Exhibit 2.2
STOCK PURCHASE OPTION
THIS STOCK PURCHASE OPTION, dated as of April 5, 1998 (the "Agreement"),
is by and between Security First Corp., a Delaware corporation ("Security
First"), and FirstMerit Corporation, an Ohio corporation ("FirstMerit").
WHEREAS, Security First and FirstMerit propose to enter into an Agreement
of Affiliation and Plan of Merger, dated as of April 5, 1998 (the "Merger
Agreement"), providing for the merger of Security First with and into
FirstMerit (the "Merger"); and
WHEREAS, as a condition and inducement to FirstMerit to enter into the
Merger Agreement, FirstMerit has requested that Security First agree, and
Security First has agreed, to grant the option contained in the Agreement to
FirstMerit;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, and covenants set forth in this Agreement and in
the Merger Agreement, Security First and FirstMerit agree as follows:
1. Certain Definitions. In addition to the terms otherwise defined in
this Agreement, the following terms shall have the meanings set forth below:
(a) "Affiliate" and "Associate" shall have the meanings given to them
in Rule 12b-2 under the Exchange Act.
(b) "Beneficial ownership" and "beneficially own" shall have the
meanings given to them in Rule 13d-3 under the Exchange Act.
(c) "BHC Act" shall mean the Bank Holding Company Act of 1956, as
amended.
(d) "Capital Stock" shall mean all classes of equity shares of
Security First, including the Common Stock and any other classes of common or
preferred shares.
(e) "Common Stock" shall mean the shares of common stock, without
par value, of Security First.
(f) "Effective Time" shall have the meaning given to it in the Merger
Agreement.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(h) "Federal Reserve" shall mean the Board of Governors of the
Federal Reserve System.
(i) "Group" shall have the same meaning as the term "group" in
Section 13(d)(3) of the Exchange Act.
(j) "Option Shares" shall mean shares of Common Stock that are
subject to the Option.
(k) "Person" shall have the meaning given to it in Sections 3(a)(9)
and 13(d)(3) of the Exchange Act.
(l) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(m) "Significant Subsidiary" shall have the meaning given to it in
Rule 1.02 of Regulation S-X of the Securities and Exchange Commission.
2. Grant of Option. Subject to the terms and conditions set forth in
this Agreement, Security First hereby grants to FirstMerit an unconditional,
irrevocable option (the "Option") to purchase from time-to-time from Security
First up to 19.9% of its Capital Stock (without giving effect to any shares
subject to or issued pursuant to this Agreement), in shares of Common Stock
(subject to adjustment hereafter pursuant to Section 7), free and clear of all
liens, claims, charges, and encumbrances of any kind, at a purchase price per
share (the "Purchase Price") equal to $22.25 per share.
3. Exercise of Option.
(a) Following the occurrence of a Purchase Event, FirstMerit may
exercise the Option, in whole or in part, at any time and from time to time
prior to the expiration of the right to exercise the Option (as provided in
Section 3(c)); except that (i) FirstMerit may not exercise the Option if, at
the time of exercise, it is in material breach of any term, condition,
covenant, representation or warranty of or contained within the Merger
Agreement, and (ii) any purchase of Option Shares upon exercise of the Option
shall be subject to compliance with applicable law, including the BHC Act and
the regulations of the Federal Reserve promulgated thereunder.
(b) As used herein, a "Purchase Event" means any of the following
events that occur after the date of this Agreement:
(i) Security First or any subsidiary of Security First, any of their
officers, directors, or authorized representatives or agents, without the
prior written consent of FirstMerit, shall have authorized, recommended, or
proposed, shall have publicly announced an intention to authorize, recommend,
or propose, or shall have entered into an agreement to effect (a) a merger,
consolidation or other business combination involving Security First or any of
its Significant Subsidiaries with or into any person (other than a merger,
consolidation, joint venture, or other business combination with or into
FirstMerit or any subsidiary of FirstMerit, or a merger or consolidation of
any subsidiary of Security First with or into Security First or any other
subsidiary of Security First), (b) a sale, lease, or other disposition of
assets or earning power of Security First or any of its subsidiaries, in one
or more transactions, representing 20% or more of the consolidated assets or
earning power of Security First and its subsidiaries to any person (other than
FirstMerit or any subsidiary of FirstMerit), or (c) an issuance, sale, or
other disposition (whether by means of a merger, consolidation, share
exchange, or other transaction) of securities representing 20% or more of the
voting power of Security First or any of its Significant Subsidiaries to any
person (other than FirstMerit or any subsidiary of FirstMerit) (any of the
foregoing being an "Acquisition Transaction;" except that, if FirstMerit has
given its prior written consent to any such transaction (which consent may be
unreasonably withheld for any or no reason), the transaction as to which
FirstMerit has given its prior written consent shall not be an "Acquisition
Transaction");
(ii) any person (other than FirstMerit or any subsidiary of
FirstMerit) shall have commenced (as such term is defined in Rule 14d-2 under
the Exchange Act), or shall have filed a registration statement under the
Securities Act with respect to, a tender offer or exchange offer to acquire
