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AGREEMENT OF AFFILIATION
AND PLAN OF MERGER
THIS AGREEMENT OF AFFILIATION AND PLAN OF MERGER, dated as of August
10, 1998 (this "Agreement"), is made by and between FirstMerit Corporation, an
Ohio corporation ("FirstMerit"), and Signal Corp., an Ohio corporation
("Signal").
WHEREAS, the respective Boards of Directors of FirstMerit and Signal
have each determined that it is in the best interests of their respective
shareholders for Signal to merge with and into FirstMerit upon the terms and
subject to the conditions set forth herein;
WHEREAS, the respective Boards of Directors of FirstMerit and Signal
have each approved the merger of Signal with and into FirstMerit, upon the terms
and subject to the conditions set forth herein;
WHEREAS, as an inducement for FirstMerit to enter into this Agreement,
certain of the shareholders of Signal have executed voting agreements in the
form attached hereto as Exhibit A;
WHEREAS, the Board of Directors of FirstMerit intends contemporaneously
with the merger of Signal with and into FirstMerit, to merge the wholly owned
subsidiaries of Signal (not including the non-banking subsidiaries), with and
into a wholly owned subsidiary of FirstMerit;
WHEREAS, the Board of Directors of FirstMerit will appoint to the
FirstMerit Board of Directors at the Effective Time, ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇, the
individual recommended by Signal's Board of Directors;
WHEREAS, as an inducement for FirstMerit to enter into this Agreement,
Signal expects (but is not obligated) to provide FirstMerit with an option to
purchase up to 19.9 percent of the capital stock of Signal, but only if certain
events occur, pursuant to the terms and conditions of the Signal Stock Purchase
Option (as hereinafter defined);
WHEREAS, for Federal income tax purposes, it is intended that the
merger shall qualify as a reorganization under the provisions of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the merger shall
be accounted for as a "pooling of interests;"
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein, and subject to the
terms and conditions set forth herein, the parties hereto hereby agree as
follows:
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1. THE MERGER
1.1. MERGER.
1.1.1. MERGER. At the Effective Time (as hereinafter defined),
Signal will be merged with and into FirstMerit (the "Merger") in accordance with
the provisions of Section 1701.78 of the Ohio General Corporation Law ("OGCL").
FirstMerit shall be the surviving corporation in the Merger and shall continue
after the Merger to be incorporated under the laws of the State of Ohio (the
"Surviving Corporation"). The Merger shall have the effects specified in the
OGCL. The name of the Surviving Corporation shall be "FirstMerit Corporation."
1.1.2. EFFECTIVE TIME. As soon as practicable following the
Closing (as hereinafter defined), FirstMerit and Signal (the "Constituent
Corporations") shall cause a certificate of merger complying with the
requirements of Section 1701.81 of the OGCL (the "Certificate of Merger") to be
filed with the Secretary of State of the State of Ohio. The Merger will become
effective at the time and date which the Certificate of Merger is filed with the
Secretary of State of the State of Ohio (the "Effective Time").
1.1.3. CONSUMMATION OF MERGER. The closing of the Merger (the
"Closing") will take place (i) at 10:00 a.m. (local time) at the principal
executive offices of FirstMerit as promptly as practicable after the date on
which all of the conditions set forth in Article 6 are satisfied or duly waived,
but in no event prior to January 1, 1999, or (ii) at such other time and place
and on such other date as FirstMerit and Signal may agree, and for purposes of
Section 7.1(h) shall be scheduled at least 15 trading days prior to the date of
Closing.
1.1.4. ARTICLES OF INCORPORATION AND REGULATIONS. The Amended
and Restated Articles of Incorporation and Code of Regulations of FirstMerit,
attached hereto as Exhibit 1.1.4, in effect immediately prior to the Effective
Time will be the Amended and Restated Articles of Incorporation and Regulations
of the Surviving Corporation after the Effective Time, until duly amended in
accordance with their respective terms and the OGCL.
1.1.5. DIRECTORS AND OFFICERS. The directors and officers of
FirstMerit immediately prior to the Effective Time will be the directors and
officers, respectively, of the Surviving Corporation, until their successors
have been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the terms of the Surviving
Corporation's Amended and Restated Articles of Incorporation and Code of
Regulations and the OGCL. Immediately following Closing, the Board of Directors
of FirstMerit will appoint to the FirstMerit Board of Directors, ▇▇. ▇▇▇▇ ▇.
▇▇▇▇▇, the individual recommended by the Signal Board of Directors, such
individual to serve in the class whose terms expire in 2002. If ▇▇. ▇▇▇▇▇ is
unable to serve, the Signal Board of Directors will recommend another individual
for appointment, subject to the approval of the FirstMerit Board of Directors.
1.1.6. SERVICE OF PROCESS. B.&McD., Inc., whose address is ▇▇▇
▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, is the statutory agent upon
whom any process, notice or demand against FirstMerit, or the Surviving
Corporation may be served.
2. CONVERSION OF SHARES
2.1. CONVERSION OF SHARES. Subject to the provisions of this Agreement,
at the Effective Time, automatically by virtue of the Merger and without any
action on the part of any party or shareholder: (a) each share of the Signal
common stock, $1 par value per share (the "Signal Common Stock"), issued and
outstanding immediately prior to the Effective Time (excluding (i) shares held
by
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Signal or any of the Signal Subsidiaries (as defined below) or by FirstMerit or
any of the FirstMerit Subsidiaries (as defined below), in each case other than
in a fiduciary capacity or as a result of debts previously contracted ("Treasury
Shares") and (ii) Dissenting Shares (as defined below)), shall cease to be
outstanding and shall be converted into and become the right to receive 1.32
(subject to adjustment pursuant to Sections 2.5 and 7.1(h)) (the "Common
Exchange Ratio") shares of common stock, no par value, of FirstMerit, including
the associated rights attached thereto under the FirstMerit Rights Plan (as
defined herein) ("FirstMerit Common Stock"); and (b) each share of the Signal
6-1/2% Cumulative Convertible Preferred Stock, Series B, no par value per share
(the "Signal Preferred Stock"), issued and outstanding immediately prior to the
Effective Time (excluding shares held by Signal or any of the Signal
Subsidiaries (as defined below) or by FirstMerit or any of the FirstMerit
Subsidiaries (as defined below), in each case other than in a fiduciary capacity
or as a result of debts previously contracted ("Treasury Shares"), shall cease
to be outstanding and shall be converted into and become the right to receive
one share of FirstMerit 6-1/2% Cumulative Convertible Preferred Stock, Series
B, no par value per share ("FirstMerit Series B Preferred Stock") which
preferred stock shall contain terms substantially identical to that of the
Signal Preferred Stock and be convertible into a number of shares of FirstMerit
Common Stock equal to the product of the Common Exchange Ratio and the number of
shares of Signal Common Stock into which the Signal Preferred Stock was
convertible immediately prior to the Effective Time.. The FirstMerit Common
Stock and FirstMerit Preferred Stock is sometimes collectively referred to
herein as the "FirstMerit Capital Stock."
2.2. FRACTIONAL SHARES. Notwithstanding any other provision hereof, no
fractional shares of FirstMerit Capital Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the Merger;
instead, FirstMerit shall pay to each holder of Signal Common or Preferred Stock
who would otherwise be entitled to a fractional share of FirstMerit Capital
Stock (after taking into account all Signal Common or Preferred Stock
certificates ("Signal Certificates") delivered by such holder) an amount in cash
(without interest) determined by: for the FirstMerit Common Stock, multiplying
such fraction by the average of the last sale prices of FirstMerit Common Stock,
as reported by The Nasdaq Stock Market National Market System ("Nasdaq/NMS")
reporting system (as reported in The Wall Street Journal or, if not reported
therein, in another authoritative source), starting 15 Nasdaq/NMS trading days
before the Effective Date and ending five Nasdaq/NMS trading days immediately
preceding the Effective Date ("Average Closing Price"); and for the FirstMerit
Series B Preferred Stock, multiplying the number of shares of FirstMerit Common
Stock into which such fraction of FirstMerit Series B Preferred Stock is
convertible by the Average Closing Price.
2.3. EXCHANGE PROCEDURES.
2.3.1. At or prior to the Effective Time, FirstMerit shall
deposit, or shall cause to be deposited, with the Exchange Agent, for the
benefit of the holders of Signal Certificates, for exchange in accordance with
this Article 2, certificates representing the shares of FirstMerit Capital Stock
("New Certificates") and an estimated amount of cash (such cash and New
Certificates, together with any dividends or distributions with respect thereto
(without any interest thereon), being hereinafter referred to as the "Exchange
Fund") to be paid pursuant to this Article 2 in exchange for outstanding shares
of Signal Capital Stock (as defined below).
2.3.2. As promptly as practicable after the Effective Date,
FirstMerit shall send or cause to be sent to each former holder of record of
shares (other than Treasury Shares or Dissenting Shares) of Signal Capital Stock
immediately prior to the Effective Time transmittal materials for use in
exchanging such shareholder's Signal Certificates for the consideration set
forth in this Article 2. FirstMerit shall cause the New Certificates into which
shares of a shareholder's Signal Capital Stock, as applicable, are
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converted on the Effective Date and any fractional share interests or dividends
or distributions which such person shall be entitled to receive to be delivered
to such shareholder upon delivery to the Exchange Agent of Signal Certificates
representing such shares of Signal Capital Stock (or indemnity reasonably
satisfactory to FirstMerit and the Exchange Agent, if any of such certificates
are lost, stolen or destroyed) owned by such shareholder. No interest will be
paid on any such cash to be paid pursuant to this Article 2 upon such delivery.
2.3.3. Notwithstanding the foregoing, neither the Exchange
Agent nor any party hereto shall be liable to any former holder of Signal
Capital Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
2.3.4. No dividends or other distributions with respect to
FirstMerit Capital Stock with a record date occurring after the Effective Time
shall be paid to the holder of any unsurrendered Signal Certificate representing
shares of Signal Capital Stock converted in the Merger into shares of such
FirstMerit Capital Stock until the holder thereof shall surrender such Signal
Certificate in accordance with this Article 2. After the surrender of a Signal
Certificate in accordance with this Article 2, the record holder thereof shall
be entitled to receive any such dividends or other distributions, without any
interest thereon, which theretofore had become payable with respect to shares of
FirstMerit Capital Stock represented by such Signal Certificate.
2.3.5. Any portion of the Exchange Fund that remains unclaimed
by the shareholders of Signal for twelve months after the Effective Time shall
be paid to FirstMerit by the Exchange Agent. Any shareholders of Signal who have
not theretofore complied with this Article 2 shall thereafter look only to
FirstMerit for payment of the shares of FirstMerit Capital Stock, cash in lieu
of any fractional shares and unpaid dividends and distributions on the
FirstMerit Capital Stock deliverable in respect of each share of Signal Capital
Stock such shareholder holds as determined pursuant to this Agreement, in each
case, without any interest thereon.
2.4. DISSENTERS' RIGHTS. To the extent provided by the OGCL, any holder
of record of the Signal Capital Stock as of the date fixed for the determination
of shareholders of Signal entitled to notice of the Signal Meeting (as defined
below), and who shall have filed with Signal, as applicable, not later than ten
(10) days after such meeting, a written demand for payment of the fair cash
value of such shares in compliance with Section 1701.85 of the OGCL, and whose
shares shall not have been voted in favor of the Merger or adoption of this
Agreement, and who comply with all of the relevant provisions of such Section
(the "Dissenting Shares"), shall cease at the Effective Time to have any of the
rights of a shareholder in respect of such shares, shall not be converted into
or be exchangeable for the right to receive the Merger Consideration (unless and
until such holders shall have failed to perfect or shall have effectively
withdrawn or lost their dissenters' rights under the OGCL), and shall only have
the right to be paid the fair cash value of such shares under Sections 1701.84
and 1701.85 of the OGCL. Any former holder of Signal Capital Stock who after the
Effective Time (i) surrenders his certificates representing shares of Signal
Capital Stock for exchange pursuant to Section 2.3 hereof, or (ii) validly
withdraws his written demand for payment of fair cash value of such shares
pursuant to Sections 1701.84 and 1702.85 of the OGCL, will thereupon be entitled
to receive the Merger Consideration as of the Effective Time pursuant to this
Agreement. If any such holder shall have failed to perfect or shall have
effectively withdrawn or lost such dissenters' rights, such holder's shares of
Signal Capital Stock shall thereupon be converted into and become exchangeable
for the right to receive, as of the Effective Time, the Merger Consideration, as
applicable, without any interest thereon, as provided in Section 2.3.
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Signal shall give FirstMerit (i) prompt notice of any written demands
for payment for any Signal Capital Stock under Section 1701.85 of the OGCL,
attempted withdrawals of such demands, and any other instruments served pursuant
to the OGCL and received by Signal relating to dissenters' rights, and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
the exercise of dissenters' rights under the OGCL. Signal shall not, except with
the prior written consent of the FirstMerit, voluntarily make any payment with
respect to any demands for payment for Signal Common or Preferred Stock under
the OGCL, offer to settle or settle any such demands or approve any withdrawal
of any such demands.
To the extent provided by the OGCL, any holder of record of FirstMerit
Common Stock as of the date fixed for the determination of stockholders of
FirstMerit entitled to notice of the FirstMerit Meeting (as hereinafter defined)
shall be entitled to relief as a dissenting shareholder in accordance, and
subject to compliance with, the OGCL.
2.5. ANTI-DILUTION PROVISIONS. In the event FirstMerit changes (or
establishes a record date for changing) the number of shares of FirstMerit
Capital Stock issued and outstanding prior to the Effective Date as a result of
a stock split, stock dividend, recapitalization or similar transaction with
respect to the outstanding FirstMerit Capital Stock and the record date therefor
shall be prior to the Effective Date, or exchanges FirstMerit Capital Stock for
a different number or kind of shares or securities or is involved in any
transaction resulting in any of the foregoing, the Common Exchange Ratio, and
the number of shares of FirstMerit Common Stock into which FirstMerit Series B
Preferred Stock is convertible, as applicable, shall be proportionately
adjusted.
2.6. TREASURY SHARES. Each of the shares of Signal Capital Stock held
as Treasury Shares immediately prior to the Effective Time shall be canceled and
retired at the Effective Time and no consideration shall be issued in exchange
therefor.
2.7. STOCK OPTIONS. The Signal Disclosure Letter (as hereinafter
defined) sets forth a list of each stock option outstanding on the date of this
Agreement (collectively, the "Signal Stock Options"), to purchase Signal Common
Stock heretofore granted pursuant to the Amended and Restated Stock Option and
Incentive Plan, the Non-Employee Director Stock Option Plan, the 1997 Omnibus
Incentive Plan, the FirstShenango Bancorp, Inc. 1993 Stock Option Plan and the
Summit Bancorp 1989 Stock Incentive Plan (the "Signal Option Plans"). The Signal
Disclosure Letter also sets forth with respect to each Signal Stock Option the
option exercise price, the number of shares subject to the option, the dates of
grant, vesting, exercisability and expiration of the option and that the option
is either an incentive or a nonqualified stock option. Without the written
consent of FirstMerit, no additional stock options shall, after the date of this
Agreement, be granted under the Signal Option Plans.
Each Signal Stock Option outstanding immediately prior to the Effective
Time shall be assumed at the Effective Time by the Surviving Corporation and
continue to be an issued and outstanding option of the Surviving Corporation in
accordance with the terms of the respective Signal Option Plans, except that:
(a) the Surviving Corporation and its Compensation Committee shall be
substituted for Signal and the committee of Signal's Board of Directors
administering such Signal Option Plans, (b) from and after the Effective Time,
each such Signal Stock Option may be exercised only for FirstMerit Common Stock
notwithstanding any contrary provision of the Signal Option Plans or stock
option agreements executed in connection therewith, (c) each such Signal Stock
Option shall at the Effective Time become an option to purchase a number of
shares of FirstMerit Common Stock equal to the product arrived at by
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multiplying the Common Exchange Ratio by the number of shares of Signal Common
Stock subject to such option immediately prior to the Effective Time rounded to
the nearest whole share, and (d) the exercise price per share of FirstMerit
Common Stock at which each such Signal Stock Option is exercisable shall be the
amount (rounded down to the next whole cent) arrived at by dividing the exercise
price per share of Signal Common Stock at which such Signal Stock Option is
exercisable immediately prior to the Effective Time by the Common Exchange
Ratio.
