for Carolina First has been derived from the consolidated
financial statements of Carolina First, including the unaudited consolidated
financial statements of Carolina First, incorporated in this document by
reference to the Carolina First September 30, 1999 Form 10-Q and audited
consolidated financial statements of Carolina First incorporated in this
document by reference to the Carolina First 1998 Form 10-K and should be read in
conjunction with those documents and the accompanying notes. See "Where You Can
Find More Information" and "Additional Information."
Historical results are not necessarily indicative of results to be expected
for any future period. In the opinion of the respective management of First
Charter and Carolina First all adjustments (which include normal recurring
adjustments) necessary to arrive at a fair statement of interim results of
operations of First Charter and Carolina First, respectively, have been
included. The results for the nine-month period ended September 30, 1999 are not
necessarily indicative of results which may be expected for any other interim
period or for the year as a whole.
11
<PAGE> 19
FIRST CHARTER CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
AS OF AND
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, AS OF AND FOR THE YEARS ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1999(1) 1998(1) 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income........ $ 101,550 $ 101,903 $ 136,509 $ 123,130 $ 116,371 $ 98,209 $ 82,174
Interest expense....... 49,995 52,610 70,623 62,827 57,416 47,844 37,516
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest
income............. 51,555 49,293 65,886 60,303 58,955 50,365 44,658
Provision for loan
losses............... 2,600 1,917 2,376 2,684 1,481 2,328 1,591
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses.......... 48,955 47,376 63,510 57,619 57,474 48,037 43,067
Noninterest income..... 14,514 10,477 13,650 15,082 8,156 7,125 6,428
Noninterest expense.... 34,244 48,992 59,166 42,765 39,169 31,817 29,757
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes.............. 29,225 8,861 17,994 29,936 26,461 23,345 19,738
Income taxes........... 9,413 5,505 8,758 10,765 9,028 7,467 6,510
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income........... $ 19,812 $ 3,356 $ 9,236 $ 19,171 $ 17,433 $ 15,878 $ 13,228
========== ========== ========== ========== ========== ========== ==========
PER SHARE DATA (2):
Net income:
Basic................ $ 1.09 $ 0.18 $ 0.51 $ 1.06 $ 0.95 $ 0.95 $ 0.81
Diluted.............. 1.09 0.18 0.50 1.03 0.94 0.94 0.80
Cash dividends
declared............. 0.51 0.44 0.61 0.53 0.50 0.43 0.34
Period-end book
value................ 13.01 13.17 13.34 12.79 12.62 7.08 6.18
BALANCE SHEET DATA (AT
PERIOD END):
Total assets........... $1,819,979 $1,832,305 $1,864,357 $1,672,641 $1,573,177 $1,415,368 $1,125,894
Loans, net............. 1,367,648 1,391,432 1,406,967 1,246,228 1,108,311 913,892 747,556
Allowance for loan
losses............... 16,837 15,375 15,554 15,263 14,140 13,552 13,144
Deposits............... 1,136,606 1,092,996 1,123,035 1,059,262 1,013,696 964,005 941,552
Total shareholders'
equity............... 228,450 243,260 245,972 243,909 232,781 311,075 135,904
PERFORMANCE RATIOS:
Net income to average
shareholders'
equity(3)............ 11.31% 1.77% 3.68% 7.47% 6.20% 7.44% 10.14%
Net income to average
total assets(3)...... 1.45% 0.25% 0.52% 1.21% 1.16% 1.34% 1.22%
CAPITAL RATIOS:
Tier 1 risk-based
capital.............. 17.44% 19.56% 19.34% 21.96% 33.98% 35.90% 18.26%
Total risk-based
capital.............. 18.69% 20.81% 20.59% 23.21% 35.47% 37.48% 20.06%
Leverage............... 12.65% 13.05% 13.36% 14.94% 20.83% 23.94% 11.53%
Shareholders' equity to
total assets......... 12.55% 13.28% 13.19% 14.58% 14.80% 21.98% 12.07%
OTHER RATIOS:
Loans to deposits...... 121.83% 128.73% 126.68% 119.12% 110.75% 96.24% 80.81%
Allowance for loan
losses to gross
loans................ 1.22% 1.09% 1.09% 1.21% 1.26% 1.46% 1.73%
Net charge offs to
average loans(3)..... 0.09% 0.18% 0.15% 0.16% 0.09% 0.23% 0.13%
Problem assets to total
assets............... 0.70% 0.62% 0.65% 0.77% 0.69% 1.13% 2.13%
</TABLE>
- ------------------------
(1) Unaudited
(2) Historical First Charter per share data is presented for 1995 and 1994. HFNC
Financial Corp., a company that merged with First Charter using a pooling of
interests accounting in 1998, was a mutual entity during these periods prior
to its conversion to a stock entity in 1995.
(3) September 30, 1999 and 1998 ratios have been annualized.
12
<PAGE> 20
CAROLINA FIRST BANCSHARES, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
AS OF AND FOR THE
NINE MONTHS
ENDED
SEPTEMBER 30, AS OF AND FOR THE YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1999(1) 1998(1) 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income................... $ 42,476 $ 38,419 $ 52,052 $ 45,237 $ 39,128 $ 32,820 $ 26,982
Interest expense.................. 17,078 16,256 22,071 19,573 17,010 14,522 10,993
-------- -------- -------- -------- -------- -------- --------
Net interest income............. 25,398 22,163 29,981 25,664 22,118 18,298 15,989
Provision for loan losses......... 1,170 880 1,365 997 1,179 710 667
-------- -------- -------- -------- -------- -------- --------
Net interest income after
provision for loan losses..... 24,228 21,283 28,616 24,667 20,939 17,588 15,322
Noninterest income................ 6,127 5,885 8,048 6,763 5,633 5,082 4,485
Noninterest expense............... 20,075 18,114 25,855 21,219 18,383 15,986 14,346
-------- -------- -------- -------- -------- -------- --------
Income before income taxes...... 10,280 9,054 10,809 10,211 8,189 6,684 5,461
Income taxes...................... 3,241 3,090 4,100 3,490 2,968 2,290 1,548
-------- -------- -------- -------- -------- -------- --------
Net income...................... $ 7,039 $ 5,964 $ 6,709 $ 6,721 $ 5,221 $ 4,394 $ 3,913
======== ======== ======== ======== ======== ======== ========
PER SHARE DATA:
Net income:
Basic(2).......................... $ 1.18 $ 1.01 $ 1.14 $ 1.20 $ 0.94 $ 0.84 $ 0.77
Diluted(2)........................ 1.16 0.98 1.11 1.18 0.93 0.84 0.77
Cash dividends declared(2)........ 0.28 0.22 0.31 0.25 0.19 0.16 0.15
Period-end book value(2).......... 10.98 10.44 10.44 9.60 7.97 7.24 5.95
BALANCE SHEET DATA (AT PERIOD END):
Total assets...................... $773,606 $690,948 $731,626 $618,077 $520,228 $459,158 $368,487
Loans, net........................ 506,981 435,596 469,386 398,188 356,575 294,817 241,230
Allowance for loan losses......... 7,338 6,350 6,724 5,837 5,313 4,407 3,663
Deposits.......................... 661,318 610,377 652,603 545,050 463,972 413,612 333,500
Total shareholders' equity........ 65,704 61,893 61,978 56,211 44,464 40,238 32,281
PERFORMANCE RATIOS:
Net income to average
shareholders' equity(3)......... 14.57% 14.02% 11.55% 13.98% 12.56% 12.37% 12.52%
Net income to average total
assets(3)....................... 1.25% 1.22% 1.00% 1.18% 1.07% 1.08% 1.09%
CAPITAL RATIOS:
Tier 1 risk-based capital......... 12.11% 12.35% 11.59% 12.58% 11.79% 12.56% 14.04%
Total risk-based capital.......... 13.35% 13.60% 12.84% 13.83% 13.05% 13.81% 15.29%
Leverage.......................... 8.22% 8.68% 8.07% 8.87% 8.06% 9.51% 9.21%
Shareholders' equity to total
assets.......................... 8.49% 8.96% 8.47% 9.09% 8.55% 8.76% 8.76%
OTHER RATIOS:
Loans to deposits................. 77.77% 72.41% 72.96% 74.13% 78.00% 72.34% 73.43%
Allowance for loan losses to gross
loans........................... 1.43% 1.44% 1.41% 1.44% 1.47% 1.47% 1.50%
Net charge offs for the period to
average loans(3)................ 0.15% 0.12% 0.11% 0.13% 0.08% 0.08% 0.34%
Problem assets to total assets.... 0.37% 0.28% 0.26% 0.22% 0.17% 0.35% 0.47%
</TABLE>
- -------------------------
(1) Unaudited.
(2) Shares outstanding and related per share data have been restated for all
periods presented for a 10% stock dividend declared by Carolina First on
June 23, 1999.
(3) September 30, 1999 and 1998 ratios have been annualized.
13
<PAGE> 21
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
The following table sets forth certain comparative per share data relating
to earnings, cash dividends, and book value on: (i) a historical basis for First
Charter and Carolina First; (ii) a pro forma combined basis per share of First
Charter common stock, giving effect to the merger; and (iii) an equivalent pro
forma basis per share of Carolina First common stock, giving effect to the
merger as of the date or at the beginning of the periods indicated.
The First Charter pro forma combined information and the Carolina First
equivalent pro forma information give effect to the merger and reflect an
exchange ratio of 2.267 shares of First Charter Common Stock for each
outstanding share of Carolina First common stock. The merger is expected to be
accounted for using the pooling of interests method of accounting. The pro forma
book value per share data at September 30, 1999 reflect preliminary estimates by
First Charter of merger-related charges to be incurred in connection with
consummation of the merger; however, the pro forma earnings per share data does
not reflect the estimated merger-related charges. Share data for Carolina First
have been restated for a 10% stock dividend issued during the second quarter of
1999. Pro forma per share data have been restated to adjust for Carolina First
shares that were owned by First Charter in the respective years. Pro forma book
value per share data at September 30, 1999 have been adjusted for the 122,263
shares issued in First Charter's purchase accounting acquisition of J.L. Suttle,
Jr. & Co., Inc. which was consummated on January 12, 2000. The pro forma per
share data are presented for informational purposes only and are not necessarily
indicative of the results of operations or combined financial position that
would have resulted had the merger been consummated at the dates or during the
periods indicated, nor are they necessarily indicative of future results of
operations or combined financial position. The pro forma earnings per share
amounts do not reflect merger-related charges to be incurred in connection with
consummation of the merger.
The information shown below should be read in conjunction with, and is
qualified in its entirety by, the historical consolidated financial statements
of First Charter and Carolina First, including the respective notes thereto. See
"Where You Can Find More Information," "Additional Information" and "-- Selected
Consolidated Financial Data."
14
<PAGE> 22
FIRST CHARTER CORPORATION AND CAROLINA FIRST BANCSHARES, INC.
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
--------------- ------------------------
1999 1998 1998 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET INCOME PER SHARE:
First Charter
Basic.................................. $ 1.09 $ 0.18 $ 0.51 $ 1.06 $ 0.95
Diluted................................ 1.09 0.18 0.50 1.03 0.94
Carolina First
Basic.................................. $ 1.18 $ 1.01 $ 1.14 $ 1.20 $ 0.94
Diluted................................ 1.16 0.98 1.11 1.18 0.93
First Charter pro forma combined
Basic.................................. $ 0.85 $ 0.30 $ 0.51 $ 0.84 $ 0.73
Diluted................................ 0.85 0.29 0.50 0.82 0.73
Carolina First pro forma equivalent(1)
Basic.................................. $ 1.93 $ 0.68 $ 1.16 $ 1.90 $ 1.65
Diluted................................ 1.93 0.66 1.13 1.86 1.65
CASH DIVIDENDS PER SHARE:
First Charter............................ $ 0.51 0.44 $ 0.61 $ 0.53 $ 0.50
Carolina First........................... 0.28 0.22 0.31 0.25 0.19
First Charter pro forma(2)............... 0.34 0.29 0.40 0.32 0.22
Carolina First pro forma equivalent(1)... 0.77 0.66 0.91 0.73 0.50
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
BOOK VALUE PER SHARE:
First Charter......................................... $13.01 $13.34
Carolina First........................................ 10.98 10.44
First Charter pro forma............................... 9.15 9.66
Carolina First pro forma equivalent(1)................ 20.74 21.90
</TABLE>
- -------------------------
(1) The equivalent pro forma per share data for Carolina First are computed by
multiplying First Charter's pro forma information by the exchange ratio of
2.267.
(2) First Charter anticipates cash dividends per share to be maintained at First
Charter's historical dividend per share level into the future. This is
equivalent to a $1.54 dividend per share for current Carolina First
shareholders. However, for purposes of presenting pro forma cash dividends
per share, the historical cash dividends of First Charter have been combined
with the historical cash dividends of Carolina First.
15
<PAGE> 23
SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following selected pro forma consolidated financial data for the nine
months ended September 30, 1999 and 1998, and for the five-year period ended
December 31, 1998, give effect to the merger as of the date or at the beginning
of the periods indicated, with the merger treated as a pooling of interests for
accounting purposes. The pro forma balance sheet data at September 30, 1999
reflect preliminary estimates by First Charter of merger-related charges to be
incurred in connection with consummation of the transaction; however, the pro
forma income statement data does not reflect the estimated merger-related
charges. Share data for Carolina First have been restated for a 10% stock
dividend issued during the third quarter of 1999. Share data have been restated
to adjust for Carolina First shares that were owned by First Charter in the
respective years. Pro forma balance sheet data for the period ended September
30, 1999 have also been given pro forma effect for the 122,263 shares issued in
First Charter's purchase accounting acquisition of J. L. Suttle, Jr. & Co., Inc.
which was consummated on January 12, 2000. The selected pro forma consolidated
financial data are presented for informational purposes only and are not
necessarily indicative of the consolidated financial position or results of
operations which actually would have occurred if the merger had been consummated
at the date or at the beginning of the periods indicated or which may be
obtained in the future.
The information shown below should be read in conjunction with, and is
qualified in its entirety by, the historical consolidated financial statements
of First Charter and Carolina First, including the respective notes thereto and
the pro forma condensed consolidated financial information contained herein. See
"Where You Can Find More Information," "Additional Information," "Pro Forma
Condensed Consolidated Financial Information" and "-- Selected Consolidated
Financial Data."
16
<PAGE> 24
FIRST CHARTER CORPORATION AND CAROLINA FIRST BANCSHARES, INC.
PRO FORMA SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
AS OF AND FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, AS OF AND FOR THE YEARS ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income........ $ 144,026 $ 140,322 $ 188,561 $ 168,367 $ 155,499 $ 131,029 $ 109,156
Interest expense....... 67,073 68,866 92,694 82,400 74,426 62,366 48,509
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest
income............. 76,953 71,456 95,867 85,967 81,073 68,663 60,647
Provision for loan
losses............... 3,770 2,797 3,741 3,681 2,660 3,038 2,258
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses........ 73,183 68,659 92,126 82,286 78,413 65,625 58,389
Noninterest income..... 20,641 16,362 21,698 21,845 13,789 12,207 10,913
Noninterest expense.... 54,319 67,106 85,021 63,984 57,552 47,803 44,103
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes.............. 39,505 17,915 28,803 40,147 34,650 30,029 25,199
Income taxes........... 12,654 8,595 12,858 14,255 11,996 9,757 8,058
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income........... $ 26,851 $ 9,320 $ 15,945 $ 25,892 $ 22,654 $ 20,272 $ 17,141
========== ========== ========== ========== ========== ========== ==========
PER SHARE DATA:
Net income
Basic(1)............. $ 0.85 $ 0.30 $ 0.51 $ 0.84 $ 0.73 $ 0.62 $ 0.54
Diluted(1)........... 0.85 0.29 0.50 0.82 0.73 0.61 0.53
Cash dividends
declared(1)(2)....... 0.34 0.29 0.40 0.32 0.22 0.18 0.12
Period-end book
value(1)............. 9.15 9.57 9.66 9.29 8.91 11.35 8.00
BALANCE SHEET DATA (AT
PERIOD END):
Total assets........... $2,593,434 $2,521,727 $2,594,585 $2,289,458 $2,092,647 $1,873,907 $1,493,930
Loans, net............. 1,874,629 1,827,028 1,876,353 1,644,416 1,464,886 1,208,709 988,785
Allowance for loan
losses............... 24,175 21,725 22,278 21,100 19,453 17,959 16,807
Deposits............... 1,797,924 1,703,373 1,775,638 1,604,312 1,477,668 1,377,617 1,275,052
Total shareholders'
equity............... 282,803 303,627 306,552 298,860 276,487 350,694 167,734
PERFORMANCE RATIOS:
Net income to average
shareholders'
equity(3)............ 12.11% 4.04% 5.18% 8.52% 7.03% 11.52% 10.97%
Net income to average
total assets(3)...... 1.39% 0.51% 0.65% 1.20% 1.14% 1.27% 1.20%
CAPITAL RATIOS:
Tier 1 risk-based
capital.............. 15.42% 17.74% 16.92% 19.36% 27.91% 29.87% 17.16%
Total risk-based
capital.............. 16.67% 18.99% 18.17% 20.61% 29.34% 31.36% 18.82%
Leverage............... 10.97% 11.97% 11.72% 13.30% 17.60% 20.54% 10.93%
Shareholders' equity to
total assets......... 10.91% 12.04% 11.82% 13.05% 13.21% 18.71% 11.23%
OTHER RATIOS:
Loans to deposits...... 105.62% 108.55% 106.94% 103.83% 100.46% 89.06% 78.88%
Allowance for loan
losses to gross
loans................ 1.27% 1.18% 1.17% 1.27% 1.31% 1.46% 1.67%
Net charge offs to
average loans(3)..... 0.11% 0.17% 0.14% 0.15% 0.09% 0.19% 0.17%
Problem assets to total
assets............... 0.60% 0.53% 0.54% 0.62% 0.56% 0.94% 1.73%
</TABLE>
- ---------------
(1) Per share data have been restated for all periods presented for a 10%
stock dividend declared by Carolina First on June 23, 1999.
(2) First Charter anticipates cash dividends per share to be maintained at
First Charter's historical dividend per share level into the future.
This is equivalent to a $1.54 dividend per share for current Carolina
First shareholders. However, for purposes of presenting pro forma cash
dividends per share, the historical cash dividends of First Charter have
been combined with the historical cash dividends of Carolina First.
(3) September 30, 1999 and 1998 ratios have been annualized.
17
<PAGE> 25
RECENT DEVELOPMENTS
RECENT FIRST CHARTER FINANCIAL INFORMATION
On January 18, 2000, First Charter announced its earnings and other
financial data as of and for the year ended December 31, 1999. First Charter had
net income for 1999 of $26.1 million, or $1.45 per diluted share, compared to
$9.2 million, or $.50 per diluted share for 1998. The 1999 results included
pretax total gains of $3.5 million ($0.13 per diluted share, after tax) on the
sales of property and mortgage loans and the 1998 results included a pretax net
expense of $15.8 million ($0.69 per diluted share, after tax) attributable to
pre-tax merger expenses offset by gains from the nonrecurring sales of
securities and merchant card program. Recurring net income for 1999 would have
been $23.8 million, or $1.32 per diluted share, and net income for 1998 would
have been $22.0 million, or $1.19 per diluted share.
First Charter's net interest income for 1999 increased to $69.4 million, up
5.4% from the prior year. Noninterest income for the year ended December 31,
1999 totaled $18.2 million compared to $13.7 million for the same period in
1998, an increase of 33.4%. For comparative purposes, the 1999 results include
total gains of $3.5 million from the sales of property and mortgage loans, while
the 1998 results included total gains of $2.4 million from the sale of
securities and the sale of First Charter's merchant card program. Excluding
these items, noninterest income increased 30.1% for the year ended December 31,
1999 compared to the same period in 1998.
Net loans at December 31, 1999 amounted to $1.4 billion, unchanged from
December 31, 1998. Total deposits at December 31, 1999 and 1998 were $1.1
billion. Shareholders' equity at December 31, 1999 was $227.7 million, compared
to $246.0 million at December 31, 1998.
For additional First Charter financial information at and for the quarter
and year ended December 31, 1999, see the First Charter Current Report on Form
8-K dated January 18, 2000.
RECENT CAROLINA FIRST FINANCIAL INFORMATION
On January 18, 2000, Carolina First announced its earnings and other
financial data at and for the year ended December 31, 1999. Carolina First had
net income for 1999 of $8.8 million, or $1.45 per diluted share, compared to
$6.7 million, or $1.11 per diluted share for 1998. The 1999 results included
additional expenses related to the compensation cost for health insurance plans
and supplemental retirement plans, professional fees associated with
establishing a real estate investment trust, and securities losses totaling
approximately $1.4 million ($1.0 million after tax, or $0.16 per diluted share).
Excluding these items, net income for 1999 would have been $9.8 million ($1.61
per diluted share), compared to net income for 1998 of $8.3 million ($1.40 per
diluted share) excluding restructuring and merger related expenses. In addition,
Carolina First's net interest income for 1999 increased to $34.5 million, up 15%
from the prior year. Noninterest income for 1999 and 1998 totaled $8.0 million.
Net loans at December 31, 1999 amounted to $533.9 million, compared to
$469.4 at December 31, 1998. Total deposits at December 31, 1999 were $667.0
million, compared to $652.6 million at December 31, 1998. Shareholders' equity
at December 31, 1999 was $66.0 million, compared to $62.0 million at December
31, 1998.
18
<PAGE> 26
For additional Carolina First financial information at and for the quarter
and year ended December 31, 1999, see the Carolina First Current Report on Form
8-K dated January 19, 2000.
FIRST CHARTER NATIONAL BANK ACQUISITION OF J.L. SUTTLE, JR. & CO., INC. ASSETS
On January 12, 2000, First Charter National Bank acquired the assets of the
J.L. Suttle, Jr. & Co., Inc. insurance agency for a purchase price comprised of
122,263 shares of First Charter common stock. First Charter National Bank
immediately transferred those assets to its subsidiary First Charter Insurance
Services, Inc. The shares of First Charter common stock issued in this
transaction are included in the calculation of the respective percentages of
First Charter common stock which will be owned by the shareholders of First
Charter and Carolina First immediately following the merger.
19
<PAGE> 27
FIRST CHARTER SPECIAL MEETING
This section contains information for First Charter shareholders about the
special meeting First Charter has called to consider and approve the merger
agreement and the issuance of the First Charter shares in the merger.
We are mailing this document to you as a First Charter shareholder, on or
about February , 2000. We are also sending to you a notice of the First
Charter special meeting and a form of proxy for use at the First Charter special
meeting. The special meeting will be held on , March , 2000, at
p.m., local time, at . A copy of the merger
agreement is attached to this document as Appendix A.
MATTERS TO BE CONSIDERED
At the First Charter special meeting, First Charter will ask First Charter
shareholders:
- to approve the merger agreement and the issuance of shares of First
Charter common stock according to the terms of the merger agreement; and
- to act on any other matters that may properly be considered at the
special meeting.
You may also be asked to vote on a proposal to adjourn or postpone the
special meeting. We could use any adjournment or postponement for the purpose,
among others, of allowing more time to solicit additional votes.
PROXIES
You should complete, sign and return the proxy form accompanying this
document even if you plan to attend the special meeting in person. You can
revoke your proxy at any time before the vote is taken at the special meeting by
submitting written notice of revocation or a properly submitted proxy of a later
date, or by attending the special meeting and voting in person by written
ballot. Written notices of revocation and other communications about revoking
your proxy should be addressed to:
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016
All shares represented by valid proxies which are not revoked before they
are exercised, will be voted in the manner specified. If you make no
specification on your returned proxy card, your proxy will be voted in favor of
approval of the merger agreement and the issuance of the shares of First Charter
common stock pursuant to the merger agreement. The First Charter board of
directors is unaware of any other matters that may be presented for action at
the First Charter special meeting. If other matters do properly come before the
special meeting, we intend that shares represented by properly submitted proxies
will be voted, or not voted, by and at the discretion of the persons named as
proxies on the proxy card.
SOLICITATION OF PROXIES
First Charter will pay the costs of soliciting proxies from its
shareholders, except that Carolina First and First Charter have each agreed to
each pay one-half of the costs and expenses of printing this document and the
filing fees paid to the SEC. In addition to
20
<PAGE> 28
solicitation of proxies by mail, First Charter will request banks, brokers and
other record holders to send proxies and proxy material to the beneficial owners
of First Charter common stock and secure their voting instructions, if
necessary. First Charter will reimburse those record holders for their
reasonable expenses in taking those actions. First Charter and Carolina First
have also made arrangements with Regan & Associates, Inc. to help them in
soliciting proxies for their respective special meetings from banks, brokers and
nominees, and each have agreed to pay $7,000 for these services. First Charter's
directors, officers and employees also may solicit proxies from shareholders,
either personally or by telephone, telegram, facsimile, letter or otherwise.
First Charter may reimburse the reasonable expenses incurred by its directors,
officers and employees in their solicitation efforts.
RECORD DATE AND VOTING RIGHTS
The close of business on , 2000 has been fixed as the record date
for determining the First Charter shareholders entitled to notice of and to vote
at the special meeting. Accordingly, you are only entitled to notice of, and to
vote at, the special meeting if you were a record holder of First Charter common
stock on the record date. At that time, shares of First Charter
common stock were outstanding and were held by approximately
holders of record. To have a quorum that permits us to conduct
business at the special meeting, we require the presence, whether in person or
through the proxies received, of holders of a majority of the shares of First
Charter common stock outstanding and entitled to vote at the special meeting.
You are entitled to one vote for each outstanding share of First Charter common
stock you held on the record date.
Shares of First Charter common stock present in person at the special
meeting but not voting, and shares of First Charter common stock for which First
Charter has received proxies indicating that their holders have abstained, will
be counted as present at the special meeting for purposes of determining the
presence of a quorum for the transaction of business. Shares held in street name
that have been designated by brokers on proxy cards as not voted will not be
counted as votes cast for or against any proposal. These broker non-votes will,
however, be counted for purposes of determining whether a quorum exists.
Approval of the merger agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of First Charter common stock
entitled to vote at the special meeting. Because of this requirement,
abstentions and broker non-votes will have the same effect as votes against
approval of the merger agreement. Accordingly, the First Charter board of
directors urges First Charter shareholders to complete, date and sign the
accompanying proxy and return it promptly in the enclosed, postage-paid
envelope.
As of the record date:
- Directors and executive officers of First Charter beneficially owned
approximately shares of First Charter common stock, entitling
them to exercise approximately % of the voting power of the First
Charter common stock entitled to vote at the First Charter special
meeting. We currently expect that each First Charter director and
executive officer will vote all shares of First Charter common stock he
or she beneficially owns "FOR" approval of the merger agreement and the
issuance of shares of First Charter common stock in the merger.
21
<PAGE> 29
- Directors and executive officers of Carolina First beneficially owned
approximately shares of First Charter common stock, or
% of the voting power of the First Charter common stock entitled to
vote at the First Charter special meeting. We currently expect that each
Carolina First director and executive officer will vote all shares of
First Charter common stock he or she beneficially owns "FOR" approval of
the merger agreement and the issuance of shares of First Charter common
stock in the merger.
- Carolina First does not own any shares of First Charter common stock.
- First Charter National Bank, as fiduciary, custodian or agent, held a
total of approximately shares of First Charter common stock,
representing approximately % of the shares entitled to vote at the
special meeting, and maintained sole or shared voting power with respect
to all of these shares. We currently expect that First Charter National
Bank will vote all shares of First Charter common stock it beneficially
owns and with respect to which it has voting power "FOR" the merger
agreement and the issuance of shares of First Charter common stock in the
merger.
- The banking subsidiaries of Carolina First, as fiduciaries, custodians or
agents, held a total of shares of First Charter common
stock, representing % of the shares entitled to vote at the special
meeting, and maintained sole or shared voting power over
of these shares. We currently expect that the banking subsidiaries of
Carolina First will vote all shares of First Charter common stock they
beneficially own and with respect to which they have voting power "FOR"
the merger agreement and the issuance of shares of First Charter common
stock in the merger.
You can find additional information about the beneficial ownership of First
Charter common stock by persons and entities owning more than 5% of the stock,
and more detailed information about the beneficial ownership of First Charter
common stock by our directors and executive officers, in the definitive proxy
statement we filed with the SEC and sent to our shareholders in connection with
our 1999 Annual Meeting of Shareholders. See "Additional Information" and "Where
You Can Find More Information" for instructions on how you can obtain this
document.
RECOMMENDATION OF THE FIRST CHARTER BOARD OF DIRECTORS
The First Charter board of directors unanimously approved the merger
agreement, the merger and related transactions, including the issuance of
additional shares of First Charter common stock. The First Charter board of
directors believes that the merger agreement and related transactions are in the
best interests of First Charter's shareholders and unanimously recommends that
the First Charter shareholders vote "FOR" the approval of the merger agreement
and the issuance of shares of First Charter common stock in the merger. See
"First Charter's Reasons For the Merger; Recommendation of the First Charter
Board of Directors" for a more detailed discussion of the First Charter board of
directors' recommendation.
22
<PAGE> 30
CAROLINA FIRST SPECIAL MEETING
This section contains information for Carolina First shareholders about the
special meeting Carolina First has called to consider and approve the merger
agreement.
We are mailing this document to you, as a Carolina First shareholder, on or
about February , 2000. We are also sending to you a notice of the Carolina
First special meeting and a form of proxy for use at the Carolina First special
meeting. The special meeting will be held on , March , 2000 at
2:00 p.m., local time at The Lincoln Cultural Center, 403 E. Main Street,
Lincolnton, North Carolina. A copy of the merger agreement is attached to this
document as Appendix A.
MATTERS TO BE CONSIDERED
At the Carolina First special meeting, Carolina First will ask Carolina
First shareholders:
- to approve the merger agreement, which provides for the merger; and
- to act on any other matters that may properly be considered at the
special meeting.
You may also be asked to vote upon a proposal to adjourn or postpone the
special meeting. We could use any adjournment or postponement for the purpose,
among others, of allowing more time to solicit additional votes.
PROXIES
You should complete, sign and return the proxy form accompanying this
document even if you plan to attend the special meeting in person. You can
revoke your proxy at any time before the vote is taken at the special meeting by
submitting written notice of revocation or a properly submitted proxy of a later
date, or by attending the special meeting and voting in person by written
ballot. Written notices of revocation and other communications about revoking
your proxy should be addressed to:
First-Citizens Bank & Trust Company
Corporate Trust Department
100 E. Tryon Road
P.O. Box 29522 (27626)
Raleigh, N.C. 27603
All shares represented by valid proxies which are not revoked before they
are exercised, will be voted in the manner specified. If you make no
specification on your returned proxy card, your proxy will be voted in favor of
approval of the merger agreement. The Carolina First board of directors is
presently unaware of any other matters that may be presented for action at the
Carolina First special meeting. If other matters do properly come before the
special meeting, however, we intend that shares represented by properly
submitted proxies will be voted, or not voted, by and at the discretion of the
persons named as proxies on the proxy card.
23
<PAGE> 31
SOLICITATION OF PROXIES
Carolina First will pay the costs of soliciting proxies from its
shareholders, except that Carolina First and First Charter have each agreed to
pay one-half of the costs and expenses of printing this document and the filing
fees paid to the SEC. In addition to solicitation of proxies by mail, Carolina
First will request banks, brokers and other record holders to send proxies and
proxy material to the beneficial owners of Carolina First common stock and
secure their voting instructions, if necessary. Carolina First will reimburse
these record holders for their reasonable expenses in taking those actions.
Carolina First and First Charter have also made arrangements with Regan &
Associates, Inc. to help them in soliciting proxies for their respective special
meetings, from banks, brokers and nominees, and each has agreed to pay $7,000
for these services. Carolina First's directors, officers and employees, also may
solicit proxies from shareholders, either personally or by telephone, telegram,
facsimile, letter or otherwise. Carolina First may reimburse the reasonable
expenses incurred by its directors, officers and employees in their solicitation
efforts.
RECORD DATE AND VOTING RIGHTS
The close of business on , 2000 has been fixed as the record date
for determining the Carolina First shareholders entitled to notice of and to
vote at the special meeting. Accordingly, you are only entitled to notice of,
and to vote at, the special meeting if you were a record holder of Carolina
First common stock on the record date. At that time, shares of
Carolina First common stock were outstanding and held by approximately
holders of record. To have a quorum that permits us to conduct
business at the special meeting, we require the presence, whether in person or
through proxies received, of the holders of a majority of the shares of Carolina
First common stock outstanding and entitled to vote at the special meeting. You
are entitled to one vote for each outstanding share of Carolina First common
stock you held on the record date.
Shares of Carolina First common stock present in person at the special
meeting but not voting, and shares of Carolina First common stock for which
Carolina First has received proxies indicating that their holders have
abstained, will be counted as present at the special meeting for purposes of
determining the presence of a quorum for transacting business. Shares held in
street name that have been designated by brokers on proxy cards as not voted
will not be counted as votes cast for or against any proposal. These broker
non-votes will, however, be counted for purposes of determining whether a quorum
exists.
Approval of the merger agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of Carolina First common stock
entitled to vote at the special meeting. Because of this requirement,
abstentions and broker non-votes will have the same effect as votes against
approval of the merger agreement. Accordingly, the Carolina First board of
directors urges you to complete, date and sign the accompanying proxy and return
it promptly in the enclosed, postage-paid envelope.
As of the record date:
- Directors and executive officers of Carolina First beneficially owned
approximately shares of Carolina First common stock, entitling
them to exercise approximately % of the voting power of the Carolina
First common stock entitled to vote at the Carolina First special
meeting. We currently expect that each
24
<PAGE> 32
director and executive officer will vote all shares of Carolina First
common stock he or she beneficially owns "FOR" approval of the merger
agreement.
- Directors and executive officers of First Charter beneficially owned
approximately shares of Carolina First common stock, or %
of the voting power of the Carolina First common stock entitled to vote
at the Carolina First special meeting. We currently expect that each
director and executive officer will vote all shares of Carolina First
common stock he or she beneficially owns "FOR" approval of the merger
agreement.
- First Charter beneficially owned shares of Carolina First
common stock, or % of the voting power of the Carolina First common
stock entitled to vote at the special meeting. We currently expect that
First Charter will vote all shares of Carolina First common stock it
beneficially owns "FOR" approval of the merger agreement.
- The banking subsidiaries of Carolina First, as fiduciaries, custodians or
agents, held a total of approximately shares of Carolina First
common stock, representing approximately % of the shares entitled to
vote at the special meeting, and maintained sole or shared voting power
with respect to of these shares. We currently expect that the
banking subsidiaries of Carolina First will vote all shares of Carolina
First common stock they beneficially own and with respect to which they
have voting power "FOR" the merger agreement.
- First Charter National Bank, as a fiduciary, custodian or agent, held a
total of shares of Carolina First common stock, representing
% of the shares entitled to vote at the special meeting, and
maintained sole or shared voting power over all of these shares. We
currently expect that First Charter National Bank will vote all shares of
Carolina First common stock it beneficially owns and with respect to
which it has voting power "FOR" the merger agreement.
You can find additional information about beneficial ownership of Carolina
First common stock by persons and entities owning more than 5% of the stock, and
more detailed information about beneficial ownership of Carolina First common
stock by our directors and executive officers, in the definitive proxy statement
we filed with the SEC and sent to our shareholders in connection with our 1999
Annual Meeting of Shareholders. See "Available Information" and "Where You Can
Find More Information" for instructions on how you can obtain this document.
RECOMMENDATION OF THE CAROLINA FIRST BOARD OF DIRECTORS
The Carolina First board of directors unanimously approved the merger
agreement, the merger and related transactions. Carolina First's board of
directors believes that the merger agreement, the merger and the related
transactions are in the best interests of Carolina First's shareholders and
unanimously recommends that Carolina First shareholders vote "FOR" the approval
of the merger agreement.
See "The Merger -- Carolina First's Reasons for the Merger; Recommendation
of the Carolina First Board of Directors" for a more detailed discussion of the
Carolina First board of director's recommendation.
25
<PAGE> 33
THE MERGER
The discussion in this document of the merger of Carolina First with and
into First Charter, as well as the discussion of the merger agreement and the
related stock option agreement do not purport to be complete and are qualified
by reference to the full text of the merger agreement and the related stock
option agreement, which are incorporated by reference. Copies of the merger
agreement and the related stock option agreement can be found in Appendices A
and B to this document.
GENERAL
The merger agreement provides for the merger of Carolina First with and
into First Charter. First Charter will be the surviving corporation of the
merger. At the effective time of the merger, each outstanding share of Carolina
First common stock will be canceled and will be converted solely into the right
to receive 2.267 shares of First Charter common stock. Only whole shares of
First Charter common stock will be issued in the merger. Cash will be paid for
any fractional shares of First Charter common stock otherwise issuable as a
result of the merger.
If, prior to the effective time of the merger, the number or kind of issued
and outstanding shares of First Charter common stock is changed as a result of a
reorganization, recapitalization, reclassification, stock dividend, stock split,
or other similar transaction which changes the number of shares of First Charter
common stock outstanding and the record date or the effective date for the
purpose of the transaction is prior to the effective time of the merger, then a
proportionate adjustment will be made to the exchange ratio.
The merger will become effective when a certificate of merger has been duly
filed with the Secretary of State of North Carolina or at any different date or
time selected by First Charter and Carolina First and specified in the
certificate of merger.
The transaction is intended to qualify as both (1) a "pooling of interests"
for accounting and financial reporting purposes and (2) a tax-free
"reorganization" for federal income tax purposes.
Based on the closing price per share of First Charter common stock on the
Nasdaq National Market of $18.75 on November 5, 1999, the last trading day prior
to the public announcement of the merger, and giving effect to the exchange
ratio, the implied per share value of Carolina First common stock in the merger
was $42.51 on that date. The closing price per share of First Charter common
stock on the Nasdaq National Market on , 2000, was $ and the
implied per share value of Carolina First common stock in the merger was $
as of that date. The prices of the common stock of both our companies will
fluctuate before and after the special meetings, and you should obtain current
quotations of these prices.
As a result of the merger, existing First Charter shareholders initially
will own approximately %, and the former Carolina First shareholders
initially will own approximately %, of the combined company's common stock
immediately after the merger, based on the number of shares of First Charter
common stock and Carolina First common stock outstanding as of , 2000.
26
<PAGE> 34
STOCK OPTION AND INCENTIVE PLANS
Carolina First's stock option and incentive plans will be assumed by First
Charter. As a result, each stock option, stock appreciation right and stock
award granted under Carolina First's stock option and incentive plans which is
outstanding and unexercised immediately prior to the effective time of the
merger will be vested and converted automatically into a stock option, stock
appreciation right or stock award with respect to First Charter common stock but
will continue to be governed by the terms of Carolina First's stock option and
incentive plans. In each case, the number of shares of First Charter common
stock subject to the new First Charter option, right or award will be equal to
the product of the applicable number of shares of Carolina First common stock
subject to the Carolina First option, right or award and 2.267, rounded down to
the nearest whole share, and the per share exercise or threshold price will be
the per share exercise or threshold price under the Carolina First option, right
or award divided by 2.267 rounded up to the nearest whole cent. The duration and
other terms of each new First Charter option will be substantially the same as
the prior Carolina First option. In any event, options that are incentive stock
options under the Internal Revenue Code of 1986, as amended shall be adjusted as
required by that law. First Charter has taken all corporate action necessary to
reserve for issuance a sufficient number of shares of First Charter common stock
for delivery upon exercise of the new First Charter options.
POST-MERGER COMPENSATION AND BENEFITS
The merger agreement provides that following the effective time, First
Charter will provide to officers and employees of Carolina First and its
subsidiaries, employee benefits under employee benefit plans (other than stock
options or other plans involving the potential issuance of First Charter common
stock), on terms and conditions which are substantially similar to those
currently provided by First Charter and its subsidiaries to their similarly
situated officers and employees. For purposes of participation, vesting, and
benefit accruals (but not accrual of benefits under First Charter's
tax-qualified defined benefit plans) under the employee benefit plans, the
service of the continuing employees on behalf of Carolina First or its
subsidiaries prior to the effective time will be treated as service with First
Charter or its subsidiaries. Prior to the effective time, Carolina First may
also amend any employee pension benefit plan to provide for full vesting of all
benefits for all participants who are actively employed as of the effective date
of the amendment.
The merger agreement also provides that following the effective time, First
Charter will assume and honor in accordance with their terms the employment
agreements, deferred compensation agreements and retirement and supplemental
income agreements and plans of Carolina First which have been disclosed to First
Charter.
The merger agreement provides that any person who was serving as an officer
or employee of Carolina First or any of its subsidiaries immediately prior to
the effective time (other than those employees covered by a written employment
agreement) whose employment is discontinued by First Charter within six months
after the effective time, other than those who are terminated for "cause," shall
be entitled to a severance payment from First Charter equal in amount to four
weeks' pay (six weeks in the case of officers at the level of vice president or
above) plus two weeks' base pay for each full or partial year of employment with
Carolina First, subject to a maximum of 40 weeks' pay, together with any accrued
but unused vacation leave with respect to the calendar year in which termination
occurs.
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<PAGE> 35
BACKGROUND OF THE MERGER
On January 22, 1999, Carolina First held its 1998 strategic planning
conference, which had been delayed to enable the inclusion of the CB&T directors
who joined the Carolina First board after CB&T was acquired in December 1998.
This meeting was facilitated by the Delta Consulting Group, Inc., Austin, Texas,
to establish a business plan for the year and to discuss topics of importance
and concern to the banking industry. Strategic alternatives that Carolina First
might consider was an agenda item covered by Delta. Robinson-Humphrey also
attended this meeting and reviewed regional bank merger and acquisition
activities and recent events in the banking markets.
Following the conference, the board passed a resolution confirming Carolina
First's long-term strategy of remaining independent.
While reaffirming its strategy to remain independent, the board of
directors also determined that, in light of merger activity within the industry,
it would be advisable to become more informed regarding the market and possible
strategic partners. It was recommended that Robinson-Humphrey prepare and
conduct an information session to help the board members familiarize themselves
with various financial institutions to better evaluate possible acquisitions or
mergers, and to be better prepared in the event that an unsolicited offer for
Carolina First was received.
At the April 7, 1999 board meeting, Robinson-Humphrey gave a presentation
covering general market conditions in the banking industry, peer bank
comparisons, possible merger of equal candidates and potential acquisition
candidates.
During Summer 1999, bank stocks in general declined. Carolina First's stock
reached a low of $16.75 per share on September 17, 1999. On July 22, 1999,
representatives of Robinson-Humphrey gave a presentation on the performance of
financial institution stocks generally, and commented on certain trends, such as
stock dividends and stock buy-backs, and the performance of various regional
bank stocks. This presentation was intended to assist the board in understanding
the performance of Carolina First's stock compared to other community bank
stocks.
In September 1999, Carolina First submitted a bid to acquire another
institution in Charlotte, North Carolina, but this proposal was rejected and no
further discussions were held.
Carolina First held its 1999 annual strategic planning conference on
September 23 and 24, 1999. At the conference, Mr. Burt outlined the principal
strategic issues facing Carolina First, and Charles T. Meeks, Bank Consultant,
as a conference facilitator, led the board in a discussion of banking industry
conditions generally, and specific issues facing Carolina First. As a result, a
consensus was reached that the board needed to focus on:
- restoring shareholder value
- addressing management succession
- meeting the challenges of new and additional technology
- upgrading facilities to meet existing and future needs
The board concluded that while Carolina First was capable of satisfactorily
addressing all of these issues as an independent company, it should also
consider a possible
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<PAGE> 36
combination with a strategic partner, whether by acquisition, merger of equals
or sale. Mr. Burt was directed to develop a plan to identify potential strategic
partners.
On September 30, 1999, Mr. Burt met with Carolina First's financial and
legal representatives, Robinson-Humphrey and Alston & Bird LLP, to discuss the
strategic planning meeting and its results.
On October 12, 1999, the executive committee of Carolina First's board met
to review the terms of a proposed engagement letter that management had received
from Robinson-Humphrey and to discuss four potential institutions that could
satisfy the issues identified at the Fall 1999 strategic planning conference. It
was the consensus of the executive committee that it was in the best interests
of the shareholders to proceed to find a strategic partner and Mr. Burt was
instructed to contact each potential partner, either personally or through
Robinson-Humphrey. Following further negotiations, the Robinson-Humphrey
engagement letter was finally executed on October 14, 1999. Robinson-Humphrey
and Carolina First obtained confidentiality agreements with four interested
parties by October 15, 1999.
On October 21, 1999, at a meeting of the executive committee,
Robinson-Humphrey summarized the preliminary indications of interest that had
been received from each of the parties contacted. Two potential bidders dropped
out as a result of other opportunities or because the pricing indications were
higher than they could meet. Robinson-Humphrey discussed the financial
fundamentals and trends of each of the other candidates. Robinson-Humphrey was
directed to solicit final proposals from two parties, including First Charter,
for consideration by Carolina First's full board of directors at its regularly
scheduled October meeting.
During the week of October 25, 1999 First Charter and the other remaining
interested party performed preliminary due diligence on Carolina First.
At the October 28, 1999 board meeting, Carolina First's board was updated
as to the executive committee's efforts to address the issues presented at the
Fall 1999 strategic planning conference. Upon the request of First Charter,
representatives of First Charter were allowed to make a presentation to the
board on the philosophy of First Charter and how they believed First Charter
could successfully address the four principal issues which had been communicated
by Robinson-Humphrey on behalf of Carolina First. After the First Charter
representatives left the meeting, Robinson-Humphrey described the two proposals
that had been received and its analysis of each. Final proposals were requested
by November 1, 1999, for consideration at Carolina First's board meeting
scheduled for November 2, 1999.
At the November 2, 1999 board meeting, Mr. Burt recommended that Carolina
First engage Alston & Bird to represent it in connection with the potential
transaction, and the board approved such engagement. The other potential partner
determined not to further participate in the process, and Carolina First
determined not to further pursue that party. Robinson-Humphrey then summarized
the proposal from First Charter, including the proposed exchange ratio and the
proposed transaction's value and terms. Robinson-Humphrey also reviewed the
financial history of First Charter that had been presented at the previous board
meeting. After full discussion and a recommendation from management, the
directors determined that First Charter could address the issues raised at the
strategic planning conference and selected First Charter as its preferred choice
for a
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<PAGE> 37
strategic partner, and management was directed to negotiate the terms of a
definitive agreement.
Following the November 2, 1999 board meeting, representatives of Carolina
First and First Charter negotiated a definitive acquisition agreement, stock
option agreement and related agreements. On November 3, 1999, representatives of
Carolina First performed due diligence at First Charter.
At board meetings held on November 7, 1999, following presentations by
their respective financial and legal advisors and discussion, the terms of the
merger agreement, the stock option agreement, and the related agreements were
unanimously approved by the Carolina First and First Charter boards of
directors.
CAROLINA FIRST'S REASONS FOR THE MERGER; RECOMMENDATION OF THE CAROLINA FIRST
BOARD OF DIRECTORS
The Carolina First board of directors, with the assistance of its outside
financial and legal advisors, evaluated the financial, legal and market
considerations bearing on the decision to recommend the merger. The terms of the
merger, including the exchange ratio, are the result of arm's-length
negotiations between representatives of Carolina First and First Charter. In
reaching its conclusion that the merger agreement is in the best interests of
Carolina First and its shareholders, the Carolina First board of directors
carefully considered the following material factors:
- the financial terms of the proposed merger, including the fact that
Carolina First shareholders will not recognize any gain or loss for
federal income tax purposes on the receipt of First Charter common stock
in the merger;
- a comparison of the terms of the proposed merger with comparable
transactions in the Southeastern United States, North Carolina and
elsewhere;
- information concerning the business, financial condition, results of
operations and prospects of Carolina First and First Charter and of the
combined organization;
- the competence, experience and integrity of First Charter and its
management;
- competitive factors and consolidation trends in the banking industry;
- the review by the Carolina First board of directors with its legal and
financial advisors of the provisions of the merger agreement and the
related stock option agreement;
- the opinion rendered by Robinson-Humphrey to the Carolina First board of
directors that the exchange ratio to be received in the merger is fair,
from a financial point of view, to the Carolina First shareholders;
- alternatives to the merger, including proceeding on a stand-alone basis,
in light of:
-- economic conditions;
-- the competitive environment faced by community banks; and
-- Carolina First's needs to address management succession, restore
shareholder value, and improve its technology and facilities;
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<PAGE> 38
- the likelihood of the merger being consummated without undue regulatory
or other delays or conditions; and
- the social and economic effects of the transaction on Carolina First and
its communities, customers, creditors and employees.
The Carolina First board of directors also considered the separate
agreements and benefits proposed for employees and management, including Mr.
Burt's proposed employment arrangements with First Charter. The board concluded
that the terms of those agreements and arrangements were reasonable. See
"--Interests of Certain Persons In the Merger."
While each member of the Carolina First board of directors individually
considered the foregoing and other factors, the board did not collectively
assign any specific or relative weights to the factors considered and did not
make any determination with respect to any individual factor. The Carolina First
board of directors collectively made its determination with respect to the
merger, based on the conclusion reached by its members, in light of the factors
that each of them considered as appropriate, that the merger is in the best
interests of the Carolina First shareholders.
THE CAROLINA FIRST BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" THE MERGER AGREEMENT WHICH PROVIDES FOR THE MERGER.
FIRST CHARTER'S REASONS FOR THE MERGER; RECOMMENDATION OF THE FIRST CHARTER
BOARD OF DIRECTORS.
