STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated September 13, 1995, between
First CharterCorporation, a North Carolina corporation
("Grantee"), and Bank of Union, a NorthCarolina commercial bank
chartered under the laws of the State of North Carolina
("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement
and Plan of Merger of even date herewith (the "Merger Agreement")
providing for the acquisition by merger of all the outstanding
shares of Issuer in exchange for shares of Grantee, which
agreement has been exectued by the parties hereto prior to the
execution of this Agreement; and
WHEREAS, as a condition and inducement to Grantee's pursuit
of the transactions contemplated by the Merger Agreement and in
consideration therefor, Issuer has agreed to grant Grantee the
Option (as hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the
Merger Agreement, the parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the
terms hereof, up to 436,261 fully paid and, except as otherwise
provided in Chapter 53 of the North Carolina General Statutes,
nonassessable shares of the common stock, $1.25 par value, of
Issuer ("Common Stock"), at a price per share equal to $9.00 (as
adjusted as set forth herein, the "Option Price"); PROVIDED, that
in no event shall the number of shares for which this Option is
exercisable exceed 19.9% of the issued and outstanding shares of
Common Stock. The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option Price are
subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common
Stock are issued or otherwise become outstanding after the date
of this Agreement (other than pursuant to this Agreement), the
number of shares of Common Stock subject to the Option shall be
increased so that, after such issuance, it equals 19.9% of the
number of shares of Common Stock then issued and outstanding
without giving effect to any shares subject or issued pursuant to
the Option. Nothing contained in this Section l(b) or elsewhere
in this Agreement shall be deemed to authorize Issuer or Grantee
to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent
Triggering Event (as hereinafter defined) shall have occurred
prior to the occurrence of an Exercise Termination Event (as
hereinafter defined). Each of the following shall be an Exercise
Termination Event: (i) the Effective Time of the Merger; (ii)
termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the
occurrence of an Initial Triggering Event; or (iii) the passage
of 12 months (or such longer period as provided in Section 10)
after termination of the Merger Agreement if such termination
follows the occurrence of an Initial Triggering Event. The term
"Holder" shall mean the holder or holders of the Option. The
rights set forth in Sections 7 and 9 shall terminate when the
right to exercise the Option terminates (other than as a result
of a complete exercise of the Option) as set forth herein.
(b) The term "Initial Triggering Event" shall mean any of
the following events or transactions occurring after the date
hereof:
(i) Issuer or any of its Subsidiaries (as hereinafter
defined) (each an "Issuer Subsidiary"), without having
received Grantee's prior written consent, shall have
entered into an agreement to engage in an Acquisition
Transaction (as hereinafter defined) with any person (the
term "person" for purposes of this Agreement having the
meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of
the Securities Exchange Act of 1934 (the "1934 Act"), and
the rules and regulations thereunder) other than Grantee or
any of its Subsidiaries (each a "Grantee Subsidiary") or the
Board of Directors of Issuer shall have recommended that the
shareholders of Issuer approve or accept any Acquisition
Transaction other than as contemplated by the Merger
Agreement or this Agreement. For purposes of this
Agreement, (a) "Acquisition Transaction" shall mean (x) a
merger or consolidation, or any similar transaction,
involving Issuer or any Significant Subsidiary (as defined
in Rule 1-02 of Regulation S-X promulgated by the Securities
and Exchange Commission (the "SEC")) of Issuer, (y) a
purchase, lease or other acquisition of all or substantially
all of the assets or deposits of Issuer or any Significant
Subsidiary of Issuer, or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange
or otherwise) of securities representing 15% or more of the
voting power of Issuer or any Significant Subsidiary of
Issuer, and (b) "Subsidiary" shall have the meaning set
forth in Rule 12b-2 under the 1934 Act:
(ii) Any person other than Grantee, any Grantee
Subsidiary or any Issuer Subsidiary acting in a fiduciary
capacity shall have acquired beneficial ownership or the
right to acquire beneficial ownership of 15% or more of the
outstanding shares of Common Stock (the term "beneficial
ownership" for purposes of this Agreement having the meaning
assigned thereto in Section 13(d) of the 1934 Act, and the
rules and regulations thereunder);
(iii) The shareholders of the Issuer shall not have
approved the transactions contemplated by the Merger
Agreement at the meeting held for that purpose or any
adjustment thereof, or such meeting shall not have been held