In addition, notwithstanding clauses (c) and (d) of the immediately
preceding sentence, each Signal Stock Option which is an incentive stock option
shall be adjusted as required by Section 424 of the Code, and the regulations
promulgated thereunder, so as not to constitute a modification, extension or
renewal of the option, within the meaning of Section 424 of the Code. The Board
of Directors of the Surviving Corporation shall take such action as may be
required under the Signal Option Plans to effectuate the foregoing. Immediately
after Closing, FirstMerit shall reserve for issuance (and, if not previously
registered pursuant to the Securities Act, register) the number of shares of
FirstMerit Common Stock necessary to satisfy FirstMerit's obligations under this
Section. Prior to the Closing, and thereafter as may be appropriate, FirstMerit
shall take such actions as are necessary to effect the provisions of this
Section, and to preserve for the holders of Signal Stock Options the benefits to
be provided pursuant to this Section.
2.8. SIGNAL CAPITAL TRUST. The Signal Disclosure Letter sets forth
information regarding Signal Capital Trust I, a Delaware business trust ("Signal
Capital Trust"). FirstMerit shall as of the Effective Time treat the Signal
Capital Trust as a subsidiary of FirstMerit and shall as of the Effective Time
assume the Indenture dated as of February 13, 1998 ("Indenture"), as well as the
Amended and Restated Declaration of Trust dated as of February 13, 1998
("Trust"), and continue the Signal Capital Trust in accordance with the terms of
the Indenture and Trust, except that: (a) the Surviving Corporation shall be
substituted for Signal; (b) the three individual "Administrative Trustees" will
be replaced with officers of the Surviving Corporation; and (c) such additional
ministerial changes as are necessary under the Indenture and Trust will be
effected. Without the written consent of FirstMerit, no additional interests
shall, after the date of this Agreement, be issued by the Signal Capital Trust.
2.9. SIGNAL SUBORDINATED NOTES. The Signal Disclosure Letter sets forth
information regarding the Signal Corp. 9.125% Subordinated Notes due March 15,
2004 ("Signal Notes"). FirstMerit shall as of the Effective Time assume the
Indenture dated March 19, 1997 ("Note Indenture"), continue the Signal Notes in
accordance with the terms of the Note Indenture, continue the due and punctual
payment of principal of and interest on the Signal Note, and the performance of
every covenant of the Note Indenture, except that: (a) the Surviving Corporation
shall be substituted for Signal; and (b) such additional ministerial changes as
are necessary under the Note Indenture will be effected. Without the written
consent of FirstMerit, no additional Signal Notes shall, after the date of this
Agreement, be issued by the Signal.
3. REPRESENTATIONS AND WARRANTIES OF FIRSTMERIT
FirstMerit hereby represents and warrants to Signal that:
3.1. CORPORATE ORGANIZATION. FirstMerit is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio and is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which its ownership or lease of property
or the nature of the business conducted by it makes such qualification
necessary, except for such jurisdictions
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in which the failure to be so qualified would not have a Material Adverse Effect
(as hereinafter defined) on FirstMerit. FirstMerit is registered as a bank
holding company under the Bank Holding Company Act of 1956, as amended (the
"BHCA"). FirstMerit has the requisite corporate power and authority to own,
lease and operate its properties and assets and to carry on its business as it
is now being conducted.
3.2. AUTHORITY. FirstMerit has the requisite corporate power and
authority to execute and deliver this Agreement and, except for any required
approval of the applicable Regulatory Authorities (as defined hereinafter) and
the approval of the FirstMerit shareholders, 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
and approved by the Board of Directors of FirstMerit, including provisions for
the resolution of certain issues by management, and no other corporate
proceedings on the part of FirstMerit are necessary to authorize this Agreement
or to consummate the transactions so contemplated other than the approval of the
FirstMerit shareholders. This Agreement has been duly executed and delivered by,
and constitutes a valid and binding obligation of, FirstMerit, enforceable
against FirstMerit in accordance with its terms, except as enforceability hereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other 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
proceedings may be brought.
3.3. CAPITALIZATION. The authorized capital stock of FirstMerit
consists of 160,000,000 shares of FirstMerit Common Stock and 7,000,000 shares
of preferred stock ("FirstMerit Preferred Stock"). As of March 31, 1998, (i)
61,245,221 shares of FirstMerit Common Stock (excluding 6,897,453 treasury
shares) were validly issued and outstanding, fully paid and nonassessable and
not issued in violation of any preemptive right of any shareholder of
FirstMerit, and (ii) no shares of FirstMerit Preferred Stock were issued and
outstanding. Since March 31, 1998 and through the date of this Agreement,
FirstMerit has not issued any additional shares of FirstMerit Common Stock or
preferred stock other than pursuant to the exercise of employee stock purchase
rights or stock options under FirstMerit Option Plans (as hereinafter defined)
outstanding on March 31, 1998, except for the 3,896,785 shares of FirstMerit
Common Stock issued by FirstMerit to the shareholders of CoBancorp Inc. on May
22, 1998 pursuant to the Agreement of Affiliation and Plan of Merger between
FirstMerit and CoBancorp Inc. dated November 2, 1998. Except as contemplated by
this Agreement, the FirstMerit Rights Plan (as hereinafter defined), the
Agreement of Affiliation and Plan of Merger between FirstMerit and Security
First Corp. dated April 5, 1998 regarding the issuance of approximately
7,800,000 shares of FirstMerit Common Stock, the agreement with ▇▇▇▇▇▇▇▇ &
Company Securities, Inc. and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. regarding the firm
underwritten offering of approximately 1,200,000 shares of FirstMerit Common
Stock, or in the FirstMerit Disclosure Letter (which is a letter attached hereto
as Exhibit 3.3, dated the date of this Agreement, from FirstMerit to Signal), as
of the date of this Agreement, there are no shares of capital stock of
FirstMerit authorized, issued or outstanding and there are no outstanding
subscriptions, options, warrants, scrip, rights, calls, convertible securities
or any other similar agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock or other securities of
FirstMerit obligating, or which may obligate, FirstMerit to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock of FirstMerit or obligating, or which may obligate, FirstMerit to grant,
extend or enter into any subscription, option, warrant, scrip, right, call,
convertible security or other similar agreement, arrangement or commitment.
Except as set forth in the FirstMerit Disclosure Letter, there are no voting
trusts or other similar agreements, arrangements or commitments to which
FirstMerit or any FirstMerit Subsidiary (as hereinafter defined) is a party with
respect to the
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voting of the capital stock of FirstMerit. All of the shares of FirstMerit
Common Stock issuable in exchange for the Signal Common Stock at the Effective
Time in accordance with this Agreement will be, when so issued, duly authorized,
validly issued, fully paid and nonassessable and will not be subject to
preemptive rights. FirstMerit has reserved for issuance the number of shares of
FirstMerit Common Stock necessary to satisfy FirstMerit's obligations under
Section 2.1.
3.4. SUBSIDIARIES. The FirstMerit Disclosure Letter sets forth, as of
the date of this Agreement, the name and state of incorporation of each banking,
and each other significant subsidiary of FirstMerit (collectively, the
"FirstMerit Subsidiaries"). Except as set forth in the FirstMerit Disclosure
Letter, each of the FirstMerit Subsidiaries is a bank, or a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation or organization and is duly qualified
to do business as a foreign corporation in each jurisdiction in which its
ownership or lease of property or the nature of the business conducted by it
makes such qualification necessary, except for such jurisdictions in which the
failure to be so qualified would not have a Material Adverse Effect on
FirstMerit. Each of the FirstMerit Subsidiaries has the requisite corporate
power and authority to own, lease and operate its properties and assets and to
carry on its businesses as they are now being conducted.
Except as set forth in the FirstMerit Disclosure Letter, as of the date
of this Agreement, all outstanding shares of capital stock of each FirstMerit
Subsidiary are owned by FirstMerit or another FirstMerit Subsidiary and are
validly issued, fully paid and nonassessable, have not been issued in violation
of any preemptive right and are owned free and clear of all liens, claims,
charges, options, encumbrances or agreements with respect thereto. Except as set
forth in the FirstMerit Disclosure Letter, as of the date of this Agreement,
neither FirstMerit nor any FirstMerit Subsidiary owns beneficially more than 5%
of any class of equity securities or any similar interests of any corporation,
bank, business, trust, association or similar organization. There are, as of the
date of this Agreement, no outstanding subscriptions, options, warrants, scrip,
rights, calls, convertible securities or any other similar agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock or other securities of any FirstMerit Subsidiary obligating, or
which may obligate, any FirstMerit Subsidiary to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of its capital stock or
obligating, or which may obligate, any FirstMerit Subsidiary to grant, extend or
enter into any subscription, option, warrant, scrip, right, call, convertible
security or other similar agreement, arrangement or commitment.
3.5. INFORMATION IN DISCLOSURE DOCUMENTS, REGISTRATION STATEMENT, ETC.
(a) None of the information with respect to FirstMerit or any
FirstMerit Subsidiary provided by FirstMerit for inclusion in the registration
statement to be filed with the Securities and Exchange Commission (the
"Commission") by FirstMerit on Form S-4 (or any other appropriate form) under
the Securities Act of 1933, as amended (the "Securities Act") for the purpose of
registering the shares of FirstMerit Capital Stock to be issued in the Merger
and the shares of FirstMerit Common Stock to be issued upon the conversion of
the FirstMerit Series B Preferred Stock (the "Registration Statement") will, at
the time it becomes effective and at the time of the Signal and FirstMerit
Meetings (as hereinafter defined), contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. None of the information with respect
to FirstMerit or any FirstMerit Subsidiary provided by FirstMerit for inclusion
in any prospectus/proxy statement or information statement or notice of
FirstMerit and Signal, or any amendments or supplements thereto, required to be
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mailed to Signal's and FirstMerit's shareholders in connection with the Merger
(the "Proxy" or "Proxy Statement") will, at the time of the mailing of the Proxy
Statement, and at the time of the Signal and FirstMerit Meetings, contain any
statement which, at the time it is made and in light of the circumstances under
which it is made, is false or misleading with respect to any material fact, or
which omits to state any material fact necessary in order to make the statements
therein not false or misleading or necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for the
Signal and FirstMerit Meeting which has become false or misleading. The
Registration Statement will comply as to form in all material respects with the
provisions of the Securities Act and the rules and regulations promulgated
thereunder. The Proxy Statement will comply as to form in all material respects
with the provisions of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated thereunder.
(b) All documents that FirstMerit is responsible for filing with any
Governmental Entity (as hereafter defined) will comply as to form in all
material respects with applicable law. None of the information with respect to
FirstMerit or any FirstMerit Subsidiary provided by FirstMerit for inclusion in
any document to be filed with any regulatory authority in connection with the
transactions contemplated hereby will contain any statement of a material fact
which is untrue as of the time that such statement is made.
3.6. CONSENTS AND APPROVALS; NO VIOLATION. Except as set forth in the
FirstMerit Disclosure Letter, neither the execution and delivery of this
Agreement by FirstMerit, nor the consummation by FirstMerit of the transactions
contemplated hereby, nor compliance by FirstMerit with any of the provisions
hereof will (a) conflict with or result in any breach of any provision of its
Amended and Restated Articles of Incorporation or Amended and Restated Code of
Regulations, (b) violate, conflict with, constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration of, or result in the creation
of any lien, security interest, charge or other encumbrance upon any of the
properties or assets of FirstMerit or any of the FirstMerit Subsidiaries under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which FirstMerit or any FirstMerit Subsidiary is a party or to
which they or any of their respective properties or assets may be subject,
except for such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of liens or other encumbrances, which, individually
or in the aggregate, will not have a Material Adverse Effect on FirstMerit, (c)
violate any judgment, ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to FirstMerit or any FirstMerit Subsidiary or any of their
respective properties or assets, except for such violations which, individually
or in the aggregate, will not have a Material Adverse Effect on FirstMerit, or
(d) require any consent, approval, authorization or permit of or from, or filing
with or notification to, any court, governmental authority or other regulatory
or administrative agency or commission, domestic or foreign ("Governmental
Entity"), except (i) pursuant to the Exchange Act and the Securities Act, (ii)
filing the certificate of merger pursuant to the OGCL, (iii) filings required
under the securities or blue sky laws of the various states, (iv) filings with,
and approval by, the Board of Governors of the Federal Reserve System (the
"FRB"), (v) filings with, and approval by, the Office of the Comptroller of the
Currency (the "OCC"), (vi) filings with, and approval by, the Office of Thrift
Supervision (the "OTS"), (vii) filings and approvals pursuant to any applicable
state takeover laws ("State Takeover Approvals"), (viii) consents, approvals,
authorizations, permits, filings or notifications in connection with compliance
with applicable provisions of federal and state securities laws relating to the
regulation of broker-dealers, investment advisors, or stock transfer agents, or
(ix) consents, approvals,
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authorizations, permits, filings or notifications which have either been
obtained or made prior to the Closing or which, if not obtained or made, will
neither, individually or in the aggregate, have a Material Adverse Effect on
FirstMerit nor restrict FirstMerit's legal authority to execute and deliver this
Agreement and consummate the transactions contemplated hereby.
3.7. REPORTS AND FINANCIAL STATEMENTS. Since December 31, 1997,
FirstMerit has filed all reports, registrations and statements, together with
any required amendments thereto, that it was required to file with the
Commission, including, but not limited to Forms 10-K, Forms 10-Q, Forms 8-K and
proxy statements (collectively, the "FirstMerit Reports"). FirstMerit has
previously made available or furnished, or, with respect to the FirstMerit
Reports filed after the date of this Agreement, will promptly furnish, Signal
with true and complete copies of each of the FirstMerit Reports. As of their
respective dates (but taking into account any amendments filed prior to the date
of this Agreement), the FirstMerit Reports complied, or, with respect to
FirstMerit Reports filed after the date of this Agreement, will comply, in all
material respects with all the rules and regulations promulgated by the
Commission and did not contain, or, with respect to FirstMerit Reports filed
after the date of this Agreement, will 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 therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated financial
statements and unaudited interim financial statements of FirstMerit included in
the FirstMerit Reports (the "FirstMerit Financial Statements") have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis (except as may be indicated therein or in the notes thereto)
and fairly present the consolidated financial position of FirstMerit and the
FirstMerit Subsidiaries as at the dates thereof and the consolidated results of
operations and cash flows for the periods then ended subject, in the case of the
unaudited interim financial statements, to normal year-end audit adjustments,
any other adjustments described therein and the absence of footnotes.
3.8. TAXES. Except as set forth in the FirstMerit Disclosure Letter,
FirstMerit and each FirstMerit Subsidiary have prepared in good faith and duly
and timely filed, all federal, state, local and foreign income, franchise,
sales, real and personal property and other tax returns and reports required to
be filed by them on or before the date of this Agreement, except where the
failure to file would not have a Material Adverse Effect on FirstMerit. Except
as set forth in the FirstMerit Disclosure Letter, FirstMerit and each FirstMerit
Subsidiary have paid, or have adequately reserved or have made adequate accruals
(in accordance with generally accepted accounting principles) with respect to,
all taxes, interest and penalties shown to be owing on all such returns or
reports. There are no liens for federal, state, local or foreign taxes upon the
assets of FirstMerit or of any FirstMerit Subsidiary, except for statutory liens
for taxes and assessments not yet delinquent or the validity of which is being
contested in good faith by appropriate proceedings. As of the date of this
Agreement, except as set forth in the FirstMerit Disclosure Letter, neither
FirstMerit nor any of the FirstMerit Subsidiaries is a party to any action or
proceeding, nor is any such action or proceeding threatened, by any Governmental
Entity for the assessment or collection of taxes which are material in amount,
and no deficiency notices or reports have been received by FirstMerit or any of
the FirstMerit Subsidiaries in respect of any material deficiencies for any tax,
assessment or government charges.