First Charter's board of directors believes that the transactions
contemplated by the merger agreement are in the best interest of First Charter
and its shareholders. In reaching this decision, First Charter's board of
directors concluded that the merger was likely to further the strategic plans of
First Charter and to increase the value of shares of First Charter common stock.
Accordingly, the board of directors decided to authorize and approve the merger
agreement and to recommend that First Charter shareholders vote "FOR" approval
of the merger agreement and the issuance of First Charter common stock in
connection with the merger.
The First Charter board of directors believes that the consummation of the
merger presents a unique opportunity to combine two of the leading banking
franchises in the Southern Piedmont region of North Carolina to create a banking
and financial services company that can utilize their combined distribution
network to offer a full range of financial products and services in many of the
region's most attractive markets.
First Charter's board of directors believes that the opportunities created
by the merger to increase the value of the First Charter common stock more than
offset any integration or other risks inherent in the merger.
The terms of the merger, including the exchange ratio, are the result of
arm's-length negotiations between representatives of First Charter and Carolina
First. In reaching its decision to approve the merger agreement, the First
Charter board of directors consulted with its legal advisors regarding the terms
of the transaction, with its financial advisors regarding the financial aspects
of the proposed transaction and the fairness of the exchange ratio, and with
management of First Charter. In reaching its conclusion that the merger
agreement is in the best interests of First Charter and its shareholders, the
First Charter board of directors considered the following material factors:
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<PAGE> 39
- the information presented to the directors by the management of First
Charter concerning the business, operations, earnings, asset quality, and
financial condition of Carolina First, including the composition of the
earning assets portfolio of Carolina First;
- the financial terms of the merger, including the relationship of the
value of the consideration issuable in the merger to the market value,
tangible book value, and earnings per share of Carolina First common
stock;
- the treatment of the merger as a tax-free exchange of Carolina First
common stock for First Charter common stock for federal income tax
purposes and the availability of the pooling of interests method of
accounting for the merger;
- the nonfinancial terms of the merger, including arrangements relating to
the continued involvement of the management and certain members of the
Carolina First board of directors with the combined company;
- the likelihood of the merger being approved by applicable regulatory
authorities without undue conditions or delay;
- the attractiveness of the Carolina First franchise and the market
position of Carolina First in the market in which it operates;
- the report of Wheat First reviewing a comparison of Carolina First to
selected peer banks and bank holding companies and of premiums paid in
other merger transactions; and
- the opinion rendered by Wheat First as to the fairness, from a financial
point of view, of the exchange ratio to the holders of First Charter
common stock.
This discussion of the information and factors considered by the First
Charter board of directors is not intended to be exhaustive, but includes all
the material factors that were considered. In reaching its determination to
approve the merger agreement and to recommend approval of the merger agreement
by its shareholders, the First Charter board of directors did not assign any
relative or specific weight to the different factors. Individual directors may
have given different weight to different factors.
THE FIRST CHARTER BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" THE MERGER AGREEMENT AND THE ISSUANCE OF SHARES OF FIRST CHARTER COMMON
STOCK IN THE MERGER.
OPINION OF CAROLINA FIRST'S FINANCIAL ADVISOR
GENERAL
Carolina First retained Robinson-Humphrey on October 14, 1999 to act as
Carolina First's financial advisor in connection with considering possible
strategic alternatives and related matters, based upon its qualifications,
expertise and reputation, as well as Robinson-Humphrey's prior investment
banking relationship and familiarity with Carolina First.
Robinson-Humphrey analyzed the financial terms of the merger agreement at
the November 7, 1999 special meeting of Carolina First's board of directors. At
that meeting, Robinson-Humphrey opinioned verbally, and subsequently confirmed
in writing, that, as of that date, and subject to the considerations set forth
in the opinion, the exchange ratio in
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<PAGE> 40
the merger agreement is fair, from a financial point of view, to Carolina
First's shareholders. The Carolina First board did not impose any limitations
with respect to the investigations made or procedures followed by
Robinson-Humphrey in preparing its analysis or rendering its opinion.
The full text of the Robinson-Humphrey opinion, which sets forth the
assumptions made, matters considered and the limitations on the reviews
undertaken, is attached to this document as Appendix C and is incorporated by
reference. The description of the Robinson-Humphrey opinion set forth below is
qualified in its entirety by reference to the full text of the Robinson-Humphrey
opinion. You are urged to read the opinion in its entirety.
The opinion of Robinson-Humphrey relates only to the fairness of the
consideration to be received by Carolina First shareholders in the merger from a
financial point of view. The opinion does not address any other aspect of the
merger and does not constitute a recommendation to any shareholder as to how you
should vote at the Carolina First special meeting. The consideration to be
received by Carolina First shareholders in the merger was determined on the
basis of arm's-length negotiations between Carolina First and First Charter, and
was approved unanimously by the Carolina First board.
In connection with rendering its opinion, Robinson-Humphrey, among other
things:
- reviewed publicly available financial statements and other information
relating to Carolina First and First Charter, respectively;
- reviewed internal financial statements and other financial and operating
data concerning Carolina First and First Charter prepared by the
managements of Carolina First and First Charter, respectively;
- analyzed financial projections prepared by the management of Carolina
First and First Charter, respectively;
- discussed the historical and current operations and financial condition
and the prospects of Carolina First and First Charter with senior
executives of Carolina First and First Charter, respectively;
- reviewed the reported market prices and trading activity for Carolina
First common stock and First Charter common stock, respectively;
- compared the financial performance of Carolina First and First Charter
and the prices and trading activity of Carolina First common stock and
First Charter common stock with that of other publicly-traded companies
believed to be comparable and their securities;
- discussed the results of regulatory examinations of Carolina First and
First Charter with senior management of the respective companies;
- discussed with senior management of Carolina First and First Charter the
strategic objectives of the merger and their estimates of the synergies
and other benefits of the merger for the combined company;
- analyzed the pro forma effects of the merger on the combined company's
earnings per share, consolidated capitalization and financial ratios;
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<PAGE> 41
- reviewed the publicly available financial terms of various merger
transactions believed to be comparable;
- participated in discussions and negotiations among representatives of
Carolina First and First Charter and their financial and legal advisors;
- reviewed the merger agreement and related documents; and
- performed other analyses and considered other factors that it deemed
appropriate.
In rendering its opinion, Robinson-Humphrey assumed and relied upon without
independent verification the accuracy and completeness of the information
reviewed for the purposes of its opinion. With respect to the financial
projections, including the synergies and other benefits expected to result from
the merger, Robinson-Humphrey has assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the future financial performance of Carolina First and First
Charter. Robinson-Humphrey has not made any independent valuation or appraisal
of the assets or liabilities of Carolina First or First Charter, nor has
Robinson-Humphrey been furnished with any appraisals. Robinson-Humphrey has not
examined any individual loan credit files of Carolina First or First Charter nor
has it evaluated the adequacy of their respective reserves. In addition,
Robinson-Humphrey has assumed the merger will be completed substantially in
accordance with the terms set forth in the merger agreement. Robinson-Humphrey's
opinion was necessarily based on financial, economic, market and other
conditions as in effect on, and the information made available to Robinson-
Humphrey as of, the date of its opinion.
The following is a summary of the financial analyses performed by Robinson-
Humphrey and reviewed with the Carolina First board on November 7, 1999, in
connection with Robinson-Humphrey delivering its opinion.
VALUATION METHODOLOGIES
As part of its financial analysis, Robinson-Humphrey performed valuation
analyses of Carolina First using various methodologies. Robinson-Humphrey
evaluated the positions and strengths of Carolina First on a stand-alone basis,
considered estimates by Carolina First and First Charter managements of the
synergies that could be expected from the merger with First Charter and
determined a range of acquisition values based upon specified assumptions. The
following is a summary of the various methodologies underlying the valuation
analyses conducted by Robinson-Humphrey.
Comparable Company Analysis
Robinson-Humphrey compared financial information of Carolina First with
publicly-available information of a peer group of eight publicly-traded
Southeastern bank holding companies that Robinson-Humphrey considered reasonably
comparable with Carolina First. The peer group institutions were:
- Anchor Financial Corporation
- Century South Banks, Inc.
- LSB Bancshares, Inc.
- First National Corporation
- Yadkin Valley Bank and Trust Company
- PAB Bankshares, Inc.
- First Bancorp
- Peoples Bancorp
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<PAGE> 42
Robinson-Humphrey analyzed the relative performance and value of Carolina
First by comparing market trading statistics for Carolina First with those of
the peer group. Market information used in the ratios provided below is as of
November 5, 1999, and financial information is as of September 30, 1999. The
market trading information used in the valuation analysis was as follows:
<TABLE>
<CAPTION>
SELECTED PEER GROUP
CAROLINA ------------------------
FIRST AVG. HIGH LOW
-------- ------ ------ ------
<S> <C> <C> <C> <C>
Price/LTM EPS(1).................................... 16.88x 17.45x 26.45x 11.58x
Price/1999 Estimated EPS............................ 16.05 15.56 17.42 11.52
Price/2000 Estimated EPS............................ 14.21 14.04 15.56 10.49
Price/Book Value.................................... 2.37 2.35 3.47 1.40
Price/Tangible Book Value........................... 2.48 2.36 3.47 1.40
Dividend Yield...................................... 1.54% 2.21% 3.11% 1.67%
Dividend Payout..................................... 24.69 34.63 50.45 23.53
</TABLE>
- ---------------------
(1)Adjusted to reflect the one-time restructuring charges of approximately $2.1
million.
Earnings per share estimates for Carolina First were provided by Carolina
First's management. The earnings per share estimates for the peer group were
based on I/B/E/S (I/B/E/S is a data service that monitors and publishes
compilations of earnings estimates by selected analysts) estimates as of
November 5, 1999.
Robinson-Humphrey analyzed the relative performance and value of Carolina
First by comparing certain operating performance ratios with those of the peer
group. A summary comparison of these results used in the valuation analysis was
as follows:
<TABLE>
<CAPTION>
SELECTED PEER GROUP
CAROLINA ---------------------
FIRST AVG. HIGH LOW
-------- ----- ----- -----
<S> <C> <C> <C> <C>
Return on Average Assets.................... 1.39% 1.37% 1.86% 1.11%
Return on Average Equity.................... 15.98 14.45 17.55 12.53
Net Interest Margin......................... 4.94 4.92 5.48 4.50
Efficiency Ratio............................ 62.82 58.37 65.81 43.42
Equity/Assets............................... 8.49 9.41 11.45 7.23
Reserves/Loans.............................. 1.43 1.35 1.59 1.11
Nonperforming Assets/Loans + OREO........... 0.55 0.86 2.20 0.23
</TABLE>
The implied range of values for Carolina First common stock derived from
the analysis of the peer group's market price to latest l2 months earnings as of
September 30, 1999, estimated 1999 and 2000 earnings per share, as well as
market price to book value and tangible book value was approximately $25 to $27
per share.
Dividend Discount Analysis
Robinson-Humphrey performed a dividend discount analysis to determine a
range of present values per share of Carolina First common stock assuming
Carolina First continued to operate as a stand-alone entity. This range was
determined by adding (a) the present value of the estimated future dividend
stream that Carolina First could generate over the five-year period from 1999
through 2003, and (b) the present value of the "terminal value" of Carolina
First's common stock at the end of the year 2003. To determine a projected
dividend stream, Robinson-Humphrey assumed a constant tangible common
equity/tangible assets ratio of 6.0%. The earnings projections which formed the
basis for
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<PAGE> 43
the dividends and the terminal value were obtained from Carolina First
management. The "terminal value" of Carolina First common stock at the end of
the period was determined by applying three price-to-earnings multiples (12x,
14x and 16x) to year 2003 projected earnings. The dividend stream and terminal
values were discounted to present values using discount rates of 10%, 11% and
12%, respectively, which Robinson-Humphrey viewed as the appropriate discount
rate range for a company with Carolina First's risk characteristics. Based on
these assumptions, the fully diluted stand-alone value of Carolina First common
stock ranged from approximately $29 to $39 per share.
Precedent Transaction Analysis
Robinson-Humphrey performed an analysis of precedent transactions by
selected commercial bank holding companies that Robinson-Humphrey deemed
comparable to the merger in order to compare the multiples of price to book
value, tangible book value, and latest 12 months earnings per share, and as a
percentage of total assets, indicated by the exchange ratio in the merger, to
those multiples indicated for the precedent transactions.
The precedent transactions were sub-divided as follows:
- 80 publicly-announced transactions nationwide since January 1, 1997 where
the seller had reported assets of $500 million to $2.5 billion, the
results of which are summarized as follows:
National Transactions
<TABLE>
<CAPTION>
PRICE/ PRICE/ PRICE/ PRICE/
BOOK TANGIBLE BOOK LTM EPS ASSETS
------ ------------- ------- ------
<S> <C> <C> <C> <C>
Average..................... 2.90x 3.15x 24.02x 26.40%
Median...................... 2.81 2.99 23.81 26.50
High........................ 5.13 5.13 47.74 48.00
Low......................... 1.70 1.73 10.63 10.79
</TABLE>
- 16 publicly-announced transactions since January 1, 1997 where the seller
was located in the Southeast United States and had reported assets of
$500 million to $2.5 billion, the results of which are summarized as
follows:
Southeastern Transactions
<TABLE>
<CAPTION>
PRICE/ PRICE/ PRICE/ PRICE/
BOOK TANGIBLE BOOK LTM EPS ASSETS
------ ------------- ------- ------
<S> <C> <C> <C> <C>
Average..................... 2.98x 3.16x 23.49x 26.79%
Median...................... 2.96 3.07 22.07 26.59
High........................ 3.80 4.13 29.69 39.62
Low......................... 2.02 2.36 16.60 18.15
</TABLE>
- Six publicly-announced transactions since January 1, 1997 where the
seller was located in North Carolina, the results of which are summarized
as follows:
North Carolina Transactions
<TABLE>
<CAPTION>
PRICE/ PRICE/ PRICE/ PRICE/
BOOK TANGIBLE BOOK LTM EPS ASSETS
------ ------------- ------- ------
<S> <C> <C> <C> <C>
Average..................... 3.06x 3.50x 32.91x 27.98%
Median...................... 3.19 3.40 28.83 28.48
High........................ 3.56 4.79 59.71 35.27
Low......................... 2.18 2.30 20.60 16.20
</TABLE>
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These multiples compare to the following summary of Carolina First's
implied multiples based on the proposed merger:
<TABLE>
<CAPTION>
M & A MULTIPLES
---------------------------------------------
CAROLINA NORTH
MULTIPLE OF: FIRST NATIONAL SOUTHEASTERN CAROLINA
- ------------ -------- -------- ------------ --------
<S> <C> <C> <C> <C>
Book Value ($10.98)............................ 3.87x 2.90x 2.98x 3.06x
Tangible Book Value ($10.50)................... 4.05 3.15 3.16 3.50
LTM EPS ($1.31)................................ 32.45x 24.02x 23.49x 32.91x
LTM EPS -- Adjusted ($1.54)(1)................. 27.60 -- -- --
Price/Assets ($776.4).......................... 32.44% 26.40% 26.79% 27.98%
Price/Current Market ($26.00).................. 63.50 -- -- --
</TABLE>
- ---------------
(1) Adjusted to reflect the one-time restructuring charges of approximately $2.1
million.
No company or transaction used in the comparable company and comparable
transaction analyses is identical to Carolina First or the merger, respectively.
Accordingly, an analysis of the results of the foregoing necessarily involves
complex considerations and judgments concerning financial and operating
characteristics of Carolina First and First Charter, and other factors that
could affect the public trading value of the companies to which they are being
compared. Mathematical analysis (such as determining the average or median) is
not in itself a meaningful method of using comparable transaction data or
comparable company data.
Contribution Analysis
Robinson-Humphrey reviewed the pro forma effects of the merger and computed
the contribution to the combined company's pro forma financial results
attributable to each of Carolina First and First Charter. This computation is
summarized as follows:
BALANCE SHEET CONTRIBUTION(1)
<TABLE>
<CAPTION>
FIRST CHARTER CAROLINA FIRST PRO FORMA
---------------- -------------- -----------------
AMOUNT % AMOUNT % AMOUNT %
-------- ---- ------ ---- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Total Assets................. $1,819.9 70.2% $773.6 29.8% $2,593.5 100.0%
Net Loans.................... 1,367.6 73.0 507.0 27.0 1,874.6 100.0
Total Deposits............... 1,136.6 63.2 661.3 36.8 1,797.9 100.0
Total Equity................. 228.4 77.7 65.7 22.3 294.1 100.0
Pro Forma Ownership(2)....... 56.1% 43.9% 100.0%
</TABLE>
- ---------------
(1) Dollar amounts in millions. Financial information as of September 30, 1999.
(2) Based on proposed acquisition terms
INCOME STATEMENT CONTRIBUTION(1)
<TABLE>
<CAPTION>
FIRST CHARTER CAROLINA FIRST PRO FORMA
-------------- -------------- ---------------
AMOUNT % AMOUNT % AMOUNT %
------ ---- ------ ---- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Net Interest Income............. $68.1 67.2% $33.2 32.8% $101.4 100.0%
Loss Provision.................. (3.1) 64.9 (1.7) 35.1 (4.7) 100.0
Other Income.................... 13.1 62.0 8.0 38.0 21.1 100.0
Other Expense................... 44.4 63.3 25.8 36.7 70.2 100.0
Net Income...................... 22.3 71.3 9.0 28.7 31.2 100.0
Pro Forma Ownership(2).......... 56.1% 43.9% 100.0%
</TABLE>
- ---------------
(1) Dollar amounts in millions. Financial information as of September 30, 1999.
(2) Based on proposed acquisition terms.
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<PAGE> 45
Pro Forma Merger Analysis
Robinson-Humphrey analyzed the financial effect of the merger on First
Charter's earnings per share and the estimates of cost savings, revenue
enhancements and other synergies that Carolina First and First Charter expected
to result from the merger. Earnings estimates were based on management estimates
as of November 5, 1999 for 2000, 2001 and 2002. This analysis showed that, after
giving effect to the merger, the projected timing of the realization of the
merger synergies and excluding the one-time merger-related charges, First
Charter's fully diluted earnings per share would increase in 2001 and 2002, in
each case compared to First Charter on a stand-alone basis.
In connection with its written opinion included with this document,
Robinson-Humphrey confirmed the appropriateness of its reliance on the analyses
used to render its November 7, 1999 opinion by performing procedures to update
the analyses and by reviewing the assumptions upon which the analyses were based
and the factors considered, and determined that no change in its analyses or
conclusions was necessary.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Robinson-Humphrey considered the results of all its
analyses as a whole and did not attribute any particular weight to any one
analysis or factor. Robinson-Humphrey believes that selecting any portion of its
analyses, without considering all analyses, would create an incomplete view of
the process underlying its opinion. In addition, Robinson-Humphrey may have
deemed various assumptions more or less probable than other assumptions, so that
the ranges of valuations resulting from any particular analysis described above
should not be taken to be Robinson-Humphrey's view of the actual value of
Carolina First.
In performing its analyses, Robinson-Humphrey made numerous assumptions
with respect to the performance of the financial services industry, general
business and economic conditions and other matters, including the changes in
competition and regulation of financial services competitors, many of which are
beyond the control of Carolina First or First Charter. The analyses performed by
Robinson-Humphrey are not necessarily indicative of actual values, which may be
significantly more or less favorable than suggested by the analyses. The
analyses were prepared solely as part of Robinson-Humphrey's analysis of the
fairness, from a financial point of view, of the exchange ratio to Carolina
First's shareholders and were conducted in connection with the delivery of
Robinson-Humphrey's opinion. The analyses do not purport to be appraisals or to
reflect the prices at which Carolina First might actually be sold in another
transaction.
As described above, Robinson-Humphrey's opinion and the information
provided by Robinson-Humphrey to the Carolina First board were among a number of
factors taken into consideration by the Carolina First board in making its
determination to recommend approval and adoption of the merger agreement to
Carolina First's shareholders. Consequently, the analyses described above should
not be viewed as determinative of the opinion of the entire Carolina First board
or the view of management with respect to the value of Carolina First.
The Carolina First board retained Robinson-Humphrey based upon its
experience and expertise, and Robinson-Humphrey's long relationship with and
services to Carolina First. Robinson-Humphrey is a nationally recognized
investment banking and advisory firm. As part of its investment banking
business, Robinson-Humphrey is regularly engaged in the valuation of businesses
and securities in connection with mergers and acquisitions,
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negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuation for estate,
corporate and other purposes. In the course of its business, Robinson-Humphrey
and its affiliates may actively trade the equity securities of Carolina First
and First Charter for their own accounts and for the accounts of customers and,
accordingly may at any time hold a long or short position in those securities.
In the past, Robinson-Humphrey has provided financial advisory and investment
banking services to Carolina First and First Charter for which services
Robinson-Humphrey received customary fees for the financial advisory services
provided.
Carolina First has agreed to pay Robinson-Humphrey a fee for its services
in connection with the merger, of (1) a $75,000 retainer, which was paid when
the engagement letter was signed, (2) $250,000 which was paid when the fairness
opinion was delivered, and (3) 0.50% of the total consideration in the merger up
to 3.5 times Carolina First's reported book value as of September 30, 1999 and
an additional 1.00% of the total consideration received in excess of 3.5 times
Carolina First's reported book value, as of September 30, 1999, payable upon
consummation of the merger. If the merger closes between June 30, 2000 and March
31, 2001, the reported book value will be as of June 30, 2000. The $325,000 in
fees paid to Robinson-Humphrey to date will be credited against any fees payable
at closing. Carolina First has also agreed to reimburse Robinson-Humphrey for
its reasonable expenses, including reasonable legal and other professional fees
and expenses, up to $10,000, and to indemnify Robinson-Humphrey against certain
liabilities, including certain liabilities under the federal securities laws.
OPINION OF FIRST CHARTER'S FINANCIAL ADVISOR
First Charter retained Wheat First to act as its financial advisor in
connection with the merger and to render its opinion to the First Charter board
as to the fairness, from a financial point of view, of the exchange ratio to the
holders of First Charter common stock. Wheat First is a nationally recognized
investment banking firm regularly engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. The First Charter board selected Wheat First to serve as its
financial advisor in connection with the merger on the basis of the firm's
expertise. Wheat First regularly publishes research reports regarding the
financial services industry and the businesses and securities of publicly owned
companies in that industry. In the ordinary course of its business, Wheat First
and its affiliates may actively trade in the equity securities of First Charter
and Carolina First for its account and the accounts of its customers, and
therefore may from time to time hold long or short positions in those
securities.
Representatives of Wheat First attended the meeting of the First Charter
board on November 7, 1999 at which the merger agreement was considered and
approved. At the meeting, Wheat First issued an oral opinion that, as of that
date, the exchange ratio was fair, from a financial point of view, to the
holders of First Charter common stock. A written opinion has been delivered to
the First Charter board to the effect that the exchange ratio was fair, from a
financial point of view, to the holders of First Charter common stock.
The full text of Wheat First's opinion, which sets forth certain
assumptions made, matters considered and limitations on the review undertaken,
is attached as Appendix D to
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this document. Wheat First's opinion is incorporated herein by reference, and
should be read in its entirety in connection with this document. This summary of
the opinion of Wheat First is qualified in its entirety by reference to the
opinion.
No limitations were imposed by the First Charter board upon Wheat First
with respect to the investigations made or procedures followed by it in
rendering its opinion. Wheat First's opinion is directed only to the fairness,
from a financial point of view, of the exchange ratio to the holders of First
Charter common stock and does not constitute a recommendation to any shareholder
of First Charter as to how such shareholder should vote on the merger agreement.
In arriving at its opinion, Wheat First reviewed financial and other
information that was both publicly available or provided by First Charter or
Carolina First and which Wheat First deemed relevant, including the following:
- First Charter's Annual Reports to Shareholders, Annual Reports on Form
10-K and related financial information for the three fiscal years ended
December 31, 1998;
- First Charter's Quarterly Reports on Form 10-Q and related financial
information for the periods ended March 31, 1999, June 30, 1999 and
certain financial exhibits made available by First Charter for the period
ended September 30, 1999;
- Carolina First's Annual Reports to Shareholders, Annual Reports on Form
10-K and related financial information for the three fiscal years ended
December 31, 1998;
- Carolina First's Quarterly Reports on Form 10-Q and related financial
information for the periods ended March 31, 1999, June 30, 1999 and
certain financial exhibits made available by Carolina First for the
period ended September 30, 1999;
- publicly available information with respect to historical market prices
and trading activities for First Charter common stock and Carolina First
common stock and for other publicly traded financial institutions which
Wheat First deemed relevant;
- publicly available information with respect to banking companies and the
financial terms of other mergers and acquisitions which Wheat First
deemed relevant;
- the merger agreement;
- estimates of the cost savings and revenue enhancements projected by First
Charter for the combined company;
- other financial information concerning the businesses and operations of
First Charter and Carolina First, and internal financial analyses and
forecasts for First Charter and Carolina First prepared by senior
managements of those companies; and
- other financial studies, analyses, inquiries and matters that it deemed
necessary.
In addition, Wheat First met with members of the senior managements of
First Charter and Carolina First to discuss the business and prospects of each
company.
In connection with its review, Wheat First relied upon and assumed the
accuracy and completeness of all of the information provided to it or publicly
available, including representations and warranties of First Charter and
Carolina First included in the merger
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<PAGE> 48
agreement, and Wheat First has not assumed any responsibility for independent
verification of that information. Wheat First relied upon the managements of
First Charter and Carolina First as to the reasonableness and achievability of
their financial and operational forecasts and projections, and the assumptions
and bases for those forecasts and projections provided to Wheat First, and
assumed that those forecasts and projections reflected the best currently
available estimates and judgments of the respective managements, and that the
forecasts and projections will be realized in the amounts and in the time
periods estimated by the respective managements. Wheat First also assumed,
without independent verification, that the aggregate allowances for loan losses
and other contingencies for First Charter and Carolina First were adequate to
cover those losses. Wheat First did not review any individual credit files of
First Charter and Carolina First, nor did it make an independent evaluation or
appraisal of the assets or liabilities of First Charter and Carolina First.
In connection with rendering its opinion, Wheat First performed a variety
of financial analyses. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances
and, therefore, fairness opinions are not readily susceptible to partial
analysis or summary description. Moreover, the evaluation of the fairness, from
a financial point of view, of the exchange ratio to holders of First Charter
common stock was to some extent a subjective one based on the experience and
judgment of Wheat First and not merely the result of mathematical analysis of
financial data. Accordingly, notwithstanding the separate factors summarized
below, Wheat First believes that its analyses must be considered as a whole and
that selecting portions of its analyses and of the factors considered by it,
without considering all analyses and factors, could create an incomplete view of
the evaluation process underlying its opinion. The ranges of valuations
resulting from any particular analysis described below should not be taken to be
Wheat First's view of the actual value of First Charter or Carolina First.
In performing its analyses, Wheat First made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of First Charter or Carolina
First. The analyses performed by Wheat First are not necessarily indicative of
actual values or future results, which may be significantly more or less
favorable than suggested by the analyses. Additionally, analyses relating to the
values of businesses do not purport to be appraisals or to reflect the prices at
which businesses actually may be sold. In rendering its opinion, Wheat First
assumed that, in the course of obtaining the necessary regulatory approvals for
the merger, no conditions will be imposed that will have a material adverse
effect on the contemplated benefits of the merger, on a pro forma basis, to
First Charter.
Wheat First's opinion was just one of the many factors taken into
consideration by the First Charter board in determining to approve the merger
agreement. Wheat First's opinion does not address the relative merits of the
merger as compared to any alternative business strategies that might exist for
First Charter, nor does it address the effect of any other business combination
in which First Charter might engage.
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The following is a summary of the analyses performed by Wheat First in
connection with its opinion delivered to the First Charter board as of November
7, 1999:
Contribution Analysis
Wheat First analyzed the relative contribution of First Charter and
Carolina First to the pro forma combined company based upon certain balance
sheet and income statement items including assets, deposits, shareholders'
equity, latest 12 months earnings and estimated earnings. This analysis included
balance sheet data as of September 30, 1999, market values as of November 3,
1999, and management earnings estimates for Carolina First and First Charter.
Wheat First then compared the relative contribution of such balance sheet and
income statement items with the fully diluted ownership percentage of the
combined company of approximately 43% for Carolina First shareholders based on
the exchange ratio. The following table summarizes the results of the
contribution analysis:
<TABLE>
<CAPTION>
FIRST CHARTER CAROLINA FIRST PRO FORMA
AS % OF TOTAL AS % OF TOTAL COMBINED
------------- -------------- ----------
<S> <C> <C> <C>
Assets.......................................... 70% 30% $2,595,758
Deposits........................................ 63 37 1,797,924
Equity (before charges)......................... 78 22 296,428
Last Twelve Months Earnings..................... 72 28 34,114
2000 Estimated Earnings (before synergies)...... 69 31 38,456
2000 Estimated Earnings (after synergies)....... 57 43 46,724
Pro forma ownership............................. 57% 43%
</TABLE>
Analysis of Selected Transactions
Wheat First performed an analysis of premiums paid in 14 selected
acquisitions of banks headquartered in Alabama, Arkansas, District of Columbia,
Delaware, Florida, Georgia, Indiana, Kentucky, Maryland, Mississippi, New
Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee,
Virginia or West Virginia announced between October 1, 1998 and November 5, 1999
with announced transaction values between $100 and $600 million. The prices and
multiples for the selected transactions were compared to the premium and
multiples implied by the consideration offered to Carolina First in the merger.
The selected transactions included the following pending and completed
transactions:
- Wachovia Corp./B C Bankshares, Inc.;
- Old National Bancorp/ANB Corporation;
- Fifth Third Bancorp/Peoples Bank Corp;
- Sky Financial Group Inc./Mahoning National Bancorp;
- Synovus Financial Corp./Merit Holding Corp.;
- BB&T Corporation/Matewan Bancshares Inc.;
- Union Planters Corp./Republic Banking;
- Summit Bancorp/Prime Bancorp;
- Independence Community Bank Corp./Broad National Bancorp.;
- BB&T Corporation/Mason-Dixon Bancshares Inc.;
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- Valley National Bancorp/Ramapo Financial Corp.;
- First Financial Bancorp/Sand Ridge Financial Corp.;
- Sky Financial Group Inc./First Western Bancorp Inc.; and
- M&T Bank Corporation/FNB Rochester Corporation.
Based on the market value of First Charter common stock on November 3,
1999, and financial data as of September 30, 1999, the analysis yielded ratios
of the implied consideration to be paid by First Charter to Carolina First. The
following table compares these implied values to the considerations paid in the
selected transactions.
<TABLE>
<CAPTION>
SELECTED TRANSACTIONS
FIRST CHARTER ---------------------------
OFFER AVERAGE MINIMUM MAXIMUM
------------- ------- ------- -------
<S> <C> <C> <C> <C>
Premium to Market Price....................... 63.5% 39.0% 12.8% 74.2%
Price to Book Value........................... 387.1% 307.4% 239.1% 417.8%
Price to Last 12 Months EPS................... 24.7x 24.3x 18.1x 30.1x
</TABLE>
The following table offers a comparison of certain measures of financial
valuation and performance based on financial data as of the six months reporting
period ended June 30, 1999 for Carolina First and the 12 months reporting period
prior to the announcement of each transaction for each acquiree in the selected
transactions:
<TABLE>
<CAPTION>
SELECTED TRANSACTION ACQUIREES
------------------------------
CAROLINA FIRST AVERAGE MINIMUM MAXIMUM
-------------- -------- -------- --------
<S> <C> <C> <C> <C>
Equity/Assets................................ 8.31% 9.05% 6.53% 12.18%
Nonaccrual Loans + Loans 90 days past
due/Assets................................. 0.76 0.48 0.08 1.36
Return on Average Assets..................... 1.27 1.27 0.92 1.79
Return on Average Equity..................... 14.80 14.15 10.00 19.07
Net Interest Margin.......................... 5.22 4.54 3.61 5.37
Efficiency Ratio............................. 62.31 58.50 47.26 72.83
</TABLE>
Impact Analysis
Wheat First estimated the impact of the transaction to First Charter's book
value and 2000 estimated earnings per share assuming that the merger qualifies
as a pooling of interests for financial reporting purposes. Utilizing financial
data as of September 30, 1999 for both First Charter and Carolina First, and
assuming certain adjustments to the equity of Carolina First, Wheat First noted
that the merger could result in 31.19% dilution to First Charter's book value
per share. Wheat First also noted that, assuming certain fully phased-in revenue
enhancements and expense savings (based on projections by First Charter
management), the merger could result in 1.49% accretion to First Charter's
earnings per share after full phasing in of synergies.
Discounted Dividends Analysis
Using a discounted dividends analysis, Wheat First estimated the future
stream of dividends that Carolina First could produce over the next five years,
under various circumstances, assuming Carolina First performed in accordance
with the earnings forecasts of Carolina First's management and that the
estimated levels of expense savings from the merger were achieved. Wheat First
then estimated the terminal values for Carolina First common stock at the end of
the period by applying multiples ranging from 12 times to 15 times earnings
projected in year five. The dividend streams and terminal
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values were then discounted to present values using different discount rates
(ranging from 14% to 16%) chosen to reflect different assumptions regarding the
required rates of return to holders or prospective buyers of Carolina First
common stock. This discounted dividends analysis indicated reference ranges of
between $41.96 and $54.04 per share for Carolina First common stock. These
values compare to the implied consideration of $42.51 based on the market value
of First Charter common stock on November 5, 1999 and the exchange ratio.
No company or transaction used as a comparison in the above analysis is
identical to First Charter, Carolina First or the merger. Accordingly, an
analysis of the results of the foregoing necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value of the companies used for comparison in the above analysis.
Wheat First's opinion in Appendix D is based solely upon the information
available to Wheat First and the economic, market and other circumstances as
they existed as of its date. Events occurring after that date could materially
affect the assumptions and conclusions contained in Wheat First's opinion. Wheat
First has not undertaken to reaffirm or revise its opinion or otherwise comment
on any events occurring after the date of its opinion.
As compensation for Wheat First's services, First Charter has agreed to pay
Wheat First total financial advisory fees of $1,000,000, of which $100,000
became payable upon execution of the merger agreement, and a further $100,000
became payable upon the mailing of this document. The balance will become
payable upon completion of the merger. First Charter has agreed also to
reimburse Wheat First for its out-of-pocket expenses incurred in connection with
the activities contemplated by its engagement, regardless of whether the merger
is consummated. First Charter has further agreed to indemnify Wheat First
against certain liabilities, including certain liabilities under federal
securities laws. The payment of the above fees is not contingent upon Wheat
First rendering a favorable opinion with respect to the merger.
INTERESTS OF MANAGEMENT AND DIRECTORS IN THE MERGER
Some members of Carolina First's and First Charter's management, and the
members of the Carolina First and First Charter boards of directors, have
interests in the merger that are in addition to their interests as shareholders
of Carolina First or First Charter. The Carolina First and First Charter boards
of directors were aware of these additional interests and considered them in
their decision to approve the merger agreement. These interests are described
below.
Indemnification and Directors' and Officers' Insurance
The merger agreement provides that First Charter will indemnify, defend and
hold harmless each present and former director, officer, employee and agent of
Carolina First and its subsidiaries against any liability, indebtedness,
obligation, penalty, cost or expense, including costs of investigation,
collection and defense, claim or deficiency, arising out of actions or omissions
occurring at or prior to the effective time, to the full extent permitted under
North Carolina law and by Carolina First's current articles of incorporation and
by-laws.
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The merger agreement further provides that, for a period of three years
following the merger, First Charter shall use its reasonable efforts to maintain
Carolina First's existing directors' and officers' liability insurance policy or
to provide substitute directors' and officers' liability insurance with respect
to claims arising from facts or events occurring prior to the effective time,
which insurance shall be of at least the same coverage and amounts, and contain
terms and conditions no less advantageous, than the coverage currently provided
by Carolina First. First Charter will not be required to expend more than 150%
of the current premium paid by Carolina First to maintain or procure the
directors' and officers' insurance coverage.
Employment Arrangements
In connection with the merger agreement, First Charter entered into an
employment agreement with Mr. Burt. The term of employment starts at the
completion of the merger and continues until July 31, 2002. From August 1, 2002,
Mr. Burt will serve as a consultant to First Charter for a period of five years.
Under the employment agreement, Mr. Burt will serve as the Chairman of the board
of directors of First Charter National Bank, and as Executive Vice President and
a director of First Charter and First Charter National Bank.
During the term of the employment agreement, Mr. Burt will be entitled to
receive a base salary and bonus at least equal to the highest annual base salary
and bonus paid to any officer reporting to the chief executive officer of First
Charter. During his consulting period, Mr. Burt will receive an annual payment
of $75,000 per year and will be allowed to participate in the First Charter
medical plans at his own cost. Should Mr. Burt die prior to expiration of the
consulting period, his personal or legal representatives would receive amounts
equal to the payments due during the balance of the consulting period.
Mr. Burt's employment agreement with First Charter will not be effective
until the merger is completed. Once the merger is consummated, the employment
agreement between Mr. Burt and First Charter will supersede his current
employment agreement with Carolina First except for his existing deferred
compensation agreements which will continue. At the merger's consummation, Mr.
Burt will receive a change of control payment of approximately $231,000 due to
Mr. Burt under his existing employment agreement as a result of the merger.
The Merger Will Accelerate Existing Carolina First Stock-Based Rights
Upon completion of the merger, under Carolina First's stock-based plans,
all of the approximately 79,200 currently unvested stock options held by
officers of Carolina First and its subsidiaries will become fully vested and
exercisable. All of Carolina First's outstanding stock appreciation rights are
and will remain fully vested.
MANAGEMENT AND OPERATIONS OF FIRST CHARTER AFTER THE MERGER
First Charter will be the surviving corporation in the merger. First
Charter will continue to be governed by the laws of the State of North Carolina
and will operate in accordance with its articles of incorporation and by-laws.
All Carolina First shareholders will become First Charter shareholders as a
result of the merger, and their rights will be governed by First Charter's
articles of incorporation and by-laws and will remain subject to North Carolina
corporate law.
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The 10 directors of First Charter before the merger will continue as
directors of First Charter after the merger. In addition, the board of directors
will be increased by six seats and Mr. Burt, Harold D. Alexander, Charles A.
James, Walter H. Jones, Jr., Samuel C. King, Jr., and L.D. Warlick, Jr., each of
whom has been designated by Carolina First, will be appointed to the First
Charter board of directors and nominated for reelection at First Charter's 2000
annual meeting of shareholders. These persons will be divided among First
Charter's three classes of directors such that the three classes are as equal in
number as practicable. Mr. Burt will also serve as Executive Vice President of
First Charter and as Chairman of the board of directors of First Charter
National Bank.
PUBLIC TRADING MARKETS
First Charter common stock is listed on the Nasdaq National Market under
the symbol "FCTR." Carolina First common stock is listed on the Nasdaq National
Market under the symbol "CFBI." Upon completion of the merger, Carolina First
common stock will be delisted from the Nasdaq National Market. The listing on
the Nasdaq National Market of the First Charter common stock issuable to
Carolina First shareholders in the merger is a condition to the completion of
the merger.
ABSENCE OF DISSENTERS' APPRAISAL RIGHTS
Appraisal rights are statutory rights that enable shareholders who object
to certain extraordinary transactions, such as mergers, to demand that the
acquiring corporation pay the fair value for their shares, as determined by a
court in a judicial proceeding, instead of receiving the consideration offered
to shareholders in connection with the transaction. Appraisal rights are not
available in all circumstances.
First Charter and Carolina First shareholders are not entitled to appraisal
rights under North Carolina law in connection with the merger because each
corporation has in excess of 2,000 shareholders.
RESALES OF FIRST CHARTER COMMON STOCK
The shares of First Charter common stock to be issued in connection with
the merger will be freely transferable under the Securities Act, except for
shares issued to any shareholder who may be deemed to be an "affiliate"
(generally directors, certain executive officers, and beneficial owners of 10%
or more of any class of capital stock) of Carolina First or First Charter for
purposes of Rule 145 under the Securities Act as of the date of the special
meetings. Those affiliates may not sell their shares of First Charter common
stock acquired in the merger except pursuant to an effective registration
statement under the Securities Act or an applicable exemption from the
registration requirements of the Securities Act, including Rule 145(d).
Carolina First has agreed in the merger agreement to use its reasonable
efforts to cause each person who may be deemed to be an "affiliate" of Carolina
First to execute and deliver to First Charter an agreement by that person not to
offer to sell, transfer or otherwise dispose of any of the shares of First
Charter common stock distributed to him or her in the merger except in
compliance with Rule 145 under the Securities Act, or in a transaction that, in
the opinion of counsel reasonably satisfactory to First Charter, is otherwise
exempt from the registration requirements of the Securities Act, or in an
offering registered under the Securities Act. Under those agreements, each
"affiliate" of Carolina
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First also agrees not to sell, transfer or otherwise dispose of shares of
Carolina First or First Charter common stock during the period commencing 30
days prior to the effective time of the merger and ending on the date that First
Charter announces results of operations covering at least 30 days of combined
operations of the two companies. First Charter may place restrictive legends on
the certificates representing the shares of First Charter common stock issued to
all persons who are deemed to be "affiliates" of Carolina First under Rule 145.
This document does not cover any resales of First Charter common stock received
in the merger.
THE MERGER AGREEMENT
The following is a description of the material provisions of the merger
agreement. The description does not purport to be complete and is subject to,
and qualified in its entirety by the full text of the merger agreement which is
attached as Appendix A and is incorporated by reference in this document. All
First Charter shareholders and Carolina First shareholders are urged to read the
merger agreement carefully and in its entirety.
CONDITIONS TO COMPLETION OF THE MERGER
The obligations of First Charter and Carolina First to consummate the
merger are subject to the satisfaction or written waiver prior to the effective
time of the following conditions:
- approval of the merger agreement by the shareholders of Carolina First;
- approval of the merger agreement and the issuance of shares of First
Charter common stock by the shareholders of First Charter;
- receipt of any required regulatory approvals that are necessary to permit
consummation of the merger, and the expiration of all applicable waiting
periods described below under "-- Regulatory Approvals Required for the
Merger;"
- no court or governmental or regulatory authority taking any action
prohibiting, restricting or making illegal the consummation of the
merger;
- the effectiveness of the registration statement of which this document
constitutes a part with the SEC and no stop order being issued;
- approval for listing of the shares of First Charter common stock issuable
in the merger on the Nasdaq National Market;
- the continued truth and accuracy of the representations and warranties of
each party other than any inaccuracies that would not be reasonably
likely, individually or in the aggregate, to have a material adverse
effect on the financial condition, results of operations or business of
the party by whom the representations and warranties were made and its
subsidiaries taken as a whole, and each party performing in all material
respects all of the obligations required to be performed by it at or
prior to the effective time of the merger pursuant to the merger
agreement, and delivering certificates confirming satisfaction of these
requirements;
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- Carolina First receiving a written opinion from Alston & Bird LLP and
First Charter receiving a written opinion from Smith Helms Mulliss &
Moore, L.L.P. to the effect that:
-- the merger will be treated as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code;
-- the tax basis of the First Charter common stock received by holders
of Carolina First common stock who exchange all of their Carolina
First common stock solely for First Charter common stock in the
merger will be the same as the tax basis of the Carolina First common
stock surrendered in the merger, reduced by an amount allocated to
any fractional share interest in First Charter common stock for which
cash is received;
-- the holding period of First Charter common stock received by holders
who exchange all of their Carolina First common stock solely for
First Charter common stock in the merger will be the same as the
holding period of the Carolina First common stock surrendered, if the
Carolina First common stock is held as a capital asset at the
effective time; and
-- no gain or loss will be recognized by Carolina First shareholders who
receive only shares of First Charter common stock in exchange for all
of their Carolina First common stock (except with respect to cash
received instead of a fractional share interest in First Charter
common stock); and
- First Charter and Carolina First receiving a letter from KPMG LLP in a
form reasonably satisfactory to First Charter and Carolina First stating
that the merger will qualify for pooling of interests accounting
treatment.
No assurances can be provided as to when or if all of the conditions to the
merger can or will be satisfied or waived by the appropriate party. As of the
date of this document, the parties have no reason to believe that any of these
conditions will not be satisfied.
EFFECTIVE TIME OF THE MERGER
The merger will become effective when a certificate of merger is duly filed
with the Secretary of State of the State of North Carolina, or at any later time
indicated in the certificate of merger. First Charter and Carolina First each
has the right to terminate the merger agreement if the merger is not completed
by June 30, 2000.
CONDUCT OF BUSINESS PENDING THE MERGER
Carolina First has agreed on behalf of itself and its subsidiaries that,
from the date of the merger agreement until the completion of the merger, unless
First Charter otherwise approves in writing, it will generally:
- operate its business only in the ordinary course, preserve intact its
business organization and assets and maintain its rights and franchises,
use its reasonable efforts to maintain its current employee
relationships, and take no action which is reasonably likely to adversely
affect the ability of any party to obtain any necessary
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consents, or adversely affect the ability of any party to perform its
covenants and agreements under the merger agreement;
- not amend its articles of incorporation, by-laws, or other governing
instruments;
- not incur, guarantee, or otherwise become responsible for, any additional
debt obligation or other obligation for borrowed money in excess of an
aggregate of $500,000, except in the ordinary course of business
consistent with past practices, or impose, or suffer the imposition, on
any asset of any lien or permit any lien to exist other than liens
arising in the ordinary course of its operations;
- not repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly
or indirectly, any shares, or any securities convertible into any shares,
of the capital stock of Carolina First or any subsidiary, or declare or
pay any dividend or make any other distribution in respect of Carolina
First's capital stock, although Carolina First may declare and pay
quarterly cash dividends at a rate of $.10 per share;
- not, except for the merger agreement or stock option agreement or
pursuant to the exercise of existing stock options and other rights,
issue, sell, pledge, encumber, authorize the issuance of, enter into any
contract to issue, sell, pledge, encumber, or authorize the issuance of,
or otherwise permit to become outstanding, any additional shares of
Carolina First common stock or any other capital stock of any subsidiary,
or any stock appreciation rights, or any option, warrant, conversion, or
other right to acquire any stock, or any security convertible into any
stock;
- not adjust, split, combine, or reclassify any capital stock of Carolina
First or any subsidiary or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of Carolina First
common stock, or sell, lease, mortgage, or otherwise dispose of or
otherwise encumber (a) any shares of capital stock of any subsidiary or
(b) any asset other than in the ordinary course of business for
reasonable and adequate consideration;
- not, except for purchases of U.S. Treasury securities or U.S. government
agency securities, which in either case have maturities of five years or
less, purchase any securities or make any material investment, either by
purchase of stock or securities, contributions to capital, asset
transfers, or purchase of any assets, in any person other than a
wholly-owned subsidiary or the Federal Home Loan Bank, or otherwise
acquire direct or indirect control over any person, other than in
connection with (a) foreclosures in the ordinary course of business, (b)
acquisitions of control by a subsidiary in its fiduciary capacity, or (c)
the creation of new wholly-owned subsidiaries organized to conduct or
continue activities otherwise permitted by the merger agreement;
- not grant any increase in compensation or benefits to Carolina First
employees or officers, except in accordance with past practice, or as
required by law, pay any severance or termination pay or any bonus other
than pursuant to written policies or written contracts in effect on the
date of the merger agreement; enter into or amend any severance
agreements with officers; grant any increase in fees or other increases
in compensation or other benefits to directors, or voluntarily accelerate
the vesting of any stock options or other stock-based compensation or
employee benefits except for any acceleration of vesting that
automatically results from the merger agreement or the related
transactions;
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- not enter into or amend any employment contract, unless the amendment is
required by law, where the contract or amendment provides that Carolina
First does not have the unconditional right to terminate without
liability;
- not adopt any new employee benefit plan or terminate or withdraw from, or
make any material change in or to, any existing employee benefit plans,
other than any change that is required by law or that, in the opinion of
counsel, is necessary or advisable to maintain the tax qualified status
of the plan;
- not make any significant change in any tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in tax laws or regulatory accounting requirements or
generally accepted accounting principles;
- not commence any litigation other than as necessary for the prudent
operation of its business or settle any litigation involving any
liability for material money damages or restrictions upon its operations;
- not enter into modify, amend, or terminate any material contract or
waive, release, compromise, or assign any material rights or claims; and
- not incur or become obligated to incur any expenses exceeding $300,000,
whether capitalized, expended or otherwise, other than in the ordinary
course of business, excluding any expenses or obligations incurred in
connection with the merger agreement or the transactions contemplated by
the merger agreement.
First Charter has agreed on behalf of itself and its subsidiaries that,
from the date of the merger agreement until the completion of the merger, unless
Carolina First otherwise approves in writing it will generally:
- not declare or pay any dividend or make any other distribution in respect
of First Charter common stock, except for regular quarterly cash
dividends at a rate not in excess of $.17 per share;
- not amend its amended and restated articles of incorporation or by-laws
in a manner which would adversely affect in any manner the terms of the
First Charter common stock or the ability of First Charter to consummate
the transactions contemplated by the merger agreement; and
- not make any acquisitions, including an acquisition of branch offices and
related deposit liabilities, that could affect the ability of First
Charter to consummate the transactions contemplated by the merger
agreement in a reasonably timely manner.
AGREEMENT NOT TO SOLICIT OTHER OFFERS
Carolina First has agreed that it will not, and will cause its subsidiaries
and its subsidiaries' representatives not to directly or indirectly initiate,
solicit, encourage or knowingly facilitate any inquiries regarding, or the
making of, any tender offer or exchange offer or any proposal for the merger or
acquisition of all of the stock or assets of Carolina First, or any other
business combination involving Carolina First. Carolina First agreed to stop any
activities, discussions or negotiations conducted with any persons other than
First Charter, with respect to any acquisition proposals and will use its
reasonable efforts to enforce any confidentiality or similar agreement relating
to an acquisition proposal.