or shall have been canceled prior to termination of the
Merger Agreement, in either case, after Issuer's Board of
Directors shall have withdrawn or modified (or publicly
announced its intention to withdraw or modify or interest in
withdrawing or modifying) its recommendation that the
shareholders of Issuer approve the transactions contemplated
by the Merger Agreement, or Issuer or any Issuer Subsidiary,
without having received Grantee's prior written consent,
shall have authorized, recommended, proposed (or publicly
announced its intention to authorize, recommend or propose
or its interest in authorizing, recommending or proposing)
an agreement to engage in an Acquisition Transaction, with
any person other than Grantee or a Grantee Subsidiary;
(iv) Any person other than Grantee or any Grantee
Subsidiary shall have made a bona fide proposal to Issuer or
its shareholders to engage in an Acquisition Transaction;
(v) Issuer shall have willfully breached any covenant
or obligation contained in the Merger Agreement in
anticipation of engaging in an Acquisition Transaction, and
such breach would entitle Grantee to terminate the Merger
Agreement; or
(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to
which Grantee has given its prior written consent, shall
have filed an application or notice with the Federal Reserve
Board, the FDIC or other federal or state bank regulatory
authority, which application or notice has been accepted for
processing, for approval to engage in an Acquisition
Transaction.
(c) The term "Subsequent Triggering Event" shall mean any
of the following events or transactions occurring after the date
hereof:
(i) The acquisition by any person of beneficial
ownership of 25% or more of the then outstanding Common
Stock; or
(ii) The occurrence of the Initial Triggering Event
described in clause (i) of subsection (b) of this Section 2,
except that the percentage referred to in clause (z)
shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of
the occurrence of any Initial Triggering Event or Subsequent
Triggering Event (together, a "Triggering Event"), it being
understood that the giving of such notice by Issuer shall not be
a condition to the right of the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice
prior to an Exercise Termination Event (the date of which being
herein referred to as the "Notice Date") specifying (i) the total
number of shares it will purchase pursuant to such exercise and
(ii) a place and date not earlier than three business days nor
later than 10 business days from the Notice Date for the closing
of such purchase (the "Closing Date"); PROVIDED that if prior
notification to or approval of the Federal Reserve Board or any
other regulatory agency is required in connection with such
purchase, the Holder shall promptly file the required notice or
application for approval, shall promptly notify the Issuer of
such filing and shall expeditiously process the same, and the
period of time that otherwise would run pursuant to this sentence
shall run instead from the date on which any required
notification periods have expired or been terminated or such
approvals have been obtained and any requisite waiting period or
periods shall have passed. Any exercise of the Option shall be
deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this
Section 2, the Holder shall pay to Issuer the aggregate purchase
price for the shares of Common Stock purchased pursuant to the
exercise of the Option in immediately available funds by wire
transfer to a bank account designated by Issuer, PROVIDED that
failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this
Section 2, Issuer shall deliver to the Holder a certificate or
certificates representing the number of shares of Common Stock
purchased by the Holder and, if the Option should be exercised in
part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable
thereunder.
(h) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall
read substantially as follows:
"The transfer of the shares represented by this
certificate is subject to certain provisions of an
agreement between the registered holder hereof and
Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such
agreement is on file at the principal office of Issuer
and will be provided to the holder hereof without
charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the
resale restrictions of the Securities Act of 1933 (the "1933
Act") in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the Holder
shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance
satisfactory to Issuer, to the effect that such legend is not
required for purposes of the 1933 Act; (ii) the reference to the
provisions of this Agreement in the above legend shall be removed
by delivery of substitute certificate(s) without such reference
if the shares have been sold or transferred in compliance with
the provisions of this Agreement and under circumstances that do
not require the retention of such reference; and (iii) the legend
shall be removed in its entirety if the conditions in the
proceeding clauses (i) and (ii) are both satisfied. In addition,
such certificates shall bear any other legend as may be required
by law.