3.9. EMPLOYEE PLANS. All employee bonus, deferred compensation,
pension, retirement, profit sharing, stock option, stock purchase, employee
stock ownership, stock appreciation rights, savings, consulting, severance,
collective bargaining, group insurance, fringe benefit and other employee
benefit, incentive and welfare plans, policies, contracts and arrangements and
all trust agreements related thereto, now in effect and relating to any present
or former directors, officers or employees of FirstMerit or FirstMerit
Subsidiaries, whether or not described in Section 3(3) of Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), are identified in the
FirstMerit Disclosure Letter ("FirstMerit
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Employee Plans"). All of the FirstMerit employee plans have been maintained,
operated and administered in substantial compliance with their terms, and
FirstMerit, all of the FirstMerit Subsidiaries and all of the FirstMerit
Employee Plans currently comply, and have at all relevant times complied, in all
material respects with ERISA, the Code, and any other applicable laws.
FirstMerit has previously delivered or made available to Signal copies of all
FirstMerit Employee Plans, in each case as in effect on the date of this
Agreement.
3.10. MATERIAL CONTRACTS. Except as set forth in the FirstMerit
Disclosure Letter or disclosed in the FirstMerit Reports, neither FirstMerit nor
any FirstMerit Subsidiary is, as of the date of this Agreement, a party to, or
is bound by, (a) any material lease not made in the ordinary course of business
of FirstMerit, (b) any agreement, arrangement, or commitment not made in the
ordinary course of business which materially restricts the conduct of any line
of business of FirstMerit, (c) any material agreement, indenture or other
instrument not specifically disclosed in the FirstMerit Financial Statements
relating to the borrowing of money by FirstMerit or the guarantee by FirstMerit
of any such obligation (other than trade payables and instruments relating to
transactions entered into in the ordinary course of business), (d) any
agreement, arrangement or commitment with or to a labor union, or (e) any other
contract or agreement or amendment thereto that would be required to be filed as
an exhibit to a Form 10-K filed by FirstMerit with the Commission as of the date
of this Agreement (the "FirstMerit Contracts"). Neither FirstMerit nor any
FirstMerit Subsidiary is in default under any FirstMerit Contract, which default
is reasonably likely to have, either individually or in the aggregate, a
Material Adverse Effect on FirstMerit, and there has not occurred any event that
with the lapse of time or the giving of notice or both would constitute such a
default.
3.11. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in the
FirstMerit Disclosure Letter or disclosed in FirstMerit Reports filed by
FirstMerit with the Commission prior to the date of this Agreement, since
December 31, 1997 to the date of this Agreement, there has not been any change
in the financial condition, results of operations or business of FirstMerit and
the FirstMerit Subsidiaries that either individually or in the aggregate has had
a Material Adverse Effect on FirstMerit.
3.12. LITIGATION. Except as disclosed in the FirstMerit Disclosure
Letter or in FirstMerit Reports filed by FirstMerit with the Commission prior to
the date of this Agreement, there is no litigation, action, arbitration or
proceeding pending, or, to the best knowledge of FirstMerit, threatened against
or affecting FirstMerit or any FirstMerit Subsidiary which, either individually
or in the aggregate, is having, or insofar as reasonably can be foreseen, will
have, a Material Adverse Effect on FirstMerit, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator,
outstanding against FirstMerit or any FirstMerit Subsidiary having, or which,
insofar as reasonably can be foreseen, in the future would have, any such
effect.
3.13. COMPLIANCE WITH LAWS AND ORDERS. Except as disclosed in the
FirstMerit Disclosure Letter or in FirstMerit Reports filed by FirstMerit with
the Commission prior to the date of this Agreement, the businesses of FirstMerit
and the FirstMerit Subsidiaries are not being conducted, and have not been
conducted since December 31, 1997, in violation of any law, ordinance,
regulation, judgment, order, decree, license or permit of any Governmental
Entity, except for possible violations which individually or in the aggregate do
not, and, insofar as reasonably can be foreseen, in the future will not, have a
Material Adverse Effect on FirstMerit. Except as set forth in the FirstMerit
Disclosure Letter, no investigation or review by any Governmental Entity with
respect to FirstMerit or any of the FirstMerit Subsidiaries outside the ordinary
course of business and not generally applicable to entities engaged in the same
business is pending or, to the knowledge of FirstMerit, threatened, and no
Governmental Entity
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has indicated an intention to conduct the same in each case other than those the
outcome of which will not have a Material Adverse Effect on FirstMerit.
3.14. AGREEMENTS WITH BANK REGULATORS. As of the date of this
Agreement, except as set forth in the FirstMerit Disclosure Letter, neither
FirstMerit nor any FirstMerit Subsidiary is a party to any written agreement or
memorandum of understanding with, or a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, any Governmental Entity outside the
ordinary course of business and not generally applicable to entities engaged in
the same business, including, without limitation, cease and desist or other
orders of any bank regulatory authority, which restricts materially the conduct
of its business, or in any manner relates to its capital adequacy, its credit
policies or its management, nor has FirstMerit been advised by any Governmental
Entity that it is contemplating issuing, requiring or requesting (or is
considering the appropriateness of issuing, requiring or requesting) any such
order, directive, agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter or similar undertaking. Except as set
forth in the FirstMerit Disclosure Letter, there are no (i) material violations
or (ii) violations with respect to which refunds or restitutions which are
material in amount to FirstMerit and the FirstMerit Subsidiaries taken as a
whole may be required, cited in any compliance report to FirstMerit or any
FirstMerit Subsidiary as a result of an examination by any bank regulatory
authority.
3.15. FIRSTMERIT OWNERSHIP OF STOCK. Except as disclosed in the
FirstMerit Disclosure Letter, and except pursuant to Stock Purchase Option dated
August 11, 1998 (the "Signal Stock Purchase Option"), a copy of which is
attached hereto as Exhibit 3.15, neither FirstMerit nor, to the best of its
knowledge, any of its affiliates or associates (i) beneficially owns, directly
or indirectly, or (ii) are parties to any agreement, arrangement or commitment
for the purpose of acquiring, holding, voting or disposing of, in each case,
shares of Signal Capital Stock (other than shares of Signal Capital Stock held
in a fiduciary, trust, custodial or agency capacity by a bank or trust
subsidiary of FirstMerit) which in the aggregate, represent 2% or more of the
outstanding shares of Signal Common Stock.
3.16. FEES. Except for the fees paid and payable to ▇▇▇▇▇▇▇, ▇▇▇▇▇ &
Co., neither FirstMerit nor any FirstMerit Subsidiary has paid or become
obligated to pay any fee or commission to any broker, finder or intermediary in
connection with the transactions contemplated by this Agreement.
3.17. FIRSTMERIT ACTION. The Board of Directors of FirstMerit (at a
meeting duly called and held) has by the requisite vote (i) determined that the
Merger is advisable and in the best interests of FirstMerit and its
shareholders, (ii) authorized and approved this Agreement and the Stock Purchase
Option, and the transactions contemplated hereby and thereby, including the
Merger, (iii) directed that the Merger be submitted for consideration by
FirstMerit's shareholders entitled to vote thereon at the FirstMerit Meeting,
and (iv) authorized and approved the Merger in accordance with Chapter 1704 of
the Ohio Revised Code with the result that Chapter 1704 will not apply to the
consummation of the Merger and acquisition of shares of FirstMerit Common Stock
by the holders of Signal Capital Stock pursuant to this Agreement, the Signal
Stock Purchase Option or any of the transactions contemplated by this Agreement
or the Signal Stock Purchase Option. ▇▇▇▇▇▇▇ Sachs & Co., FirstMerit's financial
advisor, has provided the Board of Directors of FirstMerit with its opinion
that, as of the date of such duly called meeting of the Board, the Merger
Consideration is fair, from a financial point of view, to the shareholders of
Signal.
3.18. RIGHTS AGREEMENT. No person will become an "Acquiring Person" and
no "Shares Acquisition Date" or "Distribution Date" will occur under the
Shareholder Rights Agreement, as amended
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and restated, dated June 22, 1998, between FirstMerit and FirstMerit Bank, as
rights agent (the "FirstMerit Rights Plan"), and no holder of rights issued
under the FirstMerit Rights Plan shall have any rights under the FirstMerit
Rights Plan as a result of the approval, execution or delivery of this Agreement
or the consummation of the Merger. No amendments have been made prior to the
date of this Agreement to the FirstMerit Rights Plan except as specifically
referred to in this Section.
3.19. ENVIRONMENTAL MATTERS. Except as set forth in the FirstMerit
Disclosure Letter, to the best of FirstMerit's knowledge: (i) neither FirstMerit
nor any of the FirstMerit Subsidiaries has been or is in violation of or liable
under any Environmental Law (as hereinafter defined), except for any such
violations or liabilities which would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect on FirstMerit; and (ii)
none of the Loan Portfolio Properties and Other Properties Owned (as hereinafter
defined) by FirstMerit or any of the FirstMerit Subsidiaries has been since such
properties have been owned, operated or managed by FirstMerit or any of the
FirstMerit Subsidiaries is in violation of under any Environmental Law, except
for any such violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on FirstMerit. Except
as set forth in the FirstMerit Disclosure Letter, there are no actions, suits,
demands, notices, claims, investigations or proceedings pending, or to the best
of FirstMerit's knowledge threatened, relating to the liability of the Loan
Portfolio Properties and Other Properties Owned by FirstMerit or the FirstMerit
Subsidiaries under any Environmental Law, including, without limitation, any
notices, demand letters or requests for information from any federal, state or
local environmental agency relating to any such liabilities under or violations
of Environmental Law.
3.20. ACCOUNTING MATTERS. Neither FirstMerit nor, to the best of its
knowledge, any of its affiliates, has taken or agreed to take any action that
would prevent FirstMerit from accounting for the business combination to be
effected by the Merger as a "pooling of interests."
3.21. VOTE REQUIRED. The affirmative vote of the holders of two-thirds
of the outstanding shares of FirstMerit Common Stock is necessary to approve
this Agreement and the transactions contemplated hereby.
4. REPRESENTATIONS AND WARRANTIES OF SIGNAL
Signal hereby represents and warrants to FirstMerit that:
4.1. CORPORATE ORGANIZATION. Signal is a corporation duly organized,
validly existing and in good standing under the laws of the State of Ohio and is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which its ownership or lease of property or the nature
of the business conducted by it makes such qualification necessary, except for
such jurisdictions in which the failure to be so qualified would not have a
Material Adverse Effect on Signal. Signal is registered as a bank holding
company under the BHCA. Signal has the requisite corporate power and authority
to own, lease and operate its properties and assets and to carry on its business
as it is now being conducted. Signal has delivered to FirstMerit true and
complete copies of its Articles of Incorporation, as amended, and its Code of
Regulations, as amended (the "Corporate Governance Documents") as currently in
effect.
4.2. AUTHORITY. Signal has the requisite corporate power and authority
to execute and deliver this Agreement and, except for any required approval of
Signal's shareholders and the approval of the
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applicable Regulatory Authorities, 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 and approved by the
Board of Directors of Signal and no other corporate proceedings on the part of
Signal are necessary to authorize this Agreement or to consummate the
transactions so contemplated, except for approval by the shareholders of Signal
as provided in Section 6.1(a). This Agreement has been duly executed and
delivered by, and constitutes a valid and binding obligation of, Signal,
enforceable against Signal in accordance with its terms, except as
enforceability hereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other 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 proceedings may be brought, and except as
enforceability hereof may be limited by laws relating to the safety and
soundness of insured depository institutions as set forth in 12 U.S.C.
ss.1818(b) or to the appointment of a conservator or receiver by the Federal
Deposit Insurance Corporation.
4.3. CAPITALIZATION. The authorized capital stock of Signal consists of
40,000,000 shares of Signal Common Stock and 1,500,000 shares of serial
preferred stock. As of the date of this Agreement, (i) 11,735,139 shares of
Signal Common Stock (which includes all restricted stock but not including
141,591 shares held as treasury shares), and (ii) 428,342 shares of Signal
Preferred Stock, were validly issued and outstanding, fully paid and
nonassessable and not issued in violation of any preemptive right of any Signal
shareholder. As of the date of this Agreement, there were outstanding Signal
Stock Options to purchase 963,149 shares of Signal Common Stock. The Signal
Common Stock and the Signal Preferred Stock are collectively known as the
"Signal Capital Stock."
Except as contemplated by this Agreement, the Signal Stock Purchase
Option or in the Signal Disclosure Letter (which is a letter attached hereto as
Exhibit 4.3, dated the date of this Agreement, from Signal to FirstMerit, which
includes a letter from Signal to FirstMerit executed by FirstMerit listing items
previously delivered to FirstMerit by Signal which shall be deemed incorporated
by reference into the Signal Disclosure Letter), there are no shares of capital
stock of Signal authorized, issued or outstanding and there are no outstanding
subscriptions, options, warrants, scrip, rights, calls, convertible securities
or any other similar agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock or other securities of Signal
obligating, or which may obligate, Signal to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock of Signal or
obligating, or which may obligate, Signal to grant, extend or enter into any
subscription, option, warrant, scrip, right, call, convertible security or other
similar agreement, arrangement or commitment. Except as set forth in the Signal
Disclosure Letter, there are no voting trusts or other similar agreements,
arrangements, or commitments to which Signal or any Signal Subsidiary (as
hereinafter defined) is a party with respect to the voting of the capital stock
of Signal.
4.4. SUBSIDIARIES. The Signal Disclosure Letter sets forth, as of the
date of this Agreement, the name and state of incorporation of each subsidiary
of Signal (collectively, the "Signal Subsidiaries") and the authorized capital
stock of each Signal Subsidiary. Except as set forth in the Signal Disclosure
Letter, each of the Signal Subsidiaries is a bank, savings bank, business trust,
limited liability company or a corporation, duly organized, validly existing and
in good standing under the laws of its respective jurisdiction of incorporation
or organization and is duly qualified to do business as a foreign corporation in
each jurisdiction in which its ownership or lease of property or the nature of
the business conducted by it makes such qualification necessary, except for such
jurisdictions in which the failure to be so qualified would not have a Material
Adverse Effect on Signal. Each of the Signal Subsidiaries has the requisite
corporate power and authority to own, lease and operate its properties and
assets and to carry on its businesses as they are now being conducted. Signal
has delivered to FirstMerit true and complete copies
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of the Signal Subsidiaries' corporate governance documents, organizational
documents or certificates of trust, each as currently in effect.
Except as set forth in the Signal Disclosure Letter, as of the date of
this Agreement, all outstanding shares of capital stock of each Signal
Subsidiary are owned by Signal or another Signal Subsidiary and are validly
issued, fully paid and nonassessable, have not been issued in violation of any
preemptive right and are owned free and clear of all liens, claims, charges,
options, encumbrances or agreements with respect thereto. Except as set forth in
the Signal Disclosure Letter, as of the date of this Agreement, neither Signal
nor any Signal Subsidiary owns beneficially more than 5% of any class of equity
securities or any similar interests of any corporation, bank, business trust,
limited liability company, association or similar organization, other than a
Signal affiliate. There are, as of the date of this Agreement, no outstanding
subscriptions, options, warrants, scrip, rights, calls, convertible securities
or any other similar agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock or other securities of any
Signal Subsidiary obligating, or which may obligate, any Signal Subsidiary to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of its capital stock or obligating, or which may obligate, any Signal
Subsidiary to grant, extend or enter into any subscription, option, warrant,
scrip, right, call, convertible security or other similar agreement, arrangement
or commitment.
4.5. INFORMATION IN DISCLOSURE DOCUMENTS, REGISTRATION STATEMENT, ETC.
(a) None of the information with respect to Signal or any Signal
Subsidiary provided by Signal for inclusion in the Registration Statement will,
at the time it becomes effective and at the time of the Signal and FirstMerit
Meetings, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. None of the information with respect to Signal or any Signal
Subsidiary provided in writing by Signal for inclusion in the Proxy Statement
will, at the time of the mailing of the Proxy Statement, and at the time of the
Signal and FirstMerit Meetings, contain any statement which, at the time it is
made and in light of the circumstances under which it is made, is false or
misleading with respect to any material fact, or which omits to state any
material fact necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxy for the Signal or FirstMerit
Meeting which has become false or misleading. The Proxy Statement will comply as
to form in all material respects with the provisions of the Exchange Act, and
the rules and regulations promulgated thereunder.