shares of Capital Stock such that, upon consummation of the offer, such person
would beneficially own 25% or more of the capital stock then outstanding;
(iii) any person (other than FirstMerit or any subsidiary of
FirstMerit, any subsidiary of Security First in a fiduciary capacity in the
ordinary course of such subsidiary's business, any employee benefit plan or
employee stock ownership plan of Security First or any subsidiary of Security
First, or any person organized, appointed, or established by Security First or
any subsidiary of Security First for or pursuant to the terms of any such
plan), alone or together with such person's Affiliates, shall have acquired
beneficial ownership of 20% or more of the Capital Stock then outstanding, or
any group (other than a group of which FirstMerit or any subsidiary of
FirstMerit, any subsidiary of Security First in a fiduciary capacity in the
ordinary course of such subsidiary's business, any employee benefit plan or
employee stock ownership plan of Security First or any subsidiary of Security
First, or any person organized, appointed, or established by Security First or
any subsidiary of Security First for or pursuant to the terms of any such plan
is a member) shall have been formed, as reasonably determined in good faith by
the Board of Directors of FirstMerit, that beneficially owns 20% or more of
the Capital Stock (if any) then outstanding; or
(iv) the holders of Common Stock shall not have approved the Merger
Agreement at the meeting of such stockholders (or any adjournment or
postponement thereof) held for the purpose of voting on the Merger Agreement,
such meeting shall not have been held or shall have been canceled (and not
rescheduled) prior to termination of the Merger Agreement, or Security First's
Board of Directors shall have withdrawn or modified in a manner adverse to
FirstMerit the recommendation of Security First's Board of Directors that
Security First's stockholders vote in favor of and approve the Merger and
adopt the Merger Agreement, in each case after any person (other than
FirstMerit or any subsidiary of FirstMerit) shall, after the date of this
Agreement, have (a) publicly announced a bona fide proposal, or publicly
disclosed a bona fide intention to make a bona fide proposal, to engage in an
Acquisition Transaction (or Security First shall have publicly disclosed
receipt of such a proposal) or (b) filed an application or given a notice,
whether in draft or final form, under the BHC Act or the Change in Bank
Control Act of 1978 for approval to engage in an Acquisition Transaction.
(c) Except as provided in the last sentence of this Section 3(c) and
in Section 8(c), the right to exercise the Option shall terminate upon the
earliest to occur of (i) the Effective Time, (ii) 12 months after the first
occurrence of a Purchase Event, and (iii) termination of the Merger Agreement
in accordance with its terms prior to the occurrence of a Purchase Event. The
rights set forth in Sections 9 and 11 shall not terminate when the right to
exercise the Option terminates, but shall extend to such time as is provided
in Sections 9 or 11, respectively. Notwithstanding the termination of the
right to exercise the Option, FirstMerit shall be entitled to purchase those
Option Shares with respect to which it has exercised the Option prior to
termination of the right to exercise the Option.
(d) In the event FirstMerit wishes to exercise the Option, it shall
send to Security First a written notice (the date on which the notice is sent
being herein referred to as the "Notice Date") specifying (i) the number of
Option Shares that it intends to purchase pursuant to such exercise and (ii) a
place and date not earlier than seven business days nor later than 15 business
days from the Notice Date for the closing of such purchase (the "Closing
Date"). Notwithstanding the foregoing, if the closing of such purchase cannot
be consummated by reason of any applicable judgment, decree, order, law, or
regulation, the Closing Date shall be extended and occur not earlier than
three business days nor later than 15 business days after such restriction on
consummation has expired or been terminated. If prior notification to or
approval by the Federal Reserve or any other regulatory authority is required
in connection with such purchase and sale, FirstMerit shall promptly file and
expeditiously process the notice or application for approval (and Security
First shall cooperate with FirstMerit in the filing and processing thereof),
and the Closing Date shall be extended and occur not earlier than three
business days nor later than 15 business days after the date on which (x) any
required notification period has expired or been terminated or (y) such
approval has been obtained, as the case may be, and, in either event, any
requisite waiting period has expired.
(e) Notwithstanding Section 3(d), in no event shall any Closing Date
be more than 18 months after the Notice Date, and, if the Closing Date has not
occurred within 18 months after the related Notice Date due to the failure to
obtain any required approval by the Federal Reserve or any other regulatory
authority, the exercise of the Option on the Notice Date shall be deemed to
have been rescinded. In the event (i) FirstMerit receives official notice that
an approval of the Federal Reserve or any other regulatory authority required
for the purchase and sale of the Option Shares will not be issued or granted
or (ii) a Closing Date has not occurred within 18 months after the related
Notice Date due to the failure to obtain any such required approval,
FirstMerit shall be entitled to exercise the Option in connection with the
resale of the Option Shares pursuant to a registration statement as provided
in Section 10.