(i) Upon the giving by the Holder to Issuer of the
written notice of exercise of the Option provided for under
subsection (e) of this Section 2 and the tender of the applicable
purchase price in immediately available funds, the Holder shall
be deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that
certificates representing such shares of Common Stock shall not
then be actually delivered to the Holder. Issuer shall pay all
expenses, and any and all United States federal, state and local
taxes and other charges that may be payable in connection with
the preparation, issue and delivery of stock certificates under
this Section 2 in the name of the Holder or its assignee,
transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain,
free from preemptive rights, sufficient authorized but unissued
or treasury shares of Common Stock so that the Option may be
exercised without additional authorization of Common Stock after
giving effect to all other options, warrants, convertible
securities and other rights to purchase Common Stock; (ii) that
it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions
to be observed or performed hereunder by Issuer; (iii) promptly
to take all action as may from time to time be required
(including (x) complying with all premerger notification,
reporting and waiting period requirements specified in 15 U.S.C.
Section 18a and regulations promulgated thereunder and (y) in the
event, under the BHCA, or any state or other federal banking law,
prior approval of or notice to the Federal Reserve Board or to
any state or other federal regulatory authority is necessary
before the Option may be exercised, cooperating fully with the
Holder in preparing such applications or notices and providing
such information to the Federal Reserve Board or such state or
other federal regulatory authority as they may require) in order
to permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and
(iv) promptly to take all action provided herein to protect the
rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal
office of Issuer, for other Agreements providing for Options of
different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set
forth herein, in the aggregate the same number of shares of
Common Stock purchasable hereunder. The terms "Agreement" and
"Option" as used herein include any Agreements and related
Options for which this Agreement (and the Option granted hereby)
may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated,
Issuer will execute and deliver a new Agreement of like tenor and
date.
5. The number of shares of Common Stock purchasable upon the
exercise of the Option shall be subject to adjustment from time
to time as provided in this Section 5.
(a) In the event of any change in Common Stock by reason
of stock dividends, split-ups, mergers, recapitalizations,
combinations, subdivisions, conversions, exchanges of shares or
the like, the type and number of shares of Common Stock
purchasable upon exercise hereof shall be appropriately adjusted
and proper provision shall be made so that, in the event that any
additional shares of Common Stock are to be issued or otherwise
become outstanding as a result of any such change (other than
pursuant to an exercise of the Option), the number of shares of
Common Stock that remain subject to the Option shall be increased
so that, after such issuance and together with shares of Common
Stock previously issued pursuant to the exercise of the Option
(as adjusted on account of any of the foregoing changes in the
Common Stock), it equals 19.9% of the number of shares of Common
Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock
purchasable upon exercise hereof is adjusted as provided in this
Section 5, the Option Price shall be adjusted by multiplying the
Option Price by a fraction, the numerator of which shall be equal
to the number of shares of Common Stock purchasable prior to the
adjustment and the denominator of which shall be equal to the
number of shares of Common Stock purchasable after the
adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, Issuer shall, at
the request of Grantee delivered prior to an Exercise Termination
Event (or such later period as provided in Section 10) (whether
on its own behalf or on behalf of any subsequent holder of this
Option (or part thereof) or any of the shares of Common Stock
issued pursuant hereto), promptly prepare, file and keep current
a registration statement under the 1933 Act covering any shares
issued and issuable pursuant to this Option and shall use its
best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other
disposition of any shares of Common Stock issued upon total or
partial exercise of this Option ("Option Shares") in accordance
with any plan of disposition requested by Grantee. Issuer will
use its best efforts to cause such registration statement first
to become effective and then to remain effective for such period
not in excess of 120 days from the day such registration
statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions.
Grantee shall have the right to demand two such registrations.