(b) All documents that Signal is responsible for filing with any
Governmental Entity will comply as to form in all material respects with
applicable law. None of the information with respect to Signal or any Signal
Subsidiary provided by Signal for inclusion in any document to be filed with any
Governmental Entity in connection with the transactions contemplated hereby will
contain any statement of a material fact which is untrue as of the time that
such statement is made.
4.6. CONSENT AND APPROVALS; NO VIOLATION. Except as set forth in the
Signal Disclosure Letter, neither the execution and delivery of this Agreement
by Signal, nor the consummation by Signal of the transactions contemplated
hereby, nor compliance by Signal with any of the provisions hereof, will (a)
conflict with or result in any breach of any provision of its Corporate
Governance Documents, (b) violate, conflict with, constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the performance required
by, or result in a right of termination or acceleration of, or result in the
creation of any lien, security interest, charge or other encumbrance upon any of
the properties or assets of Signal or any of the Signal
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Subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Signal or any Signal Subsidiary is a party or
to which they or any of their respective properties or assets may be subject,
except for such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of liens or other encumbrances, that are set forth in
the Signal Disclosure Letter or which, individually or in the aggregate, will
not have a Material Adverse Effect on Signal, (c) violate any judgment, ruling,
order, writ, injunction, decree, statute, rule or regulation applicable to
Signal or any Signal Subsidiary or any of their respective properties or assets,
except for such violations which, individually or in the aggregate, will not
have a Material Adverse Effect on Signal, or (d) require any consent, approval,
authorization or permit of or from, or filing with or notification to, any
Governmental Entity, except (i) pursuant to the Exchange Act and the Securities
Act, (ii) filing certificates of merger pursuant to the OGCL, (iii) filings
required under the securities or blue sky laws of the various states, (iv)
filings with, and approval by, the FRB, (v) filings with, and approval by, the
OCC, (vi) filings with, and approval by, the OTS, (vii) filings and approvals
pursuant to any applicable State Takeover Approvals, (viii) consents, approvals,
authorizations, permits, filings or notifications in connection with compliance
with applicable provisions of federal and state securities laws relating to the
regulation of broker-dealers, investment advisors, or stock transfer agents, or
(ix) consents, approvals, authorizations, permits, filings or notifications
which have either been obtained or made prior to the Closing or which, if not
obtained or made, will neither, individually or in the aggregate, have a
Material Adverse Effect on Signal nor restrict Signal's legal authority to
execute and deliver this Agreement and consummate the transactions contemplated
hereby.
4.7. REPORTS AND FINANCIAL STATEMENTS. Except as set forth in the
Signal Disclosure Letter, since December 31, 1994, Signal and Signal Capital
Trust have filed all reports, registrations and statements, together with any
required amendments thereto, that they were required to file with the
Commission, including, but not limited to Forms 10-K, Forms 10-Q, Forms 8-K and
proxy statements (collectively, the "Signal Reports"). Signal has previously
made available or furnished, or, with respect to Signal Reports filed after the
date of this Agreement, will promptly furnish, FirstMerit with true and complete
copies of each of the Signal Reports. As of their respective dates (but taking
into account any amendments filed prior to the date of this Agreement), and
except as stated in the Signal Disclosure Letter, the Signal Reports complied,
or, with respect to Signal Reports filed after the date of this Agreement, will
comply, in all material respects with all the rules and regulations promulgated
by the Commission, and did not contain, or, with respect to Signal Reports filed
after the date of this Agreement, will 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 therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated financial
statements and unaudited interim financial statements of Signal included in the
Signal Reports (the "Signal Financial Statements") have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except as may be indicated therein or in the notes thereto) and fairly
present the consolidated financial position of Signal and the Signal
Subsidiaries as at the dates thereof and the consolidated results of operations
and cash flows for the periods then ended subject, in the case of the unaudited
interim financial statements, to normal year-end audit adjustments, any other
adjustments described therein and the absence of footnotes.
4.8. TAXES. Except as set forth in the Signal Disclosure Letter, Signal
and each Signal Subsidiary have prepared in good faith and duly and timely
filed, or caused to be duly and timely filed, all federal, state, local and
foreign income, franchise, sales, real and personal property and other tax
returns and reports required to be filed by them on or before the date of this
Agreement, except where the failure to file would not have a Material Adverse
Effect on Signal. Except as set forth in the Signal Disclosure Letter, Signal
and each Signal Subsidiary have paid, or have adequately reserved or have made
adequate accruals (in accordance with generally accepted accounting principles)
with respect to, all taxes,
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interest and penalties shown to be owing on all such returns and reports. The
Signal Disclosure Letter sets forth, as of the date of this Agreement, the
following information with respect to Signal and each Signal Subsidiary: (i) the
most recent tax year through which the Internal Revenue Service ("IRS") has
completed its examination of such corporation, (ii) whether there is an
examination pending by the IRS with respect to such corporation and, if so, the
tax years involved, (iii) whether such corporation has executed or filed with
the IRS any agreement which is still in effect extending the period for
assessment and collection of any federal tax and, if so, the tax years covered
by such agreement and the expiration date of such extension, and (iv) whether
there are any existing material disputes as to state, local or foreign taxes.
Except as set forth in the Signal Disclosure Letter, there are no liens for
federal, state, local or foreign taxes upon the assets of Signal or of any
Signal Subsidiary, except for statutory liens for taxes and assessments not yet
delinquent or the validity of which is being contested in good faith by
appropriate proceedings. Except as set forth in the Signal Disclosure Letter,
neither Signal nor any of the Signal Subsidiaries is a party to any action or
proceeding, nor is any such action or proceeding threatened, by any Governmental
Entity for the assessment or collection of taxes which are material in amount,
and no deficiency notices or reports have been received by Signal or any of the
Signal Subsidiaries in respect of any material deficiencies for any tax,
assessment, or government charges. After the date of this Agreement, Signal will
promptly notify FirstMerit of (i) the commencement or threat of any such action
or proceeding involving an amount of taxes material to Signal and its
subsidiaries taken as a whole, and (ii) the receipt by Signal or the Signal
Subsidiaries of any such deficiency notices or reports in respect of any
material deficiencies.
4.9. EMPLOYEE PLANS, EMPLOYEES. All employee bonus, deferred
compensation, pension, retirement, profit sharing, stock option, stock purchase,
employee stock ownership, stock appreciation rights, savings, consulting,
severance, collective bargaining, group insurance, fringe benefit and other
employee benefit, incentive and welfare plans, policies, contracts and
arrangements and all trust agreements related thereto, now in effect and
relating to any present or former directors, officers or employees of Signal or
the Signal Subsidiaries, whether or not described in Section 3(3) of ERISA
("Signal Employee Plans"), are identified in the Signal Disclosure Letter.
Signal has previously delivered or made available to FirstMerit copies of all
Signal Employee Plans, in each case as in effect on the date of this Agreement.
Except as set forth in the Signal Disclosure Letter, all of Signal
Employee Plans have been maintained, operated and administered in substantial
compliance with their terms, and Signal, all of the Signal Subsidiaries and all
of the Signal Employee Plans currently comply, and have at all relevant times
complied, in all material respects with ERISA, the Code, and any other
applicable laws. With respect to each Signal Employee Plan which is a pension
plan (as defined in Section 3(2) of ERISA): (a) except as set forth in the
Signal Disclosure Letter each pension plan as amended (and any trust relating
thereto) intended to be a qualified plan under Section 401(a) of the Code either
has been determined by the IRS to be so qualified or is the subject of a pending
application for such determination that was timely filed, (b) except as set
forth in the Signal Disclosure Letter, would be fully funded (calculated using
the interest rate and other actuarial assumptions mandated by the Pension
Benefit Guaranty Corporation ("PBGC")) if terminated at the Effective Time and
there is no accumulated funding deficiency (as defined in Section 302 of ERISA
and Section 412 of the Code), whether or not waived, and no waiver of the
minimum funding standards of such sections has been requested from the IRS, (c)
no reportable event described in Section 4043 of ERISA has occurred, (d) no
defined benefit plan has been terminated, nor has the PBGC instituted
proceedings to terminate a defined benefit plan or to appoint a trustee or
administrator of a defined benefit plan, and no circumstances exist that
constitute grounds under Section 4042 of ERISA
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entitling the PBGC to institute any such proceedings, and (e) no pension plan is
a "multi-employer plan" within the meaning of Section 3(37) of ERISA.
Except as set forth in the Signal Disclosure Letter, no Signal Employee
Plan provides benefits, including, without limitation, death or medical benefits
(whether or not insured), with respect to current or former employees beyond
their retirement or other termination of service (other than (i) temporary
coverage mandated by applicable law, (ii) death benefits or retirement benefits
under any "employee pension plan," as that term is defined in Section 3(2) of
ERISA, (iii) deferred compensation benefits accrued as liabilities on the books
of Signal or any Signal Subsidiary, or (iv) benefits the full cost of which are
borne by the current or former employee (or his or her beneficiary)).
Except as set forth in the Signal Disclosure Letter, all employees of
Signal and the Signal Subsidiaries are "at will" and there are no employment,
consulting or like agreements, written or oral, expressed or implied.
4.10. MATERIAL CONTRACTS. Except as set forth in the Signal Disclosure
Letter or disclosed in the Signal Reports, neither Signal nor any Signal
Subsidiary is, as of the date of this Agreement, a party to, or is bound by, (a)
any material lease not made in the ordinary course of business of Signal, (b)
any agreement, arrangement, or commitment not made in the ordinary course of
business which materially restricts the conduct of any line of business of
Signal, (c) any benefit agreements providing for aggregate payments to any
person in any calendar year in excess of $100,000, (d) any material agreement,
indenture or other instrument not specifically disclosed in the Signal Financial
Statements relating to the borrowing of money by Signal or the guarantee by
Signal of any such obligation (other than trade payables and instruments
relating to transactions entered into in the ordinary course of business), (e)
any agreement, arrangement or commitment with or to a labor union or (f) any
other contract or agreement or amendment thereto that would be required to be
filed as an exhibit to a Form 10-K filed by Signal with the Commission (the
agreements and other documents referred to in clauses (a) through (f) of this
sentence, collectively, the "Signal Contracts"). Except as stated in the Signal
Disclosure Letter, neither Signal nor any Signal Subsidiary is in default under
any Signal Contract, which default is reasonably likely to have, either
individually or in the aggregate, a Material Adverse Effect on Signal, and there
has not occurred any event that with the lapse of time or the giving of notice
or both would constitute such a default.
4.11. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in the
Signal Disclosure Letter or disclosed in Signal Reports filed by Signal with the
Commission prior to the date of this Agreement, since December 31, 1997 to the
date of this Agreement, there has not been any change in the financial
condition, results of operations or business of Signal and the Signal
Subsidiaries that either individually or in the aggregate has had a Material
Adverse Effect on Signal.
4.12. LITIGATION. Except as disclosed in the Signal Disclosure Letter
or in Signal Reports filed by the Signal with the Commission prior to the date
of this Agreement, there is no litigation, action, arbitration or proceeding
pending, or, to the best knowledge of Signal, threatened against or affecting
Signal or any Signal Subsidiary which, either individually or in the aggregate,
is having, or insofar as reasonably can be foreseen will have, a Material
Adverse Effect on Signal, nor is there any judgment, decree, injunction, rule or
order of any Governmental Entity or arbitrator, outstanding against Signal or
any Signal Subsidiary having, or which, insofar as reasonably can be foreseen,
in the future would have, any such effect.
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4.13. COMPLIANCE WITH LAWS AND ORDERS. Except as disclosed in the
Signal Disclosure Letter or in Signal Reports filed by Signal with the
Commission prior to the date of this Agreement, the businesses of Signal and the
Signal Subsidiaries are not being conducted, and have not been conducted since
December 31, 1997, in violation of any law, ordinance, regulation, judgment,
order, decree, license or permit of any Governmental Entity (including, without
limitation, zoning ordinances, building codes, and environmental, civil rights,
and occupational health and safety laws and regulations and, in the case of
Signal Subsidiaries that are savings and loans or thrifts, all statutes, rules
and regulations pertaining to the conduct of such business), except for possible
violations which individually or in the aggregate do not, and, insofar as
reasonably can be foreseen, in the future will not, have a Material Adverse
Effect on Signal. Except as set forth in the Signal Disclosure Letter, no
investigation or review by any Governmental Entity with respect to Signal or any
of the Signal Subsidiaries outside the ordinary course of business and not
generally applicable to entities engaged in the same business is pending or, to
the knowledge of Signal, threatened, nor has any Governmental Entity indicated
an intention to conduct the same in each case other than those the outcome of
which will not have a Material Adverse Effect on Signal.
4.14. AGREEMENTS WITH REGULATORS. As of the date of this Agreement,
except as disclosed in the Signal Disclosure Letter, neither Signal nor any
Signal Subsidiary is a party to any written agreement or memorandum of
understanding with, or a party to any commitment letter or similar undertaking
to, or is subject to any order or directive by, or is a recipient of any
extraordinary supervisory letter from, any Governmental Entity outside the
ordinary course of business and not generally applicable to entities engaged in
the same business, including, without limitation, cease and desist orders of any
regulatory authority, which restricts materially the conduct of its business, or
in any manner relates to its capital adequacy, its credit policies or its
management, nor has Signal been advised by any Governmental Entity that it is
contemplating issuing, requiring, or requesting (or is considering the
appropriateness of issuing, requiring or requesting) any such order, directive,
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter or similar undertaking. Except as set forth in Signal
Disclosure Letter, there are no (i) material violations, or (ii) violations with
respect to which refunds or restitutions which are material in amount to Signal
and the Signal Subsidiaries taken as a whole may be required, cited in any
compliance report to Signal or any Signal Subsidiary as a result of an
examination by any regulatory authority.
4.15. SIGNAL OWNERSHIP OF STOCK. Except as disclosed in Signal
Disclosure Letter, as of the date of this Agreement, neither Signal nor, to the
best of its knowledge, any of its affiliates or associates (i) beneficially owns
directly or indirectly, or (ii) are parties to any agreement, arrangement or
commitment for the purpose of acquiring, holding, voting or disposing of, in
each case, shares of FirstMerit Common Stock (other than shares of FirstMerit
Common Stock held in a fiduciary, trust, custodial or agency capacity by a
subsidiary of Signal) which in the aggregate, represent 2% or more of the
outstanding shares of FirstMerit Common Stock.
4.16. FEES. Except for fees paid and payable to Sandler ▇'▇▇▇▇▇ &
Partners, L.P. ("Sandler ▇'▇▇▇▇▇"), neither Signal nor any Signal Subsidiary has
paid or become obligated to pay any fee or commission to any broker, finder or
intermediary in connection with the transactions contemplated by this Agreement.
4.17. SIGNAL ACTION. The Board of Directors of Signal (at a meeting
duly called and held) has by the requisite vote (i) determined that the Merger
is advisable and in the best interests of Signal and its shareholders, (ii)
authorized and approved this Agreement, the Signal Stock Purchase Option and the
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transactions contemplated hereby and thereby, including the Merger, (iii)
directed that the Merger be submitted for consideration by Signal's shareholders
entitled to vote thereon at the Signal Meeting, and (iv) authorized and approved
the Signal Stock Purchase Option and the Merger in accordance with Chapter 1704
of the Ohio Revised Code with the result that Chapter 1704 will not apply to the
consummation of the Merger and the acquisition by FirstMerit of shares of Signal
Common Stock pursuant to the Merger, the Signal Stock Purchase Option or any of
the transactions contemplated by this Agreement or the Signal Stock Purchase
Option. Sandler ▇'▇▇▇▇▇, Signal's financial advisor, has provided the Board of
Directors of Signal with its opinion that, as of the date of such duly called
meeting of the Board, the Merger Consideration is fair, from a financial point
of view, to the shareholders of Signal.