4. Payment and Delivery of Certificates.
(a) On each Closing Date, FirstMerit shall pay to Security First in
immediately available funds, by wire transfer to a bank account designated by
Security First, an amount equal to the Purchase Price multiplied by the number
of Option Shares to be purchased on the Closing Date.
(b) On each Closing Date, simultaneous with the delivery of
immediately available funds as provided in Section 4(a), Security First shall
deliver to FirstMerit a certificate or certificates representing the Option
Shares being purchased, and FirstMerit shall deliver to issuer a letter in
which FirstMerit agrees not to sell or otherwise dispose of such Option Shares
in violation of applicable law or the provisions of this Agreement.
(c) Certificates for the Option Shares shall be endorsed with a
restrictive legend substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND PURSUANT TO THE TERMS OF THE STOCK PURCHASE OPTION DATED
AS OF APRIL 5, 1998. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE
HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY SECURITY FIRST OF
A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the reference in the foregoing legend to
restrictions arising under the Securities Act shall be removed, by delivery of
a substitute certificate or certificates without such reference, if FirstMerit
delivers to Security First a copy of an opinion of counsel in form and
substance reasonably satisfactory to Security First, to the effect that an
exemption is available for the transaction under the Securities Act.
5. Representations and Warranties of Security First. Security First
hereby represents and warrants to FirstMerit as follows:
(a) Due Authorization. Security First has all requisite corporate
power and authority to enter into this Agreement and, subject to obtaining the
approvals, if any, contemplated by this Agreement or required by law, to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Security First. This Agreement has been duly executed
and delivered by Security First and constitutes a valid and binding obligation
of Security First, enforceable against Security First in accordance with its
terms.
(b) Authorized Stock. Security First has heretofore taken, and until
termination of the right to exercise the option shall hereafter take, all
corporate and other action necessary to authorize and reserve, and, subject to
obtaining the governmental and other approvals and consents contemplated by
this Agreement and as may be required by law, to permit it to issue, all of
the Option Shares, including any additional shares of Common Stock, that may
be issued pursuant to Section 7. The Option Shares, including any such
additional shares of Common Stock, upon issuance pursuant hereto, shall be
duly and validly issued, fully paid, and nonassessable, and shall be delivered
free and clear of all liens, claims, charges, and encumbrances of any kind,
including any preemptive rights of any stockholder of Security First.
Security First will not, by charter amendment or otherwise, avoid or
seek to avoid the observance or performance of any of its obligations or
representations in this Agreement.
(c) No Conflicts. Except as disclosed pursuant to the Merger
Agreement, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with,
or result in a violation of or default under, (i) any provision of the
corporate governance documents of Security First or any subsidiary of Security
First or (ii), subject to obtaining the approvals, if any, contemplated by
this Agreement or required by law, any loan or credit agreement, note,
mortgage, indenture, lease, or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule, or regulation applicable to Security First or any subsidiary
of Security First or their respective properties or assets, which conflict,
violation, or default would have a material adverse effect on Security First.
6. Representations and Warranties of FirstMerit. FirstMerit hereby
represents and warrants to Security First that:
(a) Due Authorization. FirstMerit has all requisite corporate power
and authority to enter into this Agreement and, subject to obtaining the
approvals referred to in this Agreement, to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of FirstMerit. This
Agreement has been duly executed and delivered by FirstMerit and constitutes a
valid and binding obligation of FirstMerit, enforceable against FirstMerit in
accordance with its terms.
(b) No Conflicts. The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in a violation of or default under, (i) any provision
of the Articles of Incorporation or Code of Regulations of FirstMerit or any
subsidiary of FirstMerit or (ii), subject to obtaining the approvals referred
to in this Agreement or required by law, any loan or credit agreement, note,
mortgage, indenture, lease, or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule, or regulation applicable to FirstMerit or any subsidiary of
FirstMerit or their respective properties or assets, which conflict,
violation, or default would have a material adverse effect on FirstMerit.
(c) Purchase Not for Distribution. Any Option Shares acquired by
FirstMerit upon exercise of the Option will not be taken with a view to the
public distribution thereof and will not be transferred or otherwise disposed
of except in a transaction registered or exempt from registration under the
Securities Act.
7. Adjustment Upon Changes in Capitalization, Etc.
(a) In the event of any change in the Common Stock by reason of a
stock dividend, split-up, recapitalization, combination, exchange of shares,
or similar transaction, the type and number of shares or securities subject to
the option, and the Purchase Price therefor, shall be adjusted appropriately,
and proper provision shall be made in the agreements governing any such
transaction, so that FirstMerit shall receive upon exercise of the Option the
number and class of shares, other securities or property that FirstMerit would
have received in respect of the Option Shares if the Option had been exercised
and the Option Shares had been issued to FirstMerit immediately prior to such
event or the record date therefor, as applicable.