The Issuer shall bear the costs of such registrations (including,
but not limited to, attorneys' fees, printing costs and filing
fees). The foregoing notwithstanding, if, at the time of any
request by Grantee for registration of Option Shares as provided
above, Issuer is in registration with respect to an underwritten
public offering of shares of Common Stock, and if in the good
faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters,
of such offering the inclusion of the Option Shares would
interfere with the successful marketing of the shares of Common
Stock offered by Issuer, the number of Option Shares otherwise to
be covered in the registration statement contemplated hereby may
be reduced; PROVIDED, HOWEVER, that after any such required
reduction the number of Option Shares to be included in such
offering for the account of the Holder shall constitute at least
25% of the total number of shares to be sold by the Holder and
Issuer in the aggregate; and PROVIDED FURTHER, however, that if
such reduction occurs, then the Issuer shall file a registration
statement for the balance as promptly as practical thereafter as
to which no reduction pursuant to this Section 6 shall be
permitted or occur and the Holder shall thereafter be entitled to
one additional registration. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer
shall become a party to any underwriting agreement relating to
the sale of such shares, but only to the extent of obligating
itself in respect of representations, warranties, indemnities and
other agreements customarily included in such underwriting
agreements for Issuer. Upon receiving any request under this
Section 6 from any Holder, Issuer agrees to send a copy thereof
to any other person known to Issuer to be entitled to
registration rights under this Section 6, in each case by
promptly mailing the same, postage prepaid, to the address of
record of the persons entitled to receive such copies.
7. (a) Upon the occurrence of a Subsequent Triggering Event
that occurs prior to an Exercise Termination Event, (i) at the
request of the Holder, delivered prior to an Exercise Termination
Event (or such later period as provided in Section 10), Issuer
shall repurchase the Option from the Holder at a price (the
"Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option
Price, multiplied by the number of shares for which this Option
may then be exercised and (ii) at the request of the owner of
Option Shares from time to time (the "Owner"), delivered prior to
the occurrence of an Exercise Termination Event (or such later
period as provided in Section 10), Issuer shall repurchase such
number of the Option Shares from the Owner as the Owner shall
designate at a price (the "Option Share Repurchase Price") equal
to the higher of (A) the Purchase Price paid for the Option
Shares so designated and (B) the market/offer price multiplied by
the number of Option Shares so designated. The term
"market/offer price" shall mean the highest of (i) the price per
share of Common Stock at which a tender or exchange offer
therefor has been made, (ii) the price per share of Common Stock
to be paid by any third party pursuant to an agreement with
Issuer, (iii) the highest closing price for shares of Common
Stock within the three-month period immediately preceding the
date the Holder gives notice of the required repurchase of this
Option or the Owner gives notice of the required repurchase of
Option Shares, as the case may be, or (iv) in the event of a sale
of all or substantially all of Issuer's assets or deposits, the
sum of the net price paid in such sale for such assets or
deposits, and the current market value of the remaining net
assets of Issuer as determined by an investment banking firm
selected by the Holder or the Owner, as the case may be, divided
by the number of shares of Common Stock of Issuer outstanding at
the time of such sale. In determining the market/offer price,
the value of consideration other than cash shall be determined by
an investment banking firm selected by the Holder or Owner, as
the case may be.
(b) The Holder and the Owner, as the case may be, may
exercise its right to require Issuer to repurchase the Option and
any Option Shares pursuant to this Section 7 by surrendering for
such purpose to Issuer, at its principal office, a copy of this
Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the
Holder or the Owner, as the case may be, elects to require Issuer
to repurchase this Option and/or the Option Shares in accordance
with the provisions of this Section 7. As promptly as
practicable, and in any event within ten business days after the
surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating
thereto, Issuer shall deliver or cause to be delivered to the
Holder the Option Repurchase Price and/or to the Owner the Option
Share Repurchase Price therefor or the portion thereof that
Issuer is not then prohibited under applicable law and regulation
from so delivering.