4.18. VOTE REQUIRED. The affirmative vote of the holders of a majority
of the outstanding shares of Signal Common Stock entitled to vote thereon, is
the only vote of the holders of any class or series of Signal Capital Stock
necessary to approve this Agreement and the transactions contemplated hereby,
unless FirstMerit has exercised its rights to acquire the Signal Common Stock
under the Signal Stock Purchase Option.
4.19. CONDUCT OF SIGNAL TO DATE. Except as disclosed in Signal
Disclosure Letter and in Signal Reports filed with the Commission prior to the
date of this Agreement, from and after December 31, 1997, to the date of this
Agreement: (a) Signal and the Signal Subsidiaries have carried on their
respective businesses in the ordinary and usual course consistent with their
current practices, (b) Signal has not issued or sold any of its Capital Stock
(except shares of Signal Common Stock issued upon exercise of employee stock
options outstanding on or before December 31, 1997), or any corporate debt
securities which would be classified as long-term debt on the balance sheets of
Signal, (c) Signal has not granted any option for the purchase of its Capital
Stock (other than pursuant to the Signal Stock Purchase Option), effected any
stock split, or otherwise changed its authorized capitalization, (d) Signal has
not declared, set aside, or paid any dividend or other distribution in respect
of its capital stock, or, directly or indirectly, redeemed or otherwise acquired
any of its capital stock, except regular quarterly cash dividends (based upon
historic precedent), (e) Signal has neither incurred nor prepaid any corporate
debt securities or instruments which are or would be classified as long-term
debt on the balance sheet of Signal, (f) neither Signal nor any Signal
Subsidiary has sold, assigned, transferred, or otherwise disposed of to a third
party (i) equity securities in or issued by any Signal Subsidiary, (ii) branch
offices of any Signal Subsidiary, (iii) assets constituting any other line of
business, or (iv) any of its other material properties or assets other than for
a fair consideration in the ordinary course of business, (g) neither Signal nor
any Signal Subsidiary has purchased or otherwise acquired from a third party
equity securities in or issued by such third party other than in the ordinary
course of business, branch offices of such third party, assets constituting any
other line of business, or any other material properties or assets outside the
ordinary course of its business, (h) neither Signal nor any Signal Subsidiary
has: increased the rate of compensation of, or paid any bonus to, any of its
directors, officers, or other employees, except under existing plans and
policies, entered into any new, or amended or supplemented any existing, or
secured, collateralized, or funded any, employment, management, consulting,
deferred compensation, severance, or other similar contract, entered into,
terminated, or substantially modified any Signal Employee Plan in respect of any
of its present or former directors, officers, or other employees, or agreed to
do any of the foregoing, (i) neither Signal nor any Signal Subsidiary, has
entered into any material transaction, contract, lease, agreement or commitment
requiring the approval of the Board of Directors of Signal or any Signal
Subsidiary, or amended, modified or terminated any contract, lease or other
agreement to which it is a party in a manner requiring the approval of the Board
of Directors of Signal or any Signal Subsidiary, and (j) no Signal Subsidiary
has entered into any material transaction, contract, lease, agreement or
commitment outside the ordinary
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course of business requiring the approval of the Board of Directors of such
Subsidiary or amended, modified or terminated outside the ordinary course of
business any material contract, lease or other agreement to which it is a party
in a manner requiring the approval of the Board of Directors of such Subsidiary.
4.20. ENVIRONMENTAL MATTERS. For purposes of this Agreement, the
following terms shall have the indicated meanings:
"Environmental Law" means any federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, order, judgment, decree, injunction
or agreement with any Governmental Entity relating to (i) the
protection, preservation or restoration of the environment (including,
without limitation, air, water vapor, surface water, ground water,
drinking water supply, surface soil, subsurface soil, plant and animal
life or any other natural resource), and/or (ii) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances. The
term Environmental Law includes, without limitation; the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42
U.S.C. ss.9601, et seq.; the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. ss.6901, et seq.; the Clean Air Act, as amended, 42
U.S.C. ss.7401, et seq.; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. ss.1251 et seq.; the Toxic Substances Control Act,
as amended, 125 U.S.C. ss.9601, et seq.; the Emergency Planning and
Community Right to Know Act, 42 U.S.C. ss.11001, et seq.; the Safe
Drinking Water Act, 42 U.S.C. ss.300f, et seq.; all comparable state
and local laws; and any common law (including without limitation common
law that may impose strict liability) that may impose liability or
obligations for injuries or damages due to, or threatened as a result
of, the presence of or exposure to any Hazardous Substance.
"Hazardous Substance" means any substance presently listed,
defined, designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated, under any Environmental Law, whether
by type or by quantity, including any material containing any such
substance as a component. Hazardous Substances include, without
limitation, petroleum or any derivative or by-product thereof,
asbestos, radioactive material, and polychlorinated biphenyls.
"Loan Portfolio Properties and Other Properties Owned" means
those properties owned, operated or managed (including those held in
trust) by Signal, as the case may be, or any of their subsidiaries.
Except as set forth in Signal Disclosure Letter, to the best of Signal's
knowledge: (i) neither Signal nor any of the Signal Subsidiaries has been or is
in violation of or liable under any Environmental Law, except for any such
violations or liabilities which would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect on Signal; and (ii) none
of the Loan Portfolio Properties and Other Properties Owned by Signal or any of
the Signal Subsidiaries has been since such properties have been owned, operated
or managed by Signal or any of the Signal Subsidiaries, is in violation of any
Environmental Law, except for any such violations which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
Signal. Except as set forth in Signal Disclosure Letter, there are no actions,
suits, demands, notices, claims, investigations or proceedings pending, or to
the best of Signal's knowledge threatened, relating to the liability of the Loan
Portfolio Properties and Other Properties Owned by Signal or the Signal
Subsidiaries under any Environmental
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Law, including, without limitation, any notices, demand letters or requests for
information from any federal, state or local environmental agency relating to
any such liabilities under or violations of Environmental Law.
4.21. ACCOUNTING MATTERS. Neither Signal nor, to the best of its
knowledge, any of its affiliates, has taken or agreed to take any action that
would prevent FirstMerit from accounting for the business combination to be
effected by the Merger as a "pooling of interests."
5. COVENANTS
5.1. ACQUISITION PROPOSALS AND NEGOTIATIONS. Each of Signal and the
Signal Subsidiaries shall not, directly or indirectly, and shall instruct and
otherwise use its diligent efforts to cause their respective officers,
directors, employees, agents and advisors not to, directly or indirectly,
solicit or initiate any proposals or offers from any person, or discuss or
negotiate with any such person, relating to any acquisition or purchase of all
or a material amount of the assets of, or any equity securities of, or any
merger, consolidation or business combination with, Signal or any of the Signal
Subsidiaries (such transactions are referred to herein as "Acquisition
Transactions"), provided, however, that nothing contained in this Section shall
prohibit:
(i) Signal or any Signal Subsidiary, as the case may be, from
furnishing information to, or entering into discussions or negotiations with,
any person or entity that makes an unsolicited proposal of an Acquisition
Transaction if and to the extent that,
(a) the Board of Directors of Signal, after
consultation with and based upon the opinion of Silver, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, L.L.P.
(which firm shall be entitled to rely on the opinion of Ohio counsel) determines
in good faith that such action is required for the directors of Signal to
fulfill their fiduciary duties and obligations to the Signal shareholders and
other constituencies under Ohio law, taking into consideration the sale process
engaged in connection with the transactions contemplated hereby, and
(b) prior to furnishing such information to, or
entering into discussions or negotiations with, such person or entity, Signal
provides immediate written notice to FirstMerit at least two business days prior
to furnishing information to, or entering into discussions or negotiations with,
such a person or entity, or
(ii) the Board of Directors of Signal from failing to make,
withdrawing or modifying its recommendation referred to in Section 5.14
following receipt of a proposal for an Acquisition Transaction if the Board of
Directors of Signal, after consultation with and based upon the opinion of
Silver, ▇▇▇▇▇▇▇▇ & Taff, L.L.P. (which firm shall be entitled to rely on the
opinion of Ohio counsel) determines in good faith that such action is required
for the directors of Signal to fulfill their fiduciary duties and obligations to
the Signal shareholders and other constituencies under Ohio law, taking into
consideration the sale process engaged in connection with the transactions
contemplated hereby.
In the event Signal or any officer, director or representative thereof
receives any contact, either oral or written, from a third party or its
representative regarding an Acquisition Transaction or any matter directly or
indirectly related thereto after the date of this Agreement, Signal shall
immediately notify FirstMerit of such contact, and provide such information
requested by FirstMerit, including but not limited to the name of the party or
parties, and all details related thereto. Signal shall have a continuing
obligation to provide information to FirstMerit regarding any additional or
continuing contacts. Any writings
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received by Signal or any officer, director or representative thereof, shall be
immediately provided to FirstMerit, regardless of such writing being marked
confidential or otherwise.
In the event Signal receives an opinion from Silver, ▇▇▇▇▇▇▇▇ & ▇▇▇▇,
L.L.P. pursuant to this Section 5.1, Signal shall immediately provide a copy of
such opinion to FirstMerit.
5.2. INTERIM OPERATIONS OF SIGNAL. During the period from the date of
this Agreement to the Effective Time, except as specifically contemplated by
this Agreement, as required by law, as set forth in Signal Disclosure Letter, or
as otherwise approved in writing by FirstMerit (which shall not be unreasonably
withheld):
5.2.1. CONDUCT OF BUSINESS. Signal shall, and shall cause each
of the Signal Subsidiaries to, conduct their respective businesses only in, and
not take any action except in the ordinary course of business substantially
consistent with current practices (which practices include any workout
arrangements for troubled loans and real estate development assets). Signal
shall use all diligent efforts to (i) maintain and preserve intact the business
organization of Signal and each of the Signal Subsidiaries, keep available the
services of its and their present officers and employees, and keep the branch
operations fully staffed with competent employees, (ii) preserve the goodwill of
those having business relationships with Signal or the Signal Subsidiaries,
(iii) maintain and keep its properties in as good repair and condition as at
present, except for depreciation due to ordinary wear and tear, (iv) attempt to
resolve such loans over $500,000 which FirstMerit has identified in writing to
Signal as "troubled," in a workout arrangement which conditions and terms shall
be satisfactory to Signal and FirstMerit, (v) keep in full force and effect
insurance and bonds comparable in amount and scope of coverage to that now
maintained by it, provided however, in the event that any such insurance
(including, without limitation, directors' and officers' liability insurance) is
canceled or not renewable at its expiration at current or standard rates, Signal
shall consult with FirstMerit in order to determine whether to exercise its
right to extend the discovery period and in evaluating available alternatives to
replace the current insurance, (vi) perform in all material respects all
obligations required to be performed by each of Signal and each of the Signal
Subsidiaries under all material contracts, leases and documents relating to or
affecting its assets, properties, and business, and (vii) comply with and
perform in all material respects all obligations and duties imposed upon it by
all federal, state, municipal, and local laws, and all rules, regulations and
orders imposed by federal, state, municipal or local governmental agencies.
5.2.2. NEGATIVE COVENANTS. Signal shall not and shall not
permit any of the Signal Subsidiaries to make any change or amendment to, or to
repeal, their respective articles of incorporation or codes of regulations (or
comparable governing instruments). Neither Signal nor any Signal Subsidiary
shall after the date of this Agreement enter into any loan or credit commitment
(including standby letters of credit) to, or invest (as a venture capital or
similar investment) or agree to invest (as a venture capital or similar
investment) in, any person or entity if such loan, commitment or investment,
would exceed $375,000 as a residential loan or investment, or $750,000 as a
commercial loan, without first consulting with FirstMerit; provided, however,
that nothing in this paragraph shall prohibit Signal or any Signal Subsidiary
from honoring any contractual obligation in existence on the date of this
Agreement or making any loans without consultation listed on Exhibit 5.2.2.
Neither Signal nor any Signal Subsidiary shall after the date of this Agreement
enter into any participatory agreements, loans, commitments or investments
involving collateral outside of Ohio, without first consulting with FirstMerit,
except that the following are excluded from this restriction: (i) Small Business
Association loans, (ii) agency rated asset backed securities, and (iii)
government obligations of the United States of America, or a state or
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municipality within the United States of America; and subject to the second
sentence of this Section 5.2.2, loans and investments made by: First Federal
Savings Bank of New Castle within the State of Pennsylvania; and Mobile
Consultants, Inc., within the geographic areas where it conducts business as of
the date of this Agreement.
Neither Signal nor any Signal Subsidiary shall sell, assign,
transfer or otherwise dispose of to a third party, (i) branch offices of any
Signal Subsidiary, or (ii) any of its material properties or assets. Neither
Signal nor any Signal Subsidiary shall purchase or otherwise acquire from a
third party, branch offices of such third party, assets constituting any other
line of business, or any other material properties or assets outside the
ordinary course of its business. Neither Signal nor any Signal Subsidiary shall
enter into any transaction, contract, lease, agreement or commitment (or any
amendment to any transaction, contract, lease, agreement or commitment) outside
of the ordinary course of business which is material to Signal and the Signal
Subsidiaries taken as a whole.
5.2.3. CAPITAL STOCK. Signal shall not, and shall not permit
any of the Signal Subsidiaries to, issue or sell any shares of capital stock or
any other securities of any of them (other than pursuant to Signal Stock Options
outstanding on the date of this Agreement, the Signal Dividend Reinvestment Plan
("DRIP"), as restricted pursuant to the terms herein, the Employee Stock
Purchase Plan ("ESPP"), as restricted pursuant to the terms herein, the
conversion of the Signal Preferred Stock, the issuance of 2,500 shares of
restricted Signal Common Stock under the 1997 Omnibus Incentive Plan to ▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, or the exercise by FirstMerit of its rights under the Signal
Stock Purchase Option) or issue any securities convertible into or exchangeable
for, or options, warrants to purchase, scrip, rights to subscribe for, calls or
commitments of any character whatsoever relating to, or enter into any contract,
commitment or arrangement with respect to the issuance of, any shares of capital
stock or any other securities of any of them or enter into any arrangement,
contract or commitment with respect to the purchase or voting of shares of their
capital stock, or adjust, split, combine or reclassify any of their capital
stock or other securities or make any other changes in their capital structures.
Neither Signal nor any Signal Subsidiary shall acquire beneficial ownership of
any class of equity securities or any similar interests of any corporation,
bank, business, trust, association or similar organization.
5.2.4. DIVIDENDS. Signal shall not and shall not permit any of
the Signal Subsidiaries to declare, set aside, pay or make any dividend or other
distribution or payment (whether in cash, stock or property) with respect to, or
purchase or redeem, any shares of the capital stock of any of them other than
(a) Signal's regular quarterly cash dividends in the amount (subject to the next
paragraph) of $.11 per share of Signal Common Stock and $.40625 per share of the
Signal Preferred Stock (to the extent legally permitted), and (b) dividends paid
(to the extent legally permitted) by any Signal Subsidiary to another Signal
Subsidiary or Signal with respect to such Signal Subsidiary's capital stock.
From the date of this Agreement to the earlier of the Effective Time or the
termination of this Agreement, Signal shall not, without the prior written
consent of FirstMerit, make any changes in its practice of setting dividend
record or dividend payment dates.