(b) In the event that Security First enters into an agreement (i) to
consolidate with or merge into any person (other than FirstMerit or any
subsidiary of FirstMerit), and Security First shall not be the continuing or
surviving corporation of such consolidation or merger, (ii) pursuant to which
any person (other than FirstMerit or any subsidiary of FirstMerit) shall merge
into Security First, and Security First shall be the continuing or surviving
corporation, but outstanding shares of Common Stock shall be changed into or
exchanged for stock, other securities, property, or cash, or (iii) to sell,
lease, or otherwise transfer assets of Security First or any of its
subsidiaries, in one or more transactions, representing more than 50% of the
consolidated assets or earning power of Security First and its subsidiaries to
any person (other than FirstMerit or any subsidiary of FirstMerit), then, and
in each such case, the agreement governing such transaction shall make proper
provisions so that upon the consummation of any such transaction and upon the
terms and conditions set forth herein, FirstMerit may, in its discretion,
convert the Option into the right to receive, at the election of FirstMerit,
either from the Acquiring Corporation or from any person that controls the
Acquiring Corporation, or Security First in the case of a merger described in
clause (ii), the number and class of shares, other securities or property that
FirstMerit would have received in respect of the Option Shares if the Option
had been exercised and the Option Shares had been issued to FirstMerit
immediately prior to the consummation of such transaction, the distribution of
the proceeds thereof to Security First's stockholders, or the record date
therefor, as applicable.
(c) For purposes of this Agreement, "Acquiring Corporation" means (i)
the continuing or surviving corporation in a merger or consolidation involving
Security First in which Security First is not the continuing or surviving
corporation, (ii) Security First in a merger in which Security First is the
continuing or surviving corporation in a transaction described in Section
7(b)(ii), and (iii) the transferee of more than 50% of the consolidated assets
or earning power of Security First and its subsidiaries. The provisions of
Sections 7 through 12 shall apply with appropriate adjustments to any
securities for which the Option becomes exercisable pursuant to this
Section 7.
8. Repurchase of Option at Request of FirstMerit.
(a) At the request of FirstMerit at any time during the period
beginning upon the first occurrence of a Repurchase Event and ending 12 months
thereafter, Security First shall repurchase from FirstMerit the Option (unless
the Option shall have expired or been terminated) and all shares of Common
Stock, purchased by FirstMerit upon exercise of the Option that are
beneficially owned by FirstMerit at the Request Date. The date on which
FirstMerit requests that Security First repurchase the Option or Option Shares
under this Section 8 is referred to as the "Request Date". Such repurchase
shall be at an aggregate price (the "Put Consideration") equal to the sum of:
(x) the aggregate Purchase Price paid by FirstMerit for all shares of
Common Stock, if any, purchased upon exercise of the Option that are
beneficially owned by FirstMerit on the Request Date;
(y) the excess, if any, of the Applicable Price (as defined below)
over the Purchase Price paid by FirstMerit for each share of Common Stock with
respect to which the Option has been exercised that are beneficially owned by
FirstMerit on the Request Date, multiplied by the number of such shares; and
(z) the excess, if any, of the Applicable Price over the Purchase
Price (adjusted pursuant to Section 7), multiplied by the number of Option
Shares with respect to which the Option has not been exercised; provided that,
in the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, the Closing Date shall be
suspended and the Option shall be treated, for purposes of this clause (z), as
if it had not been exercised.
(b) If FirstMerit exercises its rights under this Section 7, Security
First shall, within 10 business days after the Request Date, pay the Put
Consideration to FirstMerit in immediately available funds, by wire transfer
to a bank account designated by FirstMerit; FirstMerit shall, against receipt
of the payment therefor, surrender to Security First the Option and the
certificates evidencing the shares of Common Stock, if any, purchased upon
exercise of the Option that are beneficially owned by FirstMerit on the
Request Date; and FirstMerit shall warrant that it has sole record and
beneficial ownership of such shares, free and clear of all liens, claims,
charges, and encumbrances of any kind.
Notwithstanding the foregoing, if Security First is prohibited from
repurchasing the Option or any or all Option Shares or from paying all or any
portion of the Put Consideration by reason of any applicable judgment, decree,
order, law, or regulation, Security First shall immediately repurchase or pay
that portion of the Option and Option Shares or Put Consideration that it is
not prohibited from repurchasing or paying, shall from time to time thereafter
immediately repurchase or pay such further portion of the Put Consideration
that it is not then prohibited from repurchasing or paying, and, in all cases,
shall pay the balance of the Option and Option Shares or Put Consideration
within 10 business days after such prohibition has expired or been terminated.