(c) To the extent that Issuer is prohibited under
applicable law or regulation, or as a consequence of
administrative policy, from repurchasing the Option and/or the
Option Shares in part or in full, Issuer shall immediately so
notify the Holder and/or the Owner and thereafter deliver or
cause to be delivered, from time to time, to the Holder and/or
the Owner, as appropriate, the portion of the Option Repurchase
Price and the Option Share Repurchase Price, respectively, that
it is no longer prohibited from delivering, within ten business
days after the date on which Issuer is no longer so prohibited;
PROVIDED, HOWEVER, that if Issuer at any time after delivery of a
notice of repurchase pursuant to paragraph (b) of this Section 7
is prohibited under applicable law or regulation, or as a
consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase
Price and the Option Share Repurchase Price, respectively, in
full (and Issuer hereby undertakes to use its best efforts to
obtain all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to
accomplish such repurchase), the Holder or Owner may revoke its
notice of repurchase of the Option or the Option Shares either in
whole or to the extent of the prohibition, whereupon, in the
latter case, Issuer shall promptly (i) deliver to the Holder
and/or the Owner, as appropriate, that portion of the Option
Purchase Price or the Option Share Repurchase Price that Issuer
is not prohibited from delivering; and (ii) deliver, as
appropriate, either (A) to the Holder, a new Agreement evidencing
the right of the Holder to purchase that number of shares of
Common Stock obtained by multiplying the number of shares of
Common Stock for which the surrendered Agreement was exercisable
at the time of delivery of the notice of repurchase by a
fraction, the numerator of which is the Option Repurchase Price
less the portion thereof theretofore delivered to the Holder and
the denominator of which is the Option Repurchase Price, or (B)
to the Owner, a certificate for the Option Shares it is then so
prohibited from repurchasing.
8. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (i) to consolidate
with or merge into any person, other than Grantee or a Grantee
Subsidiary, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or a Grantee Subsidiary, to merge into
Issuer and Issuer shall be the continuing or surviving
corporation, but, in connection with such merger, the then
outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other person or
cash or any other property or the then outstanding shares of
Common Stock shall after such merger represent less than 50% of
the outstanding shares and share equivalents of the merged
company, or (iii) to sell or otherwise transfer all or
substantially all of its or any Significant Subsidiary's assets
or deposits to any person, other than Grantee or a Grantee
Subsidiary, then, and in each such case, the agreement governing
such transaction shall make proper provision so that the Option
shall, upon the consummation of any such transaction and upon the
terms and conditions set forth herein, be converted into, or
exchanged for, an option (the "Substitute Option"), at the
election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the
Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (ii) Issuer in
a merger in which Issuer is the continuing or surviving
person and (iii) the transferee of all or substantially all
of Issuer's assets or deposits (or the assets or deposits of
a Significant Subsidiary of Issuer).
(ii) "Substitute Common Stock" shall mean the common
stock issued by the issuer of the Substitute Option upon
exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the market/offer
price, as defined in Section 7.
(iv) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the one
year immediately preceding the consolidation merger or sale
in question, but in no event higher than the closing price
of the shares of Substitute Common Stock on the day
preceding such consolidation merger or sale; PROVIDED that
if Issuer is the issuer of the Substitute Option the Average
Price shall be computed with respect to a share of common
stock issued by the person merging into Issuer or by any
company which controls or is controlled by such person as
the Holder may elect.
(c) The Substitute Option shall have the same terms as
the Option, provided, that if the terms of the Substitute Option
cannot for legal reasons, be the same as the Option such terms
shall be as similar as possible and in no event less advantageous
to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this
Agreement (after giving effect for such purpose to the provisions
of Section 9), which agreement shall be applicable to the
Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common Stock as is equal to the
Assigned Value multiplied by the number of shares of Common Stock
for which the Option is then exercisable, divided by the Average
Price. The exercise price of the Substitute Option per share of
Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the
number of shares of Common Stock for which the Option is then
exercisable and the denominator of which shall be the number of
shares of Substitute Common Stock for which the Substitute Option
is exercisable.
(e) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 19.9% of the shares of Substitute Common Stock outstanding
prior to exercise of the Substitute Option.
(f) Issuer shall not enter into any transaction described
in subsection (a) of this Section 8 unless the Acquiring
Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer
hereunder.