5.2.5. EMPLOYEE PLANS, COMPENSATION AND BONUSES.
(a) Except as is necessary to comply with the Code or as
contemplated in this Agreement, Signal shall not, and shall not permit any of
Signal Subsidiaries to: adopt or amend any bonus (other than the Stay Bonus
Program (as defined below)), profit sharing, compensation, severance,
termination, stock option, pension, retirement, deferred compensation,
employment or other employee benefit agreements, trusts, plans, funds or other
arrangements for the benefit or welfare of any present or former director,
officer or employee of Signal or any Signal Subsidiary; increase the
compensation or fringe benefits of any present or former director,
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officer or employee, including the Senior Officers (as hereinafter defined); pay
any bonus (other than the Stay Bonus Program and other than bonuses in the
ordinary course of business consistent and at levels not higher than past
practice to employees other than Senior Officers), compensation or benefit not
required by any existing plan or arrangement (including, without limitation, the
granting of stock options or stock rights); take any action or grant any benefit
not required under the terms of any existing agreements, trusts, plans, funds or
other such arrangements; or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
Notwithstanding the restrictions contained in this Section,
Signal or the Signal Subsidiaries may grant individual annual increases to the
non-Senior Officer employees in accordance with past practices, up to a total of
4% of the total annual compensation of all employees, excluding from such total
the aggregate of the compensation for the employees of Signal and of the Signal
Subsidiaries who are parties to an Employment Agreement (as defined below) (the
"Senior Officers").
(b) [Reserved]
5.2.6. CONFORMING ACCOUNTING AND RESERVE POLICIES;
RESTRUCTURING EXPENSES.
(a) Notwithstanding that Signal believes that it has
established all reserves and taken all provisions for possible loan losses
required by generally accepted accounting principles and applicable laws, rules
and regulations, Signal recognizes that FirstMerit has adopted different loan,
accrual and reserve policies (including loan classifications and levels of
reserves for possible loan losses), subject to applicable laws, regulations, and
the requirements of Governmental Entities and generally accepted accounting
principles. From and after the date of this Agreement to the Effective Time,
Signal and FirstMerit shall consult and cooperate with each other with respect
to conforming, as specified in a notice from FirstMerit to Signal, based upon
such consultation, Signal's loan, accrual and reserve policies to those policies
of FirstMerit.
(b) In addition, from and after the date of this Agreement to
the Effective Time, Signal and FirstMerit shall consult and cooperate with each
other with respect to determining, as specified in a notice from FirstMerit to
Signal, based upon such consultation, appropriate accruals, reserves and charges
to establish and take in respect of excess facilities and equipment capacity,
restructuring costs, severance costs, litigation matters, write-off or
write-down of various assets and other appropriate accounting adjustments taking
into account the Surviving Corporation's business plan following the Merger.
(c) Signal and FirstMerit shall consult and cooperate with
each other with respect to determining, as specified in a notice from FirstMerit
to Signal, based upon such consultation, the amount and the timing for
recognizing for financial accounting purposes the expenses of the Merger and the
restructuring charges related to or to be incurred in connection with the
Merger.
(d) At the request of FirstMerit, and in an amount and on a
basis satisfactory to Signal, Signal shall promptly establish and take such
reserves and accruals as FirstMerit shall request to conform, on a mutually
satisfactory basis, Signal's loan, accrual and reserve policies to FirstMerit's
policies, shall establish and take such accruals, reserves and charges in order
to implement such policies in respect of excess facilities and equipment
capacity, severance costs, litigation matters, write-off or write-down of
various assets and other appropriate accounting adjustments, and to recognize
for financial accounting
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purposes such expenses of the Merger and restructuring charges related to or to
be incurred in connection with the Merger; provided, however, that it is the
objective of FirstMerit and Signal that such reserves, accruals and charges be
taken on or before the Effective Time, but in no event later than immediately
prior to the Closing; and provided, further, that Signal shall not be obligated
to take any such action pursuant to this Section 5.2.6 unless and until (i)
FirstMerit specifies its request in a writing delivered to Signal, (ii) all
conditions to the obligations of Signal and FirstMerit to consummate the Merger
set forth in Sections 6.1 through 6.3 have been waived or satisfied by the
appropriate party, and (iii) such reserves, accruals and charges conform with
generally accepted accounting principles, applicable laws, regulations, and the
requirements of Governmental Entities.
5.2.7. STOCK OPTION CASH ELECTION. Signal and FirstMerit, as
applicable shall: (i) not approve nor allow any holder of a Signal Stock Option
granted under the Amended and Restated Stock Option and Incentive Plan to elect
or receive a cash payment in lieu of the right to receive or exercise a Signal
Stock Option; and (ii) not allow any holder of a Signal Stock Option granted
under the 1997 Omnibus Incentive Plan to exercise their right to receive cash
pursuant to Section 8 of such Plan, and shall institute a procedure to effect
the issuance of Signal or FirstMerit Common Stock, as applicable, in lieu
thereof, with the right of the holder to sell such Signal or FirstMerit Common
Stock, as applicable.
5.3. INTERIM OPERATIONS OF FIRSTMERIT. During the period from the date
of this Agreement to the Effective Time, except as specifically contemplated by
this Agreement, as required by law, or as otherwise approved in writing by
Signal (which shall not be unreasonably withheld) FirstMerit shall, and shall
cause each of the FirstMerit Subsidiaries to, conduct their respective
businesses in such a manner so as not to materially interfere with the ability
to consummate the Merger, delay the Effective Time or have a Material Adverse
Effect upon the transactions contemplated by the Agreement.
5.4. EMPLOYMENT MATTERS.
(a) As of the Effective Time, Signal will pay the financial obligations
of Signal and the Signal Subsidiaries, as applicable, with regard to the
employment agreements with ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and L. ▇▇▇▇▇▇ ▇▇▇▇▇
("Employment Agreements" or "Employment Agreement"). FirstMerit will assume the
Employment Agreements and provide medical and health insurance as provided
therein, to the extent such obligations can be assumed or benefits thereunder
provided as a matter of law, but conditioned upon receipt of a standard release
of FirstMerit regarding matters related to employment and termination of
employment. FirstMerit acknowledges that the consummation of the Merger will
constitute a change in status for the Senior Officers entitling each of them to
terminate his employment for good reason under his Employment Agreement. The
parties listed herein will not be provided any separation benefits under Section
5.4(b) or (c).
(b) (1) FirstMerit agrees to pay to certain employees of Signal an
amount not to exceed $500,000 as part of a "Stay Bonus Program." The employees
selected by Signal, who are subject to FirstMerit's approval as to participation
and amount, will receive the Stay Bonus, less employment and related taxes, as
long as the employee does not voluntarily terminate his employment without good
reason (good reason being defined as cause, a reduction in base salary or an
involuntary move from their place of employment at the Effective Time to a
location more than 50 miles away) prior to the expiration of six months after
the Effective Time. Signal will designate the employees participating and the
amounts payable to each under the Stay Bonus Program and shall notify FirstMerit
ten days prior to any offer so FirstMerit can approve the person and amount,
which approval shall not be unreasonably withheld. Any
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payment due hereunder is conditioned upon receipt of a standard release of
FirstMerit regarding matters related to employment and termination of
employment.
(2) FirstMerit agrees to pay as separation monies an amount
equal to 12 months salary plus an amount sufficient to pay for medical coverage
under COBRA for12-months, less employment and related taxes, to the employees of
Signal listed on Exhibit 5.4(b)-2. Payment will be due if during the 24-month
period after the Effective Time either their employment is terminated for any
reason or their base salary is reduced below that being received at the
Effective Time. No payment will be due if the person is terminated for cause.
Such employees will also be entitled to any other benefits, if any, required by
law. Payment will only be due and payable upon receipt of a standard release of
FirstMerit regarding matters related to employment and termination of
employment.
(c) FirstMerit agrees to pay as separation monies to employees of
Signal and the Signal Subsidiaries, other than the persons with Employment
Agreements or covered in Section 5.4(a) or (b), in consideration for a standard
release of FirstMerit regarding matters related to employment and termination of
employment, who either at Closing do not become employees of FirstMerit or its
Subsidiaries or to persons who become employees of FirstMerit or its
Subsidiaries but whose employment is terminated during the 180-day period after
the Effective Time (except if such termination is for cause). The separation
monies will be calculated as indicated on Exhibit 5.4(c). Such employees will
also be entitled to any other benefits, if any, required by law.
FirstMerit is not required to hire any employees of Signal or the
Signal Subsidiaries, but may if it so desires. All persons employed by
FirstMerit and its Subsidiaries as of the Effective Time, except those persons
with written employment agreements, will remain "at will" employees, meaning
that their employment can be terminated for any or no reason.
(d) Following the Effective Time, the employee benefit programs to be
available and applicable to the persons who were employees of Signal and the
Signal Subsidiaries, and who become employees of FirstMerit and/or its
subsidiaries, are as follows:
(i) Defined Benefit Retirement and Pension Plans. Signal does
not have in effect any defined benefit retirement, pension or similar type plan
for its employees. FirstMerit maintains the Pension Plan for Employees of
FirstMerit Corporation and Subsidiaries ("FirstMerit Pension Plan"). No credit
for years of service at Signal or of any of the Signal Subsidiaries for purposes
of determining eligibility, vesting, for benefit accrual purposes, or as
"participating" or "credit service" under the FirstMerit Pension Plan will be
granted to employees of Signal or Signal Subsidiaries.
(ii) Savings Plans. Signal has a qualified, tax-exempt profit
sharing plan with a cash-or-deferred feature qualifying under Section 401(k) of
the Code ("Signal 401K Plan"). With respect to the Signal 401K Plan, and
consistent with past practices, the participant salary deferral contributions
under Section 401(k) of the Code and employer matching contributions under
Section 401(m) of the Code may continue through the Effective Date. FirstMerit
maintains the FirstMerit Corporation and Subsidiaries Employees' Salary Savings
Retirement Plan ("FirstMerit 401K Plan"). At the Effective Time, FirstMerit will
credit the Signal employees who become employees of FirstMerit or any of its
current Subsidiaries, for purposes of the FirstMerit 401K Plan, with all service
with Signal or any of the Signal Subsidiaries for purposes of determining their
eligibility to participate in such plan and the vested portion of their
respective accrued benefits under such plan.
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(iii) Health Care Plans. At such time on or after the
Effective Time as FirstMerit shall deem appropriate, FirstMerit and its
Subsidiaries will provide Signal and Signal Subsidiaries employees hired by
FirstMerit with such coverage under the FirstMerit health care plan as they then
provide their employees, with all service with Signal or any of the Signal
Subsidiaries credited for purposes of determining such employee's eligibility to
participate in such plan and without any waiting period or "prior existing
condition" exclusion or duplication of deductibles or co-payments, except if the
Signal and Signal Subsidiaries employee(s) are not participants in the Signal
health care plans as of the Effective Time. The Signal health care plans will be
continued until the employees so hired can participate in the FirstMerit health
care plans.
No benefits currently provided Signal or the Signal
Subsidiaries employees which exceed those provided by FirstMerit and its
Subsidiaries will be grandfathered or provided, except if required by law. Other
than otherwise expressly stated herein, FirstMerit shall not assume any other
health care benefit plans or benefits. FirstMerit, where such right currently
exists, retains the existing rights to amend or terminate any such plan which
have been reserved by the plan sponsor in the plan document or otherwise.
(iv) [Reserved.]
(v) Employee Stock Purchase Plan. As of the date hereof, the
ESPP was amended to freeze participation to the Signal employees who were then
currently participating in the ESPP with the further restriction that allowable
contributions by such employees shall be restricted to the amount then currently
elected by such employee (or less). An employee who is participating is not
restricted from ceasing his participation. If the above is violative of Section
423 of the Code, then the ESPP will be immediately suspended and will be
terminated on or before the Effective Date.
(vii) Dividend Reinvestment Plan. As of the date hereof, the
DRIP was suspended. On or before the Effective Date, the DRIP will be
terminated.
(viii) Restricted Stock Plan. Signal has issued restricted
stock under the 1987 Stock Option and Incentive Plan and the 1997 Omnibus
Incentive Plan. Signal represents that as of the date of this Agreement 235,625
shares of restricted Signal Common Stock are currently issued and outstanding.
All of such restrictions will lapse as of the date of the Signal Meeting if the
Merger is approved at the Signal Meeting or as of the date of the "Change of
Control,"as that term is defined in the applicable agreement. Signal covenants
that it will not grant any additional shares of restricted Signal Capital Stock,
with the possible exception of 2,500 shares to ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President of
Signal Finance Co., to whom the issuance of such shares has been approved, but
not yet issued.
5.5. ACCESS, INFORMATION AND CONFIDENTIALITY. Upon reasonable notice,
Signal and each of the Signal Subsidiaries shall afford to FirstMerit and its
representatives (including, without limitation, directors, officers and
employees of FirstMerit, its counsel, accountants, environmental consultants and
other professionals retained by FirstMerit) full access during normal business
hours throughout the period prior to the Effective Time to the books, contracts,
records (including, without limitation, tax returns and work papers of
independent auditors), shareholder and customer information, properties,
personnel and such other information and documents of Signal and each of the
Signal Subsidiaries. FirstMerit shall have a right with the prior notice to
Signal to have environmental assessments conducted on any properties owned,
managed or controlled by Signal and the Signal Subsidiaries. Signal shall not be
required to
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provide access to any such item or information if the providing of such access
(i) would be reasonably likely to result in the loss or impairment of any
privilege with respect to such information, or (ii) would be precluded by any
law, ordinance, regulation, judgment, order, decree, license or permit of any
Governmental Entity.
All information furnished by one party to another party in connection
with this Agreement and the transactions contemplated hereby which is regarded
by such furnishing party as confidential will be kept confidential by such other
party and its representatives (including, without limitation, directors,
officers and employees, its counsel, accountants and other professionals
retained by such party) and will be used only in connection with this Agreement
and the transactions contemplated hereby, and not in such party's business or by
its directors, officers and employees, its counsel, accountants and other
professionals retained by such party if the Merger is not consummated. Nothing
contained in this Section shall restrict or prohibit Signal or FirstMerit from
disclosing information in any document filed with the Commission, FRB, OCC, OTS,
and other Governmental Entities and bodies nor shall it in any way restrict
FirstMerit's right to exercise the Signal Stock Purchase Option, and so long as
this Agreement has not been terminated pursuant to Article 7 hereof, FirstMerit
may, notwithstanding this confidentiality provision, disclose such information
as it deems necessary or advisable in connection with explaining or providing
background information to security analysts and others concerning the
transactions contemplated by this Agreement, except that any such information
dealing with the areas of individual employees, their future employment,
reserves established for specific loans, matters related to litigation and
Signal's business strategies, may only be disclosed with the prior approval of
Signal, which approval shall not be unreasonably withheld. It is the parties'
intent to provide such analysts with accurate information regarding the
transaction in a light favorable to completion of the transactions contemplated
by this Agreement.
5.6. CERTAIN FILINGS; CONSENTS AND ARRANGEMENTS. FirstMerit and Signal
shall (a) promptly file all reports and applications required to be filed with
the Commission, the FRB and such other Governmental Entities (the "Regulatory
Authorities") as may have jurisdiction for such approvals as may be required to
be obtained from such Governmental Entities in order to carry out the
transactions contemplated by this Agreement as soon as practicable between the
date of this Agreement and the Effective Time and each FirstMerit Subsidiary or
Signal Subsidiary that is a bank or savings association shall also file all
reports required to be filed with the FRB, the OCC and the OTS with respect to
the Merger and the other transactions contemplated by this Agreement, (b)
cooperate with one another (i) in promptly determining whether any other filings
are required to be made or consents, approvals, permits or authorizations are
required to be obtained under any other federal, state or foreign law or
regulation, and (ii) in promptly making any such filings, furnishing information
required in connection therewith and seeking timely to obtain any such consents,
approvals, permits or authorizations, and (c) deliver to the other party to this
Agreement copies of all such applications and reports promptly after they are
filed. In no event, however, shall either party hereto be liable for any untrue
statement of a material fact or omission to state a material fact in any filing
made with any Governmental Entity pursuant to this Section made in reliance
upon, and in conformity with, written information concerning the other party
hereto furnished by such other party specifically for use in such filing. Each
party hereto shall advise the other party hereto promptly of the occurrence of
any event which makes untrue any statement of a material fact contained in any
such filing or any amendment or supplement thereto or that requires the making
of a change in any such filing or any amendment or supplement thereto in order
to make any material statement therein not misleading.