Upon receipt of a partial payment of the Put Consideration, FirstMerit shall
surrender a portion of the Option and/or Option Shares, as selected by
FirstMerit, corresponding (as closely as practicable) to the portion of the
Put Consideration received by FirstMerit.
If prior notification to or approval by the Federal Reserve or any other
regulatory authority is required in connection with the payment of all or any
portion of the Put Consideration, Security First shall pay from time to time
that portion of the Put Consideration that it is not prohibited from paying
and shall promptly file and expeditiously process the required notice or
application for approval (and FirstMerit shall cooperate with Security First
in the filing of any such notice or application and the obtaining of any such
approval), and Security First shall pay the Put Consideration within 10
business days after the date on which, as the case may be, (i) any required
notification period has expired or been terminated or (ii) such approval has
been obtained.
(c) If the Federal Reserve or any other regulatory authority
disapproves of the repurchase by Security First of all or any part of the
Option or Option Shares pursuant to this Section 8, Security First shall
promptly give notice of such disapproval to FirstMerit, and FirstMerit shall
have the right to exercise the Option as to the number of Option Shares for
which the Option was exercisable at the Request Date less the number of shares
as to which payment has been made. If the Option shall have terminated prior
to the date of such notice or shall be scheduled to terminate at any time
before the expiration of a period ending on the thirtieth business day after
the date of such notice, FirstMerit shall nevertheless have the right so to
exercise the Option or exercise its right under Section 11 until the
expiration of such period of 30 business days. Notwithstanding anything
herein to the contrary, Security First shall not be obligated to repurchase
the Option or any Option Shares on more than one occasion.
(d) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share to be paid by any person (other
than FirstMerit or one of its subsidiaries) for shares of Common Stock or the
highest consideration per share to be received by holders of Common Stock, in
each case pursuant to an agreement for a merger, consolidation, joint venture,
or other business combination with Security First entered into after the date
hereof and on or prior to the Request Date, (ii) the highest closing sales
price per share of Common Stock reported on The Nasdaq Stock Market National
Market System of the National Association of Securities Dealers Automated
Quotation System ("Nasdaq") (or, if transactions in Common Stock are not
reported on Nasdaq, the highest bid price quoted on the principal trading
market on which the Common Stock is traded as reported by a recognized source)
during the 60 business days preceding the Request Date, and (iii) in the event
of the sale by Security First or its subsidiaries, in one or more
transactions, of assets or earning power aggregating more than 50% of the
consolidated assets or earning power of Security First and its subsidiaries to
any person (other than FirstMerit or any subsidiary of FirstMerit), the sum of
the price paid for such assets or earning power and the current value of the
remaining assets of Security First and its subsidiaries divided by the number
of shares of Common Stock outstanding at the time of the sale. The value of
any consideration other than cash that is offered, paid, or received pursuant
to clauses (i) or (iii) of this Section 8(d), and the value of the remaining
assets of Security First and its subsidiaries referred to in clause (iii),
shall be determined in good faith by an independent nationally recognized
investment banking firm mutually acceptable to FirstMerit and Security First,
which determination shall be conclusive for all purposes of this Agreement.
(e) As used herein, a "Repurchase Event" means the consummation of an
Acquisition Transaction, provided, that, the percentage for purposes of
Section 3(b)(i)(b) shall be 50% and the percentages for purposes of Section
3(b)(i)(c) shall be 40%.
(f) Notwithstanding anything in this Agreement to the contrary, the
Put Consideration payable to FirstMerit, determined in accordance with
Subsection (a) of this Section, shall be adjusted so that in no event will the
aggregate Put Consideration payable to FirstMerit pursuant to the terms of
this Section 8 exceed the aggregate Purchase Price paid by FirstMerit pursuant
to the Option, plus $7,500,000.
9. Repurchase of Option at Request of Security First.
(a) Except to the extent that FirstMerit shall have previously
exercised its rights under Section 8, at the request of Security First during
the six-month period commencing 12 months following the first occurrence of a
Repurchase Event, Security First may repurchase from FirstMerit, and
FirstMerit shall sell to Security First, all (but not less than all) of the
shares of Common Stock purchased by FirstMerit upon exercise of the Option
that are beneficially owned by FirstMerit on the Call Date at a price (the
"Call Consideration") equal to the greater of (x) 110% of the Current Market
Price and (y) the sum of (a) the Purchase Price paid by FirstMerit for such
shares plus (b) FirstMerit's pretax per share carrying cost, multiplied in
either case by the number of shares being repurchased. The date on which
Security First requests that FirstMerit sell the Option Shares under this
Section 9 is referred to as the "Call Date."
Notwithstanding the foregoing, FirstMerit may, within 30 days
following Security First's notice of its intention to purchase shares pursuant
to this Section 9, deliver an Offeror's Notice pursuant to Section 11, in
which case the provisions of Section 11 and not those of this Section 9 shall
control. Notwithstanding any contrary provision of this Section 9, Security
First's rights under this Section 9 shall be suspended (with any such rights
being extended accordingly) during any period in which the exercise of such
rights would subject FirstMerit to liability pursuant to Section 16(b) of the
Exchange Act.