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Carolina First has agreed that it will promptly advise First Charter of any
developments with respect to any acquisition proposal.
Carolina First's board of directors may make such filings as may be
required by the federal tender offer and proxy rules in connection with an
alternative acquisition proposal, with respect to an unsolicited acquisition
proposal if it determines in good faith and consistent with the board's
fiduciary duties that it should consider an alternative acquisition proposal.
Carolina First has not received any merger or acquisition proposals since it
signed the merger agreement on November 7, 1999.
ADDITIONAL AGREEMENTS
Expenses and Fees
Each party will be responsible for all expenses incurred by it in
connection with the negotiation and consummation of the transactions
contemplated by the merger agreement. First Charter and Carolina First have
agreed, however, to share equally any printing expenses and SEC filing fees
related to this document.
Accounting Treatment
First Charter and Carolina First intend for the merger to be accounted for
as a pooling of interests for accounting and financial reporting purposes. Based
on the advice of KPMG LLP, First Charter and Carolina First believe that the
merger will qualify for this treatment. Under the pooling of interests method of
accounting, First Charter will restate its consolidated financial statements for
prior periods at the effective time of the merger to include the assets,
liabilities, shareholders' equity and results of operations of Carolina First as
if Carolina First had always been part of First Charter.
LISTING OF FIRST CHARTER COMMON STOCK ON THE NASDAQ NATIONAL MARKET
First Charter has agreed to use reasonable efforts to obtain approval to
list the shares of First Charter common stock to be issued to the holders of
Carolina First common stock on the Nasdaq National Market prior to the effective
time. This listing is a condition to completion of the merger.
DELIVERY OF FIRST CHARTER STOCK CERTIFICATES TO CAROLINA FIRST SHAREHOLDERS
Promptly after the effective time, First Charter and Carolina First will
cause the exchange agent selected by First Charter to send transmittal materials
to each Carolina First shareholder for use in exchanging certificates
representing shares of Carolina First common stock for shares of First Charter
common stock. Carolina First shareholders should not surrender their
certificates for exchange until they receive the letter of transmittal and
instructions. The exchange agent will deliver certificates for First Charter
common stock and a check for any unpaid fractional share interest or undelivered
dividend or distribution (without interest) once it receives the certificates
representing a holder's shares of Carolina First common stock. No party will be
liable to any shareholder for any amount delivered to a public official under
any applicable abandoned property, escheat or similar law. After the effective
time, there will be no transfers of shares of Carolina First common stock on
Carolina First's stock transfer books.
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After the effective time, former Carolina First shareholders will be
entitled to vote at any meeting of First Charter shareholders regardless of
whether he or she has exchanged his or her Carolina First stock certificates.
However, no dividends or distributions which are declared after the effective
time will be paid to a former Carolina First shareholder until he or she
exchanges his or her Carolina First stock certificates for First Charter stock
certificates.
FRACTIONAL SHARES
First Charter will not issue any fractional shares of First Charter common
stock. Instead, a Carolina First shareholder who would otherwise have received a
fraction of a share of First Charter common stock will receive cash (without
interest). The amount of cash received will be determined by multiplying the
fraction of First Charter common stock the shareholder would have been entitled
to receive by the last sale price of First Charter common stock prior to the
regular close on the Nasdaq National Market (as reported in The Wall Street
Journal or, if not reported in The Wall Street Journal, any other authoritative
source selected by First Charter), on the last trading day immediately preceding
the merger's effective time. Holders will not be entitled to dividends, voting
rights or any other rights as a shareholder with respect to any fractional
shares.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a summary of the material U.S. federal income tax
consequences to holders of Carolina First common stock who hold the stock as a
"capital asset" within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended. Special tax consequences may be applicable to particular
classes of taxpayers, such as financial institutions, insurance companies,
tax-exempt organizations, broker-dealers, traders in securities that elect to
apply a mark-to-market method of accounting, persons that hold Carolina First
common stock as part of a hedge, straddle or conversion transaction, persons who
are not citizens or residents of the United States and shareholders who acquired
their shares of Carolina First common stock through the exercise of an employee
stock option or otherwise as compensation. This discussion is for general
information only and is based upon the Internal Revenue Code, its legislative
history, existing and proposed regulations thereunder, published rulings and
decisions, all as currently in effect as of the date hereof, and all of which
are subject to change, possibly with retroactive effect. Tax considerations
under state, local and foreign laws are not addressed in this document. All
shareholders should consult with their own tax advisors as to the particular tax
consequences of the merger to them, including the applicability and effect of
the alternative minimum tax and any state, local or foreign income and other tax
laws and of changes in those tax laws.
Tax Consequences of the Merger Generally
Smith Helms Mulliss & Moore, L.L.P., counsel to First Charter, and Alston &
Bird LLP, counsel to Carolina First, have each opined to their respective
clients that on the basis of facts, representations and assumptions set forth in
their opinions:
- the merger will constitute a reorganization within the meaning of Section
368(a) of the Code. No gain or loss will be recognized by Carolina First
shareholders who receive solely shares of First Charter common stock in
exchange for all their Carolina First common stock, except with respect
to cash received in lieu of a fractional share interest in First Charter
common stock;
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- the tax basis of the First Charter common stock received by holders of
Carolina First common stock who exchange all of their Carolina First
common stock solely for First Charter common stock in the merger will be
the same as the tax basis of the Carolina First common stock surrendered
in exchange for the First Charter common stock (reduced by an amount
allocable to a fractional share interest in First Charter common stock
for which cash is received);
- and the holding period of the First Charter common stock received by
holders who exchange all of their Carolina First common stock solely for
First Charter common stock in the merger will be the same as the holding
period of the Carolina First common stock surrendered in exchange
therefor, provided that such Carolina First common stock is held as a
capital asset at the effective time.
These tax opinions are not binding on the Internal Revenue Service and
neither First Charter nor Carolina First intends to request any ruling from the
Internal Revenue Service as to the U.S. federal income tax consequences of the
merger.
It is a condition to completion of the merger that First Charter and
Carolina First receive tax opinions from their respective counsel, confirming
such federal income tax matters as of the closing date, on the basis of facts,
representations and assumptions described in the opinions. Smith Helms Mulliss &
Moore and Alston & Bird have relied and will rely upon certain representations
of officers of First Charter and Carolina First.
Exchange of Carolina First Common Stock Solely for First Charter Common
Stock
A shareholder of Carolina First who receives solely First Charter common
stock in exchange for its shares of Carolina First common stock in the merger
generally will not recognize any gain or loss upon the exchange. The shareholder
may recognize gain or loss, however, with respect to cash received instead of a
fractional share of Carolina First common stock, as discussed below. The
aggregate adjusted tax basis of the shares of First Charter common stock
received in the exchange (including fractional shares deemed received and
redeemed as described below) will be equal to the aggregate adjusted tax basis
of the shares surrendered, and the holding period of the First Charter common
stock (including fractional shares deemed received and redeemed as described
below) will include the holding period of the shares of Carolina First common
stock surrendered.
Cash Received Instead of a Fractional Interest of First Charter Common
Stock
A shareholder of Carolina First who receives cash instead of a fractional
share of First Charter common stock will be treated as having received the
fractional share pursuant to the merger and then as having exchanged the
fractional share for cash in a redemption by First Charter subject to Section
302 of the Code. This deemed redemption will be treated as a sale of the
fractional share, provided that it is not "essentially equivalent to a dividend"
or is "substantially disproportionate" with respect to the Carolina First
shareholder. If the deemed redemption is treated as a sale of a fractional
share, a Carolina First shareholder will recognize capital gain or loss equal to
the difference between the amount of cash received and the portion of the basis
of the shares of First Charter common stock allocable to the fractional
interest. This capital gain or loss will be long-term capital gain or loss if,
as of the date of the exchange, the holding period for the shares is greater
than one year.
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REGULATORY APPROVALS REQUIRED FOR THE MERGER
The merger and the rights of First Charter under the option agreement are
subject to prior approval by the Board of Governors of the Federal Reserve
System under the Bank Holding Company Act of 1956. The appropriate application
for the approval of the merger and the stock option was filed with the Federal
Reserve on January , 2000. In evaluating the application, the Federal Reserve
must consider, among other factors, the merging parties' financial and
managerial resources and future prospects, as well as the convenience and needs
of the communities to be served. The Bank Holding Company Act prohibits approval
of the merger or the option agreement if (a) it would result in a monopoly or be
in furtherance of any combination or conspiracy to monopolize or attempt to
monopolize the business of banking in any part of the United States or (b) its
effect in any section of the country may be to substantially lessen competition
or to tend to create a monopoly, or if it would be a restraint of trade in any
other manner, unless the Federal Reserve determines that any anti-competitive
effects are clearly outweighed by the public interest and the probable effect of
the transaction in meeting the convenience and needs of the communities to be
served.
The merger may not be consummated until the 15(th) day following the date
of Federal Reserve approval, during which time the United States Department of
Justice may challenge the transaction on antitrust grounds. First Charter and
Carolina First are unaware of any facts that would preclude approval of the
application by the Federal Reserve. However, we cannot be certain that the
regulatory approvals will be obtained or the timing or terms and conditions of
any approval.
First Charter and Carolina First are not aware of any other material
governmental approvals or actions that are required for consummation of the
merger. Should any other approval or action be required, the parties expect to
seek such approvals promptly.
AMENDMENT, WAIVER AND TERMINATION
Prior to the effective time, provisions of the merger agreement may be
waived by the party benefitted by those provisions or may be amended or modified
by written agreement between First Charter and Carolina First. However, after
each of the special meetings the merger agreement may not be amended to change
the manner or basis of exchanging Carolina First common stock in the merger,
without resolicitation of, and approval by, each party's shareholders.
The merger agreement may be terminated, and the merger abandoned, at any
time prior to the effective time, by mutual consent of First Charter and
Carolina First if the majority of each board of directors determines to do so.
In addition, the merger agreement may be terminated, and the merger abandoned,
prior to the effective time, by either First Charter or Carolina First provided
that the terminating party is not then in material breach of any representation
or warranty contained in the merger agreement, if a majority of its board of
directors determines to do so in the event of any of the following:
- an inaccuracy of any representation or warranty of the other party
contained in the merger agreement which cannot be or has not been cured
within 30 days after the giving of written notice to the breaching party
of the inaccuracy;
- a material breach by the other party of any covenant or agreement
contained in the merger agreement which cannot be or has not been cured
within 30 days after the giving of written notice to the breaching party
of the breach;
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- (a) any consent of any regulatory authority required for consummation of
the merger is denied by final nonappealable action of a regulatory
authority or if any action taken by a regulatory authority is not
appealed within the time limit for appeal, or (b) the shareholders of
First Charter or Carolina First fail to approve the matters submitted for
consideration at the special meetings;
- the merger shall not have been consummated by June 30, 2000, if the
failure to consummate the merger on or before that date is not caused by
any breach of the merger agreement by the party electing to terminate;
- any of the conditions precedent to the obligations of the terminating
party to consummate the merger cannot be satisfied or fulfilled by June
30, 2000; or
- Carolina First's board of directors has determined in good faith and as
permitted in the merger agreement to enter into an alternative
acquisition proposal.
Under the merger agreement, Carolina First has the right to terminate the
merger agreement if the average closing price (as defined below) of First
Charter common stock (i) is less than $13.60 and (ii) reflects a decline, on the
determination date (as defined below) of more than 15% below a weighted index of
the stock prices of the following 11 bank holding companies:
<TABLE>
<CAPTION>
TICKER WEIGHTING
------ ---------
<S> <C> <C>
BT Financial Corporation.................................... BTFC 3.14%
Carolina First Corporation.................................. CAFC 5.08
CCB Financial Corporation................................... CCB 7.82
Centura Banks, Inc.......................................... CBC 7.94
First Midwest Bancorp, Inc.................................. FMBI 5.45
First Virginia Banks, Inc................................... FVB 9.91
Fulton Financial Corporation................................ FULT 13.57
Mercantile Bankshares Corporation........................... MRBK 13.62
Sky Financial Group, Inc.................................... SKYF 15.27
Trustmark Corporation....................................... TRMK 14.22
WesBanco, Inc............................................... WSBC 3.99
---- ------
100.00%
======
</TABLE>
In the event that Carolina First gives notice of its intention to terminate
the merger agreement based on this provision, First Charter has the right,
within five days of First Charter's receipt of the notice, to elect to adjust
the exchange ratio in accordance with the terms of the merger agreement, and
thereby remove Carolina First's right to terminate.
For purposes of this provision, the average closing price means the average
of the daily last sales price of First Charter common stock reported prior to
the regular close on the Nasdaq National Market (as reported in The Wall Street
Journal or, if not reported in The Wall Street Journal, in another mutually
agreed upon authoritative source) for the 20 consecutive trading days ending at
the close of business on the determination date. The determination date will be
the date on which First Charter receives the Federal Reserve's approval of the
merger.
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STOCK OPTION AGREEMENT
The following description summarizes the material provisions of the stock
option agreement, but is not complete and is subject to the full text of, and is
qualified in its entirety by the full text of the stock option agreement which
is attached as Appendix B to this document and is incorporated by reference. All
First Charter shareholders and Carolina First shareholders are urged to read the
stock option agreement carefully and in its entirety.
GENERAL
As an inducement for First Charter to enter into the merger agreement,
Carolina First granted First Charter an option to purchase up to 1,040,838
shares of Carolina First common stock in specified circumstances.
PURPOSE OF THE OPTION AGREEMENT
Arrangements such as the option agreement are customarily entered into in
connection with mergers of publicly traded companies to increase the likelihood
that the transactions will be consummated in accordance with their terms, and to
compensate the person granted the option for the efforts undertaken and the
expenses and losses incurred by the person if the transaction is not completed.
The option agreement may have the effect of discouraging offers by third parties
to acquire Carolina First, even if those persons were prepared to offer to pay
consideration to Carolina First's shareholders that has a higher current market
price than the shares of First Charter common stock. Also, after consultation
with our independent accountants, we believe that the exercise or repurchase of
the stock option is likely to prohibit Carolina First from accounting for any
acquisition using the pooling of interests accounting method for a period of up
to two years.
EXERCISE; EXPIRATION
The number of shares subject to the option, after including all other
shares of Carolina First common stock held by First Charter, will never exceed
19.9% of the number of shares of Carolina First common stock outstanding
immediately before the exercise of the option. The exercise price of the option
is $36.00 per share.
The option is exercisable upon the occurrence of events that create the
potential for another party to acquire control of Carolina First. To the best
knowledge of First Charter and Carolina First, no event which would permit the
exercise of the option has occurred as of the date of this document.
First Charter's total profit (as defined below) from its rights under the
option is limited and can never exceed $10 million. To remain under the $10
million limit, First Charter may (1) reduce the number of shares of Carolina
First common stock subject to the option, (2) deliver to Carolina First for
cancellation, without consideration, the shares of Carolina First common stock
previously purchased pursuant to the option, or (3) pay cash to Carolina First
so that First Charter will not actually realize total profit (together with the
total profit realized by all other holders) in excess of $10 million after
taking into account the foregoing actions. In addition, the option may not be
exercised for a number of shares of Carolina First common stock that would, as
of the date of exercise, result in the holder's (taking into account all other
holders) notional total profit (as defined below) exceeding $10 million.
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The term total profit means the aggregate sum (prior to payment of taxes)
of the following:
(1) the amount received by the holder pursuant to Carolina First's
repurchase of the option (or any portion thereof);
(2) (a) the amount received by the holder pursuant to Carolina First's
repurchase of shares of Carolina First common stock purchased pursuant to
the option agreement, less (b) the holder's purchase price for such shares;
(3) (a) the net cash amounts received by the holder pursuant to the
sale of Carolina First common stock purchased pursuant to the option (or
any other securities into which such shares may be converted or exchanged)
to any unaffiliated party, less (b) the holder's purchase price of such
shares; and
(4) any amounts received by the holder on the transfer of the option
(or any portion thereof) to an unaffiliated party.
The term notional total profit with respect to any number of shares of
Carolina First common stock means the total profit determined as of the date of
the proposed exercise of the option, assuming that the option was exercised on
that date for that number of shares and assuming that the shares, together with
all other Carolina First common stock purchased pursuant to the option held by
the holder and its affiliates as of that date, were sold for cash at the closing
sale price per share of Carolina First common stock as quoted on the Nasdaq
National Market (or, if Carolina First common stock is not then quoted on the
Nasdaq National Market, the highest bid per share as quoted on the principal
trading market or securities exchange on which the shares are traded, as
reported by a recognized source selected by the holder) as of the close of
business on the preceding trading day (less customary brokerage commissions).
If no injunction or other order against the delivery of Carolina First
option shares is in effect, First Charter may exercise the option, in whole or
in part, at any time, if a purchase event occurs prior to the option's
termination, and First Charter at that time is not in material breach of the
option agreement or the merger agreement.
The term purchase event means either of the following events:
(1) without First Charter's prior written consent, Carolina First
authorizes, recommends, publicly proposes, or publicly announces an
intention to authorize, recommend or propose or enter into an agreement
with any third party to effect:
(a) a merger, consolidation, or similar transaction involving
Carolina First or any of its subsidiaries (other than transactions
solely between Carolina First's subsidiaries and transactions involving
Carolina First or any of Carolina First's subsidiaries in which the
voting securities outstanding immediately prior to the event continue to
represent (by either remaining outstanding or being converted into
securities of the surviving entity or its parent) at least 75% of the
combined voting power of the voting securities of Carolina First or the
surviving entity or its parent outstanding immediately after the
consummation of the transactions);
(b) the disposition, by sale, lease, exchange, or otherwise, of 15%
or more of the consolidated assets of Carolina First and its
subsidiaries; or
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(c) the issuance, sale, or other disposition (including by way of
merger, consolidation, share exchange, or any similar transaction) of
securities representing 25% or more of the voting power of Carolina
First or any of its subsidiaries; or
(2) any person (other than First Charter or any of its subsidiaries)
acquires beneficial ownership (as such term is defined in Rule 13d-3 under
the Exchange Act), or the right to acquire beneficial ownership of, or the
formation of any "group" (as defined under the Exchange Act), other than a
group of which First Charter or any of its subsidiaries is a member, that
beneficially owns or has the right to acquire beneficial ownership of 25%
or more of the outstanding shares of Carolina First common stock.
The option will terminate upon the earliest of the following:
(1) the completion of the merger;
(2) termination of the merger agreement in accordance with its terms
before the occurrence of a purchase event or a preliminary purchase event
(as defined below) (other than a termination of the merger agreement under
certain circumstances involving generally a willful breach by Carolina
First of a representation or warranty contained in the merger agreement or
a breach by Carolina First of a covenant contained in the merger agreement
which is called a default termination;
(3) 12 months after termination of the merger agreement by First
Charter following a default termination; and
(4) 12 months after termination of the merger agreement following the
occurrence of a purchase event or a preliminary purchase event.
The term preliminary purchase event includes either of the following
events:
(1) commencement or filing of a registration statement under the
Securities Act by any third party of a tender offer or exchange offer to
purchase any shares of Carolina First common stock such that, upon
consummation of the offer, the person would own or control 25% or more of
the then outstanding shares of Carolina First common stock; or
(2) failure of the holders of Carolina First common stock to approve
the merger agreement at the Carolina First special meeting, the failure to
have the special meeting or another meeting held for the purpose of voting
on the merger agreement, or the cancellation of the special meeting prior
to termination of the merger agreement, or the withdrawal or modification
by the Carolina First board in a manner adverse to First Charter of the
recommendation of the Carolina First board with respect to the merger
agreement, in each case, after public announcement that a third party (a)
made a proposal to engage in an acquisition transaction, (b) commenced a
tender offer or filed a registration statement under the Securities Act
with respect to an exchange offer or (c) filed an application or gave a
notice under any federal or state statute or regulation for approval or
consent to engage in an acquisition transaction.
In the event of any change in Carolina First common stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares, or similar transaction, the type and number of securities subject to
the option, and the exercise price
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shall be adjusted appropriately. In the event that any additional shares of
Carolina First common stock are issued after November 7, 1999 (other than in
connection with an event described in the preceding sentence), the number of
shares of Carolina First common stock subject to the option will be adjusted so
that, after the issuance, it, together with any shares of Carolina First common
stock previously issued pursuant to the option agreement and any other shares of
Carolina First common stock already held by First Charter, equals the lesser of
(1) 19.9% of the number of shares then issued and outstanding, without giving
effect to any shares subject to or issued pursuant to the option and (2) that
minimum number of shares of Carolina First common stock which, when aggregated
with any other shares of Carolina First common stock beneficially owned by First
Charter and its affiliates, would cause the provisions of any North Carolina
takeover laws to be applicable to the merger.
During the 12-month period commencing on the occurrence of a repurchase
event (as defined below) prior to the exercise or termination of the option,
First Charter may request Carolina First, subject to regulatory restrictions, to
repurchase the option and any shares of Carolina First common stock purchased
pursuant to the option agreement at a predetermined price.
A repurchase event will be deemed to have occurred if (1) any person (other
than First Charter or any of its subsidiaries) shall have acquired beneficial
ownership (as such term is defined in Rule 13d-3 under the Exchange Act), or the
right to acquire beneficial ownership, or any "group" (as that term is defined
under the Exchange Act) shall have been formed which beneficially owns or has
the right to acquire beneficial ownership of 50% or more of the then-outstanding
shares of Carolina First common stock, or (2) any of the following transactions
is consummated: (a) Carolina First consolidates with or merges into any person,
other than First Charter or any of its subsidiaries, and is not the continuing
or surviving corporation of the consolidation or merger; (b) Carolina First
permits any person, other than First Charter or any of its subsidiaries, to
merge into Carolina First and Carolina First shall be the continuing or
surviving corporation, but, in connection with the merger, the then outstanding
shares of Carolina First common stock shall be changed into or exchanged for
stock or other securities of Carolina First or any other person or cash or any
other property or the outstanding shares of Carolina First common stock
immediately prior to the merger shall represent less than 50% of the outstanding
shares and share equivalents of the merged company after the merger; or (c)
Carolina First sells or otherwise transfers all or substantially all of its
assets to any person, other than First Charter or any of its subsidiaries.
In the event that prior to the exercise or termination of the option,
Carolina First enters into an agreement to engage in any of the transactions
described in clause (2) in the preceding paragraph, the agreement governing that
transaction must make proper provision so that First Charter will receive for
each share of Carolina First common stock subject to the option an amount of
consideration that would be received by a holder of Carolina First common stock
in the transaction, less the purchase price of the option.
After the occurrence of a purchase event, First Charter may assign the
option agreement and its rights thereunder in whole or in part.
Upon the occurrence of certain events, Carolina First has agreed to file
with the SEC and to cause to become effective registration statements under the
Securities Act covering dispositions by First Charter of all or part of the
option and any shares of Carolina First common stock into which the option is
exercisable.
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DESCRIPTION OF FIRST CHARTER COMMON STOCK
The following summary of certain provisions of the amended and restated
articles of incorporation and by-laws of First Charter, is not intended to be
complete and is qualified in its entirety by reference to these documents, each
of which is an exhibit to First Charter's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998. See "Additional Information" and "Where You
Can Find More Information" on pages and .
GENERAL
First Charter's amended and restated articles of incorporation currently
authorize the issuance of up to 50,000,000 shares of First Charter common stock.
The shares of First Charter common stock entitle the holders (1) to
dividends declared by the First Charter board of directors, (2) to one vote per
share on each matter submitted to First Charter shareholders for their vote and
(3) to participate equally in the assets of First Charter remaining after a
liquidation, dissolution or winding up of First Charter. Holders of First
Charter common stock are not entitled to preemptive rights.
DIVIDENDS
First Charter's ability to pay dividends is limited by restrictions imposed
by North Carolina law. Under these restrictions, dividends may be paid only out
of First Charter's surplus, as defined by the North Carolina Business
Corporation Act or, if there is no surplus, First Charter's net profits for the
fiscal year in which the dividend is declared and/or the preceding fiscal year.
Most of First Charter's cash flow and its resulting ability to pay
dividends comes from dividends and other capital distributions, if any, from
First Charter National Bank. Payment of those dividends and other capital
contributions are subject to regulatory restrictions. See "Certain Differences
in the Rights of First Charter Shareholders and Carolina First
Shareholders -- Dividends."
CERTAIN DIFFERENCES IN THE RIGHTS OF FIRST CHARTER
SHAREHOLDERS AND CAROLINA FIRST SHAREHOLDERS
First Charter and Carolina First are both North Carolina corporations
organized and existing under the North Carolina Business Corporation Act. At the
effective time, Carolina First shareholders automatically will become
shareholders of First Charter, and their rights as shareholders will be
determined by First Charter's amended and restated articles of incorporation,
First Charter's by-laws and the North Carolina Business Corporation Act. The
following is a summary of the material differences in the rights of
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<PAGE> 68
holders of Carolina First and First Charter common stock. The summary is
necessarily general and it is not intended to be a complete statement of all
differences affecting the rights of shareholders and respective entities, and is
qualified in its entirety by reference to the North Carolina Business
Corporation Act as well as to the articles and by-laws of each corporation.
AUTHORIZED CAPITAL STOCK
First Charter. The First Charter articles currently authorize the issuance
of up to 50,000,000 shares of First Charter common stock, of which 17,571,729
shares were outstanding as of January 7, 2000. As of January 7, 2000, 1,702,665
shares of First Charter common stock were reserved for issuance under various
employee and director benefit plans of First Charter, 947,632 shares were
reserved for issuance under First Charter's dividend reinvestment plan, and up
to 13,942,050 shares were reserved for issuance in connection with the merger
and the assumption of the Carolina First stock plans and dividend reinvestment
plan. After taking into account the shares reserved as described above, the
number of authorized shares of First Charter common stock available for other
corporate purposes as of January 14, 2000 was 16,783,556 shares.
Carolina First. The Carolina First articles authorize the issuance of
20,000,000 shares of Carolina First common stock, of which 6,000,310 shares were
outstanding as of January 12, 2000. As of January 12, 2000, 714,432 shares of
Carolina First common stock were reserved for issuance under Carolina First's
stock plans and dividend reinvestment plan and up to 1,040,838 shares were
reserved for issuance under the option granted to First Charter. In addition,
the articles authorize the issuance of 5,000,000 shares of preferred stock, none
of which are outstanding.
AMENDMENT OF CHARTER AND BYLAWS
First Charter. In general, (a) amendments to the First Charter articles
must be approved by each voting group entitled to vote separately on the
amendment by a majority of the votes cast by that voting group, unless the
amendment creates dissenters' rights for a particular voting group, in which
case the amendment must be approved by a majority of the votes entitled to be
cast by the voting group; and (b) the dissolution of First Charter must be
approved by a majority of all votes entitled to be cast. An amendment, however,
to the provision of the First Charter articles setting forth the voting
requirements for mergers or consolidations involving First Charter and for the
disposition of all or substantially all of First Charter's assets or the stock
or assets of one of its major subsidiaries, as described above, must be approved
by the vote required to effect the merger, consolidation, or transfer of assets.
Holders of First Charter common stock currently are the only voting group
entitled to vote.
Except as otherwise required in the North Carolina Business Corporation
Act, generally the First Charter by-laws adopted by the shareholders of First
Charter may be amended or repealed by a majority of the First Charter board or
by the shareholders of First Charter, except that a by-law adopted, amended, or
repealed by the shareholders of First Charter may not be modified or repealed by
the First Charter board if neither the articles of incorporation nor the by-law
adopted by the shareholders authorize the First Charter board to do so.
The First Charter by-laws provide that all corporate powers of First
Charter will be exercised by the First Charter board except as otherwise
provided by law. The First
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<PAGE> 69
Charter board may create one or more committees, which may include an executive
committee, consisting of two or more directors and may authorize such committee
to exercise all of the authority of the First Charter board. This authority does
not include the authority to adopt, amend, and repeal the First Charter by-laws,
to authorize distributions, to propose actions to shareholders that are required
by law to be approved by the shareholders, to fill vacancies on the First
Charter board or any committee, or to declare dividends or other corporate
distributions.
Carolina First. Under the Carolina First articles, Carolina First reserves
the right to amend, alter, change or replace any provision contained in the
articles in the manner prescribed by statute. The Carolina First by-laws may be
amended or repealed and new by-laws adopted by a majority of the Carolina First
board then holding office at any regular or special meeting of the board, except
as limited by the North Carolina Business Corporation Act.
BOARD OF DIRECTORS
First Charter. First Charter directors are elected by a plurality of the
votes cast. The size of the First Charter board may be established by the
shareholders or by at least 75% of the directors of First Charter, provided that
the directors of First Charter cannot set the number of directors at less than
five or more than 25, and only the shareholders have the right to change this
range. A First Charter shareholder has the right to one vote for each share of
First Charter common stock for each nominee. Cumulative voting is not permitted.
The First Charter by-laws divide the First Charter board into three
classes, with each class as equal in number as possible. The directors in each
class serve three-year terms of office. The effect of First Charter having a
classified board of directors is that approximately one-third of the members of
the First Charter board are elected each year. Two annual meetings for First
Charter shareholders are required to change a majority of the members of the
First Charter board. The purpose of dividing the First Charter board into
classes is to facilitate continuity and stability of leadership of First Charter
by ensuring that experienced personnel familiar with First Charter will be
represented on the First Charter board at all times, and to permit First
Charter's management to plan for the future for a reasonable amount of time.
However, by potentially delaying the time within which an acquirer could obtain
control of the First Charter board, this provision may discourage some potential
mergers, tender offers, or takeover attempts that shareholders may consider
desirable.
Carolina First. Carolina First directors are elected by a plurality of the
votes cast. The Carolina First by-laws provide that the number of directors may
be increased or decreased at any time by a resolution of a majority of the
Carolina First board or by resolution of the shareholders at any shareholder
meeting, provided that the number of directors may not be less than three or
more than 25. All of the Carolina First directors are elected annually for a
term of one year and the board is not classified or staggered.
DIRECTOR REMOVAL AND VACANCIES
First Charter. Generally, directors of First Charter may be removed by the
shareholders with or without cause by the affirmative vote of a majority of the
votes cast, unless the First Charter articles are amended to provide otherwise.
Vacancies occurring on the First Charter board may be filled by the First
Charter board or shareholders.
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<PAGE> 70
Carolina First. Generally, directors of Carolina First may be removed by
the shareholders with or without cause by the affirmative vote of a majority of
the votes cast, unless the Carolina First articles are amended to provide
otherwise. Unless otherwise required by the North Carolina Business Corporation
Act, vacancies occurring on the Carolina First board may be filled by a majority
of the remaining directors even if less than a quorum.
LIMITATIONS ON DIRECTOR LIABILITY
First Charter. The First Charter articles provide that, to the extent
permitted by the North Carolina Business Corporation Act, a director of First
Charter shall not be personally liable to the corporation, its shareholders, or
otherwise, for monetary damages for breach of his or her fiduciary duty as a
director, except with respect to any breach of the duty of loyalty to First
Charter, for acts or omissions not in good faith or involving intentional
misconduct or a known violation of the law, for unlawful payment of a dividend
or an unlawful stock purchase or redemption under the North Carolina Business
Corporation Act or any transaction in which a director receives an improper
personal benefit.
Carolina First. The Carolina First articles contain limitations on
directors' liability similar to those contained in the First Charter articles.
SPECIAL MEETINGS OF THE SHAREHOLDERS
First Charter. The First Charter by-laws provide that special meetings of
First Charter shareholders may be called, unless otherwise prescribed by law,
for any purpose or purposes whatever at any time by the First Charter board, by
First Charter's chief executive officer or by the secretary acting under
instructions of the chief executive officer. So long as First Charter is a
public corporation, however, shareholders of First Charter are not entitled to
call a special meeting.
Carolina First. The Carolina First by-laws provide that special meetings
of Carolina First shareholders may only be called by the Carolina First board,
except as otherwise required by law.
ACTIONS BY SHAREHOLDERS WITHOUT A MEETING
First Charter. The First Charter by-laws provide that any action required
or permitted to be taken by First Charter shareholders at a duly called meeting
of First Charter shareholders may be effected without a meeting by the unanimous
written consent of the shareholders entitled to vote on such action.
Carolina First. The Carolina First by-laws provide that any action which
is required or permitted to be taken at a meeting of shareholders may be taken
without a meeting, if a consent in writing, setting forth the action taken, is
signed by all of the persons entitled to vote on the action at a meeting, and
filed with the secretary of Carolina First in the minute book.
SHAREHOLDER NOMINATIONS AND PROPOSALS
First Charter. The First Charter by-laws provide that nominations of
persons for election to the First Charter board may be made at the annual
meeting of shareholders by
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any shareholder of the corporation who was a shareholder of record at the time
of giving of proper notice to the secretary of the corporation, who is entitled
to vote at the meeting and who complies with the notice procedures set forth in
the First Charter by-laws.
Carolina First. The Carolina First articles require all nominations for
election to the Carolina First board, other than those made by the board, to be
made by a shareholder entitled to vote generally in the election of directors in
compliance with specified notice and other procedures.
BUSINESS COMBINATIONS
First Charter. The First Charter articles provide that a plan for First
Charter to consolidate with, or merge with or into, any other corporation or
convey to any corporation or other person or otherwise dispose of all or
substantially all of its assets, or to dispose of by any means of all or
substantially all the stock or assets of any major subsidiary, will not be
submitted to the shareholders for approval unless such plan is approved by the
affirmative vote of 75% of First Charter's directors. The articles further
provide that the First Charter board, in its evaluation of such a plan, shall
consider all relevant factors, including the social and economic effects on
employees, customers, communities and others. If submitted to the shareholders,
such plan may be approved only by (1) the affirmative vote of not less than 75%
of the aggregate voting power of the outstanding stock entitled to vote thereon,
and (2) the affirmative vote of at least 50% of the total voting power of the
outstanding stock of shareholders, if (a) any shareholder entitled to vote
thereon is a person who, including affiliates of such person, is the beneficial
owner of more than 20% of the voting power of First Charter, provided that
shares held, voted or otherwise controlled by a person as a trustee, plan
administrator, officer of First Charter or otherwise pursuant to an employee
benefit plan of First Charter or of an affiliate of First Charter shall not be
deemed to be beneficially owned by a person for the purposes of determining
whether such person is a controlling shareholder, and (b) prior to the
acquisition of 20% of the voting power of First Charter by a shareholder, the
First Charter board has not unanimously approved such transaction. This
provision of the First Charter articles can be amended only by the vote required
to approve such a transaction if there is a shareholder who owns 20% of the
voting power of First Charter.
These supermajority voting requirements do not apply to any business
combination, such as the merger, that has been unanimously approved by the First
Charter board.
The supermajority voting requirements of First Charter's board and
shareholders with respect to business combinations, as described above, may
discourage a change in control of First Charter by allowing a minority of First
Charter shareholders to prevent a transaction favored by the majority of the
shareholders. Also, in some circumstances, the First Charter board could cause a
supermajority vote to be required to approve a transaction with an interested
person, thereby enabling management to retain control over the affairs of First
Charter and their positions with First Charter. The primary purpose of the
supermajority voting requirement, however, is to encourage negotiations with
First Charter's management by groups or corporations interested in acquiring a
substantial position in, or control of, First Charter, and to reduce the danger
of a forced merger or sale of assets.
The provisions of the First Charter articles regarding business
combinations might make First Charter less attractive as a candidate for
acquisition or accumulation of stock by another person or company than might
otherwise be the case in the absence of such
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<PAGE> 72
provisions. Furthermore, an acquirer of a substantial interest in First Charter
would not obtain the ability to immediately effect a merger, consolidation, or
other similar business combination unless the described conditions were met.
As a result, First Charter shareholders may be deprived of opportunities to
sell some or all of their shares at prices that represent a premium over
prevailing market prices in a takeover context. The provisions described above
also may make it more difficult for First Charter shareholders to replace the
First Charter board or management, even if the holders of a majority of the
First Charter common stock should believe that such replacement is in the
interest of First Charter. As a result, such provisions may tend to perpetuate
the incumbent First Charter board and management.
In the event of liquidation, holders of First Charter common stock would be
entitled to receive pro rata any assets legally available for distribution to
shareholders with respect to shares held by them. All of the outstanding shares
of First Charter common stock are, and upon issuance of the shares of First
Charter common stock to be issued to shareholders of Carolina First will be,
validly issued, fully paid and nonassessable.
Carolina First. The Carolina First articles and by-laws do not include any
specific requirements related to business combinations. The articles do,
however, require that the Carolina First board, in addition to considering the
adequacy and form of payment related to a business combination, shall consider
the social and economic effects of the proposed transaction on Carolina First or
any of its subsidiaries, and upon its communities and constituents, including
employees and customers, the possible financial obligations and conditions of
any acquiring person or persons and the possible effect these obligations and
conditions on Carolina First and its subsidiaries, the competence, experience
and integrity of the acquiring person and its management, the prospects for a
successful conclusion to other business combinations and Carolina First's
prospects as an independent entity.
DIVIDENDS
First Charter. The holders of First Charter common stock are entitled to
receive such dividends or distributions as the board of directors of First
Charter may declare out of funds legally available for such payments. The
payment of distributions by First Charter is subject to the restrictions of
North Carolina law applicable to the declaration of distributions by a business
corporation. A corporation generally may not authorize and make distributions
if, after giving effect thereto, it would be unable to meet its debts as they
become due in the usual course of business or if the corporation's total assets
would be less than the sum of its total liabilities plus the amount that would
be needed, if it was dissolved at the time of distribution, to satisfy claims of
shareholders who have preferential rights superior to the rights of the holders
receiving the distribution. Share dividends, if any are declared, may be paid
from First Charter's authorized but unissued shares.
The payment of distributions to holders of First Charter common stock is
also subject to the ability of the First Charter banking subsidiaries and any
other subsidiary of First Charter to pay dividends to First Charter, subject to
the restrictions imposed by various bank and bank holding company regulations.
As of September 30, 1999, First Charter National Bank cannot make any dividend
payments to First Charter without prior regulatory approval.
Carolina First. The holders of Carolina First common stock are entitled to
receive dividends as the board of directors of Carolina First may declare out of
funds legally available for such payments. Dividends may be paid in cash,
property, or shares of any
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class or series or other securities or evidences of indebtedness of Carolina
First or any other issuer as determined by the board.
As in the case of First Charter, the payment of distributions to holders of
Carolina First common stock is subject to the provisions of the North Carolina
Business Corporation Act and the restrictions imposed by various bank and bank
holding company regulatory agencies. As of September 30, 1999, Carolina First's
banking subsidiaries could make dividend payments to Carolina First without
prior regulatory approval of up to $49,767,659.
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COMPARATIVE MARKET PRICES AND DIVIDENDS
FIRST CHARTER
First Charter common stock is quoted on the Nasdaq National Market under
the symbol "FCTR." The following table sets forth, for the indicated periods,
the high and low closing sale prices for First Charter common stock as reported
at its regular close on the Nasdaq National Market, and the cash dividends
declared per share of First Charter common stock.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
--------------- DIVIDENDS
HIGH LOW DECLARED
------ ------ ---------
<S> <C> <C> <C>
FIRST CHARTER
1998
First Quarter....................................... $26.25 $23.00 $0.14
Second Quarter...................................... 27.00 18.75 0.15
Third Quarter....................................... 25.63 18.38 0.15
Fourth Quarter...................................... 19.50 12.50 0.17
1999
First Quarter....................................... 19.25 16.88 0.17
Second Quarter...................................... 24.75 19.25 0.17
Third Quarter....................................... 24.88 17.25 0.17
Fourth Quarter...................................... 19.63 14.00 0.17
2000
First Quarter through , 2000......... --
</TABLE>
On November 5, 1999, the last trading day before public announcement of the
merger, the closing price per share of First Charter common stock on the Nasdaq
National Market was $18.75. Past price performance is not necessarily indicative
of future price performance. Holders of First Charter common stock are urged to
obtain current market quotations for shares of First Charter common stock.
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CAROLINA FIRST
Carolina First common stock is quoted on the Nasdaq National Market under
the symbol "CFBI." Carolina First common stock was traded in the
over-the-counter market and was quoted in the "pink sheets" under the symbol
"CAFB" until April 22, 1999. The following table sets forth, for the indicated
periods and adjusted for the 10% stock dividend declared in June 1999, the high
and low closing sale prices for Carolina First common stock as reported at the
regular close on the Nasdaq National Market, and the high and low bid quotations
as reported in The Charlotte Observer, as applicable. The quotations in The
Charlotte Observer reflect inter-dealer prices without markup, markdown or
commission and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
--------------- DIVIDENDS
HIGH LOW DECLARED
------ ------ ---------
<S> <C> <C> <C>
CAROLINA FIRST
1998
First Quarter....................................... $28.18 $25.45 $0.07
Second Quarter...................................... 30.91 28.18 0.07
Third Quarter....................................... 30.91 30.91 0.08
Fourth Quarter...................................... 30.91 22.73 0.09
1999
First Quarter....................................... 25.45 22.73 0.09
Second Quarter...................................... 24.55 20.45 0.09
Third Quarter....................................... 28.00 17.00 0.10
Fourth Quarter...................................... 35.00 19.75 0.10
2000
First Quarter (through , 2000)............ --
</TABLE>
On November 5, 1999, the last trading day before public announcement of the
merger, the closing price per share of Carolina First common stock on the Nasdaq
National Market was $26.00. Past price performance is not necessarily indicative
of future performance. Holders of Carolina First common stock are urged to
obtain current market quotations for shares of Carolina First common stock.
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PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following tables contain unaudited pro forma condensed consolidated
financial information including a balance sheet as of September 30, 1999 and
statements of earnings for the nine months ended September 30, 1999 and 1998,
and the years ended December 31, 1998, 1997, and 1996. These statements present
on a pro forma basis historical results for First Charter and Carolina First as
though the merger had been consummated as of the date or at the beginning of the
periods indicated.
The merger is expected to be accounted for using the pooling of interests
method of accounting. Pro forma financial information are presented for
informational purposes only and are not necessarily indicative of the results of
operations or combined financial position that would have resulted had the
merger been consummated at the dates or during the periods indicated, nor are
they necessarily indicative of future results of operations or combined
financial position.
The unaudited pro forma condensed consolidated financial information should
be read in conjunction with the consolidated historical financial statements of
First Charter and Carolina First which are incorporated by reference herein. See
"Where You Can Find More Information" on page 74.
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FIRST CHARTER CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
FIRST CAROLINA PRO FORMA PRO FORMA
CHARTER FIRST ADJUSTMENTS COMBINED
---------- -------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks....................... $ 36,867 $ 28,501 $ -- $ 65,368
Interest-bearing bank deposits................ 4,978 427 -- 5,405
Securities held to maturity................... -- 37,462 (37,462) --
Securities available for sale................. 342,037 169,084 32,208 543,329
Loans......................................... 1,384,714 514,319 -- 1,899,033
Less: Unearned income....................... (229) -- -- (229)
Allowance for loan losses.............. (16,837) (7,338) -- (24,175)
---------- -------- -------- ----------
Loans, net.................................... 1,367,648 506,981 -- 1,874,629
---------- -------- -------- ----------
Premises and equipment, net................... 31,906 12,978 -- 44,884
Other assets.................................. 36,443 18,173 5,203 59,819
---------- -------- -------- ----------
Total assets........................... $1,819,879 $773,606 $ (51) $2,593,434
========== ======== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits, domestic:
Noninterest-bearing......................... $ 127,711 $ 96,439 -- $ 224,150
Interest-bearing:
NOW....................................... 318,084 177,103 -- 495,187
Savings................................... 116,032 67,900 -- 183,932
Certificates of deposit................... 574,779 319,876 -- 894,655
---------- -------- -------- ----------
Total deposits......................... 1,136,606 661,318 $ -- 1,797,924
Other borrowings.............................. 426,704 15,061 441,765
Other liabilities............................. 28,119 31,523 11,300 70,942
---------- -------- -------- ----------
Total liabilities...................... 1,591,429 707,902 11,300 2,310,631
---------- -------- -------- ----------
SHAREHOLDERS' EQUITY
First Charter -- Common stock (no par value;
authorized -- 50,000,000 shares; issued and
outstanding -- 17,565,195 shares (pro forma
issued and outstanding -- 30,897,929
shares)).................................... 99,790 -- 48,221 148,011
Carolina First -- Common stock ($2.50 par
value; authorized -- 20,000,000 shares;
issued and outstanding -- 5,984,144
shares)..................................... -- 14,960 (14,960) --
Additional paid-in capital.................... -- 33,871 (33,871) --
Retained earnings............................. 128,759 17,983 (8,955) 137,787
Accumulated other comprehensive income:
Unrealized loss on securities available for
sale...................................... (99) (1,110) (1,786) (2,995)
---------- -------- -------- ----------
Total shareholders' equity............. 228,450 65,704 (11,351) 282,803
---------- -------- -------- ----------
Total liabilities and shareholders'
equity $1,819,879 $773,606 $ (51) $2,593,434
========== ======== ======== ==========
</TABLE>
See notes to the unaudited pro forma condensed financial information.
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FIRST CHARTER CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
------------------------- ---------------------------------------
1999 1998 1998 1997 1996
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Interest and fees on loans..... $ 120,395 $ 116,818 $ 157,224 $ 137,473 $ 122,535
Interest on investments
securities................... 22,932 21,659 28,791 28,213 30,409
Other interest................. 699 1,845 2,546 2,681 2,555
----------- ----------- ----------- ----------- -----------
Total interest income.... 144,026 140,322 188,561 168,367 155,499
----------- ----------- ----------- ----------- -----------
Interest on deposits........... 49,510 50,425 67,713 65,554 61,392
Interest on borrowings......... 17,563 18,441 24,981 16,846 13,034
----------- ----------- ----------- ----------- -----------
Total interest expense... 67,073 68,866 92,694 82,400 74,426
----------- ----------- ----------- ----------- -----------
Net interest income...... 76,953 71,456 95,867 85,967 81,073
Provision for loan losses...... 3,770 2,797 3,741 3,681 2,660
----------- ----------- ----------- ----------- -----------
Net interest income after
provision for loan
losses................ 73,183 68,659 92,126 82,286 78,413
Noninterest income............. 20,641 16,362 21,698 21,845 13,789
Noninterest expense............ 54,319 67,106 85,021 63,984 57,552
----------- ----------- ----------- ----------- -----------
Net income before income
taxes................. 39,505 17,915 28,803 40,147 34,650
Income taxes................... 12,654 8,595 12,858 14,255 11,996
----------- ----------- ----------- ----------- -----------
Income before nonrecurring
charges directly
attributable to the
merger..................... $ 26,851 $ 9,320 $ 15,945 $ 25,892 $ 22,654
=========== =========== =========== =========== ===========
BASIC INCOME PER SHARE:
Income before nonrecurring
charges directly
attributable to the merger:
First
Charter -- historical.... $ 1.09 $ 0.18 $ 0.51 $ 1.06 $ 0.95
Carolina
First -- historical...... 1.18 1.01 1.14 1.20 0.94
First Charter/Carolina
First -- pro forma
combined................. 0.85 0.30 0.51 0.84 0.73
Average common equivalent
shares:
First
Charter -- historical.... 18,125,195 18,311,489 18,273,281 18,154,131 18,301,085
Carolina
First -- historical...... 5,979,902 5,900,457 5,908,855 5,613,139 5,570,782
First Charter/Carolina
First -- pro forma
combined................. 31,424,367 31,520,248 31,497,768 30,754,475 30,852,790
DILUTED INCOME PER SHARE:
Income before nonrecurring
charges directly
attributable to the merger:
First
Charter -- historical.... $ 1.09 $ 0.18 $ 0.50 $ 1.03 $ 0.94
Carolina
First -- historical...... 1.16 0.98 1.11 1.18 0.93
First Charter/Carolina
First -- pro forma
combined................. 0.85 0.29 0.50 0.82 0.73
Average common equivalent
shares:
First
Charter -- historical.... 18,204,647 18,693,390 18,571,805 18,697,448 18,586,086
Carolina
First -- historical...... 6,056,495 6,055,699 6,059,788 5,681,819 5,585,745
First Charter/Carolina
First -- pro forma
combined................. 31,677,455 32,254,083 32,138,458 31,453,489 31,171,713
</TABLE>
See notes to unaudited pro forma condensed financial information.
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NOTES TO THE UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The unaudited First Charter and Carolina First pro forma condensed
consolidated financial information is based upon the following adjustments,
reflecting the consummation of the merger using the pooling of interests method
of accounting. Actual amounts may differ from those reflected in the unaudited
pro forma condensed financial information.
NOTE 1
First Charter will exchange 2.267 shares of First Charter common stock for
each share of Carolina First common stock outstanding immediately prior to the
effective time of the merger (except for shares of Carolina First common stock
held by First Charter or its respective subsidiaries, other than in a fiduciary
capacity or as a result of debts previously contracted, which shall be
canceled). The pro forma issued number of shares of First Charter common stock
does not reflect the exercise of options to acquire shares of Carolina First
common stock. Options to acquire 166,460 shares of Carolina First common stock
were outstanding at September 30, 1999.
At September 30, 1999, First Charter owned 156,852 (with a book value of $2.4
million and a fair market value of $4.3 million) shares of Carolina First common
stock. An entry was made to the unaudited pro forma condensed consolidated
balance sheet to eliminate the Carolina First common stock and the related
unrealized gain on such stock owned by First Charter at September 30, 1999:
<TABLE>
<S> <C> <C>
Common stock -- Carolina First.............................. 392,000
Unrealized gain on securities available for sale............ 1,226,000
Additional paid-in capital.................................. 1,991,000
Other assets (deferred taxes)............................... 783,000
Securities available for sale............................. 4,392,000
</TABLE>
The actual adjustment for the fair value of this common stock and the related
unrealized gain will be different and will be based on the fair market value of
Carolina First's common stock as of approximately the date of the consummation
of the merger.