5.7. TAKEOVER STATUTES AND PROVISIONS. Signal shall use its diligent
efforts to (i) exempt Signal, this Agreement, the Signal Stock Purchase Option
and the Merger from the requirements of any state takeover law (including
without limitation, statutes relating to business combinations, control share
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acquisitions and merger moratoriums) and from any provisions under its Corporate
Governance Documents, as applicable, by action of Signal's Board of Directors or
otherwise, and (ii) assist in any challenge by FirstMerit to the applicability
to the Merger of any state takeover law.
5.8. INDEMNIFICATION AND INSURANCE. Except as may be limited by
applicable law, for a period of six years after the Effective Time, FirstMerit
hereby agrees to honor the terms of the indemnification provisions of Article
FIFTH of Signal's Articles of Incorporation, and all such provisions of the
Signal Subsidiaries (including the provisions contained in agreements whereby
Signal acquired other entities), copies of which are attached hereto as Exhibit
5.8, which are provided to Signal's and its Subsidiaries' directors, officers
and employees, for matters occurring prior to the Effective Time. Moreover,
indemnification of directors, officers and employees of Signal and Signal
Subsidiaries following the Effective Time will be provided to the same extent it
is provided to other persons working in similar capacities for FirstMerit
following the Closing.
For a period of up to six years following the Effective Time,
FirstMerit will maintain in effect the current insurance policies maintained by
Signal (or substitute policies with substantially the same coverage and terms)
covering directors' and officers' liability with respect to claims which arise
from factors or events which occurred before the Effective Time, except that
FirstMerit's obligation under this paragraph for the second and subsequent years
following the Effective Time will be based upon its ability to obtain such
insurance at a commercially reasonable cost (which is defined as an amount not
in excess of 150% of the current cost). Signal shall notify FirstMerit prior to
purchasing or continuing any insurance to cover the matters contained herein,
provided, however, it is the intent of FirstMerit that tail coverage will be
purchased if such is available. To the extent insurance is available under any
of the provisions in this Section to cover such claims and costs, such insurance
shall be the primary source of funding these obligations.
5.9. ADDITIONAL AGREEMENTS. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its diligent efforts to take
promptly, or cause to be taken, all actions necessary, proper or advisable under
applicable laws to consummate the transactions contemplated by this Agreement.
In addition, without limitation, each party shall from time to time execute such
certificates as to factual matters necessary, proper or advisable in order to
receive the opinions contemplated by Article 6 of this Agreement.
If, at any time after the Effective Time, the Surviving Corporation
considers or is advised that any further deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record its right, title or interest in and to any of the
rights, properties or assets of Signal acquired or to be acquired by the
Surviving Corporation, Signal and its officers and directors shall be deemed to
have granted to the Surviving Corporation an irrevocable power of attorney to
execute and deliver all such deeds, bills of sale, assignments and assurances
and to take and do all such other actions and things as may be necessary or
desirable to vest, perfect or confirm any and all right, title and interest in
and to such rights, properties or assets in the Surviving Corporation.
5.10. COMPLIANCE WITH ANTITRUST LAWS. Each of FirstMerit and Signal
shall use its diligent efforts to resolve such objections, if any, which may be
asserted with respect to the Merger by the FRB, the Department of Justice, or
any other Governmental Entity (including, without limitation, objections under
any antitrust laws and any applicable laws or regulations). In the event a suit
is threatened or instituted challenging the Merger as violative of the antitrust
laws, each of FirstMerit and Signal shall use its diligent efforts to avoid the
filing of, resist or resolve such suit. FirstMerit and Signal shall use their
diligent efforts to take such action as may be required: (a) by the FRB, the
Department of Justice, or any other Governmental Entity in order to resolve such
objections as any of them may have to the Merger, or
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(b) by any federal or state court of the United States, in any suit brought by a
private party or Governmental Entity challenging the Merger as violative of any
antitrust laws, in order to avoid the entry of, or to effect the dissolution of,
any injunction, temporary restraining order or other order which has the effect
of preventing the consummation of the Merger.
5.11. PUBLICITY. The initial press release announcing this Agreement
shall be a joint press release in a form mutually agreed upon by the parties and
thereafter, except as required by law, Signal and FirstMerit shall consult with
each other and provide a written copy to each other prior to issuing any press
releases, or otherwise making public statements, with respect to the
transactions contemplated hereby and in making any filings with any Governmental
Entity.
5.12. REGISTRATION STATEMENT, PROXY STATEMENT AND COMFORT LETTERS.
(a) FirstMerit will, as soon as practicable, prepare and file with the
Commission the Registration Statement, and any required amendments thereto, will
use all reasonable efforts to have the Registration Statement declared effective
by the Commission as promptly as practicable and will maintain the effectiveness
of such Registration Statement. FirstMerit will also take any action required to
be taken under any applicable state blue sky or securities laws in connection
with the issuance of the FirstMerit Capital Stock pursuant to the Merger and to
be issued upon conversion of the FirstMerit Series B Preferred Stock. Signal
shall promptly furnish FirstMerit all information concerning Signal, the Signal
Subsidiaries, and the holders of its capital stock and shall promptly take any
action as FirstMerit may reasonably request in connection with any such action.
FirstMerit, with the direct assistance of Signal, will as soon as
practicable prepare and file the Proxy Statement with the Commission, and take
such other action so that Signal and FirstMerit may promptly after the
effectiveness of the Registration Statement mail the Proxy Statement to Signal's
and FirstMerit's shareholders. FirstMerit and Signal shall cooperate and consult
with each other in the preparation of the Proxy Statement and Signal shall
promptly furnish FirstMerit all information concerning Signal, the Signal
Subsidiaries, and the holders of its capital stock, and shall promptly take any
action as FirstMerit may reasonably request in connection with any such action.
(b) Each of FirstMerit and Signal will cause its respective independent
auditors to issue a letter addressed to both FirstMerit and Signal, within three
business days prior to the effectiveness of the Registration Statement and also
as of Closing, stating among other things, the following: (i) such accountants
are independent public accountants within the meaning of the Securities Act and
the rules and regulations promulgated thereunder; (ii) in the opinion of such
accountants, the financial statements included in the Registration Statement and
reported on therein by such accountants comply as to form in all material
respects with the applicable accounting requirements of the Securities Act and
the Rules and Regulations promulgated thereunder; (iii) on the basis of
specified limited procedures (which procedures do not constitute an examination
in accordance with generally accepted auditing standards), including a reading
of the latest available unaudited financial statements, inquiries of officials
responsible for financial and accounting matters, nothing came to their
attention which caused them to believe that, during the period subsequent to
December 31, 1997, to a specified date not more than three business days prior
to the effective date of the Registration Statement and to a specified date not
more than three business days prior to Closing, there was any change in the
shares of its capital stock or long-term debt, if any, (other than changes due
to payments in accordance with the terms of such debt, or in the event of any
such change in long-term debt, the amount thereof) or any decrease (increase) in
the total or per share amount of its net income (net loss) as compared with the
corresponding period in the preceding year, except in all instances for changes
or decreases (increases) which the Registration Statement discloses have
occurred
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or may occur; (iv) such accountants have read the other data included in the
Registration Statement with respect to the financial condition and operations of
their respective clients and they find such data to be correctly computed and in
agreement with their respective books and records of FirstMerit and Signal.
(c) FirstMerit shall be responsible for all expenses incident to the
obtaining of the requisite regulatory approvals from Governmental Entities.
Without limiting the generality of the foregoing, the expenses to be assumed by
FirstMerit shall include (i) all expenses for its own legal counsel and other
expenses incurred by FirstMerit incident to the preparation and filing of
applications on its behalf and on behalf of Signal and other requests for
regulatory consents and approvals with the appropriate regulatory agencies as
contemplated by this Agreement; (ii) all expenses for its own legal counsel and
all other expenses incurred in connection with the registration of the
FirstMerit Capital Stock under the federal and state securities laws and (iii)
all printing and mailing expenses of the parties. The expenses to be assumed by
FirstMerit shall not include any legal, accounting or other expenses incurred by
Signal in connection with its own corporate proceedings or incident to the
transactions contemplated by this Agreement.
5.13. AFFILIATES COMPLIANCE WITH THE SECURITIES ACT.
(a) Within 30 days after the date of this Agreement, each of Signal and
FirstMerit shall identify to the other party all persons whom it reasonably
believes are its "affiliates" as that term is used in paragraphs (c) and (d) of
Rule 145 under the Securities Act and/or Accounting Series, Releases 130 and
135, as amended, of the Commission (the "Affiliates"). Thereafter and until the
Effective Time, each of Signal and FirstMerit shall identify to the other party
each additional person whom it reasonably believes to have thereafter become its
Affiliate.
(b) Each of Signal and FirstMerit shall use its diligent efforts to
cause each person who is identified as an Affiliate pursuant to clause (a) above
to deliver to FirstMerit not later than the date on which the Merger is
approved, a written agreement, substantially in the form of Exhibit 5.13(b)-1
(in the case of Affiliates of Signal) and Exhibit 5.13(b)-2 (in the case of
Affiliates of FirstMerit).
Because the Merger is intended to qualify for pooling of interests
accounting treatment, the shares of FirstMerit Common Stock received by such
Affiliates in the Merger shall not be transferable until such time as financial
results covering at least 30 days of post-Merger operations have been published,
and the certificates representing such shares will bear an appropriate
restrictive legend.
5.14. SHAREHOLDER MEETINGS.
(a) Signal shall take all action necessary, in accordance with
applicable law and its Corporate Governance Documents to convene a special or
regular meeting of the holders of Signal Common Stock and Signal Preferred Stock
(the "Signal Meeting") as promptly as practicable after the effectiveness of the
Registration Statement for the purpose of considering and taking action upon
this Agreement and the transactions contemplated herein. Subject to the
fiduciary obligations and duties of the Board of Directors of Signal under Ohio
law and to the provisions of Section 5.1 of this Agreement, the Board of
Directors of Signal shall recommend that the holders of the Signal Capital Stock
vote in favor of and approve the Merger and adopt this Agreement at the Signal
Meeting.
(b) FirstMerit shall take all action necessary, in accordance with
applicable law and its Corporate Governance Documents to convene a special
meeting of the holders of FirstMerit Common Stock (the "FirstMerit Meeting") as
promptly as practicable after the effectiveness of the Registration Statement
for the purpose of considering and taking action upon this Agreement and the
transactions
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contemplated herein. Subject to the fiduciary obligations and duties of the
Board of Directors of FirstMerit under Ohio law, the Board of Directors of
FirstMerit shall recommend that the holders of the FirstMerit Common Stock vote
in favor of and approve the Merger and adopt this Agreement at the FirstMerit
Meeting.
5.15. TAX-FREE REORGANIZATION TREATMENT. Neither FirstMerit nor Signal,
nor any Subsidiary of either, shall knowingly take or cause to be taken nor fail
to take any action, whether before or after the Effective Time, to disqualify
the Merger as a "pooling of interests" for accounting purposes or as
a"reorganization" within the meaning of Section 368(a) of the Code, other than
FirstMerit's exercise of its rights under the Signal Stock Purchase Option.
5.16. MERGERS OF SUBSIDIARIES. Signal shall cause such of the Signal
Subsidiaries as FirstMerit may request to enter into definitive merger or
consolidation agreements; provided, however, that, in all cases, the obligation
of Signal to cause such merger or consolidation shall be subject to the
condition that the Merger be simultaneously consummated; and provided further,
notwithstanding anything to the contrary in this Agreement, (i) the
representations and warranties of Signal in this Agreement shall not be deemed
to be untrue or breached, (ii) Signal shall not be deemed to have failed to
perform any covenant or obligation contained in this Agreement, and (iii) no
condition to FirstMerit's obligation to effect the Merger shall be deemed not to
have been satisfied by or as a result of any merger or consolidation consummated
pursuant to this Section. Signal shall cause the Signal Subsidiaries to fully
cooperate with FirstMerit in consummating these mergers or consolidations,
including cooperating in the filing of any necessary regulatory applications.
5.17. CURRENT INFORMATION. During the period from the date of this
Agreement to the Effective Time, each of Signal and FirstMerit will promptly
notify the other of (i) any material change in the normal course of its
business, (ii) any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or receipt of any
memorandum of understanding or cease and desist order from a regulatory
authority, or (iii) the institution or the threat of material litigation
involving such party and will keep the other party fully informed of such
events. During such period, FirstMerit and Signal shall promptly provide the
other with monthly unaudited financial statements as soon as they are available
and each shall promptly provide the other with a copy of all Reports filed by it
after the date of this Agreement through the Effective Time. Each of FirstMerit
and Signal agrees to keep the foregoing information strictly confidential,
except as required by law..
5.18. INTEGRATION OF OPERATIONS. Subject to applicable laws,
regulations and the requirements of Governmental Entities, during the period
from the date of this Agreement to the Effective Time, the parties will consult
and cooperate fully with each other to do all things advisable to prepare for
and facilitate the integration of Signal and the applicable Signal Subsidiaries
operations into and with FirstMerit's operations as rapidly and effectively as
possible as of the Effective Time, including, without limitation, preparation
for the integration of such branch operations, if any (including, without
limitation, the preparation for the necessary installation of all of
FirstMerit's or its subsidiaries hardware and software systems), management
information systems, financial and accounting operations, employee compensation
and benefit matters and similar matters, and employee training, as requested by
FirstMerit; provided that all such integration prior to the Effective Time shall
be subject to the concurrence of Signal.
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5.19. NASD LISTING. FirstMerit will file an additional listing
application with the National Association of Securities Dealers, Inc. (the
"NASD") for the FirstMerit Capital Stock to be issued in the Merger at the time
prescribed by applicable rules and regulations. In addition, FirstMerit will use
its best efforts to maintain its listing on the Nasdaq/NMS.
5.20. CREATION OF CLASS OF FIRSTMERIT PREFERRED STOCK. FirstMerit shall
take such action necessary to create and register under the Securities Act the
FirstMerit Series B Preferred Stock required to be exchanged with the holders of
the Signal Preferred Stock. FirstMerit shall assume, by written instrument, the
obligation to deliver shares of FirstMerit Common Stock upon the conversion of
shares of FirstMerit Series B Preferred Stock as required by Section 8 of
Division B of Article Fourth of the Articles of Incorporation of Signal. At or
prior to the Effective Time, FirstMerit shall reserve for issuance the number of
shares of FirstMerit Common Stock into which the shares of FirstMerit Series B
Preferred Stock are convertible.
6. CONDITIONS
6.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment or waiver at or prior to the Closing of the following
conditions:
(a) The Merger and this Agreement shall have been approved and adopted
by the requisite vote of the holders of Signal's Capital Stock and FirstMerit's
Common Stock.
(b) All authorizations, consents, orders or approvals, lack of any
injunctive actions by the Department of Justice or any state anti-trust agency,
of the FRB, OCC, OTS, and any other Governmental Entity (collectively,
"Consents") which are necessary for the consummation of the Merger (other than
immaterial Consents, the failure to obtain which would not involve criminal
liability, any material civil penalties or fines, or would not have or
reasonably be expected to have a Material Adverse Effect on the combined
businesses, financial condition, or results of operations of FirstMerit, Signal,
the FirstMerit Subsidiaries and the Signal Subsidiaries taken as a whole), shall
have been obtained or shall have occurred and shall be in full force and effect,
and all applicable waiting periods shall have expired, at the Effective Time. A
material Consent shall not be deemed to have been obtained if the Consent shall
include any conditions or requirements which, in the reasonable opinion of the
Board of Directors of FirstMerit, would have a Material Adverse Effect on the
anticipated economic and business benefits to FirstMerit of the transactions
contemplated by this Agreement, taken as a whole.
(c) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act and shall not be subject to
a stop order suspending the effectiveness of the Registration Statement.
(d) No temporary restraining order, preliminary or permanent
injunction or other order by any federal or state court or agency in the United
States which enjoins or prohibits the consummation of the Merger shall have been
issued and remain in effect.
(e) FirstMerit shall have obtained an opinion of its counsel,
reasonably satisfactory in form and substance to FirstMerit and dated as of
Closing, to the effect that the Merger will constitute a tax-free reorganization
within the meaning of Section 368(a)(1)(A) of the Code.