(b) If Security First exercises its rights under this Section 9 and
FirstMerit does not deliver an Offeror's Notice or sell shares of Common Stock
to a third party pursuant to the Offeror's Notice, Security First shall,
within 10 business days after the thirtieth day following Security First's
notice of its intention to purchase shares pursuant to this Section 9 or, if
applicable, within 10 business days after abandonment of the transaction
covered by the Offeror's Notice, pay the Call Consideration in immediately
available funds, by wire transfer to a bank account designated by FirstMerit;
FirstMerit shall surrender to Security First the certificates evidencing the
shares of Common Stock purchased upon exercise of the option that are
beneficially owned by FirstMerit on the Call Date; and FirstMerit shall
warrant that it has sole record and beneficial ownership of such shares, free
and clear of all liens, claims, charges, and encumbrances of any kind.
(c) As used herein, (i) "Current Market Price" means the average
closing sales price per share of Common Stock reported on Nasdaq (or if the
Common Stock is not reported on Nasdaq, the highest bid price quoted on the
principal trading market on which such shares are traded as reported by a
recognized source) for the 10 business days preceding the Call Date, and (ii)
"FirstMerit's pretax per share carrying cost" shall be the amount equal to the
interest on the aggregate Purchase Price paid for the shares of Common Stock
being repurchased pursuant to this Section 9 from the date of purchase to the
date of repurchase at the rate of interest announced by Security First as its
prime or base lending or reference rate during such period, less any dividends
received on the shares being repurchased, divided by the number of shares
being repurchased.
10. Registration Rights. If requested by FirstMerit at any time and from
time to time within (a) the period beginning upon the first exercise of the
Option and ending 18 months thereafter or (b) the period beginning upon the
occurrence of either of the events set forth in clauses (i) and (ii) of
Section 3(e), or the receipt by FirstMerit of official notice that an approval
of the Federal Reserve or any other regulatory authority required for a
repurchase pursuant to Section 8(c) will not be issued or granted, and ending
30 business days thereafter (but solely as to shares of Common Stock with
respect to which the required approval was not received), Security First shall
prepare and file a registration statement under the Securities Act, if such
registration is necessary, in order to permit the sale or other disposition of
any or all shares of Common Stock or other securities that have been purchased
by or are issuable to FirstMerit upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by FirstMerit,
including, if applicable, a "shelf" registration statement under Rule 415
under the Securities Act or any successor provision, and Security First shall
use its best efforts to qualify such shares or other securities under any
applicable state securities laws.
FirstMerit shall use all reasonable efforts to cause, and to cause any
underwriters of any sale or other disposition to cause, any sale or other
disposition pursuant to registration statement to be effected on a widely
distributed basis. Security First shall use all reasonable efforts to cause
such registration statement to become effective, to obtain all consents or
waivers of other parties that are required therefor, and to keep such
registration statement effective for such period (not in excess of 180 days
from the day such registration statement first becomes effective) as may be
reasonably necessary to effect such sale or other disposition. In the event
that FirstMerit requests Security First to file a registration statement
following the failure to obtain an approval required for an exercise of the
Option as described in Section 3(e), the closing of the sale or other
disposition of Common Stock pursuant to such registration statement shall
occur substantially simultaneously with the exercise of the Option.
The obligations of Security First hereunder to file a registration
statement and to maintain its effectiveness may be suspended for one or more
periods of time not exceeding 90 days in the aggregate if the Board of
Directors of Security First determines that the filing of such registration
statement or the maintenance of its effectiveness would require disclosure of
non-public information that would materially and adversely affect Security
First. Any registration statement prepared and filed under this Section 10,
and any sale covered thereby, shall be at Security First's expense, except for
underwriting discounts or commissions, brokers' fees, and the fees and
disbursements of FirstMerit's counsel related thereto. FirstMerit shall
provide all information reasonably requested by Security First for inclusion
in any registration statement to be filed hereunder, and shall make all
necessary representations and warranties with respect to the accuracy and
completeness thereof and shall hold Security First harmless with respect to
any liability therefor.
If, during the time periods referred to in the first sentence of this
Section 10, Security First effects a registration under the Securities Act of
any Common Stock for its own account or for the account of any stockholder of
Security First (other than a registration on Form X-0, Xxxx X-0, or any
successor form), Security First shall afford FirstMerit the right to
participate in such registration, and such participation shall not affect the
obligation of Security First to effect the registration statement for
FirstMerit under this Section 10; provided that, if the managing underwriters
of such offering advise Security First in writing that, in their opinion, the
number of shares of Common Stock requested to be included in such registration
exceeds the number that can be sold in such offering, Security First shall
include the shares requested to be included in the offering by FirstMerit pro
rata with the shares intended to be included in the offering by Security
First. In connection with the registration pursuant to this Section 10,
Security First and FirstMerit shall provide each other and any underwriter of
the offering with customary representations, warranties, covenants,
indemnification, and contribution in connection with such registration.