A total of 122,263 shares of First Charter common stock were issued on January
12, 2000 in conjunction with the purchase of the assets of the J. L. Suttle, Jr.
& Co., Inc. insurance agency on January 12, 2000. These assets (which primarily
consists of goodwill) were placed under the subsidiary First Charter Insurance
Services, Inc. and accounted for using the purchase method of accounting. Using
a market value of First Charter common stock of $14.50, the following adjusting
entry was made to the unaudited pro forma condensed balance sheet to account for
this transaction:
<TABLE>
<S> <C> <C>
Other Assets................................................ 1,773,000
Common Stock -- First Charter............................. 1,773,000
</TABLE>
This transaction is referenced as a pro forma adjustment in the pro forma
condensed balance sheet but was not given pro forma effect in the unaudited pro
forma condensed consolidated statements of earnings.
72
<PAGE> 80
Shares expected to be issued in connection with the merger are as follows:
<TABLE>
<S> <C> <C>
Shares of Carolina First common stock, excluding Carolina First shares
owned by First Charter.................................................. 5,827,292
Exchange Ratio.......................................................... 2.267
----------
Shares of First Charter common stock to be issued....................... 13,210,471
----------
</TABLE>
The following entry was made to the unaudited pro forma condensed consolidated
balance sheet to reflect this transaction:
<TABLE>
<S> <C> <C>
Common Stock -- Carolina First.............................. 14,568,000
Additional paid-in capital.................................. 31,880,000
Common Stock -- First Charter............................. 46,448,000
</TABLE>
NOTE 2
In connection with the merger, First Charter intends to reclassify Carolina
First's securities held to maturity to securities available for sale. This
reclassification will enable First Charter to maintain its existing interest
rate risk position. The following adjusting entry was made to the unaudited pro
forma condensed balance sheet to reflect this transaction:
<TABLE>
<S> <C> <C>
Securities available for sale............................... 36,600,000
Other assets (deferred taxes)............................... 302,000
Unrealized loss on securities available for sale............ 560,000
Securities held to maturity............................... 37,462,000
</TABLE>
NOTE 3
First Charter anticipates one-time merger-related charges of $11.3 million
($9.0 million, net of tax effects) in connection with the merger.
Employee-related and professional fees associated with the transaction
(including fixed financial advisor fees as well as attorneys' and accountants'
fees) are expected to represent the largest portion of the expenses and charges.
The impact of these adjustments, net of tax effects, has been reflected in the
unaudited pro forma condensed consolidated balance sheet as of September 30,
1999, but has not been reflected in the unaudited pro forma condensed
consolidated statements of earnings. The following adjusting entry was made to
the unaudited pro forma condensed consolidated balance sheet to reflect this
transaction:
<TABLE>
<S> <C> <C>
Retained earnings........................................... 8,955,000
Other assets (deferred taxes)............................... 2,345,000
Other liabilities......................................... 11,300,000
</TABLE>
73
<PAGE> 81
EXPERTS
The consolidated financial statements of First Charter and subsidiaries as
of December 31, 1998 and 1997, and for each of the years in the three-year
period ended December 31, 1998, have been incorporated by reference herein and
in the registration statement in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Carolina First and subsidiaries as
of December 31, 1998 and 1997, and for each of the years in the three-year
period ended December 31, 1998, have been incorporated by reference herein and
in the registration statement in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
VALIDITY OF FIRST CHARTER COMMON STOCK
The validity of the shares of First Charter common stock to be issued in
the merger will be passed upon for First Charter by Smith Helms Mulliss & Moore,
L.L.P.
WHERE YOU CAN FIND MORE INFORMATION
First Charter has filed with the SEC a registration statement under the
Securities Act that registers the shares of First Charter common stock to be
issued in connection with the merger. The registration statement, including the
attached exhibits and schedules, contains additional relevant information about
First Charter and First Charter common stock. The rules and regulations of the
SEC allow us to omit certain information included in the registration statement
from this document.
First Charter and Carolina First file reports, proxy statements and other
information with the SEC under the Securities Exchange Act. You may read and
copy this information at the following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street,N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. Information regarding the operation of the
Public Reference Room may be obtained by calling 1-800-SEC-0330. The SEC also
maintains an Internet worldwide web site at http://www.sec.gov that contains
reports, proxy statements and other information about issuers like First Charter
and Carolina First.
You may also inspect reports, proxy statements and other information about
First Charter and Carolina First at the offices of the Nasdaq Stock Market, Inc.
1735 K Street, NW, Washington DC 20006-1500.
74
<PAGE> 82
The SEC allows First Charter and Carolina First to "incorporate by
reference" information into this document. This means that First Charter and
Carolina First can disclose important information to you by referring you to
another document filed separately with the SEC. The information incorporated by
reference is considered to be a part of this document, except for any
information that is superseded by information that is included directly in this
document.
This document incorporates by reference the documents listed below that
First Charter and Carolina First previously filed with the SEC. These documents
contain important information about the companies and their financial condition.
<TABLE>
<CAPTION>
FIRST CHARTER COMMISSION FILINGS PERIOD OR DATE FILED
- -------------------------------- --------------------
<S> <C>
Annual Report on Form 10-K............ Year ended December 31, 1998
Quarterly Report on Form 10-Q......... Quarter ended March 31, 1999
Quarterly Report on Form 10-Q......... Quarter ended June 30, 1999
Quarterly Report on Form 10-Q......... Quarter ended September 30, 1999
Current Reports on Form 8-K........... Filed January 11, 1999
January 15, 1999
March 25, 1999
April 15, 1999
April 27, 1999
July 9, 1999
October 13, 1999
November 8, 1999
January 18, 2000
Proxy Statement on Schedule 14A....... Filed March 22, 1999
The description of First Charter
common stock as set forth on Form
8-K................................. Filed January 26, 1998
</TABLE>
<TABLE>
<CAPTION>
CAROLINA FIRST SEC FILINGS PERIOD OR DATE FILED
- -------------------------- --------------------
<S> <C>
Annual Report on Form 10-K............ Year ended December 31, 1998
Quarterly Report on Form 10-Q......... Quarter ended March 31, 1999
Quarterly Report on Form 10-Q......... Quarter ended June 30, 1999
Quarterly Report on Form 10-Q......... Quarter ended September 30, 1999
Current Reports on Form 8-K and Form
8-K/A............................... Filed January 6, 1999
March 22, 1999
November 9, 1999
November 15, 1999
January 19, 2000
Proxy Statement on Schedule 14A....... Filed March 30, 1999
The description of Carolina First
common stock as set forth in the
Proxy Statement for Carolina First's
1998 Annual Meeting................. Filed March 26, 1998
</TABLE>
First Charter and Carolina First also incorporate by reference additional
documents that either company may file with the SEC between the date of this
document and the date of the First Charter or Carolina First special meetings.
These documents include periodic reports, such as Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy
statements.
75
<PAGE> 83
First Charter has supplied all information contained or incorporated by
reference in this document relating to First Charter before and after the
merger, as well as all pro forma financial information, and Carolina First has
supplied all historical information relating to Carolina First.
Neither First Charter nor Carolina First has authorized anyone to give any
information or make any representation about the merger or our companies that is
different from, or in addition to, that contained in this document or in any of
the materials that have been incorporated into this document. Therefore, if
anyone does give you information of this sort, you should not rely on it. The
information contained in this document speaks only as of the date of this
document unless the information specifically indicates that another date
applies.
76
<PAGE> 84
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
CAROLINA FIRST BANCSHARES, INC.
AND
FIRST CHARTER CORPORATION
DATED AS OF NOVEMBER 7, 1999
<PAGE> 85
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 TRANSACTIONS AND TERMS OF MERGER................. A-1
1.1 Merger............................................... A-1
1.2 Bank Mergers......................................... A-2
1.3 Time and Place of Closing............................ A-2
1.4 Effective Time....................................... A-2
1.5 Execution of Stock Option Agreement.................. A-2
ARTICLE 2 TERMS OF MERGER.................................. A-2
2.1 Articles of Incorporation............................ A-2
2.2 Bylaws............................................... A-2
2.3 Directors and Officers............................... A-2
ARTICLE 3 MANNER OF CONVERTING SHARES...................... A-3
3.1 Conversion of Shares................................. A-3
3.2 Anti-Dilution Provisions............................. A-3
3.3 Shares Held by Carolina First or FCC................. A-3
3.4 [Reserved]........................................... A-3
3.5 Fractional Shares.................................... A-3
3.6 Conversion of Stock Rights........................... A-4
ARTICLE 4 EXCHANGE OF SHARES............................... A-5
4.1 Exchange Procedures.................................. A-5
4.2 Rights of Former Carolina First Stockholders......... A-6
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF CAROLINA A-7
FIRST.....................................................
5.1 Organization, Standing, and Power.................... A-7
5.2 Authority; No Breach By Agreement.................... A-7
5.3 Capital Stock........................................ A-8
5.4 Carolina First Subsidiaries.......................... A-8
5.5 SEC Filings; Financial Statements.................... A-9
5.6 Absence of Undisclosed Liabilities................... A-9
5.7 Absence of Certain Changes or Events................. A-10
5.8 Tax Matters.......................................... A-10
5.9 Assets............................................... A-11
5.10 Environmental Matters................................ A-11
5.11 Compliance with Laws................................. A-12
5.12 Labor Relations...................................... A-13
5.13 Employee Benefit Plans............................... A-13
5.14 Material Contracts................................... A-16
5.15 Legal Proceedings.................................... A-16
5.16 Reports.............................................. A-17
5.17 Statements True and Correct.......................... A-17
5.18 Accounting, Tax, and Regulatory Matters.............. A-17
5.19 State Takeover Laws.................................. A-18
5.20 Charter Provisions................................... A-18
5.21 Derivatives.......................................... A-18
5.22 Year 2000............................................ A-18
5.23 Fairness Opinion..................................... A-18
5.24 Board Recommendation................................. A-18
</TABLE>
i
<PAGE> 86
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF FCC............ A-19
6.1 Organization, Standing, and Power.................... A-19
6.2 Authority; No Breach By Agreement.................... A-19
6.3 Capital Stock........................................ A-20
6.4 FCC Subsidiaries..................................... A-20
6.5 SEC Filings; Financial Statements.................... A-21
6.6 Absence of Undisclosed Liabilities................... A-21
6.7 Absence of Certain Changes or Events................. A-21
6.8 Tax Matters.......................................... A-22
6.9 Assets............................................... A-23
6.10 Environmental Matters................................ A-23
6.11 Compliance with Laws................................. A-24
6.12 Labor Relations...................................... A-25
6.13 Legal Proceedings.................................... A-25
6.14 Reports.............................................. A-25
6.15 Statements True and Correct.......................... A-25
6.16 Accounting, Tax, and Regulatory Matters.............. A-26
6.17 State Takeover Laws.................................. A-26
6.18 Charter Provisions................................... A-26
6.19 Employee Benefit Plans............................... A-26
6.20 Derivatives.......................................... A-27
6.21 Year 2000............................................ A-27
6.22 Fairness Opinion..................................... A-27
6.23 Board Recommendation................................. A-27
ARTICLE 7 CONDUCT OF BUSINESS PENDING CONSUMMATION......... A-27
7.1 Affirmative Covenants of Carolina First.............. A-27
7.2 Negative Covenants of Carolina First................. A-28
7.3 Negative Covenants of FCC............................ A-30
7.4 Adverse Changes in Condition......................... A-30
7.5 Reports.............................................. A-30
ARTICLE 8 ADDITIONAL AGREEMENTS............................ A-31
8.1 Registration Statement; Joint Proxy Statement; A-31
Stockholder Approvals..................................
8.2 Nasdaq Listing....................................... A-32
8.3 Applications......................................... A-32
8.4 Filings with State Offices........................... A-32
8.5 Agreement as to Efforts to Consummate................ A-32
8.6 Investigation and Confidentiality.................... A-32
8.7 Press Releases....................................... A-33
8.8 Certain Actions...................................... A-33
8.9 Accounting and Tax Treatment......................... A-33
8.10 State Takeover Laws.................................. A-33
8.11 Charter Provisions................................... A-33
8.12 Agreement of Affiliates.............................. A-34
8.13 Employee Benefits and Contracts...................... A-34
8.14 Indemnification...................................... A-35
8.15 Board and Management Matters......................... A-36
8.16 Certain Modifications................................ A-36
</TABLE>
ii
<PAGE> 87
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS TO A-37
CONSUMMATE..................................................
9.1 Conditions to Obligations of Each Party.............. A-37
9.2 Conditions to Obligations of FCC..................... A-38
9.3 Conditions to Obligations of Carolina First.......... A-39
ARTICLE 10 TERMINATION..................................... A-40
10.1 Termination.......................................... A-40
10.2 Effect of Termination................................ A-43
10.3 Non-Survival of Representations and Covenants........ A-43
ARTICLE 11 MISCELLANEOUS................................... A-43
11.1 Definitions.......................................... A-43
11.2 Expenses............................................. A-50
11.3 Brokers and Finders.................................. A-50
11.4 Entire Agreement..................................... A-50
11.5 Amendments........................................... A-50
11.6 Waivers.............................................. A-51
11.7 Assignment........................................... A-51
11.8 Notices.............................................. A-51
11.9 Governing Law........................................ A-52
11.10 Counterparts........................................ A-52
11.11 Captions............................................ A-52
11.12 Interpretations..................................... A-52
11.13 Enforcement of Agreement............................ A-52
11.14 Severability........................................ A-53
</TABLE>
iii
<PAGE> 88
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of November 7, 1999 by and between Carolina First Bancshares, Inc.
("Carolina First"), a corporation organized and existing under the Laws of the
State of North Carolina, with its principal office located in Lincolnton, North
Carolina; and First Charter Corporation ("FCC"), a corporation organized and
existing under the Laws of the State of North Carolina, with its principal
office located in Concord, North Carolina.
PREAMBLE
The respective Boards of Directors of Carolina First and FCC are of the
opinion that the transactions described herein are in the best interests of the
parties to this Agreement and their respective stockholders. This Agreement
provides for the merger (the "Merger") of Carolina First with and into FCC. At
the effective time of the Merger, the outstanding shares of the capital stock of
Carolina First shall be converted into shares of the common stock of FCC (except
as provided herein). As a result, stockholders of Carolina First shall become
stockholders of FCC, and each of the subsidiaries of Carolina First shall
continue to conduct its business and operations as a subsidiary of FCC. The
transactions described in this Agreement are subject to the approvals of the
stockholders of Carolina First, the stockholders of FCC, the Board of Governors
of the Federal Reserve System, and certain state regulatory authorities, and the
satisfaction of certain other conditions described in this Agreement. It is the
intention of the parties to this Agreement that the Merger for federal income
tax purposes shall qualify as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code, and for accounting purposes shall qualify
for treatment as a pooling of interests.
Immediately after the execution and delivery of this Agreement, as a
condition and inducement to FCC's willingness to enter into this Agreement,
Carolina First and FCC are entering into a stock option agreement (the "Carolina
First Stock Option Agreement"), in substantially the form of Exhibit 1, pursuant
to which Carolina First is granting to FCC an option to purchase shares of
Carolina First Common Stock.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, and other good and
valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, the Parties, intending to be legally bound, agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined herein), Carolina First shall be merged with and into
FCC in accordance with the provisions of Section 55-11-01 of the NCBCA and with
the effect provided in Section 55-11-06 of the NCBCA (the "Merger"). FCC shall
be the Surviving Corporation resulting from the Merger and shall continue to be
governed by the Laws of the State of North Carolina. The Merger shall be
consummated pursuant to the terms of this
<PAGE> 89
Agreement, which has been approved and adopted by the respective Boards of
Directors of Carolina First and FCC.
1.2 Bank Mergers. Subject to the terms and conditions of this Agreement
and plans of merger, in form mutually acceptable to Carolina First and FCC
(each, a "Bank Plan of Merger"), at a time or times subsequent to the Effective
Time designated by FCC, each of the Carolina First Banks shall be merged (the
"Bank Mergers") with and into FCC Bank pursuant to the provisions provided in 12
U.S.C. secs. 1815(d) and 1828(c). FCC Bank shall be the Surviving Bank resulting
from each of the Bank Mergers and shall continue to be governed by the Laws of
the United States. The Bank Mergers pursuant to the Bank Plans of Merger will be
approved and adopted by the respective Boards of Directors of each Carolina
First Bank and FCC Bank at the first regularly-scheduled meetings of such Boards
of Directors following the date of this Agreement.
1.3 Time and Place of Closing. The closing of the Merger (the "Closing")
shall take place at 9:00 A.M. on the date that the Effective Time occurs (or on
the immediately preceding day if the Effective Time is earlier than 9:00 A.M.),
or at such other time as the Parties, acting through their duly authorized
officers, may mutually agree. The place of Closing shall be at such location as
may be mutually agreed upon by the Parties.
1.4 Effective Time. The Merger and the other transactions contemplated by
this Agreement shall become effective on the date and at the time the Articles
of Merger reflecting the Merger shall become effective with the Secretary of
State of the State of North Carolina (the "Effective Time"). Subject to the
terms and conditions hereof, unless otherwise mutually agreed upon in writing by
the duly authorized officers of each Party, the Parties shall use their
reasonable efforts to cause the Effective Time to occur on or before the 1st
business day (as designated by FCC) following the last to occur of (i) the
effective date (including expiration of any applicable waiting period) of the
last required Consent of any Regulatory Authority having authority over and
approving or exempting the Merger, and (ii) the date on which the stockholders
of FCC and Carolina First approve the matters relating to this Agreement
required to be approved by such stockholders by applicable Law; or such later
date as may be mutually agreed by FCC and Carolina First.
1.5 Execution of Stock Option Agreement. Immediately after the execution
of this Agreement and as a condition hereto, Carolina First is executing and
delivering to FCC the Stock Option Agreement.
ARTICLE 2
TERMS OF MERGER
2.1 Articles of Incorporation. The Amended and Restated Articles of
Incorporation of FCC in effect immediately prior to the Effective Time shall be
the Amended and Restated Articles of Incorporation of the Surviving Corporation
after the Effective Time until otherwise amended or repealed.
2.2 Bylaws. The Bylaws of FCC in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation after the Effective Time
until otherwise amended or repealed.
2.3 Directors and Officers. The directors of FCC in office immediately
prior to the Effective Time, together with such additional individuals elected
in accordance with the
A-2
<PAGE> 90
terms of Section 8.15 of this Agreement shall serve as the directors of the
Surviving Corporation from and after the Effective Time in accordance with the
Bylaws of the Surviving Corporation. The officers of FCC in office immediately
prior to the Effective Time, together with such additional officers of Carolina
First as thereafter elected pursuant to this Agreement or otherwise shall serve
as the officers of the Surviving Corporation from and after the Effective Time
in accordance with the Bylaws of the Surviving Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of FCC or Carolina First, or the stockholders of either of the foregoing, the
shares of the constituent corporations shall be converted as follows:
(a) each share of FCC Common Stock issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from and
after the Effective Time; and
(b) each share of Carolina First Common Stock (excluding shares held
by any Carolina First Company or any FCC Company, in each case other than
in a fiduciary capacity or as a result of debts previously contracted)
issued and outstanding at the Effective Time shall be converted into 2.267
shares of FCC Common Stock (the "Exchange Ratio").
3.2 Anti-Dilution Provisions. In the event Carolina First changes the
number of shares of Carolina First Common Stock issued and outstanding prior to
the Effective Time as a result of a stock split, stock dividend,
recapitalization, reclassification, exchange of shares, or similar transaction
with respect to such stock, the Exchange Ratio shall be proportionately
adjusted. In the event FCC changes the number of shares of FCC Common Stock
issued and outstanding prior to the Effective Time as a result of a stock split,
stock dividend, recapitalization, reclassification, exchange of shares, or
similar transaction with respect to such stock and the record date therefor (in
the case of a stock dividend) or the effective date thereof (in the case of a
stock split, reclassification, exchange of shares, or similar recapitalization
for which a record date is not established) shall be prior to the Effective
Time, the Exchange Ratio shall be proportionately adjusted.
3.3 Shares Held by Carolina First or FCC. Each of the shares of Carolina
First Common Stock held by any Carolina First Company or by any FCC Company, in
each case other than in a fiduciary capacity or as a result of debts previously
contracted, shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
3.4 [RESERVED].
3.5 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Carolina First Common Stock exchanged
pursuant to the Merger who would otherwise have been entitled to receive a
fraction of a share of FCC Common Stock (after taking into account all
certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of
A-3
<PAGE> 91
FCC Common Stock multiplied by the market value of one share of FCC Common Stock
at the Effective Time. The market value of one share of FCC Common Stock at the
Effective Time shall be the last sale price of FCC Common Stock on the Nasdaq
NMS (as reported by The Wall Street Journal or, if not reported thereby, any
other authoritative source selected by FCC) on the last trading day preceding
the Effective Time. No such holder will be entitled to dividends, voting rights,
or any other rights as a stockholder in respect of any fractional shares.
3.6 Conversion of Stock Rights.
(a) At the Effective Time, each award, option, or other right to
purchase or acquire shares of Carolina First Common Stock pursuant to stock
options, stock appreciation rights (including any "STARs"), or stock awards
("Carolina First Rights") granted by Carolina First under the Carolina
First Stock Plans, which are outstanding at the Effective Time, whether or
not exercisable, shall be converted into and become Rights with respect to
FCC Common Stock, and FCC shall assume each Carolina First Right, in
accordance with the terms of the Carolina First Stock Plan and stock option
agreement by which it is evidenced, except that from and after the
Effective Time, (i) FCC and its Compensation Committee shall be substituted
for Carolina First and the Committee of Carolina First's Board of Directors
(including, if applicable, the entire Board of Directors of Carolina First)
administering such Carolina First Stock Plan, (ii) each Carolina First
Right assumed by FCC may be exercised solely for shares of FCC Common Stock
(or cash in the case of stock appreciation rights), (iii) the number of
shares of FCC Common Stock subject to such Carolina First Right shall be
equal to the number of shares of Carolina First Common Stock subject to
such Carolina First Right immediately prior to the Effective Time
multiplied by the Exchange Ratio, and (iv) the per share exercise price (or
similar threshold price, in the case of stock awards) under each such
Carolina First Right shall be adjusted by dividing the per share exercise
(or threshold) price under each such Carolina First Right by the Exchange
Ratio and rounding up to the nearest cent. Notwithstanding the provisions
of clause (iii) of the preceding sentence, FCC shall not be obligated to
issue any fraction of a share of FCC Common Stock upon exercise of Carolina
First Rights and any fraction of a share of FCC Common Stock that otherwise
would be subject to a converted Carolina First Right shall represent the
right to receive a cash payment equal to the product of such fraction and
the difference between the market value of one share of FCC Common Stock
and the adjusted per share exercise price of such Right. The market value
of one share of FCC Common Stock shall be the last sale price of FCC Common
Stock on the Nasdaq NMS (as reported by The Wall Street Journal or, if not
reported thereby, any other authoritative source selected by FCC) on the
last trading day preceding the Effective Time. In addition, notwithstanding
the provisions of clauses (iii) and (iv) of the first sentence and the
second sentence of this Section 3.6(a), each Carolina First Right which is
an "incentive stock option" shall be adjusted as required by Section 424 of
the Internal Revenue Code, so as not to constitute a modification,
extension, or renewal of the option, within the meaning of Section 424(h)
of the Internal Revenue Code.
(b) As soon as practicable after the Effective Time, FCC shall deliver
to the participants in each Carolina First Stock Plan an appropriate notice
setting forth such participant's rights pursuant thereto and the grants
pursuant to such Carolina First Stock Plan shall continue in effect on the
same terms and conditions (subject to the
A-4
<PAGE> 92
adjustments required by Section 3.6(a) after giving effect to the Merger),
and FCC shall comply with the terms of each Carolina First Stock Plan to
ensure, to the extent required by, and subject to the provisions of, such
Carolina First Stock Plan, that Carolina First Rights which qualified as
incentive stock options prior to the Effective Time continue to qualify as
incentive stock options after the Effective Time. At or prior to the
Effective Time, FCC shall take all corporate action necessary to reserve
for issuance sufficient shares of FCC Common Stock for delivery upon
exercise of Carolina First Rights assumed by it in accordance with this
Section 3.6. As soon as practicable after the Effective Time, FCC shall
file a registration statement on Form S-3 or Form S-8, as the case may be
(or any successor or other appropriate forms), with respect to all the
shares of FCC Common Stock subject to the Carolina First Rights assumed by
FCC in accordance with this Section 3.6 and shall use its reasonable
efforts to maintain the effectiveness of such registration statements (and
maintain the current status of the prospectus or prospectuses contained
therein), as well as comply with any applicable state securities or "blue
sky" laws, for so long as such options, stock appreciation rights, stock
awards or other rights remain outstanding. With respect to those
individuals who subsequent to the Merger will be subject to the reporting
requirements under Section 16(a) of the 1934 Act, where applicable, FCC
shall administer the Carolina First Stock Plan assumed pursuant to this
Section 3.6 in a manner that complies with Rule 16b-3 promulgated under the
1934 Act to the extent the Carolina First Stock Plan complied with such
rule prior to the Effective Time.
(c) All restrictions or limitations on transfer with respect to
Carolina First Common Stock awarded under the Carolina First Stock Plans or
any other plan, program, Contract or arrangement of any Carolina First
Company, to the extent that such restrictions or limitations shall not have
already lapsed (whether as a result of the Merger or otherwise), and except
as otherwise expressly provided in such plan, program, Contract or
arrangement, shall remain in full force and effect with respect to shares
of FCC Common Stock into which such Carolina First Common Stock or related
Carolina First Rights are converted pursuant to Section 3.1 of this
Agreement.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time, FCC and
Carolina First shall cause the exchange agent selected by FCC (the "Exchange
Agent") to mail to the former stockholders of Carolina First appropriate
transmittal materials (which shall specify that delivery shall be effected, and
risk of loss and title to the certificates theretofore representing shares of
Carolina First Common Stock shall pass, only upon proper delivery of such
certificates to the Exchange Agent). After the Effective Time, each holder of
shares of Carolina First Common Stock (other than shares to be canceled pursuant
to Section 3.3 of this Agreement) issued and outstanding at the Effective Time
shall surrender the certificate or certificates representing such shares to the
Exchange Agent and shall promptly upon surrender thereof receive in exchange
therefor the consideration provided in Sections 3.1 or 3.6 of this Agreement,
together with all undelivered dividends or distributions in respect of such
shares (without interest thereon) pursuant to Section 4.2 of this Agreement. To
the extent required by Section 3.5 of this Agreement, each holder of shares of
Carolina First Common Stock issued and outstanding at the Effective Time also
shall receive, upon surrender of the certificate or certificates
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representing such shares, cash in lieu of any fractional share of FCC Common
Stock to which such holder may be otherwise entitled (without interest). FCC
shall not be obligated to deliver the consideration to which any former holder
of Carolina First Common Stock is entitled as a result of the Merger until such
holder surrenders such holder's certificate or certificates representing the
shares of Carolina First Common Stock for exchange as provided in this Section
4.1. The certificate or certificates of Carolina First Common Stock so
surrendered shall be duly endorsed as the Exchange Agent may require. Any other
provision of this Agreement notwithstanding, neither the Surviving Corporation
nor the Exchange Agent shall be liable to a holder of Carolina First Common
Stock for any amounts paid or property delivered in good faith to a public
official pursuant to any applicable abandoned property, escheat or other Law.
Adoption of this Agreement by the stockholders of Carolina First shall
constitute ratification of the appointment of the Exchange Agent.
4.2 Rights of Former Carolina First Stockholders. At the Effective Time,
the stock transfer books of Carolina First shall be closed as to holders of
Carolina First Common Stock immediately prior to the Effective Time and no
transfer of Carolina First Common Stock by any such holder shall thereafter be
made or recognized. Until surrendered for exchange in accordance with the
provisions of Section 4.1, each certificate theretofore representing shares of
Carolina First Common Stock (other than shares to be canceled pursuant to
Section 3.3) shall from and after the Effective Time represent for all purposes
only the right to receive the consideration provided in Sections 3.1 and 3.6 in
exchange therefor, subject, however, to the Surviving Corporation's obligation
to pay any dividends or make any other distributions with a record date prior to
the Effective Time which have been declared or made by Carolina First in respect
of such shares of Carolina First Common Stock in accordance with the terms of
this Agreement and which remain unpaid at the Effective Time. To the extent
permitted by Law, former stockholders of record of Carolina First shall be
entitled to vote after the Effective Time at any meeting of FCC stockholders the
number of whole shares of FCC Common Stock into which their respective shares of
Carolina First Common Stock are convertible, regardless of whether such holders
have exchanged their certificates representing Carolina First Common Stock for
certificates representing FCC Common Stock in accordance with the provisions of
this Agreement. Whenever a dividend or other distribution is declared by FCC on
the FCC Common Stock, the record date for which is at or after the Effective
Time, the declaration shall include dividends or other distributions on all
shares issuable pursuant to this Agreement, but no dividend or other
distribution payable to the holders of record of FCC Common Stock as of any time
subsequent to the Effective Time shall be delivered to the holder of any
certificate representing shares of Carolina First Common Stock issued and
outstanding at the Effective Time until such holder surrenders such certificate
for exchange as provided in Section 4.1. However, upon surrender of such
Carolina First Common Stock certificate, the FCC Common Stock certificate,
together with all undelivered dividends or other distributions (without
interest) and any cash payments to be paid for fractional share interests
(without interest), shall be delivered and paid with respect to each share
represented by such certificate.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF CAROLINA FIRST
Except as set forth in the Carolina First Disclosure Memorandum, Carolina
First hereby represents and warrants to FCC as follows:
5.1 Organization, Standing, and Power. Carolina First is a corporation
duly organized, validly existing, and in good standing under the Laws of the
State of North Carolina, and has the corporate power and authority to carry on
its business as now conducted and to own, lease, and operate its Material
Assets. Carolina First is duly qualified or licensed to transact business as a
foreign corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Carolina First. The minute book and other organizational documents for
Carolina First have been made available to FCC for its review and are true and
complete in all Material respects as in effect as of the date of this Agreement
and accurately reflect in all Material respects all amendments thereto and all
actions of the Board of Directors and Stockholders thereof.
5.2 Authority; No Breach By Agreement.
(a) Carolina First has the corporate power and authority necessary to
execute, deliver, and perform its obligations under this Agreement and,
subject to the necessary stockholder and regulatory approvals, to
consummate the transactions contemplated hereby. The execution, delivery,
and performance of this Agreement, and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly
authorized by all necessary corporate action in respect thereof on the part
of Carolina First, subject to the approval of this Agreement by the holders
of a majority of the outstanding shares of Carolina First Common Stock,
which is the only stockholder vote required for approval of this Agreement
and consummation of the Merger by Carolina First. Subject to such requisite
stockholder approval, this Agreement represents a legal, valid, and binding
obligation of Carolina First, enforceable against Carolina First in
accordance with its terms (except in all cases as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
receivership, conservatorship, moratorium, or similar Laws affecting the
enforcement of creditors' rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding may be
brought).
(b) Neither the execution and delivery of this Agreement by Carolina
First, nor the consummation by Carolina First of the transactions
contemplated hereby, nor compliance by Carolina First with any of the
provisions hereof or thereof, will (i) conflict with or result in a breach
of any provision of Carolina First's Articles of Incorporation or Bylaws or
certificate of articles of incorporation or bylaws of any Carolina First
Subsidiary or any currently effective resolution adopted by the Board of
Directors or the stockholder(s) of any Carolina First Company, or (ii)
constitute or result in a Default under, or require any Consent pursuant
to, or result in the creation of any Lien on any Asset of any Carolina
First Company under, any Contract or Permit of any Carolina First Company,
where such Default or Lien, or any failure to obtain such Consent, is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Carolina First, or (iii) subject to receipt of the
requisite
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Consents referred to in Section 9.1(b), constitute or result in a Default
under, or require any Consent pursuant to, any Law or Order applicable to
any Carolina First Company or any of their respective Material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate, banking and securities Laws,
and rules of the NASD, and other than Consents required from Regulatory
Authorities, and other than notices to or filings with the Internal Revenue
Service or the Pension Benefit Guaranty Corporation with respect to any
employee benefit plans, or under the HSR Act, and other than Consents,
filings, or notifications which, if not obtained or made, are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Carolina First, no notice to, filing with, or Consent of,
any public body or authority is necessary for the consummation by Carolina
First of the Merger and the other transactions contemplated in this
Agreement.
5.3 Capital Stock.
(a) The authorized capital stock of Carolina First consists, as of the
date of this Agreement, of 20,000,000 shares of Carolina First Common
Stock, of which 5,984,114 shares are issued and outstanding as of the date
of this Agreement, and 5,000,000 shares of Carolina First Preferred Stock,
none of which is issued and outstanding. All of the issued and outstanding
shares of Carolina First Common Stock are duly and validly issued and
outstanding and are fully paid and nonassessable under the NCBCA. None of
the outstanding shares of Carolina First Common Stock has been issued in
violation of any preemptive rights of the current or past stockholders of
Carolina First.
(b) Except as set forth in Section 5.3(a) or Section 5.3(b) of the
Carolina First Disclosure Memorandum, or as provided pursuant to the
Carolina First Stock Option Agreement, there are no shares of capital stock
or other equity securities of Carolina First outstanding and no outstanding
Rights relating to the capital stock of Carolina First.
5.4 Carolina First Subsidiaries. Carolina First has disclosed in Section
5.4 of the Carolina First Disclosure Memorandum all of the Carolina First
Subsidiaries as of the date of this Agreement. Carolina First and/or one of its
Subsidiaries owns all of the issued and outstanding shares of capital stock of
each Carolina First Subsidiary, except as disclosed in the Carolina First
Disclosure Memorandum. No equity securities of any Carolina First Subsidiary are
or may become required to be issued (other than to another Carolina First
Company) by reason of any Rights, and there are no Contracts by which any
Carolina First Subsidiary is bound to issue (other than to another Carolina
First Company) additional shares of its capital stock or Rights or by which any
Carolina First Company is or may be bound to transfer any shares of the capital
stock of any Carolina First Subsidiary (other than to another Carolina First
Company). There are no Contracts relating to the rights of any Carolina First
Company to vote or to dispose of any shares of the capital stock of any Carolina
First Subsidiary. All of the shares of capital stock of each Carolina First
Subsidiary held by a Carolina First Company are duly authorized, validly issued,
and fully paid and, except as provided in statutes pursuant to which depository
institution Subsidiaries are organized, nonassessable under the applicable
corporation Law of the jurisdiction in which such Subsidiary is incorporated or
organized and are owned by the Carolina First Company free and clear of any
Lien. Each Carolina First Subsidiary is either a bank, a corporation or a
limited liability company, and is duly organized, validly
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existing, and (as to corporations) in good standing under the Laws of the
jurisdiction in which it is incorporated or organized, and has the corporate or
other appropriate power and authority necessary for it to own, lease, and
operate its Assets and to carry on its business as now conducted. Each Carolina
First Subsidiary is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Carolina First. Each Carolina First Subsidiary that is a depository
institution is an "insured institution" as defined in the Federal Deposit
Insurance Act and applicable regulations thereunder, and the deposits in which
are insured by the Bank Insurance Fund and/or Savings Association Insurance
Fund.
5.5 SEC Filings; Financial Statements.
(a) Carolina First has timely filed and made available to FCC all
forms, reports, and documents required to be filed by Carolina First with
the SEC since December 31, 1995 (collectively, the "Carolina First SEC
Reports"). The Carolina First SEC Reports (i) at the time filed, complied
in all Material respects with the applicable requirements of the Securities
Laws and other applicable Laws, and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such later filing) contain any untrue
statement of a Material fact or omit to state a Material fact required to
be stated in such Carolina First SEC Reports or necessary in order to make
the statements in such Carolina First SEC Reports, in light of the
circumstances under which they were made, not misleading. No Carolina First
Subsidiary is required to file any forms, reports, or other documents with
the SEC.
(b) Each of the Carolina First Financial Statements (including, in
each case, any related notes) contained in the Carolina First SEC Reports,
including any Carolina First SEC Reports filed after the date of this
Agreement until the Effective Time, complied or will comply as to form in
all Material respects with the applicable published rules and regulations
of the SEC with respect thereto, was prepared or will be prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial
statements, or, in the case of unaudited statements, as permitted by Form
10-Q of the SEC), and fairly presented or will fairly present the
consolidated financial position of Carolina First and its Subsidiaries as
at the respective dates and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be Material in amount or
effect.
5.6 Absence of Undisclosed Liabilities. No Carolina First Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Carolina First, except Liabilities which
are accrued or reserved against in the consolidated balance sheets of Carolina
First as of June 30, 1999, included in the Carolina First Financial Statements
or reflected in the notes thereto. No Carolina First Company has incurred or
paid any Liability since June 30, 1999, except for such Liabilities incurred or
paid in the ordinary course of business consistent with past business practice
and which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Carolina First.
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5.7 Absence of Certain Changes or Events. Since June 30, 1999, (i) there
have been no events, changes, or occurrences which have had, or are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Carolina First, and (ii) the Carolina First Companies have conducted their
respective businesses in the ordinary and usual course (excluding, in each case,
the incurrence of expenses or obligations in connection with this Agreement or
other changes resulting from the transactions contemplated hereby).
5.8 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of any of the
Carolina First Companies have been timely filed, or requests for extensions
have been timely filed, granted, and have not expired for periods ended on
or before December 31, 1998, and, to the Knowledge of Carolina First, all
Tax Returns filed are complete and accurate in all Material respects. All
Tax Returns for periods ending on or before the date of the most recent
fiscal year end immediately preceding the Effective Time will be timely
filed or requests for extensions will be timely filed. All Taxes shown on
filed Tax Returns have been paid or will be timely paid. There is no audit
examination, deficiency, or refund Litigation with respect to any Taxes,
that is reasonably likely to result in a determination that would have,
individually or in the aggregate, a Material Adverse Effect on Carolina
First, except to the extent reflected in the Carolina First Financial
Statements dated prior to the date of this Agreement. All Taxes and other
Liabilities due with respect to completed and settled examinations or
concluded Litigation have been paid. There are no Liens with respect to
Taxes upon any of the Assets of the Carolina First Companies, except for
any such Liens which are not reasonably likely to have a Material Adverse
Effect on Carolina First.
(b) None of the Carolina First Companies has executed an extension or
waiver of any statute of limitations on the assessment or collection of any
Tax due (excluding such statutes that relate to years currently under
examination by the Internal Revenue Service or other applicable taxing
authorities) that is currently in effect.
(c) Adequate provision for any Taxes due or to become due for any of
the Carolina First Companies for the period or periods through and
including the date of the respective Carolina First Financial Statements
has been made and is reflected on such Carolina First Financial Statements.
(d) Each of the Carolina First Companies is in compliance with, and
its records contain all information and documents (including properly
completed IRS Forms W-9) necessary to comply with, all applicable
information reporting and Tax withholding requirements under federal,
state, and local Tax Laws, and such records identify with specificity all
accounts subject to backup withholding under Section 3406 of the Internal
Revenue Code, except for such instances of noncompliance and such omissions
as are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Carolina First.
(e) None of the Carolina First Companies has made any payments, is
obligated to make any payments, or is a party to any contract, agreement,
or other arrangement that could obligate it to make any payments that would
be disallowed as a deduction under Section 280G or 162(m) of the Internal
Revenue Code except as disclosed in the Carolina First Disclosure
Memorandum.
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(f) Deferred Taxes of the Carolina First Companies have been provided
for in accordance with GAAP.
(g) None of the Carolina First Companies is a party to any Tax
allocation or sharing agreement, and none of the Carolina First Companies
has been a member of an affiliated group filing a consolidated federal
income Tax Return (other than a group, the common parent of which was
Carolina First) or has any Liability for Taxes of any Person (other than
Carolina First) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign Law) as a transferee or successor or
by Contract or otherwise.
(h) There has not been an ownership change, as defined in Internal
Revenue Code Section 382(g), of the Carolina First Companies that occurred
during or after any Taxable Period in which the Carolina First Companies
incurred a net operating loss that carries over to any Taxable Period
ending after December 31, 1998.
(i) No Carolina First Company has filed any consent under Section
341(f) of the Internal Revenue Code concerning collapsible corporations.
(j) After the date of this Agreement, no Material election with
respect to Taxes will be made without the prior consent of FCC, which
consent will not be unreasonably withheld.
(k) No Carolina First Company has or has had a permanent establishment
in any foreign country, as defined in any applicable tax treaty or
convention between the United States and such foreign country.
5.9 Assets. The Carolina First Companies have good and marketable title,
free and clear of all Liens, to all of their respective Assets. All tangible
properties used in the businesses of the Carolina First Companies are in good
condition, reasonable wear and tear excepted, and are usable in the ordinary
course of business consistent with Carolina First's past practices. All Assets
which are Material to Carolina First's business on a consolidated basis, held
under leases or subleases by any of the Carolina First Companies, are held under
valid Contracts enforceable in accordance with their respective terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, conservatorship, receivership or other Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceedings
may be brought), and each such Contract is in full force and effect. The
Carolina First Companies currently maintain insurance in amounts, scope, and
coverage reasonably necessary for their operations. None of the Carolina First
Companies has received notice from any insurance carrier that (i) such insurance
will be canceled or that coverage thereunder will be reduced or eliminated, or
(ii) premium costs with respect to such policies of insurance will be
substantially increased. The Assets of the Carolina First Companies include all
Assets required to operate the business of the Carolina First Companies as
presently conducted.
5.10 Environmental Matters.
(a) To the Knowledge of Carolina First, each Carolina First Company,
its Participation Facilities, and its Loan Properties are, and have been,
in compliance with all Environmental Laws, except those violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Carolina First.
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(b) There is no Litigation pending or, to the Knowledge of Carolina
First, threatened before any court, governmental agency, or authority, or
other forum in which any Carolina First Company or to the Knowledge of
Carolina First any of its Participation Facilities has been or, with
respect to threatened Litigation, may reasonably be expected to be named as
a defendant (i) for alleged noncompliance (including by any predecessor)
with any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material, whether or not occurring at, on,
under, or involving a site owned, leased, or operated by any Carolina First
Company or any of its Participation Facilities, except for such Litigation
pending or threatened that is not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on Carolina First.
(c) To the Knowledge of Carolina First, there is no Litigation
pending, or to the Knowledge of Carolina First, threatened before any
court, governmental agency, or board, or other forum in which any of its
Loan Properties (or Carolina First in respect of such Loan Property) has
been or, with respect to threatened Litigation, is reasonably expected to
be named as a defendant or potentially responsible party (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law or
(ii) relating to the release into the environment of any Hazardous
Material, whether or not occurring at, on, under, or involving a Loan
Property, except for such Litigation pending or threatened that is not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Carolina First.
(d) To the Knowledge of Carolina First, during the period of (i) any
Carolina First Company's ownership or operation of any of their respective
current properties, (ii) any Carolina First Company's participation in the
management of any Participation Facility, or (iii) any Carolina First
Company's holding of a security interest in a Loan Property, there have
been no releases of Hazardous Material in, on, under, or affecting (or
potentially affecting) such properties, except such as are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on Carolina First. Prior to the period of (i) any Carolina First Company's
ownership or operation of any of their respective current properties, (ii)
any Carolina First Company's participation in the management of any
Participation Facility, or (iii) any Carolina First Company's holding of a
security interest in a Loan Property, to the Knowledge of Carolina First,
there were no releases of Hazardous Material in, on, under, or affecting
any such property, Participation Facility, or Loan Property, except such as
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Carolina First.
5.11 Compliance with Laws. Carolina First is duly registered as a bank
holding company under the BHC Act. Each Carolina First Company has in effect all
Permits necessary for it to own, lease, or operate its Material Assets and to
carry on its business as now conducted, except for those Permits the absence of
which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Carolina First, and there has occurred no Default
under any such Permit, other than Defaults which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Carolina
First. None of the Carolina First Companies:
(a) is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Carolina First; and
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(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any Carolina First
Company is not in compliance with any of the Laws or Orders which such
governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Carolina First, (ii) threatening to
revoke any Permits, the revocation of which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Carolina
First, or (iii) requiring any Carolina First Company (x) to enter into or
consent to the issuance of a cease and desist order, formal agreement,
directive, commitment, or memorandum of understanding, or (y) to adopt any
Board resolution or similar undertaking, which restricts materially the
conduct of its business, or in any manner relates to its capital adequacy,
its credit or reserve policies, its management, or restricts the payment of
dividends.
5.12 Labor Relations. No Carolina First Company is the subject of any
Litigation asserting that it or any other Carolina First Company has committed
an unfair labor practice (within the meaning of the National Labor Relations Act
or comparable state Law) or seeking to compel it or any other Carolina First
Company to bargain with any labor organization as to wages or conditions of
employment, nor is any Carolina First Company a party to or bound by any
collective bargaining agreement, Contract, or other agreement or understanding
with a labor union or labor organization, nor is there any strike or other labor
dispute involving any Carolina First Company, pending or threatened, or to the
Knowledge of Carolina First, is there any activity involving any Carolina First
Company's employees seeking to certify a collective bargaining unit or engaging
in any other organization activity.
5.13 Employee Benefit Plans.
(a) Carolina First has disclosed to FCC in Section 5.13 of the
Carolina First Disclosure Memorandum, and has delivered or made available
to FCC prior to the execution of this Agreement correct and complete copies
in each case of, all Material Carolina First Benefits Plans. For purposes
of this Agreement, "Carolina First Benefit Plans" means all pension,
retirement, profit-sharing, deferred compensation, stock option, employee
stock ownership, severance pay, vacation, bonus, or other incentive plan,
all other written employee programs or agreements, all medical, vision,
dental, or other health plans, all life insurance plans, and all other
employee benefit plans or fringe benefit plans, including, without
limitation, "employee benefit plans" as that term is defined in Section
3(3) of ERISA maintained by, sponsored in whole or in part by, or
contributed to by, any Carolina First Company for the benefit of employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries are eligible to
participate. Any of the Carolina First Benefit Plans which is an "employee
welfare benefit plan," as that term is defined in Section 3(l) of ERISA, or
an "employee pension benefit plan," as that term is defined in Section 3(2)
of ERISA, is referred to herein as a "Carolina First ERISA Plan." Any
Carolina First ERISA Plan which is also a "defined benefit plan" (as
defined in Section 414(j) of the Internal Revenue Code or Section 3(35) of
ERISA) is referred to herein as a "Carolina First Pension Plan." Neither
Carolina First nor any Carolina First Company has an "obligation to
contribute" (as defined in ERISA Section 4212) to a "multiemployer plan"
(as defined in ERISA
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Sections 4001(a)(3) and 3(37)(A)). Each "employee pension benefit plan," as
defined in Section 3(2) of ERISA, maintained by any Carolina First Company
since December 31, 1990 that was intended to qualify under Section 401(a)
of the Internal Revenue Code and with respect to which any Carolina First
Company has any Liability, is disclosed as such in Section 5.13 of the
Carolina First Disclosure Memorandum.
(b) Carolina First has delivered or made available to FCC prior to the
execution of this Agreement correct and complete copies of the following
documents: (i) all trust agreements or other funding arrangements for such
Carolina First Benefit Plans (including insurance contracts), and all
amendments thereto, (ii) with respect to any such Carolina First Benefit
Plans or amendments, all determination letters, Material rulings, Material
opinion letters, Material information letters, or Material advisory
opinions issued by the Internal Revenue Service, the United States
Department of Labor, or the Pension Benefit Guaranty Corporation after
December 31, 1996, (iii) annual reports or returns, audited or unaudited
financial statements, actuarial valuations and reports, and summary annual
reports prepared for any Carolina First Benefit Plan with respect to the
most recent plan year, and (iv) the most recent summary plan descriptions
and any Material modifications thereto.
(c) All Carolina First Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other
applicable Laws, the breach or violation of which is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
Carolina First. Each Carolina First ERISA Plan which is intended to be
qualified under Section 401(a) of the Internal Revenue Code has received a
favorable determination letter or opinion letter from the Internal Revenue
Service or is still within the remedial amendment period applicable to such
Plan and Carolina First is not aware of any circumstances which will or
could reasonably revocation or denial of any such favorable determination
letter or opinion letter. Each trust created under any Carolina First ERISA
Plan has been determined to be exempt from Tax under Section 501(a) of the
Internal Revenue Code and Carolina First is not aware of any circumstance
which will or could reasonably result in revocation or denial of such
exemption. With respect to each Carolina First Benefit Plan to the
Knowledge of Carolina First, no event has occurred which will or is
reasonably likely to result in a loss of any intended Tax consequences
under the Internal Revenue Code or to any Tax under Section 511 of the
Internal Revenue Code that is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on Carolina First. There is no
Material pending or, to the Knowledge of Carolina First, threatened
Litigation relating to any Carolina First ERISA Plan. Section 5.13(c) of
the Carolina First Disclosure discloses any Plans for which a remedial
amendment has been applied for and rejected.
(d) No Carolina First Company has engaged in a transaction with
respect to any Carolina First Benefit Plan that, assuming the Taxable
Period of such transaction expired as of the date of this Agreement, would
subject any Carolina First Company to a Material tax or penalty imposed by
either Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA
in amounts which are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Carolina First. Neither Carolina
First nor, to the knowledge of Carolina First, any administrator or
fiduciary of any Carolina First Benefit Plan (or any agent of any of the
foregoing) has engaged in any transaction, or acted or failed to act in any
manner which could subject
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Carolina First to any direct or indirect Liability (by indemnity or
otherwise) for breach of any fiduciary, co-fiduciary, or other duty under
ERISA, where such Liability, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on Carolina First. No
oral or written representation or written communication with respect to any
aspect of the Carolina First Benefit Plans has been made to employees of
any Carolina First Company which is not in accordance with the written or
otherwise preexisting terms and provisions of such plans, where any
Liability with respect to such representation or disclosure is reasonably
likely to have a Material Adverse Effect on Carolina First.