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(f) FirstMerit shall have received a letter, dated the date of the
Closing, from its independent certified public accounting firm to the effect
that, for financial reporting purposes, the Merger qualifies for
pooling-of-interests accounting treatment under generally accepted accounting
principles, if consummated in accordance with this Agreement.
6.2. CONDITIONS TO OBLIGATION OF SIGNAL TO EFFECT THE MERGER. The
obligation of Signal to effect the Merger shall be subject to the fulfillment or
waiver at or prior to the Closing of the additional following conditions:
(a) FirstMerit shall have performed in all material respects all of
its obligations contained in this Agreement required to be performed at or prior
to the Closing.
(b) The representations and warranties of FirstMerit contained in this
Agreement shall be true and correct both: (i) on the date of this Agreement, and
(ii) as of the Effective Time as if made at and as of such time, (x) except,
both on the date of this Agreement and at the Effective Time, as expressly
contemplated or permitted by this Agreement, (y) except, as of the Effective
Time, for representations and warranties relating to a time or times other than
the Effective Time, and (z) except, both on the date of this Agreement and at
the Effective Time, to the extent that the untruthfulness or inaccuracy of the
representations or warranties of FirstMerit, individually or in the aggregate,
shall not have a Material Adverse Effect on FirstMerit.
(c) FirstMerit shall have furnished Signal a Certificate dated the date
of the Closing, signed on behalf of FirstMerit by the Chief Executive Officer or
President, and the Chief Financial Officer of FirstMerit, that to the best of
their knowledge and belief, the conditions set forth in Sections 6.2(a), (b),
(e) and (f) have been satisfied.
(d) Signal shall have received the opinion of legal counsel for
FirstMerit, dated as of Closing, substantially to the effect set forth in
Exhibit 6.2(d) hereto, and such certificates from the appropriate persons and/or
authorities regarding FirstMerit's board resolutions, form of corporate
governance documents and good standing.
(e) FirstMerit shall have filed a certificate of designation with the
Ohio Secretary of State amending its Articles to create the series of FirstMerit
Series B Preferred Stock to be exchanged herein.
(f) Since the date of this Agreement, there shall have not been any
change in the financial condition, results of operations or business of
FirstMerit and the Subsidiaries of FirstMerit that would have a Material Adverse
Effect on FirstMerit.
(g) The shares of FirstMerit Common Stock and FirstMerit Series B
Preferred Stock which shall be issued to the shareholders of Signal upon
consummation of the Merger shall have been authorized for listing on the
Nasdaq/NMS subject to official notice of issuance.
6.3. CONDITIONS TO OBLIGATION OF FIRSTMERIT TO EFFECT THE MERGER. The
obligation of FirstMerit to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Closing of the additional following
conditions:
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(a) Signal shall have performed in all material respects all of its
obligations contained in this Agreement required to be performed at or prior to
the Closing.
(b) The representations and warranties of Signal contained in this
Agreement shall be true and correct both: (i) on the date of this Agreement, and
(ii) as of the Effective Time as if made on and as of such time, (x) except,
both on the date of this Agreement and at the Effective Time, as expressly
contemplated or permitted by this Agreement, (y) except, as of the Effective
Time, for representations and warranties relating to a time or times other than
the Effective Time, and (z) except, both on the date of this Agreement and at
the Effective Time, to the extent that the untruthfulness or inaccuracy of the
representations or warranties of Signal, individually or in the aggregate, shall
not have a Material Adverse Effect on Signal.
(c) Since the date of this Agreement there shall not have been any
change in the financial condition, results of operations or business of Signal
and the subsidiaries of Signal that either individually or in the aggregate
would have a Material Adverse Effect on Signal, other than change as a result of
action taken under Sections 5.2.5, 5.2.6 and 5.18, and the responses thereto by
Signal and the impact thereof on the operating performance of Signal.
(d) Signal shall have furnished FirstMerit a certificate dated the date
of the Closing signed on behalf of Signal by the Chief Executive Officer or
President, and Chief Financial Officer of Signal, that to the best of their
knowledge and belief, the conditions set forth in Sections 6.3(a), (b) and (c)
have been satisfied.
(e) FirstMerit shall have received the opinion of legal counsel for
Signal dated as of Closing, substantially to the effect set forth in Exhibit
6.3(e) hereto, and such certificates from the appropriate persons and/or
authorities regarding Signal's and its subsidiaries' board resolutions, forms of
corporate governance documents and good standing.
7. MISCELLANEOUS
7.1. TERMINATION. Notwithstanding any other provision of this
Agreement, this Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of this Agreement by the shareholders of
FirstMerit and Signal:
(a) by mutual agreement of the parties by the vote of a majority of the
Board of Directors of each of FirstMerit and Signal;
(b) by the vote of a majority of the Board of Directors of either
FirstMerit or Signal if the Merger shall not have been consummated on or before
May 31, 1999, unless the failure to consummate by such date is related to the
action or inaction of the Governmental Entities and such action or inaction is
not directly related to either FirstMerit's or Signal's breach of their
respective obligations under Sections 5.6 or 5.12(a), then on or before June 30,
1999 (provided that the terminating party is not in material breach of any
representation, warranty, covenant or other agreement contained herein);
(c) by the vote of a majority of the Board of Directors of Signal if
any of the conditions specified in Sections 6.1 and 6.2 have not been met or
waived by Signal at such time as such condition can no longer be satisfied;
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(d) by the vote of a majority of the Board of Directors of FirstMerit
if any of the conditions specified in Sections 6.1 and 6.3 have not been met or
waived by FirstMerit at such time as such condition can no longer be satisfied;
(e) by the vote of a majority of the Board of Directors of either
FirstMerit or Signal if any regulatory agency has denied approval of the Merger
and such denial has become final and non-appealable (regardless of whether
Signal is deemed to be a "party" to an application with respect to the Merger);
(f) by the vote of a majority of the Board of Directors of either
FirstMerit or Signal in the event of a material breach by the other party of any
representation, warranty, covenant or agreement, which breach is not cured, or
cannot be cured, within 30 days after written notice thereof is given to the
party committing such breach;
(g) at any time after August 12, 1998, by FirstMerit if Signal shall
not have executed and delivered the Signal Stock Purchase Option; and
(h) by Signal, if it determines by the vote of a majority of its Board
of Directors (with written notice thereof to FirstMerit which notice is final
and may not be withdrawn) at any time during the fourth and fifth Nasdaq/NMS
trading days immediately prior to the Effective Time, if (x) the Average Closing
Price is less than $21.85 (subject to adjustment pursuant to Section 2.5), and
(y) FirstMerit shall not have given written notice to Signal on the second or
third Nasdaq/NMS trading day immediately prior to the Effective Time which
notice indicates that FirstMerit agrees that the Common Exchange Ratio shall be
$28.84 divided by the Average Closing Price. If FirstMerit makes an election
contemplated by the preceding sentence, whereupon no termination shall have
occurred pursuant to this Section 7(h) and this Agreement shall remain in effect
in accordance with its terms (except as the Common Exchange Ratio shall have
been so modified), and any references in this Agreement to "Common Exchange
Ratio" shall thereafter be deemed to refer to the Exchange Ratio as adjusted
pursuant to this Section.
7.2. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES; EFFECT OF
TERMINATION. The representations and warranties or covenants in this Agreement
will terminate at the Effective Time or the earlier termination of this
Agreement pursuant to Section 7.1, as the case may be: provided however, that if
the Merger is consummated, Sections 1.1.5, 2.1 through 2.9, 5.2.7, 5.4, 5.5,
5.8, 5.9, 5.10, 5.12(c), 5.13, 5.15, 5.16, 5.19, 5.20 and 7.2 will survive the
Effective Time to the extent contemplated by such Sections; provided, further in
the event of the termination of this Agreement, this Agreement shall become void
and of no effect except that the second paragraph of Section 5.5, all of
Sections of 5.11, 5.12(c), 7.2, 7.5, 7.6 and 7.11, will in all events survive
any termination of this Agreement.
7.3. WAIVER. Either party hereto may, by written notice to the other
party hereto, (a) extend the time for the performance of any of the obligations
or other actions of such other party under this Agreement, (b) waive any
inaccuracies in the representations or warranties of such other party contained
in this Agreement or in any document delivered pursuant to this Agreement, (c)
waive compliance with any of the conditions or covenants of such other party
contained in this Agreement, or (d) waive or modify performance of any of the
obligations of such other party under this Agreement. Except as provided in the
preceding sentence, no action taken pursuant to this Agreement, including,
without limitation, any investigation by or on behalf of either party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any of the representations, warranties, covenants, conditions, or
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agreements contained in this Agreement. The waiver by either party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.
7.4. AMENDMENT. This Agreement may be amended or supplemented by the
parties hereto, by action taken by or on behalf of their respective Boards of
Directors, at any time before or after approval of this Agreement by the
shareholders of Signal, provided however, that any such amendment or supplement
to this Agreement made subsequent to the adoption of this Agreement by the
shareholders of Signal shall not (a) alter the amount or change the form of the
consideration contemplated by this Agreement, (b) alter or change any term of
the Amended and Restated Articles of Incorporation of the Surviving Corporation
to be affected by the Merger, or (c) alter or change the qualification of the
Merger as a tax-free reorganization under the provisions of Section 368 of the
Code.
7.5. ENTIRE AGREEMENT. This Agreement and the Signal Stock Purchase
Option, and the agreements referenced and contemplated therein and thereby,
contain the entire agreement among FirstMerit and Signal with respect to the
Merger and the other transactions contemplated hereby and thereby, and supersede
all prior agreements among the parties with respect to such matters.
7.6. APPLICABLE LAW. This Agreement will be governed by and construed
in accordance with the laws of the State of Ohio, without giving effect to the
principles of conflicts of law thereof.
7.7. CERTAIN DEFINITIONS.
(a) For purposes of this Agreement, the term:
(i) "affiliate" and "associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect on the date hereof;
(ii) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction
of the management or policies of a person, whether through the
ownership of stock, as trustee or executor, by contract or credit
arrangement or otherwise;
(iii) "person" means an individual, corporation, partnership,
association, trust or unincorporated organization; and
(iv) "Material Adverse Effect" on Signal or FirstMerit means a
material adverse effect (other than as a result of changes (x) in
banking laws or regulations of general applicablilty or interpretations
thereof by court or governmental entities, and (y) in generally
accepted accounting principles) on the respective condition (financial
and otherwise), results of operations, or business of Signal and its
Subsidiaries, or FirstMerit and its Subsidiaries, as the case may be,
taken as a whole, or on the ability of Signal or FirstMerit, as the
case may be, to consummate the transactions contemplated hereby.
The effect of any action taken by Signal at the written
request of FirstMerit pursuant to Sections 5.2.5, 5.2.6 and 5.18 shall
not be taken into consideration in determining whether any Material
Adverse Effect has occurred.
7.8. NOTICES. All notices and other communications hereunder will be in
writing and will be deemed to have been duly given or delivered, if delivered
personally or delivered by a recognized commercial courier, to each of the
parties at the following addresses:
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TO SIGNAL: TO FIRSTMERIT:
▇▇▇▇ ▇. ▇▇▇▇▇, Chairman ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chairman and
and Chief Executive Officer Chief Executive Officer
Signal Corp. FirstMerit Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ III ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
WITH A COPY TO: WITH COPIES TO:
▇▇▇▇▇ ▇. ▇▇▇▇, P.C. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Senior Vice President
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, P.C. FirstMerit Corporation
Silver, ▇▇▇▇▇▇▇▇ & Taff, L.L.P. III Cascade Plaza, 7th Floor
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇., ▇.▇.,▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. O'▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, L.P.A.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section 7.8.
7.9. COUNTERPARTS; EXHIBITS. This Agreement may be executed in any
number of counterparts, each of which will be deemed to be an original but all
of which together will constitute but one agreement. Any exhibits or schedules
referenced herein and attached hereto shall be incorporated by reference herein
as if fully written out in this Agreement.
7.10. PARTIES IN INTEREST. This Agreement is not intended to nor will
it confer upon any other person any rights or remedies, except as expressly
stated herein.
7.11. EXPENSES. Except as otherwise set forth in this Agreement, each
party shall be responsible for the costs and expenses incurred by it in
connection with the transactions contemplated by this Agreement. If this
Agreement is terminated by Signal or FirstMerit pursuant to 7.1(f) because of
the material breach by the other party of any representation, warranty,
covenant, undertaking or restriction contained in this Agreement, if the
terminating party is not in material breach of any representation, warranty,
covenant, undertaking or restriction contained in this Agreement, then the
breaching party shall pay all costs and expenses of the terminating party,
including but not limited to printing, mailing and related fees, as well as fees
for financial advisors, accountants and legal counsel; provided, however, that
if this Agreement is terminated under circumstances other than those described
in this Section 7.11, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby will be paid by the party
incurring such costs and expenses.
7.12. ENFORCEMENT OF THE AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached, that it is impossible to measure in money the damages that
would result to a party by reason of the failure of any of the parties to
perform any of the obligations of
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this Agreement and that money damages would be an inadequate remedy in this
instance. It is accordingly agreed that the parties hereto will be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, it is agreed
and that if any party should institute an action or proceeding seeking specific
enforcement of this Agreement, the party against which such action or proceeding
is brought hereby waives the claim or defense that the party instituting such
action or proceeding has an adequate remedy at law and hereby agrees not to
assert in any such action or proceeding the claim or defense that such a remedy
at law exists and shall waive or not assert any requirement to post bond in
connection with seeking specific performance. Notwithstanding anything to the
contrary herein, and in addition to any rights set forth in Section 7.11, a
party may seek monetary damages against a breaching party for any willful breach
of this Agreement.
7.13. SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party hereto. Upon any such determination that any term or other provision
is invalid, illegal or incapable of being enforced and does not adversely affect
the substance of these transactions in a material way, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated by this Agreement are consummated to the
extent possible.
[Next Page is Signature Page]
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IN WITNESS WHEREOF, Signal and FirstMerit have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of the
day and year first written above.
FirstMerit Corporation
Attest:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------- ---------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Secretary ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chairman and
Chief Executive Officer
[KCO:merger.WPD]
ACKNOWLEDGMENT
STATE OF OHIO )
) SS:
COUNTY OF SUMMIT )
BE IT REMEMBERED that on this 10th day of August, 1998, personally came
before me, a Notary Public in and for the State and County aforesaid, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇, Chairman and Chief Executive Officer, and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Senior Vice
President and Secretary of FirstMerit Corporation, an Ohio corporation, and they
duly executed the Agreement of Affiliation and Plan of Merger before me and
acknowledged it to be their act and deed and the act and deed of said
Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 10th day
of August, 1998.
/s/ ▇▇▇▇▇ ▇. ▇'▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇. ▇'▇▇▇▇, Notary Public
42
Signal Corp.
Attest:
/s/ ▇▇▇ ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------ --------------------------
▇▇▇ ▇▇▇▇, Asst. Secretary ▇▇▇▇ ▇. ▇▇▇▇▇, Chairman and
Chief Executive Officer
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EXHIBITS TO
AGREEMENT OF AFFILIATION AND PLAN OF MERGER
FIRSTMERIT CORPORATION
AND
SIGNAL CORP.
Form of Shareholder Voting Agreement Exhibit A
Articles and Regulations of Surviving Corporation Exhibit 1.1.4
FirstMerit Disclosure Letter Exhibit 3.3
Signal Stock Purchase Option Exhibit 3.15
Signal Disclosure Letter Exhibit 4.3
Signal Contractual Obligations and Loans Exhibit 5.2.2.
Keyman Severance Policy Exhibit 5.4(b)-2
Severance Policy Exhibit 5.4(c)
Indemnification Provisions Exhibit 5.8
Form of Affiliates Agreement for Signal Exhibit 5.13(b)-1
Form of Affiliates Agreement for FirstMerit Exhibit 5.13(b)-2
Form of Legal Opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Exhibit 6.2(d)
Form of Legal Opinion of Silver, ▇▇▇▇▇▇▇▇ & Taff, L.L.P. Exhibit 6.3(e)-1
Form of Legal Opinion of ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, Ltd. Exhibit 6.3(e)-1