11. First Refusal. At any time after the first occurrence of a Purchase
Event and prior to the later of (a) the expiration of 24 months following the
first purchase of shares of Common Stock upon exercise of the Option and (b)
the termination of the right to exercise the Option pursuant to Section 3(c),
if FirstMerit desires to sell, assign, transfer, or otherwise dispose of all
or any of the shares of Common Stock or other securities purchased by it upon
exercise of the Option, FirstMerit shall give Security First written notice of
the proposed transaction (an "Offeror's Notice"), identifying the proposed
transferee, accompanied by a copy of a binding offer to purchase such shares
or other securities signed by such transferee and setting forth the terms of
the proposed transaction. An Offeror's Notice shall be deemed an offer by
FirstMerit to Security First, which may be accepted within 10 business days
after receipt of such Offeror's Notice by Security First, to sell such shares
or other securities to Security First on the same terms and conditions and at
the same price as those set forth in the Offeror's Notice for the proposed
transaction. The purchase of any such shares or other securities by Security
First shall be settled within 10 business days of the date of the acceptance
of the offer by Security First, and the purchase price shall be paid to
FirstMerit in immediately available funds. Notwithstanding the foregoing, if
prior notification to or approval by the Federal Reserve or any other
regulatory authority is required in connection with such purchase, Security
First shall promptly file and expeditiously process the required notice or
application for approval (and FirstMerit shall cooperate with Security First
in the filing of any such notice or application and the obtaining of any such
approval), and the purchase of such shares or other securities by Security
First shall be settled within 10 business days after the date on which, as the
case may be, (a) any required notification period has expired or been
terminated or (b) such approval has been obtained.
In the event of the failure or refusal of Security First to purchase all
the shares or other securities covered by an Offeror's Notice, or if the
Federal Reserve or any other regulatory authority disapproves of Security
First's proposed purchase of such shares or other securities, FirstMerit may
thereafter sell such shares to the proposed transferee at no less than the
price specified and on terms no more favorable than those set forth in the
Offeror's Notice. The requirements of this Section 11 shall not apply to (x)
any disposition as a result of which the proposed transferee will purchase or
acquire in such transaction not more than 2% of the outstanding Common Stock,
(y) any sale by means of a public offering registered under the Securities Act
in which steps are taken to reasonably ensure that no purchaser will purchase
or acquire more than 2% of the outstanding Common Stock, or (z) any transfer
to a wholly-owned subsidiary of FirstMerit that agrees in writing to be bound
by the terms hereof.
12. Listing. If shares of Common Stock or any other securities to be
acquired upon exercise of the Option are quoted on Nasdaq, Security First, at
the request of FirstMerit, will thereafter, use reasonable efforts to cause
the Common Stock to continue to be so quoted.
13. Division of Option. This Agreement (and the Option granted hereby)
are exchangeable, without expense, at the option of FirstMerit, upon
presentation and surrender of this Agreement at the principal office of
Security First, for other Agreements providing for options of different
denominations entitling the Holder thereof to purchase in the aggregate the
same number of shares of Common Stock purchasable hereunder. The terms
"Agreement" and "Option" as used herein include any other Agreements and
related options for which this Agreement and the Option granted hereby may be
exchanged. Upon receipt by Security First of evidence reasonably satisfactory
to it of the loss, theft, destruction, or mutilation of this Agreement, and
(in the case of loss, theft, or destruction) of reasonably satisfactory
indemnification, and (in the case of mutilation) upon surrender and
cancellation of this Agreement, Security First will execute and deliver a new
Agreement of like tenor and date. Any such new Agreement, when executed and
delivered, shall constitute an additional contractual obligation on the part
of Security First, whether or not the Agreement so lost, stolen, destroyed, or
mutilated shall at any time be enforceable by anyone.
14. FirstMerit's Breach. Notwithstanding anything to the contrary
contained herein, all of Security First's obligations under this Agreement
shall be terminated and the Option shall not be exercisable if the Merger
Agreement has been terminated and FirstMerit was in material breach of any
term, condition, covenant, representation or warranty of or contained within
the Merger Agreement when it was terminated; provided, however, that Security
First may not assert, for purposes of this Section 14 only, a material breach
of the Merger Agreement by FirstMerit if FirstMerit terminated the Merger
Agreement pursuant to the terms of the Merger Agreement and Security First
failed to notify FirstMerit, upon FirstMerit's written request prior to
termination, of the material breach; provided, further, however, that Security
First may not assert, for purposes of this Section 14 only, a material breach
of the Merger Agreement by FirstMerit if Security First terminated the Merger
Agreement pursuant to the terms of the Merger Agreement and all material
breaches by FirstMerit were curable, unless Security First provided written
notice to FirstMerit of the material breaches and an opportunity to cure as
soon as reasonably practicable.
15. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 10, each of
the parties hereto shall bear and pay all expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants, and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision, but such waiver shall only be effective if in writing and signed by
the party entitled to the benefits of such provision. This Agreement may not
be modified, amended, altered, or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary; Severability.
Except as otherwise set forth in the Merger Agreement, this Agreement, the
Merger Agreement, and the other documents and instruments referred to therein
and herein (a) constitute the entire agreement and understanding, and
supersede all prior agreements and understandings, both written and oral,
between the parties with respect to their subject matter and (b) are not
intended to confer upon any person other than the parties hereto any rights or
remedies. If any term, provision, covenant, or restriction of this Agreement
is held by a court of competent jurisdiction or a federal or state regulatory
agency to be invalid, void, or unenforceable, the other terms, provisions,
covenants, and restrictions of this Agreement shall remain in full force and
effect and shall not be affected, impaired, or invalidated. If for any reason
such court or regulatory agency determines that the Option does not permit
FirstMerit to acquire, or does not require Security First to repurchase, the
full number of shares of Common Stock as provided in Sections 3 and 8 (as
adjusted pursuant to Section 7), it is the express intention of Security First
to allow FirstMerit to acquire, or to require Security First to repurchase,
such lesser number of shares as may be permissible without any amendment or
modification hereof.
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Ohio without regard to any applicable
conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation), or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
as shall be specified by like notice):
To Security First: To FirstMerit:
Xxxxxxx X. Xxxxxxxxx, Chairman of the Xxxx X. Xxxxxxx, Chairman and
Board and Chief Executive Officer Chief Executive Officer
Security First Corp. FirstMerit Corporation
0000 Xxxxxx Xxxx Xxxxxxxxx III Cascade Plaza, 7th Floor
Xxxxxxxx Xxxxxxx, Xxxx 00000 Xxxxx, Xxxx 00000
With a copy to: With copies to:
Xxxxx X. Xxxxxxxxx Xxxxx X. Xxxxxx, Senior Vice
Silver, Xxxxxxxx & Taff, L.L.P. President and Secretary
0000 Xxx Xxxx Xxx., X.X. FirstMerit Corporation
Xxxxx 000 XXX Xxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxxxxx, X.X. 00000 Xxxxx, Xxxx 00000
Xxxxx X. O'Xxxx
Xxxxxx & XxXxxxxx
000 Xxxxx Xxxxxxxx Xxxxx
Xxxxx, Xxxx 00000
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that both Parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other party. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
(i) Further Assurances. In the event of any exercise of the Option by
FirstMerit, Security First and FirstMerit shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such
exercise.
(j) Specific Performance. This Agreement may be enforced by either
party through specific performance, injunctive relief, and other equitable
relief. Both parties hereby waive any requirement for the securing or posting
of any bond in connection with the obtaining of any such equitable relief and
agree that this provision is without prejudice to any other rights that the
parties hereto may have for any failure to perform this Agreement. Both
parties acknowledge that damages would be an inadequate remedy for a breach of
this Agreement by either party.
IN WITNESS WHEREOF, Security First 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/ Xxxxx X. Xxxxxx By: /s/ Xxxx X. Xxxxxxx
------------------------------ -----------------------------
Xxxxx X. Xxxxxx, Secretary Xxxx X. Xxxxxxx, Chairman and
Chief Executive Officer
ACKNOWLEDGMENT
STATE OF OHIO )
) SS:
COUNTY OF SUMMIT )
BE IT REMEMBERED that on this 5th day of April, 1998, personally came
before me, a Notary Public in and for the State and County aforesaid, Xxxx X.
Xxxxxxx, Chairman and Chief Executive Officer, and Xxxxx X. Xxxxxx, 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 5th day of
April, 1998.
/s/ Xxxxx X. X'Xxxx
--------------------------------
Xxxxx X. X'Xxxx, Notary Public
Security First Corp.
Attest:
/s/ Xxxxxxx X. Xxxxxxxxx By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------------ ---------------------------------
Xxxxxxx X. Xxxxxxxxx, Secretary Xxxxxxx X. Xxxxxxxxx, Chairman of
the Board and Chief Executive
Officer
ACKNOWLEDGMENT
STATE OF OHIO )
) SS:
COUNTY OF CUYAHOGA )
BE IT REMEMBERED that on this 5th day of April, 1998, personally came
before me, a Notary Public in and for the State and County aforesaid, Xxxxxxx
X. Xxxxxxxxx, Chairman of the Board and Chief Executive Officer and Xxxxxxx
X. Xxxxxxxxx, Secretary of Security First Corp., a Delaware 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 5th day of
April, 1998.
/s/
----------------------------
Notary Public