(e) Since the date of the most recent actuarial valuation, there has
been (i) no Material change in the financial position or funded status of
any Carolina First Pension Plan, (ii) no change in the actuarial
assumptions with respect to any Carolina First Pension Plan, and (iii) no
increase in benefits under any Carolina First Pension Plan as a result of
plan amendments or changes in applicable Law, any of which is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on Carolina First. Neither any Carolina First Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any Carolina First Company, or the
single-employer plan of any entity which is considered one employer with
Carolina First under Section 4001 of ERISA or Section 414 of the Internal
Revenue Code or Section 302 of ERISA (whether or not waived) (a "Carolina
First ERISA Affiliate") has an "accumulated funding deficiency" within the
meaning of Section 412 of the Internal Revenue Code or Section 302 of
ERISA. All contributions with respect to a Carolina First Pension Plan or
any single-employer plan of a Carolina First ERISA Affiliate have or will
be timely made and there is no lien under Internal Revenue Code Section
412(n) or ERISA Section 302(f) or Tax under Internal Revenue Code Section
4971. No Carolina First Company has provided, or is required to provide,
security to a Carolina First Pension Plan or to any single-employer plan of
a Carolina First ERISA Affiliate pursuant to Section 401(a)(29) of the
Internal Revenue Code. All premiums required to be paid under ERISA Section
4006 have been timely paid by Carolina First, except to the extent any
failure would not have a Material Adverse Effect on Carolina First.
(f) No Liability under Title IV of ERISA has been or is expected to be
incurred by any Carolina First Company with respect to any defined benefit
plan currently or formerly maintained by any of them or by any Carolina
First ERISA Affiliate that has not been satisfied in full (other than
Liability for Pension Benefit Guaranty Corporation premiums, which have
been paid when due, except to the extent any failure would not have a
Material Adverse Effect on Carolina First).
(g) No Carolina First Company has any obligations for retiree health
and retiree life benefits under any of the Carolina First Benefit Plans
other than with respect to benefit coverage mandated by applicable Law.
(h) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, by themselves,
(i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute, or otherwise) becoming due to
any director or any employee of any Carolina First Company from any
Carolina First Company under any Carolina First Benefit Plan or otherwise,
(ii) increase any benefits otherwise payable under any Carolina First
Benefit Plan, or (iii) result in any acceleration of the time of payment or
vesting of any such benefit.
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5.14 Material Contracts. Except as disclosed in Section 5.14 of the
Carolina First Disclosure memorandum, none of the Carolina First Companies, nor
any of their respective Assets, businesses, or operations, is a party to, or is
bound or affected by, or receives benefits under, (i) any employment, severance,
termination, consulting, or retirement Contract providing for aggregate payments
to any Person in any calendar year in excess of $75,000, (ii) any Contract
relating to the borrowing of money by any Carolina First Company or the
guarantee by any Carolina First Company of any such obligation (other than
Contracts evidencing deposit liabilities, purchases of federal funds, fully-
secured repurchase agreements, and Federal Home Loan Bank advances to depository
institution Subsidiaries, trade payables, and Contracts relating to borrowings
or guarantees made in the ordinary course of business), (iii) any Contract which
prohibits or restricts any Carolina First Company from engaging in any business
activities in any geographic area, line of business or otherwise in competition
with any other Person, (iv) any Contract relating to the provision of data
processing network communication, or other technical services to or by any
Carolina First Company, (v) any Contract relating to the purchase or sale of
goods or services (other than Contracts entered into in the ordinary course of
business and involving payments under any individual Contract not in excess of
$300,000), (vi) any exchange-traded or over-the-counter Swap, forward, future,
option, cap, floor or collar financial Contract, or any other interest rate or
foreign currency protection Contract not reflected in the Carolina First
Financial Statements, which is a financial derivative Contract or (vii) any
other Contract or amendment thereto that would be required to be filed as an
exhibit to a Form 10-K filed by Carolina First with the SEC as of the date of
this Agreement that has not been filed as an exhibit to Carolina First's Form
10-K filed for the fiscal year ended December 31, 1998, or in another SEC
Document and identified to FCC (together with all Contracts referred to in
Sections 5.9 and 5.13(a) of this Agreement, the "Carolina First Contracts").
With respect to each Carolina First Contract: (i) the Contract is in full force
and effect; (ii) no Carolina First Company is in Default thereunder, other than
Defaults which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Carolina First; (iii) no Carolina First
Company has repudiated or waived any Material provision of any such Contract;
and (iv) no other party to any such Contract is, to the Knowledge of Carolina
First, in Default in any respect, other than Defaults which are not reasonably
likely to have, individually or in the aggregate or has repudiated or waived any
Material provision thereunder. Except for Federal Home Loan Bank advances, all
of the indebtedness of any Carolina First Company for money borrowed is
prepayable at any time by such Carolina First Company without penalty or
premium.
5.15 Legal Proceedings.
(a) There is no Litigation instituted or pending, or, to the Knowledge
of Carolina First, threatened against any Carolina First Company, or
against any director or employee (in their capacity as such) or against any
Asset, employee benefit plan, interest, or right of any of them, nor,
except as described in Section 5.15(a) of the Carolina First Disclosure
Memorandum, are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any Carolina
First Company.
(b) Section 5.15(b) of the Carolina First Disclosure Memorandum
includes a summary report of all Litigation as of the date of this
Agreement to which any Carolina First Company is a party and which names a
Carolina First Company as a
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defendant or cross-defendant and where the maximum exposure is reasonably
estimated to be $200,000 or more.
5.16 Reports. Since January 1, 1996, or the date of organization if later,
each Carolina First Company has timely filed all reports and statements,
together with any amendments required to be made with respect thereto, that it
was required to file with any Regulatory Authorities (except in the case of
state securities authorities, failures to file which are not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Carolina
First). As of their respective dates, each of such reports and documents,
including the financial statements, exhibits, and schedules thereto, complied in
all Material respects with all applicable Laws. As of their respective dates,
each such report and document did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading.
5.17 Statements True and Correct. No statement, certificate, instrument,
or other writing furnished or to be furnished by or on behalf of any Carolina
First Company or any executive officer or director of any Carolina First Company
thereof to FCC pursuant to this Agreement or any other document, agreement, or
instrument referred to herein contains or will contain any untrue statement of
Material fact or will omit to state a Material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of the information supplied or to be supplied by any
Carolina First Company or any executive officer or director of any Carolina
First Company thereof regarding Carolina First or such executive officer or
director of any Carolina First Company for inclusion in the Registration
Statement to be filed by FCC with the SEC will, when the Registration Statement
becomes effective, be false or misleading with respect to any Material fact, or
contain any untrue statement of a Material fact, or omit to state any Material
fact required to be stated thereunder or necessary to make the statements
therein not misleading. None of the information supplied or to be supplied by
any Carolina First Company or any executive officer or director of any Carolina
First Company thereof for inclusion in the Joint Proxy Statement to be mailed to
FCC's and Carolina First's stockholders in connection with the Stockholders'
Meetings will, when first mailed to the stockholders of FCC and Carolina First,
be false or misleading with respect to any Material fact, or contain any
misstatement of Material fact, or omit to state any Material fact required to be
stated thereunder or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or, in the case of the
Joint Proxy Statement or any amendment thereof or supplement thereto, at the
time of the Stockholders' Meetings, be false or misleading with respect to any
Material fact, or omit to state any Material fact required to be stated
thereunder or necessary to correct any Material statement in any earlier
communication with respect to the solicitation of any proxy for the
Stockholders' Meetings. All documents that any Carolina First Company or any
executive officer or director of any Carolina First Company thereof is
responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all Material respects
with the provisions of applicable Law.
5.18 Accounting, Tax, and Regulatory Matters. No Carolina First Company or
any executive officer or director of Carolina First thereof has taken or agreed
to take any action and Carolina First has no Knowledge of any fact or
circumstance that is reasonably likely to (i) prevent the transactions
contemplated hereby, including the Merger, from qualifying for pooling of
interests accounting treatment or as a reorganization within the meaning of
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Section 368(a) of the Internal Revenue Code, or (ii) materially impede or delay
receipt of any Consents of Regulatory Authorities referred to in Section 9.1(b)
of this Agreement or result in the imposition of a condition or restriction of
the type referred to in the last sentence of such Section.
5.19 State Takeover Laws. Each Carolina First Company has taken all
necessary action to exempt the transactions contemplated by this Agreement from,
or if necessary to challenge the validity or applicability if, any applicable
"moratorium," "control share," "fair price," "business combination," or other
anti-takeover laws and regulations, including Articles 9 and 9A of the NCBCA
(collectively, "Takeover Laws").
5.20 Charter Provisions. Each Carolina First Company has taken all action
so that the entering into of this Agreement and the consummation of the Merger
and the other transactions contemplated by this Agreement do not and will not
result in the grant of any rights to any Person under the Articles of
Incorporation, Bylaws, or other governing instruments of any Carolina First
Company or restrict or impair the ability of FCC or any of its Subsidiaries to
vote, or otherwise to exercise the rights of a stockholder with respect to,
shares of any Carolina First Company that may be directly or indirectly acquired
or controlled by it.
5.21 Derivatives. All interest rate swaps, caps, floors, option
agreements, futures and forward contracts, and other similar risk management
arrangements, whether entered into for Carolina First's own account, or for the
account of one or more the Carolina First Subsidiaries or their customers, were
entered into (i) in accordance with prudent business practices and all
applicable Laws, and (ii) with counter parties believed to be financially
responsible.
5.22 Year 2000. Carolina First has completed the four phases of its Year
2000 readiness program, as described in the May 5, 1997, Statement of the
Federal Financial Institutions Examination Council ("FFIEC"), entitled "Year
2000 Project Management Awareness" and the April 20, 1998, "Guidance Concerning
Testing for Year 2000 Readiness." Carolina First has made available to FCC
complete and accurate copies of its Year 2000 remediation contingency plan, as
described in the FFIEC Statements of March 17, 1998, and May 13, 1998, entitled
"Guidance Concerning Institution Due Diligence in Connection with Service
Provider and Software Vendor Year 2000 Readiness" and "Guidance Concerning
Contingency Planning in Connection with Year 2000 Readiness," respectively.
Carolina First has completed the four phases of the business resumption
contingency planning process, as set forth in the guidance issued by FFIEC on
December 11, 1998, and May 13, 1998, and has provided to FCC a complete and
accurate copy of its business resumption contingency plan, written documentation
supporting the plan's development and validation, the results of tests on the
plan, and a schedule of future tests.
5.23 Fairness Opinion. Carolina First has received a written opinion of
The Robinson-Humphrey Company, LLC to the effect that, as of the date of this
Agreement, the Exchange Ratio is fair, from a financial point of view, to the
holders of Carolina First Common Stock, a signed copy of which has been
delivered to FCC.
5.24 Board Recommendation. The Board of Directors of Carolina First, at a
meeting duly called and held, has by vote of the directors present (who
constituted all the directors then in office) (i) determined that this Agreement
and the transactions contemplated, hereby including the Merger, and the
transactions contemplated thereby, taken together,
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are fair to and in the best interests of the Carolina First Stockholders and
(ii) resolved to recommend that the holders of the shares of Carolina First
Common Stock approve this Agreement.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF FCC
Except as set forth in the FCC Disclosure Memorandum, FCC hereby represents
and warrants to Carolina First as follows:
6.1 Organization, Standing, and Power. FCC is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
North Carolina, and has the corporate power and authority to carry on its
business as now conducted and to own, lease, and operate its Material Assets.
FCC is duly qualified or licensed to transact business as a foreign corporation
in good standing in the States of the United States and foreign jurisdictions
where the character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on FCC. The
minute book and other organizational documents for FCC have been made available
to Carolina First for its review and are true and complete in all Material
respects or in effect as of the date of this Agreement and accurately reflect in
all Material respects all amendment thereto and all actions of the Board of
Directors and Stockholders thereof.
6.2 Authority; No Breach By Agreement.
(a) FCC has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and, subject to
the necessary stockholder and regulatory approvals, to consummate the
transactions contemplated hereby. The execution, delivery, and performance
of this Agreement and the consummation of the transactions contemplated
herein, including the Merger, have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of FCC, subject
to the approval of this Agreement and the issuance of the shares of FCC
Common Stock pursuant to the Merger by the holders of a majority of the
outstanding shares of FCC Common Stock, which is the only stockholder vote
required for the consummation of the Merger by FCC. Subject to such
requisite stockholder approval and the Consent of all necessary Regulatory
Authorities, this Agreement represents a legal, valid, and binding
obligation of FCC, enforceable against FCC in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
moratorium, or similar Laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of
specific performance or injunctive relief is subject to the discretion of
the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by FCC, nor
the consummation by FCC of the transactions contemplated hereby, nor
compliance by FCC with any of the provisions hereof, will (i) conflict with
or result in a breach of any provision of FCC's Amended and Restated
Articles of Incorporation or Bylaws or certificate or articles of
incorporation or bylaws of any FCC Subsidiary or any currently effective
resolution adopted by the Board of Directors or the Stockholder(s)
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of any FCC Company, (ii) constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of any Lien on
any Asset of any FCC Company under, any Contract or Permit of any FCC
Company, where such Default or Lien, or any failure to obtain such Consent,
is reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FCC, or (iii) subject to receipt of the requisite
Consents referred to in Section 9.1(b), constitute or result in a Default
under, or require any Consent pursuant to, any Law or Order applicable to
any FCC Company or any of their respective Material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate, banking and securities Laws,
and rules of the NASD, and other than Consents required from Regulatory
Authorities, and other than notices to or filings with the Internal Revenue
Service or the Pension Benefit Guaranty Corporation with respect to any
employee benefit plans, or under the HSR Act, and other than Consents,
filings, or notifications which, if not obtained or made, are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FCC, no notice to, filing with, or Consent of, any public
body or authority is necessary for the consummation by FCC of the Merger
and the other transactions contemplated in this Agreement.
6.3 Capital Stock. The authorized capital stock of FCC consists, as of the
date of this Agreement, of 50,000,000 shares of FCC Common Stock, of which
17,571,729 shares were issued and outstanding as of December 31, 1999. All of
the issued and outstanding shares of FCC Common Stock are, and all of the shares
of FCC Common Stock to be issued in exchange for shares of Carolina First Common
Stock upon consummation of the Merger, when issued in accordance with the terms
of this Agreement, will be, duly and validly issued and outstanding and fully
paid and nonassessable under the NCBCA. None of the outstanding shares of FCC
Common Stock has been, and none of the shares of FCC Common Stock to be issued
in exchange for shares of Carolina First Common Stock upon consummation of the
Merger will be, issued in violation of any preemptive rights of the current or
past stockholders of FCC.
6.4 FCC Subsidiaries. FCC has disclosed in Section 6.4 of the FCC
Disclosure Memorandum all of the FCC Subsidiaries as of the date of this
Agreement. FCC or one of its Subsidiaries owns all of the issued and outstanding
shares of capital stock of each FCC Subsidiary. No equity securities of any FCC
Subsidiary are or may become required to be issued (other than to another FCC
Company) by reason of any Rights, and there are no Contracts by which any FCC
Subsidiary is bound to issue (other than to another FCC Company) additional
shares of its capital stock or Rights or by which any FCC Company is or may be
bound to transfer any shares of the capital stock of any FCC Subsidiary (other
than to another FCC Company). There are no Contracts relating to the rights of
any FCC Company to vote or to dispose of any shares of the capital stock of any
FCC Subsidiary. All of the shares of capital stock of each FCC Subsidiary held
by an FCC Company are duly authorized, validly issued and fully paid and, except
as provided in statutes pursuant to which depository institution Subsidiaries
are organized, nonassessable under the applicable corporation Law of the
jurisdiction in which such Subsidiary is incorporated or organized and are owned
by the FCC Company free and clear of any Lien. Each FCC Subsidiary is either a
bank or a corporation, and is duly organized, validly existing, and (as to
corporations) in good standing under the Laws of the jurisdiction in which it is
incorporated or organized, and has the corporate power and authority necessary
for it to own, lease, and operate its Assets and to carry on its business as now
conducted.
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Each FCC Subsidiary is duly qualified or licensed to transact business as a
foreign corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on FCC. Each FCC Subsidiary that is a depository institution is an
"insured institution" as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder, and the deposits in which are insured by the
Bank Insurance Fund and/or Savings Association Insurance Fund.
6.5 SEC Filings; Financial Statements.
(a) FCC has timely filed and made available to Carolina First all
forms, reports, and documents required to be filed by FCC with the SEC
since December 31, 1995 (collectively, the "FCC SEC Reports"). The FCC SEC
Reports (i) at the time filed, complied in all Material respects with the
applicable requirements of the Securities Laws and other applicable Laws,
as the case may be, and (ii) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement, then
on the date of such later filing) contain any untrue statement of a
Material fact or omit to state a Material fact required to be stated in
such FCC SEC Reports or necessary in order to make the statements in such
FCC SEC Reports, in light of the circumstances under which they were made,
not misleading. Except for FCC Subsidiaries that are registered as a
broker, dealer, or investment advisor or filings required due to fiduciary
holdings of the FCC Subsidiaries, no FCC Subsidiary is required to file any
forms, reports, or other documents with the SEC.
(b) Each of the FCC Financial Statements (including, in each case, any
related notes) contained in the FCC SEC Reports, including any FCC SEC
Reports filed after the date of this Agreement until the Effective Time,
complied or will comply as to form in all Material respects with the
applicable published rules and regulations of the SEC with respect thereto,
was or will be prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved (except as may be indicated in the
notes to such financial statements or, in the case of unaudited statements,
as permitted by Form 10-Q of the SEC), and fairly presented or will fairly
present the consolidated financial position of FCC and its Subsidiaries as
at the respective dates and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be Material in amount or
effect.
6.6 Absence of Undisclosed Liabilities. No FCC Company has any Liabilities
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FCC, except Liabilities which are accrued or reserved against
in the consolidated balance sheets of FCC as of June 30, 1999, included in the
FCC Financial Statements or reflected in the notes thereto and except for
Liabilities incurred in the ordinary course of business subsequent to June 30,
1999. No FCC Company has incurred or paid any Liability since June 30, 1999,
except for such Liabilities incurred or paid in the ordinary course of business
consistent with past business practice and which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on FCC.
6.7 Absence of Certain Changes or Events. Since June 30, 1999, (i) there
have been no events, changes or occurrences which have had, or are reasonably
likely to have,
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individually or in the aggregate, a Material Adverse Effect on FCC, and (ii) the
FCC Companies have conducted their respective businesses in the ordinary and
usual course (excluding, in each case, the incurrence of expenses or obligations
in connection with this Agreement or other changes resulting from the
transactions contemplated hereby).
6.8 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of any of the
FCC Companies have been timely filed, or requests for extensions have been
timely filed, granted, and have not expired for periods ended on or before
December 31, 1998, and, to the Knowledge of FCC, all Tax Returns filed are
complete and accurate in all Material respects. All Tax Returns for periods
ending on or before the date of the most recent fiscal year end immediately
preceding the Effective Time will be timely filed or requests for
extensions will be timely filed. All Taxes shown on filed Tax Returns have
been paid or will be timely paid. There is no audit examination,
deficiency, or refund Litigation with respect to any Taxes, that is
reasonably likely to result in a determination that would have,
individually or in the aggregate, a Material Adverse Effect on FCC, except
to the extent reflected in the FCC Financial Statements dated prior to the
date of this Agreement. All Taxes and other Liabilities due with respect to
completed and settled examinations or concluded Litigation have been paid.
There are no Liens with respect to Taxes upon any of the Assets of the FCC
Companies, except for any such Liens which are not reasonably likely to
have a Material Adverse Effect on FCC.
(b) None of the FCC Companies has executed an extension or waiver of
any statute of limitations on the assessment or collection of any Tax due
(excluding such statutes that relate to years currently under examination
by the Internal Revenue Service or other applicable taxing authorities)
that is currently in effect.
(c) Adequate provision for any Taxes due or to become due for any of
the FCC Companies for the period or periods through and including the date
of the respective FCC Financial Statements has been made and is reflected
on such FCC Financial Statements.
(d) Each of the FCC Companies is in compliance with, and its records
contain all information and documents (including properly completed IRS
Forms W-9) necessary to comply with, all applicable information reporting
and Tax withholding requirements under federal, state, and local Tax Laws,
and such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Internal Revenue Code, except for
such instances of noncompliance and such omissions as are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on FCC.
(e) None of the FCC Companies has made any payments, is obligated to
make any payments, or is a party to any contract, agreement, or other
arrangement that could obligate it to make any payments that would be
disallowed as a deduction under Section 280G or 162(m) of the Internal
Revenue Code except as disclosed in the FCC Disclosure Memorandum.
(f) Deferred Taxes of the FCC Companies have been provided for in
accordance with GAAP.
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(g) None of the FCC Companies is a party to any Tax allocation or
sharing agreement, and none of the FCC Companies has been a member of an
affiliated group filing a consolidated federal income Tax Return (other
than a group, the common parent of which was FCC) or has any Liability for
Taxes of any Person (other than Carolina First) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign Law)
as a transferee or successor or by Contract or otherwise.
(h) There has not been an ownership change, as defined in Internal
Revenue Code Section 382(g), of the FCC Companies that occurred during or
after any Taxable Period in which the FCC Companies incurred a net
operating loss that carries over to any Taxable Period ending after
December 31, 1998.
(i) No FCC Company has filed any consent under Section 341(f) of the
Internal Revenue Code concerning collapsible corporations.
(j) After the date of this Agreement, no Material election with
respect to Taxes will be made without the prior consent of Carolina First,
which consent will not be unreasonably withheld.
(k) No FCC Company has or has had a permanent establishment in any
foreign country, as defined in any applicable tax treaty or convention
between the United States and such foreign country.
6.9 Assets. The FCC Companies have good and marketable title, free and
clear of all Liens, to all of their respective Assets. All tangible properties
used in the businesses of the FCC Companies are in good condition, reasonable
wear and tear excepted, and are usable in the ordinary course of business
consistent with FCC's past practices. All Assets which are Material to FCC's
business on a consolidated basis, held under leases or subleases by any of the
FCC Companies, are held under valid Contracts enforceable in accordance with
their respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, conservatorship,
receivership or other Laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceedings may be brought), and each such Contract is in full
force and effect. The FCC Companies currently maintain insurance in amounts,
scope, and coverage reasonably necessary for their operations. None of the FCC
Companies has received notice from any insurance carrier that (i) such insurance
will be canceled or that coverage thereunder will be reduced or eliminated, or
(ii) premium costs with respect to such policies of insurance will be
substantially increased. The Assets of the FCC Companies include all Assets
required to operate the business of the FCC Companies as presently conducted.
6.10 Environmental Matters.
(a) To the Knowledge of FCC, each FCC Company, its Participation
Facilities, and its Loan Properties are, and have been, in compliance with
all Environmental Laws, except those violations which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on FCC.
(b) There is no Litigation pending or, to the Knowledge of FCC,
threatened before any court, governmental agency, or authority, or other
forum in which any FCC Company or, to the Knowledge of FCC, any of its
Participation Facilities has
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been or, with respect to threatened Litigation, may reasonably be expected
to be named as a defendant (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release
into the environment of any Hazardous Material, whether or not occurring
at, on, under, or involving a site owned, leased, or operated by any FCC
Company or any of its Participation Facilities, except for such Litigation
pending or threatened that is not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on FCC.
(c) There is no Litigation pending or, to the Knowledge of FCC,
threatened before any court, governmental agency, or board, or other forum
in which any of its Loan Properties (or FCC in respect of such Loan
Property) has been or, with respect to threatened Litigation, is reasonably
expected to be named as a defendant or potentially responsible party (i)
for alleged noncompliance (including by any predecessor) with any
Environmental Law or (ii) relating to the release into the environment of
any Hazardous Material, whether or not occurring at, on, under, or
involving a Loan Property, except for such Litigation pending or threatened
that is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on FCC.
(d) To the Knowledge of FCC, during the period of (i) any FCC
Company's ownership or operation of any of their respective current
properties, (ii) any FCC Company's participation in the management of any
Participation Facility, or (iii) any FCC Company's holding of a security
interest in a Loan Property, there have been no releases of Hazardous
Material in, on, under, or affecting (or potentially affecting) such
properties, except such as are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on FCC. Prior to the period
of (i) any FCC Company's ownership or operation of any of their respective
current properties, (ii) any FCC Company's participation in the management
of any Participation Facility, or (iii) any FCC Company's holding of a
security interest in a Loan Property, to the Knowledge of FCC, there were
no releases of Hazardous Material in, on, under, or affecting any such
property, Participation Facility, or Loan Property, except such as are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FCC.
6.11 Compliance with Laws. FCC is duly registered as a bank holding
company under the BHC Act. Each FCC Company has in effect all Permits necessary
for it to own, lease, or operate its Material Assets and to carry on its
business as now conducted, except for those Permits the absence of which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on FCC, and there has occurred no Default under any such Permit, other
than Defaults which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on FCC. None of the FCC Companies:
(a) is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on FCC; and
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any FCC Company is not in
compliance with any of the Laws or Orders which such governmental authority
or Regulatory Authority
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enforces, where such noncompliance is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FCC, (ii)
threatening to revoke any Permits, the revocation of which is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on FCC, or (iii) requiring any FCC Company (x) to enter into or consent to
the issuance of a cease and desist order, formal agreement, directive,
commitment, or memorandum of understanding, or (y) to adopt any Board
resolution or similar undertaking, which restricts materially the conduct
of its business, or in any manner relates to its capital adequacy, its
credit or reserve policies, its management, or restricts the payment of
dividends.
6.12 Labor Relations. No FCC Company is the subject of any Litigation
asserting that it or any other FCC Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state Law) or seeking to compel it or any other FCC Company to bargain with any
labor organization as to wages or conditions of employment, nor is any FCC
Company a party to or bound by any collective bargaining agreement, Contract, or
other agreement or understanding with a labor union or labor organization, nor
is there any strike or other labor dispute involving any FCC Company, pending or
threatened, or to the Knowledge of FCC, is there any activity involving any FCC
Company's employees seeking to certify a collective bargaining unit or engaging
in any other organization activity.
6.13 Legal Proceedings. There is no Litigation instituted or pending, or,
to the Knowledge of FCC, threatened against any FCC Company, or against any
Asset, employee benefit plan, interest, or right of any of them, that is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on FCC, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any FCC Company,
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FCC.
6.14 Reports. Since January 1, 1996, or the date of organization if later,
each FCC Company has timely filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with any Regulatory Authorities, except failures to file which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on FCC. As of their respective dates, each of such reports and documents,
including the financial statements, exhibits, and schedules thereto, complied in
all Material respects with all applicable Laws. As of their respective dates,
each such report and document did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading.
6.15 Statements True and Correct. No statement, certificate, instrument,
or other writing furnished or to be furnished by any FCC Company or any
Affiliate thereof to Carolina First pursuant to this Agreement or any other
document, agreement, or instrument referred to herein contains or will contain
any untrue statement of Material fact or will omit to state a Material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to be
supplied by any FCC Company or any Affiliate thereof regarding FCC or such
Affiliate for inclusion in the Registration Statement to be filed by FCC with
the SEC will, when the Registration Statement becomes effective, be false or
misleading with respect to any Material fact, or contain any untrue statement of
a Material fact, or omit to state any Material fact required to be stated
thereunder or necessary to make the
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statements therein not misleading. None of the information supplied or to be
supplied by any FCC Company or any Affiliate thereof for inclusion in the Joint
Proxy Statement to be mailed to Carolina First's and FCC's stockholders in
connection with the Stockholders' Meetings, will, when first mailed to the
stockholders of Carolina First and FCC, be false or misleading with respect to
any Material fact, or contain any misstatement of Material fact, or omit to
state any Material fact required to be stated thereunder or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, or, in the case of the Joint Proxy Statement or any
amendment thereof or supplement thereto, at the time of the Stockholders'
Meetings, be false or misleading with respect to any Material fact, or omit to
state any Material fact required to be stated thereunder or necessary to correct
any Material statement in any earlier communication with respect to the
solicitation of any proxy for the Stockholders' Meetings. All documents that any
FCC Company or any Affiliate thereof is responsible for filing with any
Regulatory Authority in connection with the transactions contemplated hereby
will comply as to form in all Material respects with the provisions of
applicable Law.
6.16 Accounting, Tax, and Regulatory Matters. No FCC Company or, to FCC's
Knowledge, any Affiliate thereof has taken or agreed to take any action, and FCC
has no Knowledge of any fact or circumstance that is reasonably likely to (i)
prevent the transactions contemplated hereby, including the Merger, from
qualifying for pooling of interests accounting treatment or as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, or (ii)
materially impede or delay receipt of any Consents of Regulatory Authorities
referred to in Section 9.1(b) of this Agreement or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
6.17 State Takeover Laws. Each FCC Company has taken all necessary action
to exempt the transactions contemplated by this Agreement from any applicable
Takeover Laws.
6.18 Charter Provisions. Each FCC Company has taken all action so that the
entering into of this Agreement and the consummation of the Merger and the other
transactions contemplated by this Agreement do not and will not result in the
grant of any rights to any Person under the Articles of Incorporation, Bylaws,
or other governing instruments of any FCC Company.
6.19 Employee Benefit Plans. All FCC Plans have complied with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
Laws, the breach or violation of which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FCC. For purposes
of this Agreement, the term "FCC Plan" means each bonus, incentive compensation,
severance pay, medical or other insurance program, retirement plan, or other
employee benefit plan program, agreement, or arrangement sponsored, maintained,
or contributed to by FCC or any trade or business, whether or not incorporated,
that together with FCC or any of its Subsidiaries would be deemed a "single
employer" under Section 414 of the Internal Revenue Code (a "FCC ERISA
Affiliate") or under which FCC or any FCC ERISA Affiliate has any Liability or
obligation. No Liability under Title IV of ERISA has been incurred by FCC or any
FCC ERISA Affiliate that has not been satisfied in full, and no condition exists
that presents a Material risk to FCC or any FCC ERISA Affiliate of incurring any
such Liability. With respect to any FCC Plan that is subject to Title IV of
ERISA, full payment has been made, or will be made in accordance with Section
404(a)(6) of the Internal Revenue Code, of all amounts that FCC or any FCC ERISA
Affiliate is required to pay under
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Section 412 of the Internal Revenue Code or under the terms of the FCC Plans,
and no accumulated funding deficiency (within the meaning of Section 412 of the
Internal Revenue Code) exists with respect to any FCC Plan. There are no
Material actions, suits, or claims pending, or, to the Knowledge of FCC,
threatened or anticipated relating to any FCC Plan. There has been no Material
adverse change in the financial position or funded status of any FCC Plan that
is subject to Title IV of ERISA since the date of the information relating to
the financial position and funded status of each such plan contained in the most
recent FCC Form 10-K filed with the SEC.
6.20 Derivatives. All interest rate swaps, caps, floors, option
agreements, futures and forward contracts, and other similar risk management
arrangements, whether entered into for FCC's own account, or for the account of
one or more the FCC Subsidiaries or their customers, were entered into (i) in
accordance with prudent business practices and all applicable Laws, and (ii)
with counterparties believed to be financially responsible.
6.21 Year 2000. FCC has completed the four phases of its Year 2000
readiness program, as described in the May 5, 1997, Statement of the Federal
Financial Institutions Examination Council ("FFIEC"), entitled "Year 2000
Project Management Awareness" and the April 20, 1998, "Guidance Concerning
Testing for Year 2000 Readiness." FCC has made available to Carolina First
complete and accurate copies of its Year 2000 remediation contingency plan, as
described in the FFIEC Statements of March 17, 1998, and May 13, 1998, entitled
"Guidance Concerning Institution Due Diligence in Connection with Service
Provider and Software Vendor Year 2000 Readiness" and "Guidance Concerning
Contingency Planning in Connection with Year 2000 Readiness," respectively. FCC
has completed the four phases of the business resumption contingency planning
process, as set forth in the guidance issued by FFIEC on December 11, 1998, and
May 13, 1998, and has provided to Carolina First a complete and accurate copy of
its business resumption contingency plan, written documentation supporting the
plan's development and validation, the results of tests on the plan, and a
schedule of future tests.
6.22 Fairness Opinion. FCC has received a written opinion of Wheat First
Securities, a division of First Union Securities, Inc. ("Wheat First
Securities") to the effect that, as of the date of this Agreement, the Exchange
Ratio is fair, from a financial point of view, to the holders of FCC Common
Stock.
6.23 Board Recommendation. The Board of Directors of FCC, at a meeting
duly called and held, has by vote of the directors present (who constituted all
the directors then in office) (i) determined that this Agreement and the
transactions contemplated, hereby including the Merger, and the transactions
contemplated thereby, taken together, are fair to and in the best interests of
the FCC Stockholders and (ii) resolved to recommend that the holders of the
shares of FCC Common Stock approve this Agreement.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Carolina First. Unless the prior written
consent of FCC shall have been obtained, and except as otherwise expressly
contemplated herein, Carolina First shall and shall cause each Carolina First
Company to (i) operate its business only in the usual, regular, and ordinary
course, (ii) preserve intact its business organization and Assets and maintain
its rights and franchises, (iii) use its reasonable efforts to maintain its
current employee relationships, and (iv) take no action which is
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reasonably likely to (a) adversely affect the ability of any Party to obtain any
Consents required for the transactions contemplated hereby without imposition of
a condition or restriction of the type referred to in the last sentence of
Section 9.1(b) or 9.1(c) of this Agreement, or (b) adversely affect the ability
of any Party to perform its covenants and agreements under this Agreement.
7.2 Negative Covenants of Carolina First. From the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement,
Carolina First covenants and agrees that it will not do or agree or commit to
do, or permit any of its Subsidiaries to do or agree or commit to do, any of the
following without the prior written consent of the chief executive officer or
chief financial officer of FCC:
(a) amend the Articles of Incorporation, Bylaws, or other governing
instruments of any Carolina First Company, or
(b) incur, guarantee, or otherwise become responsible for, any
additional debt obligation or other obligation for borrowed money (other
than indebtedness of a Carolina First Company to another Carolina First
Company) in excess of an aggregate of $500,000 (for the Carolina First
Companies on a consolidated basis), except in the ordinary course of the
business consistent with past practices (which shall include, for Carolina
First Subsidiaries that are depository institutions, creation of deposit
liabilities, purchases of federal funds, advances from the Federal Reserve
Bank or Federal Home Loan Bank, and entry into repurchase agreements fully
secured by U.S. government or agency securities), or impose, or suffer the
imposition, on any Asset of any Carolina First Company of any Lien or
permit any such Lien to exist (other than in connection with deposits,
repurchase agreements, Federal Home Loan Bank advances, bankers
acceptances, "treasury tax and loan" accounts established in the ordinary
course of business, the satisfaction of legal requirements in the exercise
of trust powers, and Liens in effect as of the date hereof that are
disclosed in the Carolina First Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of any Carolina First Company, or declare or pay any
dividend or make any other distribution in respect of Carolina First's
capital stock, provided that (i) Carolina First may (to the extent legally
and contractually permitted to do so), but shall not be obligated to,
declare and pay regular quarterly cash dividends on the shares of Carolina
First Common Stock at a rate of $.10 per share with usual and regular
record and payment dates in accordance with past practice as disclosed in
Section 7.2(c) of the Carolina First Disclosure Memorandum and such dates
may not be changed without the prior written consent of FCC, and (ii)
nothing contained in this Section 7.2(c) shall be deemed to affect the
ability of a Carolina First Subsidiary to pay dividends on its capital
stock to Carolina First; provided, that, notwithstanding the provisions of
Section 1.3, the Parties shall cooperate in selecting the Effective Time to
ensure that, with respect to the quarterly period in which the Effective
Time occurs, the holders of Carolina First Common Stock do not receive both
a cash dividend in respect of their Carolina First Common Stock and a cash
dividend in respect of FCC Common Stock or fail to receive any cash
dividend in respect of Carolina First Common Stock or FCC Common Stock; or
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(d) except for this Agreement and the transactions contemplated
hereby, or pursuant to the Carolina First Stock Option Agreement or
pursuant to the exercise of Rights outstanding as of the date of this
Agreement and pursuant to the terms thereof in existence on the date of
this Agreement, issue, sell, pledge, encumber, authorize the issuance of,
enter into any Contract to issue, sell, pledge, encumber, or authorize the
issuance of, or otherwise permit to become outstanding, any additional
shares of Carolina First Common Stock or any other capital stock of any
Carolina First Company, or any stock appreciation rights, or any option,
warrant, conversion, or other right to acquire any such stock, or any
security convertible into any such stock; or
(e) adjust, split, combine, or reclassify any capital stock of any
Carolina First Company or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of Carolina First
Common Stock, or sell, lease, mortgage, or otherwise dispose of or
otherwise encumber (i) any shares of capital stock of any Carolina First
Subsidiary (unless any such shares of stock are sold or otherwise
transferred to another Carolina First Company) or (ii) any Asset other than
in the ordinary course of business for reasonable and adequate
consideration; or
(f) except for purchases of U.S. Treasury securities or U.S.
government agency securities, which in either case have maturities of five
years or less, purchase any securities or make any Material investment,
either by purchase of stock or securities, contributions to capital, Asset
transfers, or purchase of any Assets, in any Person other than a
wholly-owned Carolina First Subsidiary or the Federal Home Loan Bank, or
otherwise acquire direct or indirect control over any Person, other than in
connection with (i) foreclosures in the ordinary course of business, (ii)
acquisitions of control by a depository institution Subsidiary in its
fiduciary capacity, or (iii) the creation of new wholly-owned Subsidiaries
organized to conduct or continue activities otherwise permitted by this
Agreement; or
(g) grant any increase in compensation or benefits to the employees or
officers of any Carolina First Company, except in accordance with past
practice, as disclosed in Section 7.2(g) of the Carolina First Disclosure
Memorandum or as required by Law, pay any severance or termination pay or
any bonus other than pursuant to written policies or written Contracts in
effect on the date of this Agreement or as set forth in Section 8.13(f) of
this Agreement; enter into or amend any severance agreements with officers
of any Carolina First Company; grant any increase in fees or other
increases in compensation or other benefits to directors of any Carolina
First Company; or voluntarily accelerate the vesting of any stock options
or other stock-based compensation or employee benefits except for such
acceleration of vesting that automatically results from this Agreement or
the transactions contemplated hereby in accordance with the existing terms
of such options or benefits without any exercise of discretion; or
(h) enter into or amend any employment Contract between any Carolina
First Company and any Person (unless such amendment is required by Law)
where such Contract or amendment provides that the Carolina First Company
does not have the unconditional right to terminate without Liability (other
than Liability for services already rendered), at any time on or after the
Effective Time; or
(i) adopt any new employee benefit plan of any Carolina First Company
or terminate or withdraw from, or make any Material change in or to, any
existing employee benefit plans of any Carolina First Company other than
any such change
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that is required by Law or that, in the opinion of counsel, is necessary or
advisable to maintain the tax qualified status of any such plan; or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or
GAAP; or
(k) commence any Litigation other than as necessary for the prudent
operation of its business or settle any Litigation involving any Liability
of any Carolina First Company for Material money damages or restrictions
upon the operations of any Carolina First Company; or
(l) enter into modify, amend, or terminate any Material Contract or
waive, release, compromise, or assign any Material rights or claims.
(m) incur or become obligated to incur any expenses exceeding
$300,000, whether capitalized, expended or otherwise other than in the
ordinary course of business without FCC's prior written approval, excluding
any expenses or obligations incurred in connection with this Agreement or
the transactions contemplated hereby.
7.3 Negative Covenants of FCC. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, FCC
covenants and agrees that it will not do or agree to commit to do, or permit any
of its Subsidiaries to do or agree or commit to do, any of the following without
the prior written consent of the chief executive officer or chief financial
officer of Carolina First, which consent shall not be unreasonably withheld:
(a) declare or pay any dividend or make any other distribution in
respect of the FCC Common Stock, except for regular quarterly cash
dividends at a rate not in excess of $.17 per share of FCC Common Stock,
provided, however, that nothing contained herein shall be deemed to affect
the ability of a FCC Subsidiary to pay dividends on its capital stock to
FCC; or
(b) amend its Amended and Restated Articles of Incorporation or Bylaws
in a manner which would adversely affect in any manner the terms of the FCC
Common Stock or the ability of FCC to consummate the transactions
contemplated hereby; or
(c) make any acquisition (including an acquisition of branch offices
and related deposit liabilities) that could affect the ability of FCC to
consummate the transactions contemplated hereby in a reasonably timely
manner.
7.4 Adverse Changes in Condition. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
Material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
7.5 Reports. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements will
fairly present the consolidated financial position of the entity filing
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such statements as of the dates indicated and the consolidated results of
operations, changes in stockholders' equity, and cash flows for the periods then
ended in accordance with GAAP (subject in the case of interim financial
statements to normal recurring year-end adjustments that are not Material). As
of their respective dates, such reports filed with the SEC will comply in all
Material respects with the Securities Laws and will not contain any untrue
statement of a Material fact or omit to state a Material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Any financial
statements contained in any other reports to another Regulatory Authority shall
be prepared in accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Registration Statement; Joint Proxy Statement; Stockholder
Approvals. As soon as reasonably practicable after execution of this Agreement,
FCC shall file the Registration Statement with the SEC, and shall use its
reasonable efforts to cause the Registration Statement to become effective under
the 1933 Act and take any action required to be taken under the applicable state
Blue Sky or securities Laws in connection with the issuance of the shares of FCC
Common Stock upon consummation of the Merger. Carolina First shall furnish all
information as FCC may reasonably request in connection with such action.
Carolina First shall call a Stockholders' Meeting, to be held as soon as
reasonably practicable after the Registration Statement is declared effective by
the SEC, for the purpose of voting upon approval of this Agreement, the Merger,
and such other related matters as it deems appropriate. FCC shall call a
Stockholders' Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of this Agreement, the Merger, and the issuance of shares
of FCC Common Stock pursuant to the Merger and such other related matters as it
deems appropriate. In connection with the Stockholders' Meetings, (i) FCC and
Carolina First shall prepare and file with the SEC a Joint Proxy Statement and
mail such Joint Proxy Statement to their respective stockholders, (ii) the
Parties shall furnish to each other all information concerning them that they
may reasonably request in connection with such Joint Proxy Statement, (iii) the
Boards of Directors of FCC and Carolina First shall, subject to the provisions
of Section 8.8, recommend to their respective stockholders the approval of the
matters submitted for approval, and (iv) the Boards of Directors and officers of
FCC and Carolina First shall use their reasonable efforts to obtain such
stockholders' approvals, provided that Carolina First may withdraw, modify, or
change in an adverse manner to FCC its recommendations in compliance with the
provisions of Section 8.8. In addition, nothing in this Section 8.1 or elsewhere
in this Agreement shall prohibit accurate disclosure by either Party of
information that is required to be disclosed in the Registration Statement or
the Joint Proxy Statement or in any other document required to be filed with the
SEC (including, without limitation, a Solicitation/ Recommendation Statement on
Schedule 14D-9) or otherwise required to be publicly disclosed by applicable Law
or regulations or rules of the NASD. Carolina First and FCC shall use their
reasonable efforts to include the fairness opinions of The Robinson-Humphrey
Company, LLC and Wheat First Securities respectively in the Joint Proxy
Statement and Registration Statement with dates updated to a date that is just
prior to the mailing of the Joint Proxy Statement.
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8.2 Nasdaq Listing. FCC shall use its reasonable efforts to list, prior to
the Effective Time, on the Nasdaq NMS, subject to official notice of issuance,
the shares of FCC Common Stock to be issued to the holders of Carolina First
Common Stock pursuant to the Merger.
8.3 Applications. FCC shall promptly prepare and file, and Carolina First
shall cooperate in the preparation and, where appropriate, filing of,
applications with all Regulatory Authorities having jurisdiction over the
transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement.
8.4 Filings with State Offices. Upon the terms and subject to the
conditions of this Agreement, Carolina First and FCC shall execute and FCC shall
file the Articles of Merger with the Secretary of State of the State of North
Carolina in connection with the Closing.
8.5 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
reasonably practicable after the date of this Agreement, the transactions
contemplated by this Agreement, including, without limitation, using its
reasonable efforts to lift or rescind any Order adversely affecting its ability
to consummate the transactions contemplated herein and to cause to be satisfied
the conditions referred to in Article 9 of this Agreement; provided, that
nothing herein shall preclude either Party from exercising its rights under this
Agreement. Each Party shall use, and shall cause each of its Subsidiaries to
use, its reasonable efforts to obtain all Consents necessary or desirable for
the consummation of the transactions contemplated by this Agreement.
8.6 Investigation and Confidentiality.
(a) Prior to the Effective Time, each Party shall keep the other Party
advised of all Material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or
cause to be made such investigation of the business and properties of it
and its Subsidiaries and of their respective financial and legal conditions
as the other Party reasonably requests, provided that such investigation
shall be reasonably related to the transactions contemplated hereby and
shall not interfere unnecessarily with normal operations. No investigation
by a Party shall affect the representations and warranties of the other
Party.
(b) Each Party shall, and shall cause its advisers and agents to,
maintain the confidentiality of all confidential information furnished to
it by the other Party concerning its and its Subsidiaries' businesses,
operations, and financial positions and shall not use such information for
any purpose except in furtherance of the transactions contemplated by this
Agreement. If this Agreement is terminated prior to the Effective Time,
each Party shall promptly return or certify the destruction of all
documents and copies thereof, and all work papers containing confidential
information received from the other Party. The Confidentiality Agreements
shall remain in force and effect, unmodified by this Agreement.
(c) Each Party agrees to give the other Party written notice as soon
as practicable after any determination by it of any fact or occurrence
relating to the other Party which it has discovered through the course of
its investigation and which
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represents, or is reasonably likely to represent, a Material breach of any
representation, warranty, covenant, or agreement of the other Party or
which has had or is reasonably likely to have a Material Adverse Effect on
the other Party.
8.7 Press Releases. Prior to the Effective Time, FCC and Carolina First
shall consult with each other as to the form and substance of any press release
or other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 8.7
shall be deemed to prohibit any Party from making any disclosure which it deems,
after having consulted with and considered the advice of outside counsel,
necessary or advisable in order to satisfy such Party's disclosure obligations
imposed by Law.
8.8 Certain Actions. Except with respect to this Agreement and the
transactions contemplated hereby, no Carolina First Company nor any of its
officers or directors nor any Representative thereof, shall directly or
indirectly, initiate, solicit, encourage or knowingly facilitate (including by
way of furnishing information) any inquiries regarding or the making of any
Acquisition Proposal. Notwithstanding anything to the contrary in this
Agreement, Carolina First and its Board of Directors shall be permitted (i) to
the extent applicable, to comply with Rule 14d-9 and Rule 14e-2 promulgated
under the Exchange Act with regard to an Acquisition Proposal, (i) to engage in
any discussions or negotiations with, or provide any information to, any Person
in response to an unsolicited bona fide written Acquisition Proposal by any such
Person, if and only to the extent that Carolina First's Board of Directors
concludes in good faith and consistent with its fiduciary duties to Carolina
First's shareholders that it should consider such Acquisition Proposal, and
prior to providing any information or data to any Person in connection with an
Acquisition Proposal by any such Person, Carolina First receives from such
Person an executed confidentiality agreement containing confidentiality terms at
least as stringent as those contained in the Confidentiality Agreement. Carolina
First Shall promptly advise FCC following the receipt of any developments with
respect to such Acquisition Proposal and the details thereof, and advise FCC of
any developments with respect to such Acquisition Proposal promptly upon the
occurrence thereof. Carolina First shall (i) immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any Persons
conducted heretofore with respect to any of the foregoing, and (ii) direct and
use its reasonable efforts to cause all of its directors, officers and
Representatives not to engage in any of the foregoing.
8.9 Accounting and Tax Treatment. Each of the Parties undertakes and
agrees to use its reasonable efforts to cause the Merger, and to take no action
which would cause the Merger not, to qualify for treatment as a pooling of
interests for accounting purposes or as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code for federal income tax purposes.
8.10 State Takeover Laws. Each Party shall take all necessary steps to
exempt the transactions contemplated by this Agreement from, or if necessary
challenge the validity or applicability of, any applicable Takeover Laws.
8.11 Charter Provisions. Each Party shall take all necessary action to
ensure that the entering into of this Agreement and the consummation of the
Merger and the other transactions contemplated hereby do not and will not result
in the grant of any rights to any Person under the Articles of Incorporation,
Bylaws, or other governing instruments of any Party or restrict or impair the
ability of FCC or any of its Subsidiaries to vote, or
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otherwise to exercise the rights of a stockholder with respect to, shares of any
Carolina First Company that may be directly or indirectly acquired or controlled
by it.
8.12 Agreement of Affiliates. Carolina First shall use its reasonable
efforts to cause each Person, whom it reasonably believes may be deemed an
"affiliate" of it for purposes of Rule 145 under the 1933 Act, to execute and
deliver to FCC as soon as practicable after the date of this Agreement, and in
any event prior to the date of the Stockholders' Meetings, a written agreement
in the form of Exhibit 3. Shares of FCC Common Stock issued to such affiliates
of Carolina First in exchange for shares of Carolina First Common Stock shall
not be transferable until such time as financial results covering at least 30
days of combined operations of FCC and Carolina First have been published within
the meaning of Section 201.01 of the SEC's Codification of Financial Reporting
Policies, regardless of whether each such affiliate has provided the written
agreement referred to in this Section 8.12 (and FCC shall be entitled to place
restrictive legends upon certificates for shares of FCC Common Stock issued to
affiliates of Carolina First pursuant to this Agreement to enforce the
provisions of this Section 8.12). FCC shall not be required to maintain the
effectiveness of the Registration Statement under the 1933 Act for the purposes
of resale of FCC Common Stock by such affiliates.