9. (a) At the request of the holder of the Substitute Option
(the "Substitute Option Holder"), the issuer of the Substitute
Option (the "Substitute Option Issuer") shall repurchase the
Substitute Option from the Substitute Option Holder at a price
(the "Substitute Option Repurchase Price") equal to the amount by
which (i) the highest Closing Price (as hereinafter defined)
exceeds (ii) the exercise price of the Substitute Option,
multiplied by the number of shares of Substitute Common Stock for
which the Substitute Option may then be exercised, and at the
request of the owner (the "Substitute Share Owner") of shares of
Substitute Common Stock (the "Substitute Shares"), the Substitute
Option Issuer shall repurchase the Substitute Shares at a price
(the "Substitute Share Repurchase Price") equal to the highest
Closing Price multiplied by the number of Substitute Shares so
designated. The term "Highest Closing Price" shall mean the
highest closing price for shares of Substitute Common Stock
within the three-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase
of the Substitute Option or the Substitute Share Owner gives
notice of the required repurchase of the Substitute Shares, as
applicable.
(b) The Substitute Option Holder and the Substitute Share
Owner, as the case may be, may exercise its respective right to
require the Substitute Option Issuer to repurchase the Substitute
Option and the Substitute Shares pursuant to this Section 9 by
surrendering for such purpose to the Substitute Option Issuer, at
its principal office, the agreement for such Substitute Option
(or, in the absence of such an agreement, a copy of this
Agreement) and certificates for Substitute Shares accompanied by
a written notice or notices stating that the Substitute Option
Holder or the Substitute Share Owner, as the case may be, elects
to require the Substitute Option Issuer to repurchase the
Substitute Option and/or the Substitute Shares in accordance with
the provisions of this Section 9. As promptly as practicable,
and in any event within ten business days after the surrender of
the Substitute Option and/or certificates representing Substitute
Shares and the receipt of such notice or notices relating
thereto, the Substitute Option Issuer shall deliver or cause to
be delivered to the Substitute Option Holder the Substitute
Option Repurchase Price and/or to the Substitute Share Owner the
Substitute Share Repurchase Price therefor or the portion thereof
which the Substitute Option Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation, or as a
consequence of administrative policy, from repurchasing the
Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner
and thereafter deliver or cause to be delivered, from time to
time, to the Substitute Option Holder and/or the Substitute Share
Owner, as appropriate, the portion of the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price,
respectively, that it is no longer prohibited from delivering,
within ten business days after the date on which the Substitute
Option Issuer is no longer so prohibited; PROVIDED, HOWEVER, that
if the Substitute Option Issuer is at any time after delivery of
a notice of repurchase pursuant to subsection (b) of this Section
9 prohibited under applicable law or regulation, or as a
consequence of administrative policy, from delivering to the
Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its best efforts to obtain all
required regulatory and legal approvals as promptly as
practicable in order to accomplish such repurchase), the
Substitute Option Holder or Substitute Share Owner may revoke its
notice of repurchase of the Substitute Option or the Substitute
Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall
promptly (i) deliver to the Substitute Option Holder and/or
Substitute Share Owner, as appropriate, that portion of the
Substitute Option Repurchase Price or the Substitute Share
Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Substitute Option Holder, a new Substitute
Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock
obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was
exercisable at the time of delivery of the notice of repurchase
by a fraction, the numerator of which is the Substitute Option
Repurchase Price less the portion thereof theretofore delivered
to the Substitute Option Holder and the denominator of which is
the Substitute Option Repurchase Price, or (B) to the Substitute
Share Owner, a certificate for the Substitute Option Shares it is
then so prohibited from repurchasing.
10. The periods for exercise of certain rights under Sections
2, 6, 7, 9 and 12 shall be extended: (i) to the extent necessary
to obtain all regulatory approvals for the exercise of such
rights (for so long as the Holder is using commercially
reasonable efforts to obtain such regulatory approvals), and for
the expiration of all statutory waiting periods; and (ii) to the
extent necessary to avoid liability under Section 16(b) of the
1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer, and no other corporate proceedings
on the part of Issuer are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by
Issuer and constitute a valid and binding agreement of Issuer,
enforceable in accordance with its terms.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times
from the date hereof through the termination of this Agreement in
accordance with its terms will have reserved for issuance upon
the exercise of the Option, that number of shares of Common Stock
equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares,
upon issuance pursuant thereto, will be duly authorized, validly
issued, fully paid, nonassessable (except as otherwise required
under Chapter 53 of the North Carolina General Statutes), and
will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any
preemptive rights.