8.13 Employee Benefits and Contracts.
(a) Following the Effective Time, FCC shall provide to officers and
employees of the Carolina First Companies (the "Continuing Employees"),
employee benefits under employee benefit plans (other than stock options or
other plans involving the potential issuance of FCC Common Stock), on terms
and conditions which when taken as a whole are substantially similar to
those currently provided by the FCC Companies to their similarly situated
officers and employees. For purposes of participation, vesting, and benefit
accruals (but not accrual of benefits under FCC's tax-qualified defined
benefit plans) under such employee benefit plans, the service of the
employees of the Carolina First Companies prior to the Effective Time shall
be treated as service with an FCC Company participating in such employee
benefit plans. Prior to the Effective Time, Carolina First may amend any
Carolina First Benefit Plan that is an "employee pension benefit plan" as
that term is defined in Section 3(2) of ERISA, to provide for full vesting,
as of the Effective Time or any earlier date, of all benefits that accrue
under such plan for participants who are actively employed as of the
effective date of such amendment.
(b) Following the Effective Time, FCC shall, and shall cause the
appropriate FCC Subsidiaries to, assume and honor in accordance with their
terms the employment agreements, deferred compensation agreements and
retirement and supplemental income agreements and plans which have been
disclosed in Section 8.13 of the Carolina First Disclosure Memorandum.
(c) Any person who was serving as an employee of Carolina First or any
Carolina First Subsidiary immediately prior to the Effective Time (other
than those employees covered by a written employment agreement) whose
employment is discontinued by FCC or any of the FCC Subsidiaries within six
months after the Effective Time (unless termination of such employment is
for Cause (as defined below)) shall be entitled to a severance payment from
FCC equal in amount to four weeks' severance (six weeks in the case of
officers at the level of vice president or above), plus two week's base pay
for each full or partial year such employee was employed by Carolina First
or any other Carolina First Subsidiary, subject to a
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maximum of 40 weeks' severance, together with any accrued but unused
vacation leave with respect to the calendar year in which termination
occurs. For purposes of this Section 8.13(c), "Cause" shall mean
termination because of the employee's personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties or willful violation of any
law, rule, or regulation (other than traffic violations or similar
offenses). An employee shall be considered in full-time service if he or
she typically was scheduled to work thirty or more hours per calendar week.
Paid vacation and paid sick leave shall count towards this thirty hour
requirement.
8.14 Indemnification.
(a) After the Effective Time, FCC shall indemnify, defend and hold
harmless the present and former directors, officers, employees, and agents
of Carolina First or any of Carolina First's Subsidiaries (each, a
"Indemnified Party") (including any person who becomes a director, officer,
employee, or agent prior to the Effective Time) against all Liabilities
(including reasonable attorneys' fees, and expenses, judgments, fines and
amounts paid in settlement) arising out of actions or omissions occurring
at or prior to the Effective Time (including the transactions contemplated
by this Agreement and the Carolina First Stock Option Agreement) to the
full extent permitted under North Carolina Law and by Carolina First's
Articles of Incorporation and Bylaws, as in effect on the date hereof and
any indemnity agreements entered into prior to the date of this Agreement
by any of the Carolina First Companies and any director, officer, employee,
or agent of any of the Carolina First Companies, including, without
limitation, provisions relating to advances of expenses incurred in the
defense of any Litigation. Without limiting the foregoing, in any case in
which approval by FCC is required to effectuate any indemnification, FCC
shall direct, at the election of the Indemnified Party, that the
determination of any such approval shall be made by independent counsel
mutually agreed upon between FCC and the Indemnified Party.
(b) FCC and the Surviving Corporation shall use their reasonable
efforts (and Carolina First shall cooperate prior to the Effective Time in
these efforts) to maintain in effect for a period of three years after the
Effective Time, Carolina First's existing directors' and officers'
liability insurance policy (provided that FCC and the Surviving Corporation
may substitute therefor (i) policies of at least the same coverage and
amounts containing terms and conditions which are substantially no less
advantageous or (ii) with the consent of Carolina First given prior to the
Effective Time, any other policy) with respect to claims arising from facts
or events which occurred prior to the Effective Time and covering persons
who are currently covered by such insurance; provided, that the Surviving
Corporation shall not be obligated to make annual premium payments for any
year in such three-year period in respect of such policy (or coverage
replacing such policy) which exceed, for the portion related to Carolina
First's directors and officers, 150% of the annual premium payments on
Carolina First's current policy in effect as of the date of this Agreement
(the "Maximum Amount"). If the amount of the annual premium necessary to
maintain or procure such insurance coverage exceeds the Maximum Amount, FCC
shall use its reasonable efforts to maintain the most advantageous policies
of directors' and officers' liability insurance obtainable for a premium
equal to the Maximum Amount.
(c) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 8.14, upon learning of any such Liability or
Litigation, shall promptly notify FCC thereof, provided that the failure so
to notify shall not affect the
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obligations of FCC under this Section 8.14 unless and to the extent such
failure materially increases FCC's Liability under this Section 8.14. In
the event of any such Litigation (whether arising before or after the
Effective Time), (i) FCC or the Surviving Corporation shall have the right
to assume the defense thereof and FCC shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection
with the defense thereof, except that if FCC or the Surviving Corporation
elects not to assume such defense or counsel for the Indemnified Parties
advises that there are substantive issues which raise conflicts of interest
between FCC or the Surviving Corporation and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and FCC or the
Surviving Corporation shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are
received; provided, that FCC shall be obligated pursuant to this paragraph
(c) to pay for only one firm of counsel for all Indemnified Parties in any
jurisdiction, (ii) the Indemnified Parties will cooperate in the defense of
any such Litigation, and (iii) FCC shall not be liable for any settlement
effected without its prior written consent; and provided further that the
Surviving Corporation shall not have any obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall
determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated hereby
is prohibited by applicable Law.
(d) The Surviving Corporation shall not be liable for any settlement
effected without its prior written consent which consent shall not be
unreasonably withheld.
(e) The provisions of this Section 8.14 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs or representatives.
8.15 Board and Management Matters.
(a) At the first regularly scheduled meeting of the Board of Directors
of FCC following the Effective Time, FCC shall effect all corporate action
necessary to appoint six individuals designated by Carolina First and
reasonably acceptable to FCC (the "Carolina First Designees") as directors
of FCC to serve until the 2000 annual meeting stockholders of FCC. At the
2000 annual meeting of stockholders of FCC, FCC shall nominate for election
the Carolina First Designees to the Board of Directors of FCC to serve as a
member of the respective classes of the FCC Board of Directors as necessary
so that each class of the FCC Board of Directors is nearly equal in number
as practicable.
(b) On the date hereof FCC and James E. Burt, III have executed an
Employment Agreement in the form attached as Exhibit 2 hereto, which shall
become effective upon the consummation of the Merger.
8.16 Certain Modifications. FCC and Carolina First shall consult with
respect to their respective loan, litigation, and real estate valuation policies
and practices (including loan classifications and levels of reserves) and
Carolina First shall make such modifications or changes to its policies and
practices, if any, prior to the Effective Time, as may be mutually agreed upon.
FCC and Carolina First also shall consult with respect to the character, amount,
and timing of restructuring and Merger-related expense charges to be taken by
each of the Parties in connection with the transactions contemplated by this
Agreement and shall take such charges in accordance with GAAP as may be mutually
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agreed upon by the Parties. Neither Party's representations, warranties, and
covenants or agreements contained in this Agreement shall be deemed to be
inaccurate or breached in any respect as a consequence of any modifications or
charges undertaken solely on account of this Section 8.16.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective obligations of
each Party to perform this Agreement and to consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 11.6 of
this Agreement:
(a) Stockholder Approvals. The stockholders of Carolina First shall
have approved this Agreement, and the consummation of the transactions
contemplated hereby, including the Merger, as and to the extent required by
Law, by the provisions of any governing instruments, and by the rules of
the NASD. The stockholders of FCC shall have approved this Agreement and
the issuance of shares of FCC Common Stock pursuant to the Merger, as and
to the extent required by Law, by the provisions of any governing
instruments, and by the rules of the NASD.
(b) Regulatory Approvals. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired.
(c) Consents and Approvals. Each Party shall have obtained any and
all Consents required for consummation of the Merger (other than those
referred to in Section 9.1(b) of this Agreement) or for the preventing of
any Default under any Contract or Permit of such Party which, if not
obtained or made, is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on such Party.
(d) Legal Proceedings. No court or governmental or Regulatory
Authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced, or entered any Law or Order (whether temporary,
preliminary, or permanent) or taken any other action which prohibits,
restricts, or makes illegal consummation of the transactions contemplated
by this Agreement.
(e) Registration Statement. The Registration Statement shall be
effective under the 1933 Act, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued, no action, suit,
proceeding, or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing, and all necessary
approvals under state securities Laws or the 1933 Act or 1934 Act relating
to the issuance or trading of the shares of FCC Common Stock issuable
pursuant to the Merger shall have been received.
(f) Nasdaq Listing. The shares of FCC Common Stock issuable pursuant
to the Merger shall have been approved for listing on the Nasdaq NMS.
(g) Tax Matters. Carolina First shall have received a written opinion
from Alston & Bird LLP and FCC shall have received a written opinion from
Smith Helms Mulliss & Moore, L.L.P., in a form reasonably satisfactory to
such Party (the "Tax
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Opinions"), to the effect that (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, (ii) no gain or loss will be recognized by holders of Carolina First
Common Stock who exchange all of their Carolina First Common Stock solely
for FCC Common Stock pursuant to the Merger (except with respect to any
cash received in lieu of a fractional share interest in FCC Common Stock),
(iii) the tax basis of the FCC Common Stock received by holders of Carolina
First Common Stock who exchange all of their Carolina First Common Stock
solely for FCC Common Stock in the Merger will be the same as the tax basis
of the Carolina First Common Stock surrendered in exchange for the FCC
Common Stock (reduced by an amount allocable to a fractional share interest
in FCC Common Stock for which cash is received), and (iv) the holding
period of the FCC Common Stock received by holders who exchange all of
their Carolina First Common Stock solely for FCC Common Stock in the Merger
will be the same as the holding period of the Carolina First Common Stock
surrendered in exchange therefor, provided that such Carolina First Common
Stock is held as a capital asset at the Effective Time. In rendering such
Tax Opinions, such counsel shall be entitled to rely upon representations
of officers of Carolina First and FCC reasonably satisfactory in form and
substance to such counsel.
(h) Pooling Letters. Each Party shall have received a letter, dated
as of the Effective Time, in a form reasonably acceptable to such Party,
from KPMG Peat Marwick LLP to the effect that the Merger will qualify for
pooling of interests accounting treatment.
9.2 Conditions to Obligations of FCC. The obligations of FCC to perform
this Agreement and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless
waived by FCC pursuant to Section 11.6(a) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
9.2(a), the accuracy of the representations and warranties of Carolina
First set forth in this Agreement shall be assessed as of the date of this
Agreement and as of the Effective Time with the same effect as though all
such representations and warranties had been made on and as of the
Effective Time (provided that representations and warranties which are
confined to a specified date shall speak only as of such date). The
representations and warranties of Carolina First set forth in Section 5.3
of this Agreement shall be true and correct (except for inaccuracies which
are de minimis in amount). The representations and warranties of Carolina
First set forth in Sections 5.18, 5.19, and 5.20 of this Agreement shall be
true and correct in all Material respects. There shall not exist
inaccuracies in the representations and warranties of Carolina First set
forth in this Agreement (including the representations and warranties set
forth in Sections 5.3, 5.18, 5.19, and 5.20) such that the aggregate effect
of such inaccuracies has, or is reasonably likely to have, a Material
Adverse Effect on Carolina First; provided that, for purposes of this
sentence only, those representations and warranties which are qualified by
references to "material," "Material," "Material Adverse Effect," or
variations thereof, or to the "Knowledge" of Carolina First or to a matter
being "known" by Carolina First shall be deemed not to include such
qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Carolina First to be performed and complied
with pursuant to this
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Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all
Material respects.
(c) Certificates. Carolina First shall have delivered to FCC (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and chief financial officer, to the effect that the
conditions of its obligations set forth in Section 9.1 as relates to
Carolina First and in Section 9.2(a) and 9.2(b) of this Agreement have been
satisfied, and (ii) certified copies of resolutions duly adopted by
Carolina First's Board of Directors and stockholders evidencing the taking
of all corporate action necessary to authorize the execution, delivery, and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as FCC and its counsel
shall request.
(d) Affiliate Agreements. FCC shall have received from each affiliate
of Carolina First the affiliates agreements referred to in Section 8.12 of
this Agreement, to the extent necessary to ensure in the reasonable
judgment of FCC that the transactions contemplated hereby will qualify for
pooling of interests accounting treatment.
9.3 Conditions to Obligations of Carolina First. The obligations of
Carolina First to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by Carolina First pursuant to Section
11.6(b) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
9.3(a), the accuracy of the representations and warranties of FCC set forth
in this Agreement shall be assessed as of the date of this Agreement and as
of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of FCC set forth in Section 6.3 of this Agreement shall be true
and correct (except for inaccuracies which are de minimis in amount). The
representations and warranties of FCC set forth in Sections 6.16, 6.17, and
6.18 of this Agreement shall be true and correct in all Material respects.
There shall not exist inaccuracies in the representations and warranties of
FCC set forth in this Agreement (including the representations and
warranties set forth in Sections 6.3, 6.16, 6.17, and 6.18) such that the
aggregate effect of such inaccuracies has, or is reasonably likely to have,
a Material Adverse Effect on FCC; provided that, for purposes of this
sentence only, those representations and warranties which are qualified by
references to "material," "Material," "Material Adverse Effect," or
variations thereof, or to the "Knowledge" of FCC or to a matter being
"known" by FCC shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of FCC to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all
Material respects.
(c) Certificates. FCC shall have delivered to Carolina First (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and chief financial officer, to the effect that the
conditions of its obligations set forth in Section 9.1 as relates to FCC
and in Section 9.3(a) and 9.3(b) of this Agreement
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have been satisfied, and (ii) certified copies of resolutions duly adopted
by FCC's Board of Directors and stockholders evidencing the taking of all
corporate action necessary to authorize the execution, delivery, and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as Carolina First and
its counsel shall request.
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement by the stockholders of
Carolina First or FCC, this Agreement may be terminated and the Merger abandoned
at any time prior to the Effective Time:
(a) By mutual consent of the Board of Directors of FCC and the Board
of Directors of Carolina First; or
(b) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of Carolina First and Section
9.3(a) of this Agreement in the case of FCC or in Material breach of any
covenant or other agreement contained in this Agreement) in the event of an
inaccuracy of any representation or warranty of the other Party contained
in this Agreement which cannot be or has not been cured within 30 days
after the giving of written notice to the breaching Party of such
inaccuracy and which inaccuracy would provide the terminating Party the
ability to refuse to consummate the Merger under the applicable standard
set forth in Section 9.2(a) of this Agreement in the case of Carolina First
and Section 9.3(a) of this Agreement in the case of FCC; or
(c) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of Carolina First and Section
9.3(a) in the case of FCC) in the event of a Material breach by the other
Party of any covenant or agreement contained in this Agreement which cannot
be or has not been cured within 30 days after the giving of written notice
to the breaching Party of such breach; or
(d) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of Carolina First and Section
9.3(a) of this Agreement in the case of FCC or in Material breach of any
covenant or other agreement contained in this Agreement) in the event (i)
any Consent of any Regulatory Authority required for consummation of the
Merger and the other transactions contemplated hereby shall have been
denied by final nonappealable action of such authority or if any action
taken by such authority is not appealed within the time limit for appeal,
or (ii) the stockholders of FCC or Carolina First fail to vote their
approval of the matters submitted for the approval by such stockholders at
the Stockholders' Meetings where the appropriate transactions contemplated
by this Agreement were presented to such stockholders for approval and
voted upon; or
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(e) By the Board of Directors of either Party in the event that the
Merger shall not have been consummated by June 30, 2000, if the failure to
consummate the transactions contemplated hereby on or before such date is
not caused by any breach of this Agreement by the Party electing to
terminate pursuant to this Section 10.1(e); or
(f) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of Carolina First and Section
9.3(a) of this Agreement in the case of FCC or in Material breach of any
covenant or other agreement contained in this Agreement) in the event that
any of the conditions precedent to the obligations of such Party to
consummate the Merger cannot be satisfied or fulfilled by the date
specified in Section 10.1(e) of this Agreement; or
(g) By Carolina First if:
(1) the Average Closing Price (as defined below) shall be less than
the product of 0.80 and the Starting Price; and
(2) (i) the number obtained by dividing the Average Closing Price
by the Starting Price (such number being referred to herein as the "FCC
Ratio") shall be less than (ii) the number obtained by dividing the
Index Price on the Determination Date by the Index Price on the Starting
Date and subtracting 0.15 from such quotient (such number being referred
to herein as the "Index Ratio").
If Carolina First elects its termination right pursuant to the
immediately preceding sentence, it shall give to FCC written notice on or
before the second trading day after the Determination Date. During the
five-day period commencing on the date of such notice, FCC shall have the
option of adjusting the Exchange Ratio to equal the lesser of (i) a number
equal to a quotient (rounded to the nearest one-ten thousandth), the
numerator of which is the product of 0.80, the Starting Price and the
Exchange Ratio (as then in effect) and the denominator of which is the
Average Closing Price, or (ii) a number equal to a quotient (rounded to the
nearest one-ten thousandth), the numerator of which is the Index Ratio
multiplied by the Exchange Ratio (as then in effect) and the denominator of
which is the FCC Ratio. If FCC makes an election contemplated by the
preceding sentence, within such five-day period, it shall give prompt
written notice to Carolina First of such election and the revised Exchange
Ratio, whereupon no termination shall have occurred pursuant to this
Section, and this Agreement shall remain in effect in accordance with its
terms (except as the Exchange Ratio shall have been so modified), and any
references in this Agreement to "Exchange Ratio" shall thereafter be deemed
to refer to the Exchange Ratio as adjusted pursuant to this Section.
For purposes of this Section only, the following terms shall have the
meanings indicated:
"Average Closing Price" means the average of the last reported sale
prices per share of FCC Common Stock as reported on The Nasdaq Stock
Market or such successor exchange on which FCC Common Stock may then be
traded (as reported in The Wall Street Journal or, if not reported
therein, in another mutually agreed upon authoritative source) for the
20 consecutive trading days on The Nasdaq Stock Market or such successor
exchange on which FCC Common
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Stock may then be traded ending at the close of trading on the
Determination Date.
"Determination Date" means the date on which the approval of the
Federal Reserve Board required for consummation of the Merger shall be
received by FCC, without regard to any requisite waiting periods in
respect thereof.
"Index Group" means the group of this 11 bank holding companies
listed below, the common stock of all of which shall be publicly traded
and as to which there shall not have been, since the Starting Date and
before the Determination Date, an announcement of a transaction whereby
such company would be acquired or whereby such company would acquire
another company or companies in transactions with a value exceeding 25%
of the acquiror's market capitalization as of the Starting Date. In the
event that the common stock of any such company ceases to be publicly
traded or any such announcement is made with respect to any such
company, such company will be removed from the Index Group, and the
weights (which have been determined based on the number of outstanding
shares of common stock) redistributed proportionately for purpose of
determining the Index Price. The bank holding companies and the weights
attributed to them are as follows:
<TABLE>
<CAPTION>
TICKER WEIGHTING
------ ---------
<S> <C> <C>
BT Financial Corporation............. BTFC 3.14%
Carolina First Corporation........... CAFC 5.08
CCB Financial Corporation............ CCB 7.82
Centura Banks, Inc................... CBC 7.94
First Midwest Bancorp, Inc........... FMBI 5.45
First Virginia Banks, Inc............ FVB 9.91
Fulton Financial Corporation......... FULT 13.57
Mercantile Bankshares Corporation.... MRBK 13.62
Sky Financial Group Inc.............. SKYF 15.27
Trustmark Corporation................ TRMK 14.22
WesBanco, Inc........................ WSBC 3.99
------
100.00%
======
</TABLE>
"Index Price" on a given date means the weighted average (weighted
in accordance with the factors listed above) of the closing prices of
the companies comprising the Index Group.
"Starting Date" means November 8, 1999.
"Starting Price" shall mean the last reported sale price per share
of FCC Common Stock on the Starting Date, as reported by The Nasdaq
Stock Market or such successor exchange on which FCC Common Stock may
then be traded (as reported in The Wall Street Journal or, if not
reported therein, in another mutually agreed upon authoritative source).
If any company belonging to the Index Group or FCC declares or effects
a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the Starting
Date and the Determination Date, the prices for the common stock of such
company or FCC shall be appropriately adjusted for the purposes of applying
this Section.
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(h) By either Party in the event Carolina First's Board of Directors
has determined in good faith and as permitted by Sections 8.1 and 8.8
hereof to enter into an alternative Acquisition Proposal.
10.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement shall become void and have no effect, except that (i) the provisions
of this Section 10.2 and Article 11 and Section 8.6(b) of this Agreement shall
survive any such termination and abandonment, and (ii) a termination pursuant to
Sections 10.1(b), 10.1(c), or 10.1(f) of this Agreement shall not relieve the
breaching Party from Liability for an uncured willful breach of a
representation, warranty, covenant, or agreement giving rise to such
termination. The Stock Option Agreement shall be governed by its own terms.
10.3 Non-Survival of Representations and Covenants. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except this Section 10.3 and
Articles 1, 2, 3, 4, and 11 and Sections 8.12, 8.13, 8.14, and 8.15 of this
Agreement.
ARTICLE 11
MISCELLANEOUS
11.1 Definitions.
(a) Except as otherwise provided herein, the capitalized terms set
forth below shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"ACQUISITION PROPOSAL" with respect to a Party shall mean any tender offer
or exchange offer or any proposal for a merger, acquisition of all of the stock
or Assets of, or other business combination involving such Party or any of its
Subsidiaries or the acquisition of a substantial equity interest in, or a
substantial portion of the Assets of, such Party or any of its Subsidiaries.
"AFFILIATE" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person; (ii) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity or
voting interest of such Person; or (iii) any other Person for which a Person
described in clause (ii) acts in any such capacity.
"AGREEMENT" shall mean this Agreement and Plan of Merger, including the
Exhibits and the Confidentiality Agreements (and excepting the Stock Option
Agreement) delivered pursuant hereto and incorporated herein by reference.
"ARTICLES OF MERGER" shall mean the Articles of Merger to be executed by
FCC and filed with the Secretary of State of the State of North Carolina
relating to the Merger as contemplated by Section 1.1 of this Agreement.
"ASSETS" of a Person shall mean all of the assets, properties, businesses,
and rights of such Person of every kind, nature, character, and description,
whether real, personal, or mixed, tangible or intangible, accrued or contingent,
or otherwise relating to or utilized in
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such Person's business, directly or indirectly, in whole or in part, whether or
not carried on the books and records of such Person, and whether or not owned in
the name of such Person or any Affiliate of such Person and wherever located.
"BHC ACT" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"CAROLINA FIRST BANKS" shall mean Lincoln Bank of North Carolina, Cabarrus
Bank of North Carolina and Community Bank and Trust Company.
"CAROLINA FIRST COMMON STOCK" shall mean the $2.50 par value common stock
of Carolina First.
"CAROLINA FIRST COMPANIES" shall mean, collectively, Carolina First and all
Carolina First Subsidiaries.
"CAROLINA FIRST DISCLOSURE MEMORANDUM" shall mean the written information
entitled "Carolina First Disclosure Memorandum" delivered prior to the execution
of this Agreement to FCC describing in reasonable detail the matters contained
therein and, with respect to each disclosure made therein, specifically
referencing each Section or subsection of this Agreement under which such
disclosure is being made. Information disclosed with respect to one Section or
subsection shall not be deemed to be disclosed for all purposes hereunder. The
inclusion of any matter in this document shall not be deemed an admission or
otherwise to imply that any such matter is Material for purposes of this
Agreement.
"CAROLINA FIRST FINANCIAL STATEMENTS" shall mean (i) the consolidated
statements of financial position (including related notes and schedules, if any)
of Carolina First as of June 30, 1999 and as of December 31, 1997, 1997, and
1996, and the related statements of income, changes in stockholders' equity, and
cash flows (including related notes and schedules, if any) for the six months
ended June 30, 1999, and for each of the three years ended December 31, 1998,
1997 and 1996, as filed by Carolina First in SEC Documents, and (ii) the
consolidated statements of financial position of Carolina First (including
related notes and schedules, if any) and related statements of income, changes
in stockholders' equity, and cash flows (including related notes and schedules,
if any) included in SEC Documents filed with respect to periods ended subsequent
to June 30, 1999.
"CAROLINA FIRST PREFERRED STOCK" shall mean the $1.00 par value preferred
stock of Carolina First.
"CAROLINA FIRST STOCK OPTION AGREEMENT" shall mean the Stock Option
Agreement of even date herewith issued to FCC by Carolina First, in
substantially the form of Exhibit 1.
"CAROLINA FIRST SUBSIDIARIES" shall mean the Subsidiaries of Carolina
First, which shall include the Carolina First Subsidiaries described in Section
5.4 of this Agreement and any corporation, bank, savings association, or other
organization acquired as a Subsidiary of Carolina First in the future and owned
by Carolina First at the Effective Time.
"CONFIDENTIALITY AGREEMENTS" shall mean those certain Confidentiality
Agreements, entered into prior to the date of this Agreement, between Carolina
First and FCC.
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"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding, or undertaking of any kind or
character, or other document to which any Person is a party or that is binding
on any Person or its capital stock, Assets, or business.
"DEFAULT" shall mean (i) any breach or violation of or default under any
Contract, Order, or Permit, (ii) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach or
violation of or default under any Contract, Order, or Permit, or (iii) any
occurrence of any event that with or without the passage of time or the giving
of notice would give rise to a right to terminate or revoke, change the current
terms of, or renegotiate, or to accelerate, increase, or impose any Liability
under, any Contract, Order, or Permit, where, in any such event, such Default is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on a Party.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface, or subsurface strata) and which are
administered, interpreted, or enforced by the United States Environmental
Protection Agency and state and local agencies with jurisdiction over, and
including common law in respect of, pollution or protection of the environment,
including the Comprehensive Environmental Response Compensation and Liability
Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"), the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and other Laws
relating to emissions, discharges, releases, or threatened releases of any
Hazardous Material, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of any
Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"EXHIBITS" 1 through 3, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be referred to
in this Agreement and any other related instrument or document without being
attached hereto.
"FCC BANK" shall mean First Charter National Bank.
"FCC COMMON STOCK" shall mean the no par value common stock of FCC.
"FCC COMPANIES" shall mean, collectively, FCC and all FCC Subsidiaries.
"FCC DISCLOSURE MEMORANDUM" shall mean the written information entitled
"FCC Disclosure Memorandum" delivered prior to the execution of this Agreement
to Carolina First describing in reasonable detail the matters contained therein
and, with respect to each disclosure made therein, specifically referencing each
Section or subsection of this Agreement under which such disclosure is being
made. Information disclosed with respect to one Section or subsection shall not
be deemed to be disclosed for all purposes hereunder. The inclusion of any
matter in this document shall not be deemed an admission or otherwise to imply
that any such matter is Material for purposes of this Agreement.
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"FCC FINANCIAL STATEMENTS" shall mean (i) the consolidated statements of
condition (including related notes and schedules, if any) of FCC as of June 30,
1999, and as of December 31, 1998, 1997, and 1996, and the related statements of
income, changes in stockholders' equity, and cash flows (including related notes
and schedules, if any) for the six months ended June 30, 1999, and for each of
the three years ended December 31, 1998, 1997, and 1996, as filed by FCC in SEC
Documents, and (ii) the consolidated statements of condition of FCC (including
related notes and schedules, if any) and related statements of income, changes
in stockholders' equity, and cash flows (including related notes and schedules,
if any) included in SEC Documents filed with respect to periods ended subsequent
to June 30, 1999.
"FCC SUBSIDIARIES" shall mean the Subsidiaries of FCC and any corporation,
bank, savings association, or other organization acquired as a Subsidiary of FCC
in the future and owned by FCC at the Effective Time.
"GAAP" shall mean generally accepted accounting principles, consistently
applied during the periods involved.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any chemicals,
pollutants, contaminants, petroleum, petroleum products, or oil (and
specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and any
polychlorinated biphenyls).
"HOLA" the Home Owners' Loan Act of 1933, as amended.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"JOINT PROXY STATEMENT" shall mean the joint proxy statement used by FCC
and Carolina First to solicit the approval of their respective stockholders of
the transactions contemplated by this Agreement, which shall include the
prospectus of FCC relating to the issuance of the FCC Common Stock to holders of
Carolina First Common Stock, as amended or supplemented.
"KNOWLEDGE" as used with respect to a Person (including references to such
Person being aware of a particular matter) shall mean the personal knowledge of
the chairman, president, chief financial officer, chief accounting officer,
chief credit officer, general counsel, or any executive vice president of such
Person.
"LAW" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its Assets,
Liabilities, or business, including those promulgated, interpreted, or enforced
by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost, or expense (including costs
of investigation, collection, and defense), claim, deficiency, guaranty, or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course of
business) of any type, whether accrued, absolute or contingent, liquidated or
unliquidated, matured or unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reserva-
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tion, restriction, security interest, title retention, or other security
arrangement, or any adverse right or interest, charge, or claim of any nature
whatsoever of, on, or with respect to any property or property interest, other
than (i) Liens for property Taxes not yet due and payable, (ii) for depository
institution Subsidiaries of a Party, pledges to secure deposits, and other Liens
incurred in the ordinary course of the banking business and (iii) Liens which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on the related Party.
"LITIGATION" shall mean any action, arbitration, cause of action, claim,
complaint, criminal prosecution, demand letter, governmental or other
examination or investigation, hearing, inquiry, administrative or other
proceeding, or notice (written or oral) by any Person alleging potential
Liability or requesting information relating to or affecting a Party, its
business, its Assets (including Contracts related to it), or the transactions
contemplated by this Agreement, but shall not include regular, periodic
examinations of depository institutions and their Affiliates by Regulatory
Authorities.
"LOAN PROPERTY" shall mean any property owned, leased, or operated by the
Party in question or by any of its Subsidiaries or in which such Party or
Subsidiary holds a security or other interest (including an interest in a
fiduciary capacity), and, where required by the context, includes the owner or
operator of such property, but only with respect to such property.
"MATERIAL" for purposes of this Agreement shall be determined in light of
the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine materiality in
that instance.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change, or
occurrence which, individually or together with any other event, change, or
occurrence, has a Material adverse impact on (i) the financial condition,
results of operations, or business of such Party and its Subsidiaries, taken as
a whole, or (ii) the ability of such Party to perform its obligations under this
Agreement or to consummate the Merger or the other transactions contemplated by
this Agreement, provided that "Material Adverse Effect" shall not be deemed to
include the impact of (a) changes in banking and similar Laws of general
applicability or interpretations thereof by courts or governmental authorities,
(b) changes in GAAP or regulatory accounting principles generally applicable to
banks or savings associations and their holding companies, (c) actions and
omissions of a Party (or any of its Subsidiaries) taken with the prior informed
consent of the other Party in contemplation of the transactions contemplated
hereby, including without limitation actions taken pursuant to Section 8.16 of
this Agreement, and (d) the Merger (and the reasonable expenses incurred in
connection therewith) and compliance with the provisions of this Agreement on
the operating performance or financial condition of the Party.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Nasdaq NMS" shall mean the National Market System of The Nasdaq Stock
Market.
"NCBCA" shall mean the North Carolina Business Corporation Act.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local, or foreign or other court, arbitrator, mediator,
tribunal, administrative agency, or Regulatory Authority.
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"PARTICIPATION FACILITY" shall mean any facility or property in which the
Party in question or any of its Subsidiaries participates in the management
(including, but not limited to, participating in a fiduciary capacity) and,
where required by the context, said term means the owner or operator of such
facility or property, but only with respect to such facility or property.
"PARTY" shall mean either Carolina First or FCC, and "Parties" shall mean
both Carolina First and FCC.
"PERMIT" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any Person is a party or that is or may be
binding upon or inure to the benefit of any Person or its securities, Assets, or
business.
"PERSON" shall mean a natural person or any legal, commercial, or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form S-4,
or other appropriate form, including any pre-effective or post-effective
amendments or supplements thereto, filed with the SEC by FCC under the 1933 Act
with respect to the shares of FCC Common Stock to be issued to the stockholders
of Carolina First in connection with the transactions contemplated by this
Agreement.
"REGULATORY AUTHORITIES" shall mean, collectively, the United States
Department of Justice, the Board of the Governors of the Federal Reserve System,
the Office of the Comptroller of the Currency, the Federal Deposit Insurance
Corporation, all state regulatory agencies having jurisdiction over the Parties
and their respective Subsidiaries, the NASD, and the SEC.
"REPRESENTATIVE" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative of a Person.
"RIGHTS" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the capital stock of a
Person or by which a Person is or may be bound to issue additional shares of its
capital stock or other Rights.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to be
filed, by a Party or any of its Subsidiaries with any Regulatory Authority
pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"STOCKHOLDERS' MEETINGS" shall mean the respective meetings of the
stockholders of FCC and Carolina First to be held pursuant to Section 8.1 of
this Agreement, including any adjournment or adjournments thereof.
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"SUBSIDIARIES" shall mean all those corporations, banks, associations, or
other entities of which the entity in question owns or controls 50% or more of
the outstanding equity securities either directly or through an unbroken chain
of entities as to each of which 50% or more of the outstanding equity securities
is owned directly or indirectly by its parent; provided, there shall not be
included any such entity acquired through foreclosure or any such entity the
equity securities of which are owned or controlled in a fiduciary capacity.
"SURVIVING BANK" shall mean FCC Bank as the surviving bank resulting from
the Bank Merger.
"SURVIVING CORPORATION" shall mean FCC as the surviving corporation
resulting from the Merger.
"TAX" or "TAXES" shall mean all federal, state, local, and foreign taxes,
charges, fees, levies, imposts, duties, or other assessments, including income,
gross receipts, excise, employment, sales, use, transfer, license, payroll,
franchise, severance, stamp, occupation, windfall profits, environmental,
federal highway use, commercial rent, customs duties, capital stock, paid-up
capital, profits, withholding, Social Security, single business and
unemployment, disability, real property, personal property, registration, ad
valorem, value added, alternative or add-on minimum, estimated, or other tax or
governmental fee of any kind whatsoever, imposed or required to be withheld by
the United States or any state, local, or foreign government or subdivision or
agency thereof, including any interest, penalties, or additions thereto.
"TAXABLE PERIOD" shall mean any period prescribed by any governmental
authority, including the United States or any state, local, or foreign
government or subdivision or agency thereof for which a Tax Return is required
to be filed or Tax is required to be paid.
"TAX RETURN" shall mean any report, return, information return, or other
information required to be supplied to a taxing authority in connection with
Taxes, including any return of an affiliated or combined or unitary group that
includes a Party or its Subsidiaries.
(b) The terms set forth below shall have the meanings ascribed thereto in
the referenced sections:
<TABLE>
<S> <C>
Bank Mergers................................................ Section 1.2
Carolina First Benefit Plans................................ Section 5.13(a)
Carolina First Contracts.................................... Section 5.14
Carolina First ERISA Affiliate.............................. Section 5.13(e)
Carolina First ERISA Plan................................... Section 5.13(a)
Carolina First Rights....................................... Section 3.6(a)
Carolina First Pension Plan................................. Section 5.13(a)
Carolina First SEC Reports.................................. Section 5.5(a)
Cause....................................................... Section 8.13(c)
Closing..................................................... Section 1.3
Continuing Employee......................................... Section 8.13
Effective Time.............................................. Section 1.4
Exchange Agent.............................................. Section 4.1
Exchange Ratio.............................................. Section 3.1(b)
FCC ERISA Affiliate......................................... Section 6.19
</TABLE>
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<TABLE>
<S> <C>
FCC SEC Reports............................................. Section 6.5(a)
Indemnified Party........................................... Section 8.14
Maximum Amount.............................................. Section 8.14(b)
Merger...................................................... Section 1.1
Takeover Laws............................................... Section 5.19
Tax Opinions................................................ Section 9.1(g)
</TABLE>
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
11.2 Expenses.
(a) Except as otherwise provided in this Section 11.2, each of the
Parties shall bear and pay all direct costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including filing, registration, and application fees, printing fees, and
fees and expenses of its own financial or other consultants, investment
bankers, accountants, and counsel, except that each of the Parties shall
bear and pay one-half of the printing costs incurred in connection with the
printing of the Registration Statement and the Joint Proxy Statement and
the SEC fees related thereto.
(b) Nothing contained in this Section 11.2 shall constitute or shall
be deemed to constitute liquidated damages for the willful breach by a
Party of the terms of this Agreement or otherwise limit the rights of the
nonbreaching Party.
11.3 Brokers and Finders. Except for The Robinson-Humphrey Company, LLC as
to Carolina First and except for Wheat First Securities as to FCC, each of the
Parties represents and warrants that neither it nor any of its officers,
directors, employees, or Affiliates has employed any broker or finder or
incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby. In the event of a claim by
any broker or finder based upon his, her, or its representing or being retained
by or allegedly representing or being retained by Carolina First or FCC, each of
Carolina First and FCC, as the case may be, agrees to indemnify and hold the
other Party harmless of and from any Liability in respect of any such claim.
11.4 Entire Agreement. Except as otherwise expressly provided herein, this
Agreement (including the Confidentiality Agreements and other documents and
instruments referred to herein) constitutes the entire agreement between the
Parties with respect to the transactions contemplated hereunder and supersedes
all prior arrangements or understandings with respect thereto, written or oral.
Nothing in this Agreement expressed or implied, is intended to confer upon any
Person, other than the Parties or their respective successors, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
other than as provided in Sections 8.12, 8.13(b), 8.14, and 8.15(b) of this
Agreement.
11.5 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties, whether before or after
stockholder approval of this Agreement has been obtained; provided, that the
provisions of this Agreement relating to the manner or basis in which shares of
Carolina First Common Stock will be exchanged for FCC Common Stock shall not be
amended (except in accordance with Section 10.1(g)) after the Stockholders'
Meetings without the requisite approval of the
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holders of the issued and outstanding shares of FCC Common Stock and Carolina
First Common Stock, as the case may be, entitled to vote thereon.
11.6 Waivers.
(a) Prior to or at the Effective Time, FCC, acting through its Board
of Directors, chief executive officer, chief financial officer, or other
authorized officer, shall have the right to waive any Default in the
performance of any term of this Agreement by Carolina First, to waive or
extend the time for the compliance or fulfillment by Carolina First of any
and all of its obligations under this Agreement, and to waive any or all of
the conditions precedent to the obligations of FCC under this Agreement,
except any condition which, if not satisfied, would result in the violation
of any Law. No such waiver shall be effective unless in writing signed by a
duly authorized officer of FCC.
(b) Prior to or at the Effective Time, Carolina First, acting through
its Board of Directors, chief executive officer, chief financial officer,
or other authorized officer, shall have the right to waive any Default in
the performance of any term of this Agreement by FCC, to waive or extend
the time for the compliance or fulfillment by FCC of any and all of its
obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of Carolina First under this Agreement, except
any condition which, if not satisfied, would result in the violation of any
Law. No such waiver shall be effective unless in writing signed by a duly
authorized officer of Carolina First.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of
such Party at a later time to enforce the same or any other provision of
this Agreement. No waiver of any condition or of the breach of any term
contained in this Agreement in one or more instances shall be deemed to be
or construed as a further or continuing waiver of such condition or breach
or a waiver of any other condition or of the breach of any other term of
this Agreement.
11.7 Assignment. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests, or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by the Parties and their respective successors and assigns.
11.8 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the
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persons at the addresses set forth below (or at such other address as may be
provided hereunder), and shall be deemed to have been delivered as of the date
so delivered:
<TABLE>
<S> <C>
Carolina First: Carolina First Bancshares, Inc.
402 E. Main Street
Lincolnton, North Carolina 25092
Telecopy Number: (704) 732-7201
Attention: James E. Burt III
President and Chief Executive Officer
Copy to Counsel: Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopy Number: (404) 881-4777
Attention: Ralph F. MacDonald, III
FCC: First Charter Corporation
22 Union Street
North Concord, North Carolina 28025
Telecopy Number: (704) 788-0445
Attention: Lawrence M. Kimbrough
President and Chief Executive Officer
Copy to Counsel: Smith Helms Mulliss & Moore, L.L.P.
201 North Tryon Street
Charlotte, North Carolina 282
Telecopy Number: (704) 334-8467
Attention: Robert M. Donlon
</TABLE>
11.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of North Carolina, without regard to any
applicable conflicts of Laws.
11.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 Captions. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
11.12 Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any Party, whether under
any rule of construction or otherwise. No Party to this Agreement shall be
considered the draftsman. The Parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all Parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of the
Parties.
11.13 Enforcement of Agreement. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the
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United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
11.14 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
<TABLE>
<S> <C>
CAROLINA FIRST BANCSHARES, INC.
By: /s/ JAMES E. BURT, III
-----------------------------------------------------
Name: James E. Burt, III
Title: President and Chief Executive Officer
First Charter Corporation
By: /s/ LAWRENCE M. KIMBROUGH
-----------------------------------------------------
Name: Lawrence M. Kimbrough
Title: President and Chief Executive Officer
</TABLE>
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APPENDIX B
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into as
of November 7, 1999 by and between First Carolina BancShares, Inc., a North
Carolina corporation ("Issuer"), and First Charter Corporation, a North Carolina
corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into that certain Agreement and
Plan of Merger, dated as of November 7, 1999 (the "Merger Agreement"), providing
for, among other things, the merger of Issuer with and into Grantee, with
Grantee as the surviving entity; and
WHEREAS, as a condition and inducement to Grantee's execution of the Merger
Agreement, Grantee has required that Issuer agree, and Issuer has agreed, to
grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Merger Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 1,040,838 shares (as adjusted as set forth herein, the "Option Shares,"
which shall include the Option Shares before and after any transfer of such
Option Shares) of common stock, $2.50 par value per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (subject to adjustment
as set forth herein, the "Purchase Price") equal to $36.00; provided, however,
in no event shall the number of shares of Issuer Common Stock for which this
Option is exercisable together with all other shares of Issuer Common Stock held
by Holder exceed the lesser of (i) 19.9% of the Issuer's issued and outstanding
shares of Issuer Common Stock without giving effect to any shares subject to or
issued pursuant to the Option and (ii) that minimum number of shares of Issuer
Common Stock which when aggregated with any other shares of Issuer Common Stock
beneficially owned by Grantee or any Affiliate thereof would cause the
provisions of any Takeover Laws of the NCBCA to be applicable to the Merger.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of its agreements or covenants
contained in this Agreement or the Merger Agreement, and (ii) no preliminary or
permanent injunction or other order against the delivery of shares covered by
the Option issued by any court of competent jurisdiction in the United States
shall be in effect, Holder may exercise the Option, in whole or in part, at any
time and from time to time following the occurrence of a Purchase Event (as
hereinafter defined) and prior to the termination of the Option. The Option
shall terminate and be of no further force and effect upon the earliest to occur
of (A) the Effective Time, (B) termination of the Merger Agreement in accordance
with the terms thereof prior to the occurrence of a Purchase Event or a
Preliminary Purchase Event (as
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hereinafter defined) (other than a termination of the Merger Agreement by
Grantee pursuant to (i) Section 10.1(b) thereof (but only if such termination
was a result of a willful breach by Issuer) or (ii) Section 10.1(c) thereof
(each a "Default Termination")), (C) 12 months after a Default Termination, and
(D) 12 months after any termination of the Merger Agreement following the
occurrence of a Purchase Event or a Preliminary Purchase Event. Any purchase of
shares upon exercise of the Option shall be subject to compliance with
applicable law, including, without limitation, the Bank Holding Company Act of
1956, as amended (the "BHC Act"). The term "Holder" shall mean the holder or
holders of the Option from time to time, and which initially is the Grantee. The
rights set forth in Section 8 shall terminate when the right to exercise the
Option terminates (other than as a result of a complete exercise of the Option)
as set forth herein.
(b) As used herein, a "Purchase Event" means any of the following
events subsequent to the date of this Agreement:
(i) without Grantee's prior written consent, Issuer shall have
authorized, recommended, publicly proposed or publicly announced an
intention to authorize, recommend or propose, or entered into an
agreement with any person (other than Grantee or any Subsidiary of
Grantee) to effect an Acquisition Transaction (as defined below). As
used herein, the term Acquisition Transaction shall mean (A) a merger,
consolidation or similar transaction involving Issuer or any of its
Subsidiaries (other than transactions solely between Issuer's
Subsidiaries and transactions involving Issuer or any Subsidiary in
which the voting securities of Issuer outstanding immediately prior
thereto continue to represent (by either remaining outstanding or being
converted into securities of the surviving entity or the parent thereof)
at least 75% of the combined voting power of the voting securities of
the Issuer or the surviving entity or the parent thereof outstanding
immediately after the consummation of the transaction), (B) except as
permitted pursuant to Article 7 of the Merger Agreement, the
disposition, by sale, lease, exchange or otherwise, of Assets of Issuer
or any of its Subsidiaries representing in either case 15% or more of
the consolidated assets of Issuer and its Subsidiaries, or (C) the
issuance, sale or other disposition of (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 25% or more of the voting power of Issuer or any of its
Subsidiaries (any of the foregoing, an "Acquisition Transaction"); or
(ii) any person (other than Grantee or any Subsidiary of Grantee)
shall have acquired beneficial ownership (as such term is defined in
Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), of or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under the Exchange
Act), other than a group of which Grantee or any of its Subsidiaries is
a member, shall have been formed which beneficially owns or has the
right to acquire beneficial ownership of, 25% or more of the
then-outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any Subsidiary of Grantee)
shall have commenced (as such term is defined in Rule 14d-2 under the
Exchange Act), or shall have filed a registration statement under the
Securities Act of 1933, as amended (the "Securities Act") with respect
to, a tender offer or
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exchange offer to purchase any shares of Issuer Common Stock such that,
upon consummation of such offer, such person would own or control 25% or
more of the then-outstanding shares of Issuer Common Stock (such an
offer being referred to herein as a "Tender Offer" or an "Exchange
Offer," respectively); or
(ii) the holders of Issuer Common Stock shall not have approved the
Merger Agreement at the meeting of such stockholders held for the
purpose of voting on the Merger Agreement, such meeting shall not have
been held or shall have been canceled prior to termination of the Merger
Agreement, or Issuer's Board of Directors shall have withdrawn or
modified in a manner adverse to Grantee the recommendation of Issuer's
Board of Directors with respect to the Merger Agreement, in each case
after it shall have been publicly announced that any person (other than
Grantee or any Subsidiary of Grantee) shall have (A) made a proposal to
engage in an Acquisition Transaction, (B) commenced a Tender Offer or
filed a registration statement under the Securities Act with respect to
an Exchange Offer, or (C) filed an application (or given a notice),
whether in draft or final form, under any federal or state statute or
regulation (including a notice filed under the HSR Act and an
application or notice filed under the BHC Act, the Bank Merger Act, or
the Change in Bank Control Act of 1978) seeking the Consent to an
Acquisition Transaction from any federal or state governmental or
regulatory authority or agency.
As used in this Agreement, "person" shall have the meaning specified
in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) In the event Holder wishes to exercise the Option, it shall send
to Issuer a written notice (the date of which being herein referred to as
the "Notice Date") specifying (i) the total number of Option Shares it
intends to purchase pursuant to such exercise and (ii) a place and date not
earlier than three business days nor later than 15 business days from the
Notice Date for the closing (the "Closing") of such purchase (the "Closing
Date"). If prior Consent of any governmental or regulatory agency or
authority is required in connection with such purchase, Issuer shall
cooperate with Holder in the filing of the required notice or application
for such Consent and the obtaining of such Consent and the Closing shall
occur immediately following receipt of such Consents (and expiration of any
mandatory waiting periods).
(e) Notwithstanding any other provision of this Agreement to the
contrary, in no event shall:
(i) Holder's (taking into account all other Holders) Total Profit
(as defined below) exceed $10 million and, if it otherwise would exceed
such amount, Holder, at its sole election, shall either (A) reduce the
number of shares of Issuer Common Stock subject to the Option, (B)
deliver to issuer for cancellation without consideration Option Shares
previously purchased by Holder, (C) pay cash to Issuer, or (D) any
combination of the foregoing, so that Holder's actually realized Total
Profit (together with the Total Profit realized by all other Holders)
shall not exceed $10 million after taking into account the foregoing
actions; and
(ii) the Option be exercised for a number of shares of Issuer
Common Stock as would, as of the date of exercise, result in Holder's
(taking into account all other Holders) Notional Total Profit (as
defined below) of more than $10
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million; provided, that nothing in this clause (ii) shall restrict any
exercise of the Option permitted hereby on any subsequent date.
As used in this Agreement, the term "Total Profit" shall mean the
aggregate sum (prior to the payment of taxes) of the following: (i) the
amount received by Holder pursuant to Issuer's repurchase of Option (or any
portion thereof) pursuant to Section 8, (ii) (x) the amount received by
Holder pursuant to Issuer's repurchase of Option Shares pursuant to Section
8, less (y) Holder's purchase price for such Option Shares; (iii) (x) the
net cash amounts received by Holder pursuant to the sale of Option Shares
(or any other securities into which such Option Shares shall be converted
or exchanged) to any unaffiliated person, less (y) Holder's purchase price
of such Option Shares; and (v) any amounts received by Grantee on the
transfer of the Option (or any portion thereof) to any unaffiliated person.
As used in this Agreement, the term "Notional Total Profit" with
respect to any number of shares of Issuer Common Stock as to which Holder
may propose to exercise the Option shall be the Total Profit determined as
of the date of such proposed exercise, assuming that the Option were
exercised on such date for such number of shares and assuming that such
shares, together with all other Option Shares held by Holder and its
affiliates as of such date, were sold for cash at the closing sale price
per share of Issuer Common Stock as quoted on the Nasdaq NMS (or, if Issuer
Common Stock is not then quoted on the Nasdaq NMS, the highest bid price
per share as quoted on the principal trading market or securities exchange
on which such shares are traded as reported by a recognized source chosen
by Holder) as of the close of business on the preceding trading day (less
customary brokerage commissions).
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated
by Issuer, an amount equal to the Purchase Price multiplied by the number
of Option Shares to be purchased on such Closing Date, and (ii) present and
surrender this Agreement to the Issuer at the address of the Issuer
specified in Section 12(f) hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section
4(a), (i) Issuer shall deliver to Holder (A) a certificate or certificates
representing the Option Shares to be purchased at such Closing, which
Option Shares shall be free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever and subject to no pre-emptive rights,
and (B) if the Option is exercised in part only, an executed new agreement
with the same terms as this Agreement evidencing the right to purchase the
balance of the shares of Issuer Common Stock purchasable hereunder, and
(ii) Holder shall deliver to Issuer a letter agreeing that Holder shall not
offer to sell or otherwise dispose of such Option Shares in violation of
applicable federal and state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by applicable
law, certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as
follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AS
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AMENDED OR ANY STATE OR FOREIGN SECURITIES LAWS. THE TRANSFER OF THE
STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO RESTRICTIONS ARISING
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT TO THE TERMS
OF A STOCK OPTION AGREEMENT DATED AS OF NOVEMBER, 1999. A COPY OF SUCH
AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON
RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that: (i) the references in the above
legend to resale restrictions of the Securities Act shall be removed by
delivery of substitute certificate(s) without such reference if Holder
shall have delivered to Issuer a copy of a letter from the staff of the
SEC, or an opinion of counsel in form and substance reasonably satisfactory
to Issuer and its counsel, to the effect that such legend is not required
for purposes of the Securities Act; (ii) the references in the above legend
to the provisions of this Agreement shall be removed by delivery of
substitute certificate(s) without such reference if the shares have been
sold or transferred in compliance with the provisions of this Agreement and
under circumstances that do not require the retention of such reference;
and (iii) the legend shall be removed in its entirety if the conditions in
the preceding clauses (i) and (ii) are both satisfied.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents and
warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the
part of Issuer. This Agreement has been duly executed and delivered by
Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and, at all times from the date hereof
until the obligation to deliver Issuer Common Stock upon the exercise of
the Option terminates, will have reserved for issuance, upon exercise of
the Option, the number of shares of Issuer Common Stock necessary for
Holder to exercise the Option, and Issuer will take all necessary corporate
action to authorize and reserve for issuance all additional shares of
Issuer Common Stock or other securities which may be issued pursuant to
Section 7 upon exercise of the Option. The shares of Issuer Common Stock to
be issued upon due exercise of the Option, including all additional shares
of Issuer Common Stock or other securities which may be issuable pursuant
to Section 7, upon issuance pursuant hereto, shall be duly and validly
issued, fully paid, and nonassessable, and shall be delivered free and
clear of all liens, claims, charges, and encumbrances of any kind or nature
whatsoever, including any preemptive rights of any stockholder of Issuer.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby represents and
warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution
and delivery of this
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Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of
Grantee. This Agreement has been duly executed and delivered by Grantee.
(b) This Option is not being, and any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the Securities Laws, provided that with
respect to any transfer or other disposition proposed to be made in
reliance upon an exemption from registration, such transfer or other
disposition shall not be made unless Issuer first receives an opinion of
counsel in form and substance reasonably acceptable to it regarding the
availability of such exemption.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination,
exchange of shares or similar transaction, the type and number of shares or
securities subject to the Option, and the Purchase Price therefor, shall be
adjusted appropriately, and proper provision shall be made in the
agreements governing such transaction, if any, so that Holder shall
receive, upon exercise of the Option, the number and class of shares or
other securities or property that Holder would have received in respect of
Issuer Common Stock if the Option had been exercised immediately prior to
such event, or the record date therefor, as applicable. If any additional
shares of Issuer Common Stock are issued after the date of this Agreement
(other than pursuant to an event described in the first sentence of this
Section 7(a) or pursuant to this Option), the number of shares of Issuer
Common Stock subject to the Option shall be adjusted so that, after such
issuance, it, together with any shares of Issuer Common Stock previously
issued pursuant hereto or otherwise held by Holder, shall not exceed the
lesser of (i) 19.9% of the number of shares of Issuer Common Stock then
issued and outstanding, without giving effect to any shares subject to or
issued pursuant to the Option and (ii) that minimum number of shares of
Issuer Common Stock which when aggregated with any other shares of Issuer
Common Stock beneficially owned by Grantee or any Affiliate thereof would
cause the provisions of any Takeover Laws of the NCBCA to be applicable to
the Merger.
(b) In the event that Issuer shall enter into an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving corporation of
such consolidation or merger; (ii) to permit any person, other than Grantee
or one of its Subsidiaries, to merge into Issuer and Issuer shall be the
continuing or surviving corporation, but, in connection with such merger,
the then-outstanding shares of Issuer Common Stock shall be changed into or
exchanged for stock or other securities of Issuer or any other person or
cash or any other property or the outstanding shares of Issuer Common Stock
immediately prior to such merger shall after such merger represent less
than 50% of the outstanding shares and share equivalents of the merged
company; or (iii) to sell or otherwise transfer all or substantially all of
its assets to any person, other than Grantee or one of its Subsidiaries,
then, and in each such case, the agreement governing such transaction shall
make proper provisions so that upon the consummation of any such
transaction and upon the terms and conditions set forth herein, Holder
shall receive for each Option Share with respect to which the Option has
not been exercised an amount of consideration in the form of and equal to
the per share amount of
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consideration that would be received by the holder of one share of Issuer
Common Stock less the Purchase Price (and, in the event of an election or
similar arrangement with respect to the type of consideration to be
received by the holders of Issuer Common Stock, subject to the foregoing,
proper provision shall be made so that Holder would have the same election
or similar rights a would the holder of the number of shares or Issuer
Common Stock for which the Option is then exercisable).
(c) Issuer shall not enter into any agreement of the type described in
Section 7(b) unless the other party thereto consents to provide the funding
required for Issuer to pay the Section 8 Repurchase Consideration.
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a) and to Section 3(e),
at the request of Holder at any time commencing upon the first occurrence
of a Repurchase Event (as defined in Section 8(d)) and ending 12 months
immediately thereafter, Issuer shall repurchase from Holder the Option and
all shares of Issuer Common Stock purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The date on which
Holder exercises its rights under this Section 8 is referred to as the
"Request Date." Such repurchase shall be at an aggregate price (the
"Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares of
Issuer Common Stock acquired by Holder pursuant to the Option with
respect to which Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number
of shares of Issuer Common Stock with respect to which the Option has
not been exercised; and
(iii) the excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 7) paid (or, in the
case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Holder for
each share of Issuer Common Stock with respect to which the Option has
been exercised and with respect to which Holder then has beneficial
ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within ten business days after the Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment Holder shall surrender to Issuer the
Option and the certificates evidencing the shares of Issuer Common Stock
purchased thereunder with respect to which Holder then has beneficial
ownership, and Holder shall warrant that it has sole record and beneficial
ownership of such shares and that the same are then free and clear of all
liens, claims, charges and encumbrances of any kind whatsoever.
Notwithstanding the foregoing, to the extent that prior notification to or
Consent of any governmental or regulatory agency or authority is required
in connection with the payment of all or any portion of the Section 8
Repurchase Consideration, Holder shall have the ongoing option to revoke
its request for repurchase pursuant to Section 8, in whole or in part, or
to require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited from
paying and promptly file the required notice or application for Consent and
expeditiously process the same (and
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each party shall cooperate with the other in the filing of any such notice
or application and the obtaining of any such Consent). If any governmental
or regulatory agency or authority disapproves of any part of Issuer's
proposed repurchase pursuant to this Section 8, Issuer shall promptly give
notice of such fact to Holder. If any governmental or regulatory agency or
authority prohibits the repurchase in part but not in whole, then Holder
shall have the right (i) to revoke the repurchase request or (ii) to the
extent permitted by such agency or authority, determine whether the
repurchase should apply to the Option and/or Option Shares and to what
extent to each, and Holder shall thereupon have the right to exercise the
Option as to the number of Option Shares for which the Option was
exercisable at the Request Date less the sum of the number of shares
covered by the Option in respect of which payment has been made pursuant to
Section 8(a)(ii) and the number of shares covered by the portion of the
Option (if any) that has been repurchased. Holder shall notify Issuer of
its determination under the preceding sentence within five business days of
receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Holder's
rights under this Section 8 shall terminate on the date of termination of
this Option pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for
any such share by the person or groups described in Section 8(d)(i), (ii)
the price per share of Issuer Common Stock received by holders of Issuer
Common Stock in connection with any merger or other business combination
transaction described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii)
the highest bid price per share as quoted on the principal trading market
or securities exchange on which such shares are traded as reported by a
recognized source chosen by Holder, during the 60 business days preceding
the Request Date; provided, however, that in the event of a sale of less
than all of Issuer's Assets, the Applicable Price shall be the sum of the
price paid in such sale for such assets and the current market value of the
remaining assets of Issuer as determined by an independent nationally
recognized investment banking firm selected by Holder and reasonably
acceptable to Issuer (which determination shall be conclusive for all
purposes of this Agreement), divided by the number of shares of the Issuer
Common Stock outstanding at the time of such sale. If the consideration to
be offered, paid or received pursuant to either of the foregoing clauses
(i) or (ii) shall be other than in cash, the value of such consideration
shall be determined in good faith by an independent nationally recognized
investment banking firm selected by Holder and reasonably acceptable to
Issuer, which determination shall be conclusive for all purposes of this
Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any Subsidiary of Grantee shall have acquired
beneficial ownership (as such term is defined in Rule 13d-3 promulgated
under the Exchange Act), or the right to acquire beneficial ownership, or
any "group" (as such term is defined under the Exchange Act) shall have
been formed which beneficially owns or has the right to acquire beneficial
ownership of 50% or more of the then-outstanding shares of Issuer Common
Stock, or (ii) any of the transactions described in Section 7(b)(i),
7(b)(ii) or 7(iii) shall be consummated.
(e) In connection with the application of the provisions of this
Section 8, Grantee acknowledges (i) the regulatory and capital matters set
forth in Issuer's
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Disclosure Memorandum and Issuer's Financial Statements, (ii) that Issuer's
ability to fund the Section 8 Repurchase Consideration in accordance with
the provisions of this Section 8 may be dependent upon the payment by
Issuer's Subsidiaries of a capital distribution or distributions ("Capital
Distribution") to Issuer and that any such Capital Distribution will be
subject to the prior approval of the Federal Reserve Board and the
principal federal and state regulatory agencies having jurisdiction over
Issuer's Subsidiary banks, and (iii) that, Issuer's obligations under this
Section 8 do not impose on Issuer an obligation to otherwise finance the
payment of the Section 8 Repurchase Consideration through the incurrence of
indebtedness or the issuance of capital instruments or securities by Issuer
in either case sufficient in amount to satisfy the payment of the Section 8
Repurchase Consideration. Accordingly, Issuer shall not be deemed to be in
breach of this Section 8 if, after making all reasonable efforts to obtain
the necessary regulatory and other Consents for a Capital Distribution or
the incurrence of indebtedness required to pay the Section 8 Repurchase
Consideration, it is unable to do so; provided, however, that Issuer shall
have an ongoing obligation to use reasonable efforts to meet its
obligations under this Section 8.
9. REGISTRATION RIGHTS.
(a) Following Termination of the Merger Agreement, Issuer shall,
subject to the conditions of subparagraph (c) below, if requested by any
Holder, including Grantee and any permitted transferee ("Selling Holder"),
as expeditiously as possible prepare and file a registration statement
under the Securities Laws if necessary in order to permit the sale or other
disposition of any or all shares of Issuer Common Stock or other securities
that have been acquired by or are issuable to Selling Holder upon exercise
of the Option in accordance with the intended method of sale or other
disposition stated by Holder in such request (it being understood and
agreed that any such sale or other disposition shall be effected on a
widely distributed basis so that, upon consummation thereof, no purchaser
or transferee shall beneficially own more than 5% of the shares of Issuer
Common Stock then outstanding), including, without limitation, a "shelf"
registration statement under Rule 415 under the Securities Act or any
successor provision, and Issuer shall use its best efforts to qualify such
shares or other securities for sale under any applicable state securities
laws. Each such Holder shall provide all information reasonably requested
by Issuer for inclusion in any registration statement to be filed
hereunder.
(b) If Issuer at any time after the exercise of the Option, but prior
to the termination of the Option, proposes to register any shares of Issuer
Common Stock under the Securities Laws in connection with an underwritten
public offering of such Issuer Common Stock, Issuer will promptly give
written notice to Holder of its intention to do so and, upon the written
request of Holder given within 30 days after receipt of any such notice
(which request shall specify the number of shares of Issuer Common Stock
intended to be included in such underwritten public offering by Selling
Holder), Issuer will use all reasonable efforts to cause all such shares,
the holders of which shall have requested participation in such
registration, to be so registered and included in such underwritten public
offering; provided, that Issuer may elect to not cause any such shares to
be so registered (i) if the underwriters in good faith determine that the
inclusion of such shares would interfere with the successful marketing of
the shares of Issuer Common Stock for the account of Issuer, or (ii) in the
case of a registration solely to implement a dividend reinvestment or
similar plan, an employee benefit plan or a registration filed on Form S-4
or any successor form, or
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a registration filed on a form which does not permit registrations of
resales; provided, further, that such election pursuant to clause (i) may
only be made twice. If some but not all the shares of Issuer Common Stock,
with respect to which Issuer shall have received requests for registration
pursuant to this subparagraph (b), shall be excluded from such
registration, Issuer shall make appropriate allocation of shares to be
registered among Selling Holders and any other person (other than Issuer or
any person exercising demand registration rights in connection with such
registration) who or which is permitted to register their shares of Issuer
Common Stock in connection with such registration pro rata in the
proportion that the number of shares requested to be registered by each
Selling Holder bears to the total number of shares requested to be
registered by all persons then desiring to have Issuer Common Stock
registered for sale (other than Issuer or any person exercising demand
registration rights in connection with such registration).
(c) Issuer shall use all reasonable efforts to cause the registration
statement referred to in subparagraph (a) above to become effective and to
obtain all consents or waivers of other parties which are required therefor
and to keep such registration statement effective, provided, that Issuer
may delay any registration of Option Shares required pursuant to
subparagraph (a) above for a period not exceeding 90 days, provided Issuer
shall in good faith determine that any such registration would adversely
affect an offering or contemplated offering of other securities by Issuer.
Notwithstanding anything to the contrary contained herein, Issuer shall not
be required to register Option Shares under the Securities Laws pursuant to
subparagraph (a) above:
(i) prior to the occurrence of the earliest of (a) termination of
the Merger Agreement or (b) a Purchase Event or following the
termination of the Option;
(ii) more than twice in total or more than once in any calendar
year;
(iii) within 90 days after the effective date of a registration
referred to in subparagraph (b) above pursuant to which the Selling
Holders concerned were afforded the opportunity to register such shares
under the Securities Laws and such shares were registered as requested;
and
(iv) unless a request therefor is made to Issuer by Selling Holders
holding at least 25% or more of the aggregate number of Option Shares
then outstanding or the right to acquire at least 15% of the Option
Shares.
In addition to the foregoing, Issuer shall not be required to maintain
the effectiveness of any registration statement after the expiration of 120
days from the effective date of such registration statement. Issuer shall
use all reasonable efforts to make any filings, and take all steps, under
all applicable state securities laws to the extent necessary to permit the
sale or other disposition of the Option Shares so registered in accordance
with the intended method of distribution for such shares, provided, that
Issuer shall not be required to consent to general jurisdiction or qualify
to do business in any state where it is not otherwise required to so
consent to such jurisdiction or to so qualify to do business.
(d) Except where applicable state law prohibits such payments, Issuer
will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and
expenses of Issuer's counsel), accounting expenses, printing expenses,
expenses of underwriters, excluding discounts and
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commissions but including liability insurance if Issuer so desires or the
underwriters so require, and the reasonable fees and expenses of any
necessary special experts) in connection with each registration pursuant to
subparagraph (a) or (b) above (including the related offerings and sales by
Selling Holders) and all other qualifications, notifications or exemptions
pursuant to subparagraph (a) or (b) above. Underwriting discounts and
commissions relating to Option Shares and any other expenses incurred by
such Selling Holders in connection with any such registration (including
expenses of Selling Holders' counsel) shall be borne by such Selling
Holders.
(e) In connection with any registration under subparagraph (a) or (b)
above Issuer hereby agrees to indemnify the Selling Holders, and each
underwriter thereof, including each person, if any, who controls such
holder or underwriter within the meaning of Section 15 of the Securities
Act, against all expenses, losses, claims, damages and liabilities caused
by any untrue statement of a material fact contained in any registration
statement or prospectus (including any amendments or supplements thereto)
or any preliminary prospectus, or caused by any omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, except insofar as such expenses, losses, claims,
damages or liabilities of such indemnified party are caused by any untrue
statement or alleged untrue statement or any omission or alleged omission
made in reliance upon and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use therein, and
Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such Selling Holder, or by such underwriter, as the case may
be, for all such expenses, losses, claims, damages and liabilities caused
by any untrue, or alleged untrue, statement or omission made in reliance
upon, and in conformity with, information furnished in writing to Issuer by
such holder or such underwriter, as the case may be, expressly for such
use.
Promptly upon receipt by a party indemnified under this subparagraph
(e) of notice of the commencement of any action against such indemnified
party in respect of which indemnity or reimbursement may be sought against
any indemnifying party under this subparagraph (e), such indemnified party
shall notify the indemnifying party in writing of the commencement of such
action, but the failure so to notify the indemnifying party shall not
relieve it of any liability which it may otherwise have to any indemnified
party under this subparagraph (e), except to the extent such failure to
notify materially prejudices the indemnifying party. In case notice of
commencement of any such action shall be given to the indemnifying party as
above provided, the indemnifying party shall be entitled to participate in
and, to the extent it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense of such action at its own
expense, with counsel chosen by it and reasonably satisfactory to such
indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof,
but the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party either agrees to pay the same, (ii) the indemnifying
party fails to assume the defense of such action with counsel satisfactory
to the indemnified party, or (iii) the indemnified party has been advised
by counsel that one or more legal defenses may be available to the
indemnifying party that may be contrary to the interest of the indemnified
party, in which case the indemnifying party shall be entitled to assume the
defense of such
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action notwithstanding its obligation to bear fees and expenses of such
counsel; provided, however, that the indemnifying party shall not be liable
for the expenses of more than one firm of counsel for all indemnified
parties in any jurisdiction. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this subparagraph (e) is
unavailable to a party otherwise entitled to be indemnified in respect of
any expenses, losses, claims, damages or liabilities referred to herein,
then the indemnifying party, in lieu of indemnifying such party otherwise
entitled to be indemnified, shall contribute to the amount paid or payable
by such party to be indemnified as a result of such expenses, losses,
claims, damages or liabilities in such proportion as is appropriate to
reflect the relative benefits received by Issuer, all Selling Holders and
the underwriters from the offering of the securities and also the relative
fault of Issuer, all Selling Holders and the underwriters in connection
with the statements or omissions which resulted in such expenses, losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The amount paid or payable by a party as a result of the
expenses, losses, claims, damages and liabilities referred to above shall
be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any
action or claim; provided, that in no case shall any Selling Holder be
responsible, in the aggregate, for any amount in excess of the net offering
proceeds attributable to its Option Shares included in the offering. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. Any
obligation by any holder to indemnify shall be several and not joint with
other holders.
In connection with any registration pursuant to subparagraph (a) or
(b) above, Issuer and each Selling Holder (other than Grantee) shall enter
into an agreement containing the indemnification provisions of this
subparagraph (e).
(f) Issuer shall use all reasonable efforts to comply with all
reporting requirements and will do all such other things as may be
necessary to permit the expeditious sale at any time of any Option Shares
by Holder in accordance with and to the extent permitted by any rule or
regulation promulgated by the SEC from time to time, including, without
limitation, Rules 144 and 144A.
(g) Issuer will pay all stamp taxes in connection with the issuance
and the sale of the Option Shares and in connection with the exercise of
the Option, and will save Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. QUOTATION; LISTING. If Issuer Common Stock or any other securities to
be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on the Nasdaq NMS or any other securities exchange or any
automated quotations system maintained by a self-regulatory organization,
Issuer, upon the request of Holder, will promptly file an application, if
required, to authorize for quotation or trading or listing the shares of Issuer
Common Stock or other securities to be acquired upon exercise of the Option on
the Nasdaq NMS or any other securities exchange or any automated quotations
system maintained by a self-regulatory organization and will use all reasonable
efforts to obtain approval, if required, of such quotation or listing as soon as
practicable.
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11. DIVISION OF OPTION. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. MISCELLANEOUS.
(a) EXPENSES. Except as otherwise provided in Section 9, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
(b) WAIVER AND AMENDMENT. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
(c) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARY; SEVERABILITY. This
Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between Grantee and Issuer (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to
the subject matter hereof and (b) is not intended to confer upon any person
other than the parties hereto (other than any transferees of the Option
Shares or any permitted transferee of this Agreement pursuant to Section
12(h) and other than as provided in the Merger Agreement) any rights or
remedies hereunder. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or a federal or
state governmental or regulatory agency or authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated. If for any reason
such court or regulatory agency determines that the Option does not permit
Holder to acquire, or does not require Issuer to repurchase, the full
number of shares of Issuer Common Stock as provided in Sections 3 and 8 (as
adjusted pursuant to Section 7), it is the express intention of Issuer to
allow Holder to acquire or to require Issuer to repurchase such lesser
number of shares as may be permissible without any amendment or
modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of North Carolina without regard to
any applicable conflicts of law rules.
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(e) DESCRIPTIVE HEADINGS. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied
(with confirmation) or mailed by registered or certified mail (return
receipt requested) to the parties at the addresses set forth in the Merger
Agreement(or at such other address for a party as shall be specified by
like notice).
(g) COUNTERPARTS. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by
any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other party, except that Grantee
may assign this Agreement to a wholly owned Subsidiary of Grantee and
Grantee may assign its rights hereunder in whole or in part after the
occurrence of a Purchase Event. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
(i) FURTHER ASSURANCES. In the event of any exercise of the Option by
Holder, Issuer and Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in
order to consummate the transactions provided for by such exercise.
(j) SPECIFIC PERFORMANCE. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection
with the obtaining of any such equitable relief and that this provision is
without prejudice to any other rights that the parties hereto may have for
any failure to perform this Agreement.
(k) CONFIDENTIALITY AGREEMENTS. The parties hereto agree that none of
the provisions included in the Confidentiality Agreements will act to
preclude Holder from exercising the Option or exercising any other rights
under this Agreement or act to preclude Issuer from fulfilling any of its
obligations under this Agreement.
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IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
<TABLE>
<S> <C>
ATTEST: CAROLINA FIRST BANCSHARES, INC.
By: /s/ JAN H. HOLLAR By: /s/ JAMES E. BURT, III
----------------------------------------
Jan H. Hollar --------------------------------------------------
Sr. Vice President, James E. Burt, III
Chief Financial Officer President and Chief Executive Officer
and Secretary
[CORPORATE SEAL]
ATTEST: FIRST CHARTER CORPORATION
By: /s/ ANNE C. FORREST By: /s/ LAWRENCE M. KIMBROUGH
----------------------------------------
Anne C. Forrest --------------------------------------------------
Assistant Secretary Lawrence M. Kimbrough
President and Chief Executive Officer
[CORPORATE SEAL]
</TABLE>
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APPENDIX C
FAIRNESS OPINION OF THE ROBINSON-HUMPHREY COMPANY, LLC
February , 2000
Board of Directors
Carolina First BancShares, Inc.
236 East Main Street
Lincolnton, North Carolina 28092
Members of the Board of Directors:
We understand that Carolina First BancShares, Inc. (the "Company") is
considering a proposed merger of the Company with First Charter Corporation
("First Charter"). We understand that under this merger (the "Proposed
Transaction"), the Company's shareholders will receive 2.267 shares (the
"Exchange Ratio") of First Charter common stock in exchange for each share of
Company common stock. We further understand that the merger will be accounted
for as a pooling of interests and will be treated as a tax-free exchange to the
Company's shareholders. The terms and conditions of the Proposed Transaction are
set forth in more detail in the Agreement and Plan of Merger dated November 7,
1999 (the "Agreement").
We have been requested by the Company to render our opinion with respect to
the fairness, from a financial point of view, to the Company's shareholders of
the exchange ratio pursuant to the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and
exhibits thereto, (2) certain publicly available information concerning the
Company and First Charter that we believe relevant to our inquiry, (3) financial
and operating information with respect to the business, operations and prospects
of the Company and First Charter furnished to us by the Company and First
Charter, (4) certain internal financial analyses and forecasts of the Company
and Carolina First prepared by and reviewed with management of the Company and
Carolina First, respectively, (5) trading histories of the Company's common
stock and First Charter's common stock, (6) a comparison of the historical
financial results and present financial condition of the Company and First
Charter with those of other companies that we deemed relevant, (7) a comparison
of the financial terms of the Proposed Transaction with the terms of certain
other recent transactions that we deemed relevant, and (8) certain historical
data relating to percentage premiums paid in acquisitions of publicly traded
bank holding companies that we deemed relevant. In addition, we have had
discussions with the management of the Company and First Charter concerning
their respective businesses, operations, assets, present condition and future
prospects, and undertook such other studies, analyses and investigations, as we
deemed appropriate.
We have assumed and relied upon the accuracy and completeness of the
financial and other information used by us in arriving at our opinion without
independent verification. With respect to the financial projections, including
the synergies and other benefits expected to result from the Proposed
Transaction, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgements of the
managements of the Company and First Charter regarding the future financial
performance of the Company and First Charter and that such performances will be
achieved, and we express no opinion as to such financial projections or the
assumptions on which they are based. We have also assumed that there has been no
material change in
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the Company's or First Charter's assets, financial condition, results of
operations, business or prospects since the date of the most recent financial
statements made available to us. We have assumed in all respects material to our
analysis that the Company and First Charter will remain as going concerns for
all periods relevant to our analysis, that all of the representations and
warranties contained in the Agreement and all related agreements are true and
correct, that each party to such agreements will perform all of the covenants
required to be performed by such party under such agreements, that the
conditions precedent in the Agreement are not waived and that the regulatory
authorities having jurisdiction over approving the Proposed Transaction will not
impose any conditions which will materially undermine the economic benefits of
the Proposed Transaction to First Charter. In arriving at our opinion, we have
not conducted a physical inspection of the properties and facilities of the
Company or First Charter and have not made nor obtained any evaluations or
appraisals of the assets or liabilities of the Company or First Charter. We did
not make an independent evaluation of the adequacy of the allowance for loan
losses of the Company or First Charter, nor have we reviewed any individual
credit files relating to the Company and First Charter and, with your
permission, we have assumed that the respective allowances for loan losses for
both the Company and First Charter are adequate to cover such losses and will be
adequate on a pro forma basis for the combined entity.
Our opinion is necessarily based upon market, economic and other conditions
as they exist on, and can only be evaluated as of, the date of this letter.
Events occurring after the date hereof could materially affect this opinion. We
have not undertaken to update, revise, or reaffirm this opinion or otherwise
comment upon events occurring after the date hereof. We are expressing no
opinion herein as to the prices at which the Company's or First Charter's common
stock will trade at any time.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that the Exchange Ratio pursuant to the Proposed Transaction is
fair, from a financial point of view, to the shareholders of the Company.
This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered in connection with its consideration of the Proposed
Transaction. This opinion is not intended to be and does not constitute a
recommendation to any shareholder of the Company as to how such shareholder
should vote with respect to the Proposed Transaction.
Very truly yours,
THE ROBINSON-HUMPHREY COMPANY, LLC
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APPENDIX D
FAIRNESS OPINION OF WHEAT FIRST SECURITIES,
A DIVISION OF FIRST UNION SECURITIES, INC.
November 7, 1999
Board of Directors
First Charter Corporation
845 Church Street, North
Concord, North Carolina 28025
Members of the Board:
First Charter Corporation ("First Charter") and Carolina First BancShares,
Inc. ("Carolina First") have entered into an Agreement and Plan of Merger, dated
as of November 7, 1999 (the "Agreement"), pursuant to which Carolina First will
combine with First Charter by means of the merger (the "Merger") of Carolina
First with and into First Charter. Upon consummation of the Merger, each of the
outstanding shares of the $2.50 par value common stock of Carolina First
("Carolina First Stock") will be converted into 2.267 shares of the no par value
common stock of First Charter ("First Charter Stock"), as adjusted in accordance
with the terms of the Agreement (the "Exchange Ratio"). The terms of the Merger
are more fully set forth in the Agreement. You have asked us whether, in our
opinion, the Exchange Ratio is fair, from a financial point of view, to the
holders of First Charter Stock (other than Carolina First and its affiliates).
Wheat First Securities, a division of First Union Securities, Inc. ("Wheat
First") as part of its investment banking business, is regularly engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. In the ordinary course of
our business as a broker-dealer, we may, from time to time, have a long or short
position in, and buy or sell, debt or equity securities of First Charter or
Carolina First for our own account or for the accounts of our customers. Wheat
First will receive a fee from First Charter for our financial advisory services,
which include the rendering of this opinion.
In arriving at the opinion set forth below, we have conducted discussions
with members of senior management of First Charter and Carolina First concerning
their businesses and prospects and have reviewed and relied upon certain
publicly available business and financial information and certain other
information prepared or provided to us in connection with the Merger, including,
among other things, the following:
(1) First Charter's Annual Report to Stockholders, Annual Report on
Form 10-K and related financial information for the three fiscal years
ended December 31, 1998;
(2) First Charter's Quarterly Report on Form 10-Q and related
financial information for the quarters ended March 31, 1999 and June 30,
1999;
(3) Carolina First's Annual Report to Stockholders, Annual Report on
Form 10-K and related financial information for the three fiscal years
ended December 31, 1998;
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(4) Carolina First's Quarterly Report on Form 10-Q and related
financial information for the quarters ended March 31, 1999 and June 30,
1999;
(5) Certain publicly available information with respect to historical
market prices and trading activities for First Charter Stock and Carolina
First Stock;
(6) Certain publicly available information with respect to banking
companies and the financial terms of certain other mergers and acquisitions
which we deemed relevant;
(7) The Agreement;
(8) Certain estimates of the cost savings and revenue enhancements
projected by First Charter and Carolina First for the combined company;
(9) Other financial information concerning the businesses and
operations of First Charter and Carolina First, and certain internal
financial analyses and forecasts for First Charter and Carolina First
prepared by the senior managements of those companies; and
(10) Such financial studies, analyses, inquiries and other matters as
we deemed necessary.
In preparing our opinion, we have relied on and assumed the accuracy and
completeness of all information provided to us or publicly available, including
the representations and warranties of First Charter and Carolina First included
in the Agreement, and we have not assumed any responsibility for independent
verification of such information. We have relied upon the managements of First
Charter and Carolina First as to the reasonableness and achievability of their
financial and operational forecasts and projections, including the estimates of
cost savings and revenue enhancements expected to result from the Merger, and
the assumptions and bases therefor, provided to us, and, with your consent, we
have assumed that such forecasts and projections reflect the best currently
available estimates and judgments of such managements, and that such forecasts
and projections will be realized in the amounts and in the time periods
currently estimated by such managements. We also assumed, without independent
verification, that the aggregate allowances for loan losses and other
contingencies for First Charter and Carolina First are adequate to cover such
losses. Wheat First did not review any individual credit files of First Charter
and Carolina First, nor did it make an independent evaluation or appraisal of
the assets or liabilities of First Charter and Carolina First. We also assumed
that, in the course of obtaining the necessary regulatory approvals for the
Merger, no conditions will be imposed that will have a material adverse effect
on the contemplated benefits of the Merger, on a pro forma basis, to First
Charter.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on the date hereof and the information made
available to us through the date hereof. Events occurring after that date could
materially affect the assumptions and conclusions contained in our opinion. We
have not undertaken to reaffirm or revise this opinion or otherwise comment on
any events occurring after the date hereof. Wheat First's opinion is directed
only to the fairness, from a financial point of view, of the Exchange Ratio to
the holders of First Charter Stock and does not address any other aspect of the
Merger, nor does it constitute a recommendation to any shareholder of First
Charter as to how such shareholder should vote with respect to the Merger, and
it is understood that this letter is solely for the information of the Board of
Directors of First
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Charter. Wheat First's opinion does not address the relative merits of the
Merger as compared to any alternative business strategies that might exist for
First Charter, nor does it address the effect of any other business combination
in which First Charter might engage.
It is understood that this opinion may be included in its entirety in the
Joint Proxy Statement/Prospectus. This opinion may not, however, be summarized,
excerpted from or otherwise publicly referred to without our prior written
consent. On the basis of and subject to the foregoing, we are of the opinion
that as of the date hereof the Exchange Ratio is fair, from a financial point of
view, to the holders of First Charter Stock (other than Carolina First and its
affiliates).
Very truly yours,
(/s/ Wheat First Securities)
WHEAT FIRST SECURITIES
a division of First Union Securities,
Inc.
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<PAGE> 161
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
In accordance with the provisions of the NCBCA, the Registrant's Amended
and Restated Articles of Incorporation (the "Registrant's Articles") and the
Registrant's Bylaws provide that, in addition to the indemnification of
directors and officers otherwise provided by the North Carolina Business
Corporation Act (the "NCBCA"), the Registrant shall, under certain
circumstances, indemnify its directors, executive officers and certain other
designated officers against any and all liability and expenses, including
reasonable attorneys' fees, in any proceeding (including without limitation a
proceeding brought by or on behalf of the Registrant itself) arising out of
their status or activities as directors and officers, except for liability or
litigation expense incurred on account of activities of such person which at the
time taken were known or believed by such person to be clearly in conflict with
the best interests of the Registrant. The Registrant's Bylaws further provide
that the Registrant shall also indemnify such person for reasonable costs,
expenses and attorneys' fees incurred in connection with the enforcement of the
rights to indemnification granted in the Bylaws, if it is determined in
accordance with the procedures set forth in the Bylaws that such person is
entitled to indemnification thereunder. Pursuant to such bylaw and as authorized
by statute, the Registrant maintains insurance on behalf of its directors and
officers against liability asserted against such persons in such capacity
whether or not such directors or officers have the right to indemnification
pursuant to the bylaw or otherwise. In addition, the Registrant's Articles
prevent the recovery by the Registrant or any of its shareholders of monetary
damages against its directors to the fullest extent permitted by the NCBCA.
In addition to the above-described provisions, Sections 55-8-50 through
55-8-58 of the NCBCA contain provisions prescribing the extent to which
directors and officers shall or may be indemnified. Section 55-8-51 of the NCBCA
permits a corporation, with certain exceptions, to indemnify a current or former
director against liability if (i) he conducted himself in good faith, (ii) he
reasonably believed (x) in the case of conduct in his official capacity with the
corporation, that his conduct was in the best interests of the corporation and
(y) in all other cases his conduct was at least not opposed to the corporation's
best interests, and (iii) in the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful. A corporation may not
indemnify a director in connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation or in
connection with a proceeding charging improper personal benefit to him, whether
or not involving action in his official capacity, in which he was adjudged
liable on basis that personal benefit was improperly received by him. The above
standard of conduct is determined by the Board of Directors or a committee
thereof or special legal counsel or the shareholders as prescribed in Section
55-8-55.
Sections 55-8-52 and 55-8-56 of the NCBCA require a corporation to
indemnify a director or officer in the defense of any proceeding to which he was
a party because of his capacity as a director or officer against reasonable
expenses when he is wholly successful, on the merits or otherwise, in his
defense, unless the articles of incorporation provide otherwise. Upon
application, the court may order indemnification of the director or officer if
the court determines that he is entitled to mandatory indemnification under
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Section 55-8-52, in which case the court shall also order the corporation to pay
the reasonable expenses incurred to obtain court-ordered indemnification or if
he is adjudged fairly and reasonably so entitled in view of all relevant
circumstances under Section 55-8-54. Section 55-8-56 allows a corporation to
indemnify and advance expenses to an officer, employee or agent who is not a
director to the same extent, consistent with public policy, as a director or as
otherwise set forth in the Corporation's articles of incorporation or bylaws or
by resolution of the Board of Directors or contact.
In addition, Section 55-8-57 permits a corporation to provide for
indemnification of directors, officers, employees or agents, in its articles of
incorporation or bylaws or by contract or resolution, against liability in
various proceedings and to purchase and maintain insurance policies on behalf of
these individuals.
ITEM 21. EXHIBITS
The following exhibits are filed herein or have been, as noted, previously
filed:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <C> <S>
2.1 -- Agreement and Plan of Merger, dated as of November 7, 1999,
by and between Carolina First BancShares, Inc. and First
Charter Corporation (Included as Appendix A to the Joint
Proxy Statement/Prospectus included as part of this
Registration Statement.)
2.2 -- Stock Option Agreement, dated as of November 7, 1999, issued
by Carolina First BancShares, Inc. to First Charter
Corporation (Included as Appendix B to the Joint Proxy
Statement/Prospectus included as part of this Registration
Statement.)
4.1 -- Amended and Restated Articles of Incorporation of First
Charter Corporation. (Incorporated by reference to Exhibit
3.1 to the Annual Report on Form 10-K of First Charter
Corporation for the fiscal year ended December 31, 1997.)
4.2 -- Bylaws of First Charter Corporation, as amended.
(Incorporated by reference to exhibit 3.2 to the Annual
Report on Form 10-K of First Charter Corporation for the
fiscal year ended December 31, 1995.)
5.1 -- Opinion of Smith Helms Mulliss & Moore, L.L.P., as to the
validity of the shares of FCC Common Stock.
8.1 -- Opinion of Smith Helms Mulliss & Moore, L.L.P., as to
federal income tax consequences.
8.2 -- Opinion of Alston & Bird LLP, as to federal income tax
consequences.
10.1 -- Employment Agreement for James E. Burt, III.
23.1 -- Consent of KPMG Peat Marwick LLP.
23.2 -- Consents of Smith Helms Mulliss & Moore, L.L.P., (included
in Exhibits 5.1 and 8.1).
23.3 -- Consent of Alston & Bird LLP, (included in Exhibit 8.2).
23.4 -- Consent of Wheat First Securities, Inc.
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <C> <S>
23.5 -- Consent of The Robinson-Humphrey Company, LLC
23.6 -- Consent of directors and executive officers of Carolina
First BancShares, Inc. to be elected directors and executive
officers of First Charter Corporation.
24.1 -- Power of Attorney
99.1 -- Form of Proxy of Carolina First BancShares, Inc.
99.2 -- Form of Proxy of First Charter Corporation.
</TABLE>
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(2) That for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(3) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(5) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form S-4, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt
means. This includes information contained in
II-3
<PAGE> 164
documents filed subsequent to the effective date of the registration
statement through the date of responding to the request.
(6) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(7) That prior to any public reoffering of the securities registered
hereunder through the use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes that
such reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons who may
be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(8) That every prospectus: (i) that is filed pursuant to Paragraph (7)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-4
<PAGE> 165
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Concord,
State of North Carolina on this the 19th day of January, 2000.
REGISTRANT
FIRST CHARTER CORPORATION
By: * LAWRENCE M. KIMBROUGH
-----------------------------------
Lawrence M. Kimbrough
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amendment to the registration statement has been signed below by the
following persons in the capacities and at the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* LAWRENCE M. KIMBROUGH President, Chief Executive Officer,
- -------------------------------------- and Director (Principal Executive
Lawrence M. Kimbrough Officer)
* ROBERT O. BRATTON Executive Vice President (Principal
- -------------------------------------- Financial and Principal Accounting
Robert O. Bratton Officer)
* WILLIAM R. BLACK Director
- --------------------------------------
William R. Black
* MICHAEL R. COLTRANE Director
- --------------------------------------
Michael R. Coltrane
* J. ROY DAVIS, JR. Director
- --------------------------------------
J. Roy Davis, Jr.
* JOHN J. GODBOLD, JR. Director
- --------------------------------------
John J. Godbold, Jr.
* CHARLES F. HARRY III Director
- --------------------------------------
Charles F. Harry III
Director
- --------------------------------------
Frank H. Hawfield, Jr.
Director
- --------------------------------------
Jerry E. McGee
* HUGH H. MORRISON Director
- --------------------------------------
Hugh H. Morrison
* THOMAS R. REVELS Director
- --------------------------------------
Thomas R. Revels
*By: /s/ LAWRENCE M. KIMBROUGH
---------------------------------
Lawrence M. Kimbrough
As attorney in fact and agent.
</TABLE>
II-5
<PAGE> 1
EXHIBIT 5.1
[Smith Helms Mulliss & Moore, L.L.P. Letterhead]
January 19, 2000
First Charter Corporation
22 Union Street
Concord, North Carolina 28025
Re: Registration Statement on Form S-4 Related to 13,942,050
Shares of Common Stock
Ladies and Gentlemen:
We have acted as counsel to First Charter Corporation, a North Carolina
corporation (the "Corporation"), in connection with the registration under the
Securities Act of 1933, as amended, pursuant to the Registration Statement on
Form S-4 (the "Registration Statement") filed with the Securities and Exchange
Commission (the "Commission") on January 19, 2000 related to 13,942,050 shares
(the "Shares") of the Corporation's common stock (the "Common Stock"), to be
issued by the Corporation in connection with the merger (the "Merger") of
Carolina First Bancshares, Inc., a North Carolina corporation ("Carolina
First"), with and into the Corporation.
This opinion is Exhibit 5.1 to the Registration Statement.
In rendering this opinion, we have reviewed resolutions of the Board of
Directors of the Corporation approving the Merger and the issuance of the
Shares.
Based on the foregoing, we are of the opinion that the Shares are
legally authorized, and when the Registration Statement shall have been declared
effective by order of the Commission and such Shares shall have been issued upon
the terms and conditions set forth in the Registration Statement, then the
Shares shall have been validly issued, fully paid and nonassessable.
We hereby consent (1) to be named in the Registration Statement and in
the prospectus contained therein as attorneys who passed upon the legality of
the Shares and (2) to the filing of this opinion as Exhibit 5.1 to the
Registration Statement.
Very truly yours
/s/ SMITH HELMS MULLISS & MOORE, L.L.P.
SMITH HELMS MULLISS & MOORE, L.L.P.
<PAGE> 1
EXHIBIT 8.1
January 19, 2000
First Charter Corporation
Post Office Box 228
Concord, North Carolina 28026
Re: Merger of First Charter Corporation and Carolina First Bancshares, Inc.
Ladies and Gentlemen:
We have acted as tax counsel to First Charter Corporation, a North
Carolina corporation ("FCC"), in connection with the adoption of the Agreement
and Plan of Merger, dated November 7, 1999 (the "Merger Agreement"), by and
between FCC and Carolina First BancShares, Inc., a North Carolina corporation
("CFBI"). The Merger Agreement provides for the merger of CFBI with and into FCC
(the "Merger"). Except to the extent otherwise defined herein, capitalized terms
used herein have the same meaning set forth in the Merger Agreement.
In rendering this opinion we have assumed, without independent
verification, the legal capacity of natural persons, the genuineness of all
signatures on, and the authenticity of, all documents submitted to us as
originals, and the conformity to original documents of all documents submitted
to us as certified, conformed or photostatic copies thereof and the authenticity
of the originals of such documents. We have further assumed that each of the
parties to the Merger Agreement has the requisite corporate power and authority
to enter into and to perform the Merger Agreement and the transactions
contemplated thereby, that the Merger Agreement has been duly authorized,
executed and delivered by and constitutes a legal, valid and binding obligation
of each of the parties thereto, and that all requisite regulatory approvals have
been duly obtained.
In rendering the opinions set forth below, we have considered the
Merger Agreement, including the representations of FCC and CFBI in the Merger
Agreement, applicable case law and applicable provisions of (i) the Internal
Revenue Code of 1986, as amended and as currently in effect (the "Code"), (ii)
the regulations adopted under the Code, (iii) the Revenue Rulings and Revenue
Procedures published under and with respect to the Code and (iv) the North
Carolina General Statutes as currently in effect and regulations promulgated
thereunder. In addition, we are relying upon the representations made to us by
FCC in correspondence dated January 18, 2000 and the representations made to us
by CFBI in correspondence dated January 18, 2000.
No assurance can be given that legislative, administrative or judicial
decisions or interpretations may not be forthcoming that would differ materially
from the opinions set forth
<PAGE> 2
First Charter Corporation
January 19, 2000
Page 2
herein. In addition, it should be noted that an opinion of counsel represents
only that counsel's best legal judgment and has no binding effect on the
Internal Revenue Service or North Carolina Department of Revenue or official
status of any kind.
Based solely upon the matters and resources we have considered as
indicated above, and in reliance thereon, and subject to the limitations,
qualifications and exceptions set forth below, we are of the opinion that, upon
consummation of the Merger in strict accordance with all the terms and
conditions of the Merger Agreement, the transaction will be treated as follows
for federal income tax purposes:
(a) The Merger will constitute a reorganization within the meaning of
Section 368(a)(1)(A) of the Code.
(b) No gain or loss will be recognized by the holders of CFBI Common
Stock who exchange all of their CFBI Common Stock solely for FCC Common Stock
pursuant to the Merger, except with respect to any cash received in lieu of a
fractional share interest in FCC Common Stock.
(c) The tax basis of the FCC Common Stock received by holders of CFBI
Common Stock who exchange all of their CFBI Common Stock solely for FCC Common
Stock pursuant to the Merger will be the same as the tax basis of the CFBI
Common Stock surrendered in exchange for the FCC Common Stock, reduced by an
amount allocable to a fractional share interest in FCC Common Stock for which
cash is received.
(d) The holding period of the FCC Common Stock received by holders of
CFBI Common Stock who exchange all of their CFBI Common Stock solely for FCC
Common Stock pursuant to the Merger will include the period during which the
CFBI Common Stock surrendered in exchange therefore was held, provided that the
CFBI Common Stock was held as a capital asset at the Effective Time.
In rendering this opinion, we are not expressing an opinion as to the
laws of any jurisdiction other than the State of North Carolina and the United
States of America, and we assume no responsibility as to the applicability of
the laws of any other jurisdiction to the subject transaction or to the effects
of such laws thereon. Except to the extent specifically provided herein, no
opinion is expressed or implied concerning the federal income tax consequences
of the transactions described in the Merger Agreement or the consequences under
any other federal, state or local tax laws.
<PAGE> 3
First Charter Corporation
January 19, 2000
Page 3
The opinions expressed herein are for the exclusive benefit of FCC in
connection with the transactions described in the Merger Agreement. This opinion
may not be relied upon by FCC for any other purpose, and may not be relied upon,
or used, circulated or quoted, by, nor may copies thereof be provided to, any
other person or entity for any purpose whatsoever without our prior consent.
Unless the prior written consent of our firm is obtained, this opinion is not to
be quoted or otherwise referred to in any report, proxy statement or
registration statement, nor is it to be filed with or furnished to any
governmental agency or other person, except as otherwise required by law.
This opinion is specifically limited to those matters expressed herein,
effective as of the date hereof. We assume no duty to inform you of any changes
in our opinion hereafter due to any change in law or facts that may hereafter
occur or come to our attention. We hereby consent (1) to be named in the
Registration Statement and in the prospectus contained therein as attorneys who
provided an opinion as to certain tax consequences of the Merger and (2) to the
filing of this opinion as Exhibit 8.1 to the Registration Statement.
Very truly yours,
/s/ Smith Helms Mulliss & Moore, L.L.P.
SMITH HELMS MULLISS & MOORE, L.L.P.
<PAGE> 1
EXHIBIT 8.2
[Alston & Bird Letterhead]
January 19, 2000
Carolina First BancShares, Inc.
236 E. Main Street
Lincolnton, North Carolina 28092
RE: Merger of Carolina First BancShares, Inc. with and into
First Charter Corporation
Ladies and Gentlemen:
We have acted as counsel to Carolina First BancShares, Inc. ("Carolina
First"), in connection with the Merger as set forth in the Agreement and Plan of
Merger by and between Carolina First and First Charter Corporation ("FCC") dated
as of November 7, 1999 (the "Agreement"). In our capacity as counsel to Carolina
First, our opinion has been requested with respect to certain of the federal
income tax consequences of the Merger.
In the Merger, Carolina First, a North Carolina corporation, will merge
into FCC, also a North Carolina corporation, pursuant to North Carolina law, and
each outstanding share of Carolina First Common Stock (the only class
outstanding) is to be converted into 2.267 shares of FCC Common Stock. Cash will
be paid in lieu of issuance of fractional shares. Shareholders are not entitled
by state law to dissent to the Merger. All capitalized terms not otherwise
defined herein shall have the meanings given to them in the Agreement and,
unless otherwise specified, all Section references herein are to the Internal
Revenue Code of 1986, as amended (the "Code").