12. Neither of the parties hereto may assign any of its
rights or obligations under this Agreement or the Option created
hereunder to any other person, without the express written
consent of the other party, except that in the event a Subsequent
Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions
hereof, may assign in whole or in part its rights and obligations
hereunder following such Subsequent Triggering Event; PROVIDED,
HOWEVER, that until the date 30 days following the date on which
the Federal Reserve Board or other applicable federal or state
regulatory authority has approved applications by Grantee to
acquire the shares of Common Stock subject to the Option, Grantee
may not assign its rights under the Option except in (i) a widely
dispersed public distribution, (ii) a private placement in which
no one party acquires the right to purchase in excess of 2% of
the voting shares of Issuer, (iii) an assignment to a single
party (i.e., a broker or investment banker) for the purpose of
conducting a widely disbursed public distribution on Grantee's
behalf, or (iv) any other manner approved by the Federal Reserve
Board.
13. Each of Grantee and Issuer will use its best efforts to
make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the
consummation of the transactions contemplated by this Agreement,
including without limitation applying to the Federal Reserve
Board under the BHCA for approval to acquire the shares issuable
hereunder, but Grantee shall not be obligated to apply to state
banking authorities for approval to acquire the shares of Common
Stock issuable hereunder until such time, if ever, as it deems
appropriate to do so.
14. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party
hereto and that the obligations of the parties hereto shall be
enforceable by either party hereto through injunctive or other
equitable relief.
15. If any term, provision, covenant or restriction contained
in this Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions and
covenants and restrictions contained in this Agreement shall
remain in full force and effect, and shall in no way be affected,
impaired or invalidated. If for any reason such court or
regulatory agency determines that the Holder is not permitted to
acquire, or Issuer is not permitted to repurchase pursuant to
Section 7, the full number of shares of Common Stock provided in
Section l(a) hereof (as adjusted pursuant to Section 5 hereof),
it is the express intention of Issuer to allow the Holder to
acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible, without any amendment or
modification hereof.
16. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given
when delivered in person, by fax, telecopy, or by registered or
certified mail (postage prepaid, return receipt requested) at the
respective address of the parties set forth in the Merger
Agreement.
17. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina,
regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
18. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement.
19. Except as otherwise expressly provided herein, each of
the parties hereto shallbear and pay all costs and expenses
incurred by it or on its behalf in connection with
thetransactions contemplated hereunder, including fees and
expenses of its own financialconsultants, investment bankers,
accountants and counsel.
20. Except as otherwise expressly provided herein or in the
Merger Agreement, thisAgreement contains the entire agreement
between the parties with respect to the transactionscontemplated
hereunder and supersedes all prior arrangements or understandings
with respectthereof, written or oral. The terms and conditions
of this Agreement shall inure to thebenefit of and be binding
upon the parties hereto and their respective successors
andpermitted assignees. Nothing in this Agreement, expressed or
implied, is intended to conferupon any party, other than the
parties hereto, and their respective successors except
asassignees, any rights, remedies, obligations or liabilities
under or by reason of thisAgreement, except as expressly provided
herein.
21. Capitalized terms used in this Agreement and not defined
herein shall have themeanings assigned thereto in the Merger
Agreement.
IN WITNESS WHEREOF, each of the parties had caused this
Agreement to beexecuted on its behalf by their officers thereunto
duly authorized, all as the date first abovewritten.
FIRST CHARTER CORPORATION
By: /s/ XXXXXXXX X. XXXXXXXXX
President and Chief Executive
Officer
BANK OF UNION
By: /s/ H. XXXXX XXXXXXX
President and Chief
Executive Officer