In giving this opinion we have reviewed, and with your permission we
have relied upon, the representations and warranties contained in or the facts
described in the Agreement and the Tax Certificates of Representations dated
January 18, 2000 in which officers of Carolina First and officers of FCC make
certain representations on behalf of Carolina First and FCC regarding the Merger
(which statements we have neither investigated nor verified) ("Tax
Certificates"). We also have reviewed such other documents as we have considered
necessary and appropriate for the purposes of this
<PAGE> 2
January 19, 2000
Page 2
opinion.
In giving this opinion we have with your permission assumed that the
statements in the Tax Certificates will be true as of the Effective Date, and
that any representation or statement made "to the best of knowledge" or
similarly qualified is correct without such qualification. As to all matters in
which a person or entity has represented that such person or entity either is
not a party to, or does not have, or is not aware of, any plan or intention,
understanding or agreement, we have assumed that there is in fact no such plan,
intention, understanding or agreement. We also assume that (a) the Merger will
be consummated in accordance with the Agreement, (b) Carolina First's only
outstanding stock (as that term is used in Section 368 of the Code) is the
Carolina First Common Stock, and (c) that Carolina First has not declared or
paid (and will not pay) any dividends in connection with the Merger.
Based on the foregoing, and subject to the limitations herein, we are
of the opinion that under existing law, upon consummation of the Merger in
accordance with the Agreement, for federal income tax purposes:
(1) The Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Code.
(2) No gain or loss will be recognized by the shareholders of
Carolina First upon the receipt of FCC Common Stock solely in
exchange for their shares of Carolina First Common Stock
(except with respect to cash received in lieu of a fractional
share interest in FCC Common Stock).
(3) The aggregate adjusted basis of the FCC Common Stock
(including any fractional share interest to which they may be
entitled) to be received by the shareholders of Carolina First
will be the same as the aggregate adjusted basis of the
Carolina First Common Stock surrendered in exchange therefor
(reduced by an amount allocable to a fractional share interest
in FCC Common Stock for which cash is received).
(4) The holding period of the FCC Common Stock (including any
fractional share interest to which the shareholder may be
entitled) to be received by the shareholders of Carolina First
in the Merger will include the holding period of the Carolina
First Common Stock surrendered in exchange therefor, provided
the Carolina First Common Stock was held as a capital asset by
the shareholder of Carolina First on the date of the exchange.
The opinion expressed herein is addressed solely to the federal income
tax consequences of the Merger. We express no opinion as to the laws of any
individual state
<PAGE> 3
January 19, 2000
Page 3
or foreign jurisdiction. Further, our opinion is limited to the specific
conclusions set forth above, and no other opinions are expressed or implied. The
opinions stated with respect to shares of Carolina First Common Stock do not
apply to any stock rights, warrants or options to acquire Carolina First Common
Stock. The opinions stated as to Carolina First shareholders are general in
nature and do not necessarily apply to any particular Carolina First
shareholder, and, for example, may not apply to shareholders who are
corporations, trusts, dealers in securities or those who must mark securities to
market, financial institutions, insurance companies, tax exempt organizations;
or to persons who are not United States citizens or resident aliens or domestic
entities (partnerships or trusts), subject to the alternative minimum tax (to
the extent that tax affects the tax consequences), or are subject to the "golden
parachute" provisions of the Code (to the extent that tax affects the tax
consequences); or to shareholders who acquired Carolina First Common Stock
pursuant to employee stock options or otherwise as compensation, who do not hold
their shares as capital assets, or who hold their shares as part of a "straddle"
or "conversion transaction."
This opinion represents our best legal judgment, but it is not binding
on any governmental agency and is not a guarantee of result. Changes to the
Code, regulations, the rulings thereunder, or changes by the courts in the
interpretation of the authorities relied upon, may be applied retroactively and
may affect the opinions expressed herein. Any material defect in any assumption
or representation on which we have relied would adversely affect our opinions.
Our opinions are limited to the tax matters specifically covered thereby, and
we have not been asked to address, nor have we addressed, any other tax
consequences of the Merger, including for example any issues related to
intercompany transactions, accounting methods, or changes in accounting methods
resulting from the Merger. This opinion is provided solely for the benefit of
and use of Carolina First and Carolina First shareholders. No other party is
entitled to rely on this opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to us under the heading "Federal
Income Tax Consequences of the Merger -- Tax Consequences of the Merger
Generally" in the Joint Proxy Statement/Prospectus. In giving such consent, we
do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act.
Very truly yours,
/s/ Alston & Bird LLP
ALSTON & BIRD LLP
CW/mcs
Enclosure
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into
this the 7th day of November, 1999 by and between First Charter Corporation
("First Charter") a North Carolina corporation, and James E. Burt, III
("Executive"), an individual residing in Lincoln County, North Carolina, and
shall become effective upon the effective time of the merger (the "Merger") of
Carolina First BancShares, Inc. ("Carolina First") with First Charter;
WHEREAS, Executive has been employed by Carolina First since June 1,
1990 and has served as the President of Carolina First since June 1, 1990 and as
Chief Executive Officer of Carolina First since December 1, 1998;
WHEREAS, pursuant to an Agreement and Plan of Merger by and between
First Charter and Carolina First (the "Merger Plan"), of even date herewith,
Carolina First will enter into the Merger, with First Charter as the survivor
corporation;
WHEREAS, First Charter desires to employ Executive, with such
employment to commence on the effective date of the merger as defined in the
Merger Plan (the "Commencement Date"), and Executive desires to accept such
employment and serve as an executive of First Charter and its wholly owned
subsidiary, First Charter National Bank (the "Bank") in accordance with the
terms of this Agreement;
WHEREAS, following the Employment Term (as defined in Section 4 below),
First Charter desires to hire Executive as a consultant, and Executive desires
to accept such consulting engagement in accordance with the terms of this
Agreement and any other terms and conditions that may be mutually agreed to by
the Parties; and
WHEREAS, Executive has or will become familiar with First Charter's and
the Bank's products, relationships, trade secrets and confidential information
relating to First Charter's, the Bank's and their respective customers'
business, products, processes and developments and may generate or have
generated confidential information, First Charter wishes to protect its
long-term interests by having Executive enter into certain non-disclosure and
non-competition covenants;
NOW, THEREFORE, in consideration of the terms contained herein,
including the compensation First Charter agrees to pay to Executive upon certain
events, Executive's employment with First Charter, Executive's covenants and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, First Charter and Executive agree as follows:
1. EMPLOYMENT DUTIES.
a. During the Employment Term (as defined in Section 4 below),
First Charter hereby employs Executive, and Executive hereby agrees to
serve, as Executive Vice President of First Charter. As such, Executive
shall have responsibilities, duties and authority reasonably accorded
to, expected of, and consistent with Executive's position as Executive
Vice President of First Charter and will report directly to the Board
of Directors (the "Board") of First Charter unless the Board directs
the Executive to report to the President and Chief Executive Officer of
First Charter. Executive shall also
<PAGE> 2
perform the duties and exercise the powers and functions that from time
to time may be assigned or vested in him by the Board and/or the Board
of Directors of First Charter's subsidiaries in relation to: (i) First
Charter; and/or (ii) any subsidiary or affiliated company of First
Charter. Executive hereby accepts this employment upon the terms and
conditions herein contained and, subject to Section 1.d., agrees to
devote substantially all of his business time, attention and efforts to
promote and further the business of First Charter and the Bank.
b. Executive shall faithfully adhere to, execute and fulfill
all lawful requests, instructions and policies made by the Board or its
authorized agent(s).
c. Between the date of this Agreement and the Commencement
Date the Board of the Bank will take any and all measures necessary to
have Executive elected Chairman of the Board of the Bank to take effect
on or with a reasonable time following the Commencement Date, and
Executive agrees to accept such election and to serve as the Chairman
of the Board of the Bank. Executive shall serve as the Chairman of the
Board of the Bank during the Employment Term (as defined in Section 4
below). In addition, the Board of the Bank will take any and all
measures necessary to have Executive elected to serve as a member of
the Board of First Charter during the Term of Agreement (as defined in
Section 4 below).
d. Except as specifically authorized in advance by the Board,
Executive shall not, during the Employment Term (as defined in Section
4 below), be engaged as an employee or otherwise in any other business
or commercial activity pursued for gain, profit or other pecuniary
advantage, except for the management of personal and family
investments. The foregoing limitations also shall not be construed as
prohibiting Executive from making personal investments in such form or
manner as will neither require his services in the operation or affairs
of the companies or enterprises in which such investments are made nor
violate the terms of Section 9 hereof, provided, however, that during
the Employment Term (as defined in Section 4 below), Executive may not
beneficially own the stock or options to acquire stock totaling more
than 5% of the outstanding shares of any corporation or entity, or
otherwise acquire or agree to acquire a significant present or future
equity or other proprietorship interests, whether as a stockholder,
partner, proprietor, or otherwise, with any enterprise, business or
division thereof, that is engaged in Competitive Activity (as defined
in Section 9 below) with First Charter and/or the Bank.
2. COMPENSATION. For all services rendered by Executive during the
Employment Term (as defined in Section 4 below), First Charter shall compensate
Executive as follows:
a. BASE SALARY. During the Employment Term (as defined in
Section 4 below), and for services rendered under this Agreement, First
Charter will pay Executive a semi-monthly base salary equal to that
amount paid to the highest compensated officer of First Charter and its
subsidiaries who reports directly to the Chief Executive Officer of
First Charter (the "Base Salary"), such compensation shall be payable
on a regular basis in
2
<PAGE> 3
accordance with First Charter's standard payroll procedures but not
less than monthly, less applicable deductions required by law.
b. BONUS. In addition to the Base Salary set forth above,
during the Employment Term (as set forth in Section 4 below) and as
long as Executive remains actively employed by First Charter, Executive
will receive an annual bonus equal to that amount paid to the highest
compensated officer of First Charter and its subsidiaries who reports
directly to the Chief Executive Officer of First Charter (the "Bonus"),
such Bonus shall be payable in accordance with First Charter's standard
bonus policy.
c. EXECUTIVE PERQUISITES, BENEFITS AND OTHER COMPENSATION.
During the Employment Term (as defined in Section 4 below), Executive
shall be entitled to receive additional benefits and compensation from
First Charter in such form and to such extent as specified below:
i. Payment of all or a portion of premiums for
coverage for Executive and his dependent family members under
health, hospitalization, disability, dental, life and other
insurance plans covering executive officers of First Charter
and its subsidiaries as may be in effect from time to time.
Benefits provided to Executive under this Section 2.c.i. will
require Executive to pay the same proportion of premiums for,
and shall provide benefits at least equal to, the benefits
then provided to First Charter's other executive employees.
ii. Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Executive in the
performance of his services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in
reasonable detail by Executive upon submission of any request
for reimbursement, and in a format and manner consistent with
First Charter's expense reporting policy.
iii. First Charter shall provide Executive with other
employee perquisites as may be available to or deemed
appropriate for Executive by the Board and participation in
all other company-wide employee benefits, including but not
limited to, any qualified and/or nonqualified retirements
plans sponsored by First Charter, as such are available from
time to time. Such current additional perquisites are listed
on Schedule A, which is attached hereto and incorporated
herein, and may be amended from time to time in the discretion
of the Board..
iv. Schedule B, which is attached hereto and
incorporated herein, lists those other supplemental benefits
in which Executive is currently entitled to participate, and
may be amended from time to time with the consent of the
parties. Such benefits will include, without limitation,
Executive's existing Deferred Compensation Agreements with
Carolina First, which First Charter hereby expressly assures
and agrees to honor in accordance with their terms.
3
<PAGE> 4
3. CONSULTANT PERIOD. During the Consultant Period (as defined in
Section 4 below), and unless otherwise mutually agreed to by the Parties in
writing, Executive will devote up to twenty (20) hours per month to providing
consultation services as mutually agreed to by the parties to First Charter.
During the Consultant Period Executive will be paid $6,250.00 per month,
equivalent to $75,000.00 per year ("Consultant Compensation"). Such payment
shall be payable to Executive on or before the 1st day of the month following
the month such services are rendered. Commencing on August 1, 2003, and
continuing on each August 1st of each year of the Consultant Period, Executive's
Consultant Compensation shall be increased by ten percent (10%). The Executive,
during the Consultant Period, shall at his own expense be entitled to
participate in First Charter's health, hospitalization, disability and other
health and wellness programs to the fullest extent permitted by such programs.
4. TERMS. The term of this Agreement shall begin on the Commencement
Date and continue until July 31, 2007, unless terminated sooner as hereinafter
provided in Section 5 below (the "Term of Agreement"). The term of Executive's
employment by First Charter shall begin on the Commencement Date and continue
until July 31, 2002, unless terminated sooner as hereafter provided in Section 5
below (the "Employment Term"). The term of the Executive's consulting for First
Charter shall begin on the day following the last day of the Employment Term and
continue until July 31, 2007, unless terminated sooner as hereinafter provided
in Section 5 below (the "Consultant Period").
5. TERMINATION. The Term of Agreement, Employment Term and/or
Consultant Period shall terminate immediately upon the occurrence of any of the
following events: (a) immediately upon the retirement or death of Executive; (b)
upon the end of the time period specified in the First Charter Corporation
Comprehensive Stock Option Plan following the Disability of Executive (as
defined below); (c) upon the effective date of Resignation by Executive Without
Good Reason (as defined below); (d) upon the effective date of Resignation by
Executive For Good Reason; (e) upon the 60th day following the date the Board
gives Executive notice of Termination Without Cause (as defined below); or (f)
upon the close of business on the date the Board gives Executive notice of
Termination for Cause (as defined below).
a. RETIREMENT. "Retirement by Executive" shall mean any
voluntary retirement by Executive with the consent of the Board.
b. DISABILITY. "Disability" shall mean Executive is
"disabled", as that term is defined in the First Charter Corporation
Comprehensive Stock Option Plan, such that he is unable to perform the
essential functions of his position with First Charter. Executive
agrees to submit such medical evidence to First Charter regarding his
disability as is reasonably requested by the Board.
c. RESIGNATION WITHOUT GOOD REASON. "Resignation Without Good
Reason" shall mean any voluntary termination or resignation by
Executive for any reason other than retirement or "Resignation for Good
Reason". Executive is required to give at least 60 days advance written
notice of Resignation Without Good Reason to the Board, and First
Charter is entitled upon receiving such notice, in its discretion, to
accept such resignation as effective on: (i) the resignation date
proposed by Executive, or (ii) such
4
<PAGE> 5
other earlier date designated by First Charter. In addition, First
Charter will be required to pay Executive his regular
salary/compensation and benefits only through Executive's final
resignation date as agreed to or revised by the Board, regardless of
whether Executive is actually permitted to perform any services for
First Charter during that period.
d. RESIGNATION FOR GOOD REASON. "Resignation For Good Reason"
shall mean any voluntary termination or resignation by Executive for:
(i) a material reduction in Executive's position, duties,
responsibilities or status, or a change in Executive's title resulting
in a material reduction in his responsibilities or position with First
Charter, in either case without Executive's consent, but excluding for
this purpose any isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied promptly by First Charter
after receiving notice from Executive and further excluding any such
reductions or changes made in good faith to conform with generally
accepted industry standards for Executive's position; (ii) a reduction
in the rate of Executive's Base Salary, Consultant Compensation or a
decrease in any Bonus to which Executive was entitled pursuant to the
First Charter Corporation Executive Incentive Plan or incentive plans
at the end of the most recently concluded fiscal year, in either case
without Executive's consent; provided, however, that a decrease in
Executive's Bonus amount shall not constitute "Good Reason" and nothing
herein shall be construed to guarantee such bonus awards if
performance, either by First Charter or Executive, is below such
targets as may reasonably and in good faith be set forth in the First
Charter Corporation Executive Incentive Plan or other incentive
arrangements; or (iii) the relocation of Executive, without his
consent, to a location outside a fifty (50) mile radius of Concord,
North Carolina. Executive is required to give written notice of
Resignation For Good Reason to the Board, and First Charter is entitled
upon receiving such notice, in its discretion, to accept such
resignation as effective on the resignation date proposed by Executive,
or such other earlier date designated by the Board. In addition, First
Charter will be required to pay Executive his regular salary and
benefits only through Executive's final resignation date as agreed to
or revised by the Board, regardless of whether Executive is actually
permitted to perform any services for the First Charter during that
period.
e. TERMINATION WITHOUT CAUSE. "Termination Without Cause"
shall mean any termination of the employment or consultancy of
Executive by First Charter for any reason other than termination due to
the retirement or death of Executive, "Disability" or "Termination for
Cause".
f. TERMINATION FOR CAUSE. "Termination for Cause" shall mean
termination of the employment or consultancy of Executive by First
Charter as a result of: (i) the willful and continued failure of
Executive to perform substantially Executive's duties with First
Charter (other than as a result of incapacity due to physical or mental
illness, and specifically excluding any failure by Executive, after
reasonable efforts, to meet performance expectations), after a written
demand for substantial performance is delivered to Executive by the
Board of Directors of First Charter which specifically identifies the
manner in which such Board believes the Executive has not substantially
5
<PAGE> 6
performed his duties; (ii) the willful engaging by Executive in illegal
conduct or grossly negligent or willful misconduct which is materially
and demonstrably injurious to First Charter or the Bank; or (iii)
Executive becomes ineligible to serve as an officer or director of a
depository institution or a depository institution holding company as a
result of any action by a regulatory or governmental agency.
For purposes of this provision, no act or failure to act on
the part of Executive shall be considered "willful" unless it is done
or admitted to be done by Executive in bad faith or without reasonable
belief that Executive's act or omission was in the best interests of
First Charter. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board of First Charter or
the Bank or based upon the advice of counsel for First Charter or the
Bank shall be conclusively presumed to be done, or omitted to be done,
by the Executive in good faith and in the best interests of First
Charter.
The termination of employment of Executive shall not be deemed
a "Termination for Cause" pursuant to subparagraphs (i) or (ii) of the
first paragraph of Section 5(f) unless and until the Executive has
received a resolution of the Board of First Charter adopted by
affirmative vote of not less than two-thirds of the entire Board of
First Charter at a meeting duly called and held for such purpose upon
reasonable notice to Executive and where the Executive is given an
opportunity, together with counsel, to be heard before such Board of
First Charter, finding that in the good faith opinion of such Board,
Executive has engaged in the conduct described in subparagraphs (i) or
(ii) of the first paragraph of Section 5(f) and specifying in
particular the details thereof.
6. RIGHTS UPON TERMINATION. Following the termination of the Term of
Agreement for any reason, except for the payment of any earned but unpaid Base
Salary or Consultant Compensation if any, due at the time of termination of the
Employment Term and Executive's general right to elect certain coverage
continuation under COBRA, and except for any payments which may be due as set
forth in this Section 6 and Section 7 below, Executive shall not be entitled to
receive any additional compensation, wages, bonuses, incentive pay, commissions,
severance pay, consideration and/or benefits of any kind from First Charter
and/or the Bank hereunder upon the termination of the Term of Agreement, except
that Executive will not forfeit any vested stock options or vested 401(k) or
pension benefits with First Charter and the Bank, if any:
a. DEATH. If termination of the Employment Term or the
Consultant Period occurs at any time due to the death of Executive,
then Executive's personal representative shall be paid all earned but
unpaid Base Salary, accrued Bonus, plus all Consultant Compensation
that would have been paid to Executive under this Agreement had
Executive completed the Term of Agreement (as those terms are described
in Sections 2, 3 and 4). In addition, all supplemental benefits,
awards, grants and options under any First Charter or Bank supplemental
agreement, stock option or grant will be fully vested notwithstanding
any other provision in such plan or grant. The Executive's personal
representative shall at his or her own expense be entitled to
participate in First Charter's
6
<PAGE> 7
health, hospitalization, disability and other health and wellness
programs to the fullest extent permitted by such programs.
b. DISABILITY. If termination of the Employment Term or the
Consultant Period occurs at any time due to the Disability of
Executive, then Executive shall be entitled to receive all earned but
unpaid Base Salary, accrued Bonus and/or Consultant Compensation that
would have been paid to Executive under this Agreement had Executive
completed the Term of Agreement (as those terms are described in
Sections 2, 3 and 4) less any amounts which Executive receives from
First Charter's long-term disability plan. In addition, all
supplemental benefits, awards, grants and options under any First
Charter or Bank supplemental agreement, stock option or grant will be
fully vested notwithstanding any other provision in such plan or grant.
c. TERMINATION FOR CAUSE OR RESIGNATION WITHOUT GOOD REASON.
If termination of the Employment Term or the Consultant Period occurs
at any time due to "Termination For Cause" by First Charter or due to
"Resignation Without Good Reason" by Executive, then Executive shall be
entitled only to receive all earned but unpaid Base Salary or
Consultant Compensation, unreimbursed expenses and/or accrued, vested
stock options and vested 401(k) or pension benefits through the
effective date of the "Termination For Cause" or "Resignation Without
Good Reason".
d. TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON.
If termination of the Employment Term or the Consultant Period occurs
at any time due to termination by First Charter "Without Cause" or due
to resignation by Executive "For Good Reason", then Executive shall be
entitled to: (i) be paid all earned but unpaid Base Salary, accrued
Bonus and/or Consultant Compensation that would have been paid to
Executive under this Agreement had Executive completed the Term of
Agreement (as those terms are described in Sections 2, 3 and 4); (ii)
continuation of health and welfare benefit coverage (including coverage
for Executive's dependents to the extent such coverage is provided by
First Charter for its employees generally) under such plans and
programs to which an Executive was entitled to participate immediately
prior to the date of the end of his employment for the greater of the
remainder of the Term of Agreement or two (2) years, provided such
continued participation is possible under the terms and provisions of
such plans and programs. In the event that participation in any such
plan or program is barred, First Charter shall arrange to provide
Executive with health insurance benefits at First Charter's expense for
the greater of the remainder of the Term of Agreement or two (2) years
with such benefits being substantially similar to those which Executive
would otherwise have been entitled to receive under such plans and
programs from which his continued participation is barred. However, in
no event will Executive receive from First Charter such health
insurance benefits if and to the extent Executive receives comparable
insurance from any other source; and (iii) acceleration of vesting of
all supplemental benefits, awards, grants, and options under any First
Charter or Bank supplemental agreement, stock option plan or grant
notwithstanding any other provision in such plan or grant.
7
<PAGE> 8
e. RETIREMENT WITH THE CONSENT OF FIRST CHARTER. If Executive
retires with the consent of First Charter, then Executive shall be
entitled to receive all earned but unpaid Base Salary, accrued Bonus
and/or Consultant Compensation (as those terms are described in
Sections 2, 3 and 4) through July 31, 2007. In addition, all
supplemental benefits, awards, grants and options under any First
Charter or Bank supplemental agreement, stock option or grant will be
fully vested notwithstanding any other provision in such plan or grant.
7. TERMINATION FOLLOWING A CHANGE IN CONTROL.
a. CHANGE IN CONTROL. For purposes of this Section 7, "Change
in Control" shall mean: (i) the consummation of a merger,
consolidation, share exchange or similar transaction of First Charter
with any other corporation as a result of which the holders of the
voting capital stock of First Charter as a group would receive less
than 50% of the voting capital stock of the surviving or resulting
corporation; (ii) the sale or transfer (other than as security for
obligations of First Charter) of substantially all the assets of First
Charter; (iii) in the absence of a prior expression of approval by the
Board of First Charter, the acquisition of more than 20% of First
Charter's voting capital stock by any person within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), other than a person, or group including a person,
who beneficially owned, as of the date of this Agreement, more than 5%
of First Charter's securities; (iv) during any period of two
consecutive years, individuals who at the beginning of such period
constitute the Board of First Charter cease for any reason to
constitute at least a majority thereof unless the election, or the
nomination for election by First Charter's shareholders, of each new
director was approved by a 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 First Charter of a nature that
would be required to be reported in response to Item 6(e) of Schedule
14A of Regulation 14A promulgated 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 First Charter by any person,
company or other entity.
b. Upon Change of Control of First Charter, Executive will
become immediately vested in any and all stock options and shares of
restricted stock previously granted to him by First Charter
notwithstanding any provision to the contrary of any plan under which
the options or restricted stock are granted. Any accrued but ungranted
stock options or restricted stock shall also be fully vested upon grant
to Executive. Executive may exercise such options only at the times and
in the method described in such options. All restrictions on shares of
First Charter's stock granted under any plan shall lapse upon a Change
of Control. First Charter will amend such options or plans in any
manner necessary to facilitate the provisions of this Section 7.b.
c. Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or distribution by
First Charter to or for the benefit of Executive (whether paid or
payable or distributed or distributable pursuant to the terms
8
<PAGE> 9
of this Agreement or otherwise) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code (the "Excise Tax"),
then, prior to the making of any Payment to Executive, a calculation
shall be made comparing (i) the net benefit to Executive of the Payment
after payment of the Excise Tax, to (ii) the net benefit if the Payment
had been limited to the extent necessary to avoid being subject to the
Excise Tax. If the amount calculated under (i) above is less than the
amount calculated under (ii) above, then the Payment shall be limited
to the extent necessary to avoid being subject to the Excise Tax (the
"Reduced Amount"). In that event, Executive shall direct which Payments
are to be modified or reduced. The determination of whether an Excise
Tax would be imposed, the amount of such Excise Tax, and the
calculation of the amounts referred to Section 7 shall be made by First
Charter's regular independent accounting firm at the expense of First
Charter or, at the election and expense of Executive, another
nationally recognized independent accounting firm (the "Accounting
Firm") which shall provide detailed supporting calculations. Any
determination by the Accounting Firm shall be binding upon First
Charter and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that
Payments which Executive was entitled to, but did not receive pursuant
to Section 7(c), could have been made without the imposition of the
Excise Tax ("Underpayment"). In such event, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by First Charter to or for the
benefit of Executive. In the event that the provisions of Code Section
280G and 4999 or any successor provisions are repealed without
succession, this Section 7.c shall be of no further force or effect.
d. Except as elected by Executive with the prior consent of
First Charter, all payments provided for under this Section 7 shall be
paid in cash (including the cash values of stock options or restricted
stock, if any) from the general funds of First Charter, and no special
or separate fund shall be established, and no other segregation of
assets shall be made to assure payment, except as provided to the
contrary in funded benefits plans. Executive shall have no right, title
or interest whatsoever in or to any investments that First Charter may
make to aid First Charter in meeting its obligations under this Section
7. Nothing contained herein, and no action taken pursuant to the
provisions hereof, shall create or be construed to create a trust of
any kind or a fiduciary relationship between First Charter and
Executive or any other person. To the extent that any person acquires a
right to receive payments from First Charter hereunder, such right
shall be no greater than the right of an unsecured creditor of First
Charter.
8. COVENANT NOT TO DISCLOSE CONFIDENTIAL INFORMATION.
a. Executive understands that his position with First Charter
is one of trust and confidence because of Executive's access to trade
secrets and confidential and proprietary business information.
Executive pledges his best efforts and utmost diligence to protect and
keep confidential the trade secrets and confidential or proprietary
business information of First Charter.
9
<PAGE> 10
b. Unless required by First Charter in connection with his
employment, and/or consultancy, or with First Charter's express written
consent, Executive agrees that he will not, either during his
employment and/or consultancy or for two years afterwards, directly or
indirectly, use, misappropriate, disclose or aid anyone else in
disclosing to any third party for Executive's own benefit or the
benefit of another all or any part of any of First Charter's or its
subsidiaries' trade secrets or confidential or proprietary information,
whether or not the information is acquired, learned, or developed by
Executive alone or in conjunction with others. Executive makes the same
pledge with regard to the confidential information of First Charter's
and its subsidiaries' customers, contractors, or others with whom First
Charter or its subsidiaries have a business relationship.
c. Executive understands that trade secrets and confidential
or proprietary information, for purposes of this Agreement, shall
include, but not be limited to, any and all versions of First Charter's
or its subsidiaries' computer software, hardware, and documentation;
all methods, processes, techniques, practices, product designs, pricing
information, billing histories, customer requirements, customer lists,
account data, loan records, employee lists and salary/commission
information, personnel matters, financial data, operating results,
plans, contractual relationships, and projections for business
opportunities for new or developing business of First Charter or its
subsidiaries; and all other confidential or proprietary information,
patents, ideas, know-how and trade secrets which are in the possession
of First Charter or its subsidiaries, no matter what the source,
including any such information that First Charter or its subsidiaries
obtain from a customer, contractor or another party or entity and that
First Charter treats or designates as confidential or proprietary
information, whether or not such information is owned or was developed
by First Charter.
d. Executive understands that First Charter expects him to
respect any trade secrets and/or confidential information of any of
Executive's former employers, business associates, or other business
relationships. Executive also agrees to respect First Charter's express
direction to Executive not to disclose to First Charter, its officers,
or any of its employees any such information so long as it remains
confidential.
9. COVENANT NOT TO COMPETE. For and in consideration of this Agreement,
the change in control protection contained herein and Executive's employment
with First Charter, Executive agrees that, unless specifically authorized by
First Charter in writing, Executive will not for a period of two (2) years from
the earlier of Executive ceasing to perform service hereunder or the scheduled
Term of Agreement has terminated or ended (whatever the reason for the end of
the employment relationship):
a. Engage in any "Competitive Activity" (as defined below)
within the "Restricted Territory" (as defined below);
b. Serve as an employee, director, owner, partner, contractor,
consultant or agent of, or own any interest in (except for beneficially
owning the stock or options to acquire stock totaling less than 5% of
the outstanding shares in a "public" competitor), any
10
<PAGE> 11
person, firm or corporation that engages in "Competitive Activity"
within the "Restricted Territory"; or
c. Engage in any "Competitive Activity" with, for or towards
or divert, attempt to divert or direct others to divert any business of
First Charter from an existing First Charter customer, a joint venturer
or other business partner of First Charter (hereinafter referred to as
an "affiliate"), or from a potential customer identified through leads
or relationships developed during the last two (2) years of Executive's
employment with First Charter, within the "Restricted Territory."
Furthermore, Executive will not during the Employment or Consultant
Period, and for a period of three (3) years from the earlier of Executive
ceasing to perform services hereunder or the scheduled Term of Agreement has
ended, solicit or hire for employment or as an independent contractor any
employee of First Charter, the Bank or any of First Charter's affiliates, or
solicit, assist, induce, recruit, or assist or induce anyone else to recruit, or
cause another person in the employ of First Charter, the Bank or any of First
Charter's affiliates to leave his employment with First Charter, the Bank or
First Charter's affiliate for the purpose of joining, associating, or becoming
employed with any business or activity with which Executive is or expects to be
directly or indirectly associated or employed.
"Competitive Activity" means: (1) the business activities engaged in by
First Charter during Executive's employment or consultancy with First Charter,
including the sales, marketing, distribution and provision of banking, financial
and insurance services or other products or services of the type of which
Executive was involved during his employment or consultancy with First Charter;
and/or (2) the performance of any other business activities competitive with
First Charter and/or the Bank for or on behalf of any financial or insurance
services entity.
"Restricted Territory" means: (1) any county where First Charter or the
Bank have offices upon the end of Executive's employment or consultancy with
First Charter; and/or (2) the geographic area encompassing a fifty (50) mile
radius of Concord, North Carolina.
Executive further agrees that except with the express written consent
of the Board, Executive will not engage in any Competitive Activity individually
or with any entity or individual other than First Charter, the Board or its
subsidiaries during the Term of Agreement.
10. ACKNOWLEDGMENTS BY EXECUTIVE.
a. Executive acknowledges that the restrictions placed upon
him by Sections 8 and 9 of this Agreement are reasonable given the
nature of Executive's position with First Charter, the area in which
First Charter markets its products and services, and the consideration
provided by First Charter to Executive pursuant to this Agreement.
Specifically, Executive acknowledges that the length of the Covenant
Not to Compete in Section 9 is reasonable and that the definitions of
"Competitive Activity" and "Restricted Territory" are reasonable.
11
<PAGE> 12
b. Executive acknowledges that all of the provisions of the
Agreement are fair and necessary to protect the interests of First
Charter.
c. Executive understands that every provision of this
Agreement is severable from each other provision of this Agreement.
Therefore, if any provision of this Agreement, including but not
limited to all provisions of Sections 8 and 9, is held invalid or
unenforceable, every other provision of this Agreement will continue to
be fully valid and enforceable. In the event that any provision of this
Agreement is determined by a court of competent jurisdiction to be void
or unenforceable, Executive and First Charter agree that such provision
shall be enforced to the extent reasonable under the circumstances and
that all other provisions shall be enforceable to the fullest extent
permissible by law. Executive and First Charter further agree that, if
any court makes such a determination, such court shall have the power
to reduce the duration, scope and/or area of such provisions and/or
delete specific words and phrases by "blue penciling" and, in its
reduced or blue penciled form, such provisions shall then be
enforceable as allowed by law.
d. Executive understands that his obligations under Sections 8
and 9 of this Agreement will continue whether or not his employment or
consultancy with First Charter is terminated voluntarily or
involuntarily, or with or without Cause or Good Reason.
11. BREACH BY EXECUTIVE. Executive agrees that in the event of any
breach or threatened breach of the provisions of Sections 8 and 9 hereof by
Executive, First Charter's remedies at law would be inadequate, and First
Charter shall be entitled to an injunction (without any bond or other security
being required), restraining such breach, and costs and reasonable attorneys'
fees relating to any such proceeding or any other legal action to enforce the
provisions of this Agreement, but nothing herein shall be construed to preclude
First Charter from pursuing any other remedies at law or in equity available to
it for any such breach or threatened breach. Moreover, Executive also agrees
that if Executive breaches any of Sections 8 or 9 above, Executive shall forfeit
at the time of the breach the right to any additional future payments or
benefits under this Agreement, except to the extent such benefits or payments
are vested and earned, it being understood and agreed that all bonuses under
this Deferred Compensation Agreement attached as Exhibit A have been fully
earned and vested on the date of this Agreement. In such case, Executive and
First Charter agree that the confidential information and non-compete
obligations contained in this Agreement shall remain valid and enforceable based
upon the consideration actually paid.
12. ASSIGNMENT AND BINDING EFFECT. This Agreement shall be binding
upon, and inure to the benefit of, Executive and First Charter and the Bank and
their respective permitted successors and assigns. Neither this Agreement nor
any right or interest hereunder shall be assignable by Executive, his
beneficiaries, or legal representatives without the First Charter's prior
written consent. First Charter will require any successor (whether direct or
indirect, by purchase, merger, consolidation, share exchange or otherwise) to
all or substantially all of the business and/or assets of First Charter, by
agreement in form and substance satisfactory to Executive, to expressly assume
and agree to perform all of First Charter's obligations under this
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<PAGE> 13
Agreement in the same manner and to the same extent that First Charter would be
required to perform it if no such succession had taken place, and to perform all
obligations to Executive as provided in Section 7. Failure of First Charter to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach of this Agreement and shall entitle Executive to compensation from
First Charter in the same amount and on the same terms as he would be entitled
to hereunder if he terminated his employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the date Executive's employment was
terminated. As used in this Agreement, "First Charter" shall mean First Charter
as defined herein and any successor to its business and/or assets as aforesaid
that executes and delivers the agreement provided for in this Section 12 or that
otherwise becomes bound by the all terms and provisions of this Agreement by
operation of law.
13. COMPLETE AGREEMENT. This Agreement replaces, upon the Commencement
Date, Executive's employment agreement with Carolina First, except for Exhibit
A, which is ratified and affirmed and shall remain in full force and effect as a
fully earned and vested benefit of Executive. Executive has no oral
representations, understandings or agreements with First Charter or any of its
officers, directors or representatives inconsistent with this Agreement. This
written Agreement, including the Exhibits and Schedules hereto, and the
applicable provisions of the Merger Plan, is the final, complete and exclusive
statement and expression of the agreement between First Charter and Executive
and of all the terms of this Agreement, and it cannot be varied, contradicted or
supplemented by evidence of any prior or contemporaneous oral or written
agreements. This written Agreement may not be later modified except by a further
writing signed by a duly authorized officer of First Charter and Executive, and
no term of this Agreement may be waived except by writing signed by the party
waiving the benefit of such term. The foregoing not withstanding, nothing
contained herein shall be deemed to affect or limit Executive's rights under
Exhibit A or to any stock options, stock appreciation rights, "STARs" or other
Rights (as defined in the Merger Plan) all of which are or will be fully earned
and vested as of the Commencement Date, and which will be assumed and honored by
First Charter at such time.
14. NOTICE. Whenever any notice is required hereunder, it shall be
given in writing addressed as follows:
To First Charter: Laura Nelson Blalock
SVP, Human Resources
First Charter National Bank
2353 Concord Lake Road, Suite 160
Concord, North Carolina 28025
To Executive: James E. Burt, III
208 Mockingbird Lane
Lincolnton, North Carolina 28092
Notice shall be deemed given and effective on the earlier of three (3) days
after the deposit in the U.S. mail of a writing addressed as above and sent
first class mail, certified, return receipt
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<PAGE> 14
requested, or when actually received. Either party may change the address for
notice by notifying the other party of such change in accordance with this
Section 14.
15. HEADINGS. The section headings herein are for reference purposes
only and are not intended in any way to describe, interpret, define or limit the
extent or intent of the Agreement or of any part hereof.
16. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of North Carolina.
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<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
/s/ Lawrence M. Kimbrough
--------------------------------------------
FIRST CHARTER CORPORATION
Name: Lawrence M. Kimbrough
Title: President and Chief Executive Officer
EXECUTIVE
/s/ James E. Burt, III
--------------------------------------------
JAMES E. BURT, III
15
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
First Charter Corporation:
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the proxy statement /
prospectus.
/s/ KPMG LLP
KPMG LLP
Charlotte, North Carolina
January 18, 2000
<PAGE> 2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Carolina First BancShares, Inc.
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the proxy statement /
prospectus.
/s/ KPMG LLP
KPMG LLP
Charlotte, North Carolina
January 18, 2000
<PAGE> 1
EXHIBIT 23.4
[WHEAT FIRST SECURITIES LETTERHEAD]
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the use in this Registration Statement on Form
S-4 of our letter to the Board of Directors of First Charter Corporation,
included as Appendix D to the Proxy Statement/Prospectus that is a part of this
Registration Statement, and to the references to such letter and to our firm in
such Prospectus. In giving such consent we do not thereby admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933 or the rules and regulations of the Securities and
Exchange Commission thereunder.
/s/ Wheat First Securities
WHEAT FIRST SECURITIES,
a division of First Union Securities, Inc.
Richmond, Virginia
Date: January 19, 2000
<PAGE> 1
EXHIBIT 23.5
THE ROBINSON-HUMPHREY COMPANY, LLC
CORPORATE FINANCE INVESTMENT BANKING
DEPARTMENT SINCE 1894
CONSENT OF THE ROBINSON-HUMPHREY COMPANY, LLC
We hereby consent to the inclusion as an annex to this Registration Statement
on Form S-4 (the "Registration Statement") of Carolina First BancShares, Inc.
and First Charter Corporation of our opinion (the "Opinion"), dated January 18,
2000, with respect to the merger of Carolina First BancShares, Inc. with First
Charter Corporation. We also consent to the references to the Opinion and our
firm in the Registration Statement.
In giving such consent, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of
1933, as amended or the rules and regulations of the Securities and Exchange
Commission thereunder.
THE ROBINSON-HUMPHREY COMPANY, LLC
/s/ The Robinson-Humphrey Company, LLC
Atlanta, Georgia
January 19, 2000
ATLANTA FINANCIAL CENTER
3333 PEACHTREE ROAD, NE - ATLANTA, GEORGIA 30326
(404) 266-6000
<PAGE> 1
Exhibit 23.6
CONSENT
I hereby consent to being named as a person chosen to become a director
of First Charter Corporation ("First Charter") in the Registration Statement on
Form S-4 relating to the merger of Carolina First Bancshares, Inc. with and into
First Charter filed with the Securities and Exchange Commission on or about
January 18, 2000.
/s/ HAROLD D. ALEXANDER
-------------------------------
Harold D. Alexander
/s/ CHARLES A. JAMES
-------------------------------
Charles A. James
/s/ WALTER H. JONES, JR.
-------------------------------
Walter H. Jones, Jr.
/s/ L. D. WARLICK, JR.
-------------------------------
L. D. Warlick, Jr.
/s/ SAMUEL C. KING, JR.
-------------------------------
Samuel C. King, Jr.
/s/ JAMES E. BURT, III
-------------------------------
James E. Burt, III
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of First Charter Corporation,
and the several undersigned Officers and Directors thereof whose signatures
appear below, hereby makes, constitutes and appoints Lawrence M. Kimbrough and
Robert O. Bratton, and each of them acting individually, its, and his true and
lawful attorneys, with power to act without any other and with full power of
substitution, to execute, deliver and file in its, and his name and on its, and
his behalf, and in each of the undersigned Officer's and Director's capacity or
capacities as shown below, (a) a Registration Statement on Form S-4 (or other
appropriate form) with respect to the registration under the Securities Act of
1933, as amended (the "Securities Act"), of a number of shares of common stock
of First Charter Corporation to be issued in exchange for the outstanding shares
of common stock of Carolina First BancShares, Inc. not owned by First Charter
Corporation upon consummation of the proposed merger of Carolina First
BancShares, Inc. with and into First Charter Corporation (hereinafter
collectively referred to as the "Securities"), and any and all documents in
support thereof or supplemental thereto and any and all amendments, including
any and all pre-effective and post-effective amendments, to the foregoing
(hereinafter collectively called the "Registration Statement"); and (b) such
registration statements, petitions, applications, consents to service of process
or other instruments, any and all documents in support thereof or supplemental
thereto, and any and all amendments or supplements to the foregoing, as may be
necessary or advisable to qualify or register the Securities covered by said
Registration Statement under such securities laws, regulations and requirements
as may be applicable; and each of First Charter Corporation and said Officers
and Directors hereby grants to said attorneys, and to each of them, full power
and authority to do and perform each and every act and thing whatsoever as said
attorneys or attorney may deem necessary or advisable to carry out fully the
intent of this power of attorney to the same extent and with the same effect as
First Charter Corporation might or could do, and as each of said Officers and
Directors might or could do personally in his capacity or capacities as
aforesaid, and each of First Charter Corporation and said Officers and Directors
hereby ratifies and confirms all acts and things which said attorneys or
attorney might do or cause to be done by virtue of this power of attorney and
its, or his signature as the same may be signed by said attorneys or attorney,
or any of them, to any or all of the following (and/or any and all amendments
and supplements to any or all thereof): such Registration Statement under the
Securities Act and all such registration statements, petitions, applications,
consents to service of process and other instruments, and any and all documents
in support thereof or supplemental thereto, under such securities laws,
regulations and requirements as may be applicable.
<PAGE> 2
IN WITNESS WHEREOF, First Charter Corporation has caused this power of
attorney to be signed on its behalf, and each of the undersigned Officers and
Directors in the capacity or capacities noted has hereunto set his hand as of
the date indicated below.
FIRST CHARTER CORPORATION
By: /s/ LAWRENCE M. KIMBROUGH
-------------------------------------
(Lawrence M. Kimbrough)
President and Chief Executive Officer
Dated January 18, 2000
Signature Title Date
- --------- ----- ----
/s/ LAWRENCE M. KIMBROUGH
- --------------------------- President, Chief Executive January 18, 2000
(Lawrence M. Kimbrough) Officer and Director
(Principal Executive Officer)
/s/ ROBERT O. BRATTON
- --------------------------- Executive Vice President January 18, 2000
(Robert O. Bratton) Principal Financial Executive
(Principal Accounting Officer)
/s/ WILLIAM R. BLACK
- --------------------------- Director January 18, 2000
(William R. Black)
/s/ MICHAEL E. COLTRANE
- --------------------------- Director January 18, 2000
(Michael E. Coltrane)
/s/ J. ROY DAVIS, JR.
- --------------------------- Director January 18, 2000
(J. Roy Davis, Jr.)
/s/ JOHN J. GODBOLD, JR.
- --------------------------- Director January 18, 2000
(John J. Godbold, Jr.)
/s/ CHARLES F. HARRY, III
- --------------------------- Director January 18, 2000
(Charles F. Harry, III)
- --------------------------- Director January 18, 2000
(Jerry E. McGee)
- --------------------------- Director January 18, 2000
(Frank H. Hawfield, Jr.)
/s/ HUGH H. MORRISON
- --------------------------- Director January 18, 2000
(Hugh H. Morrison)
2
<PAGE> 3
/s/ THOMAS R. REVELS
- --------------------------- Director January 18, 2000
(Thomas R. Revels)
3
<PAGE> 1
EXHIBIT 99.1
PROXY
CAROLINA FIRST BANCSHARES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AND MAY BE REVOKED PRIOR TO ITS EXERCISE
The undersigned hereby constitutes and appoints L. D. Warlick, Jr. and
James E. Burt, III, or either of them, as proxies, each with full power of
substitution, to vote the number of shares of common stock of Carolina First
BancShares, Inc. ("Carolina First") which the undersigned would be entitled to
vote if personally present at the Special Meeting of Carolina First shareholders
to be held at The Lincoln Cultural Center, 403 E. Main Street, Lincolnton, North
Carolina, at 2:00 p.m., local time, on March , 2000, and at any adjournment
or postponement thereof (the "Carolina First Special Meeting"), upon the
proposals described in the Joint Proxy Statement/Prospectus and the Noticeof
Carolina First Special Meeting of Shareholders, both dated February , 2000,
the receipt of which is acknowledged in the manner specified below. The
undersigned hereby revokes all prior proxies given to vote shares of common
stock at the Carolina First Special Meeting.
1. MERGER. To consider and vote upon a proposal to approve the Agreement and
Plan of Merger (the "Agreement"), dated as of November 7, 1999, by and
between Carolina First and First Charter Corporation, ("FCC") pursuant to
which (i) Carolina First will merge (the "Merger") with and into FCC, with
the effect that FCC will be the surviving corporation resulting from the
Merger, and (ii) each share of the $2.50 par value common stock of Carolina
First issued and outstanding at the effective time of the Merger (excluding
shares held by Carolina First or FCC, or their respective subsidiaries, in
each case other than shares held in a fiduciary capacity or as a result of
debts previously contracted) will be converted into and exchanged for 2.267
shares (subject to possible adjustment as set forth in the Agreement) of the
no par value common stock of FCC, and cash in lieu of issuing any fractional
share. A copy of the Agreement is included in Appendix A to the accompanying
Joint Proxy Statement/Prospectus and is incorporated by reference therein.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. OTHER BUSINESS. To transact such other business as may come properly before
the Carolina First Special Meeting or any adjournments or postponements of
the Carolina First Special Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" PROPOSAL 1 ABOVE AND OTHERWISE IN THE DISCRETION OF THE PROXIES.
PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS PROXY CARD. WHEN SHARES ARE HELD
BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY-IN-FACT, EXECUTOR,
ADMINISTRATOR, PERSONAL REPRESENTATIVE, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL
TITLE AS SUCH. IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT
OR OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME
BY AUTHORIZED PERSON.
Dated: , 2000
-----------------
SIGNATURE
------------------------------
SIGNATURE, IF HELD JOINTLY
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE> 1
EXHIBIT 99.2
PROXY
FIRST CHARTER CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AND MAY BE REVOKED PRIOR TO ITS EXERCISE
The undersigned hereby constitutes and appoints and ,
or either of them, as proxies, each with full power of substitution, to vote the
number of shares of common stock of First Charter Corporation ("FCC") which the
undersigned would be entitled to vote if personally present at the Special
Meeting of FCC shareholders to be held at , at p.m., local time, on
March , 2000, and at any adjournment or postponement thereof (the "FCC
Special Meeting"), upon the proposals described in the Joint Proxy
Statement/Prospectus and the Notice of FCC Special Meeting of Shareholders, both
dated February , 2000, the receipt of which is acknowledged in the manner
specified below. The undersigned hereby revokes all prior proxies given to vote
shares of common stock at the FCC Special Meeting.
1. MERGER. To consider and vote upon a proposal to approve the Agreement and
Plan of Merger (the "Agreement"), dated as of November 7, 1999, by and
between Carolina First BancShares, Inc. ("Carolina First") and FCC pursuant
to which (i) Carolina First will merge (the "Merger") with and into FCC,
with the effect that FCC will be the surviving corporation resulting from
the Merger, and (ii) each share of the $2.50 par value common stock of
Carolina First issued and outstanding at the effective time of the Merger
(excluding shares held by Carolina First or FCC, or their respective
subsidiaries, in each case other than shares held in a fiduciary capacity or
as a result of debts previously contracted) will be converted into and
exchanged for 2.267 shares (subject to possible adjustment as set forth in
the Agreement) of the no par value common stock of FCC, and cash in lieu of
issuing any fractional share. A copy of the Agreement is included in
Appendix A to the accompanying Joint Proxy Statement/Prospectus and is
incorporated by reference therein.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. OTHER BUSINESS. To transact such other business as may come properly before
the FCC Special Meeting or any adjournments or postponements of the FCC
Special Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" PROPOSAL 1 ABOVE AND OTHERWISE IN THE DISCRETION OF THE PROXIES.
PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS PROXY CARD. WHEN SHARES ARE HELD
BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY-IN-FACT, EXECUTOR,
ADMINISTRATOR, PERSONAL REPRESENTATIVE, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL
TITLE AS SUCH. IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT
OR OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME
BY AUTHORIZED PERSON.
Dated: , 2000
-----------------
------------------------------
SIGNATURE
------------------------------
SIGNATURE, IF HELD JOINTLY
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
