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Exhibit 99.1
AGREEMENT OF AFFILIATION
AND PLAN OF MERGER
THIS AGREEMENT OF AFFILIATION AND PLAN OF MERGER, dated as of April 5,
1998 (this "Agreement"), is made by and between FirstMerit Corporation, an Ohio
corporation ("FirstMerit"), and Security First Corp., a Delaware corporation
("Security First").
WHEREAS, the respective Boards of Directors of FirstMerit and Security
First have each determined that it is in the best interests of their respective
shareholders for Security First 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 Security
First have each approved the merger of Security First with and into FirstMerit,
upon the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of FirstMerit intends,
contemporaneously with the merger of Security First with and into FirstMerit, to
merge the wholly owned subsidiaries of Security First (not including the
non-banking subsidiaries), with and into FirstMerit Bank, N.A., 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, an individual to be
recommended by Security First (subject to the approval of the FirstMerit Board
of Directors);
WHEREAS, as an inducement for FirstMerit to enter into this Agreement,
Security First will provide FirstMerit with an option to purchase up to 19.9
percent of the capital stock of Security First, but only if certain events
occur, pursuant to the terms and conditions of the Security First 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),
Security First 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 Security First (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 form of
Certificate of Merger is attached hereto as Exhibit 1.1.2, which has attached to
it the Amended and Restated Articles of Incorporation of the Surviving
Corporation. 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,
or (ii) at such other time and place and on such other date as FirstMerit and
Security First may agree.
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, an individual
to be recommended by Security First, but subject to the approval of the
FirstMerit Board of Directors, such individual to serve in the class whose terms
expire in 2001.
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1.1.6. SERVICE OF PROCESS. B.&McD., Inc., whose address is 000
X. Xxxx Xxxxxx, Xxxxx, Xxxxxx Xxxxxx, Xxxx 00000, 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, each share of the common stock,
$.01 par value per share, of Security First (the "Security First Common Stock"),
issued and outstanding immediately prior to the Effective Time (excluding shares
held by Security First or any of the Security First 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 .8855 (subject to
adjustment pursuant to Section 2.5) (the "Exchange Ratio") shares of common
stock, no par value, of FirstMerit ("FirstMerit Common Stock").
2.2. FRACTIONAL SHARES. Notwithstanding any other provision hereof, no
fractional shares of FirstMerit Common 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 Security First Common Stock who
would otherwise be entitled to a fractional share of FirstMerit Common Stock
(after taking into account all Security First Certificates delivered by such
holder) an amount in cash (without interest) determined by 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), for the five Nasdaq/NMS trading days
immediately preceding the Effective Date.
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 Security First Certificates, for exchange in
accordance with this Article 2, certificates representing the shares of
FirstMerit Common 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 Security First Common Stock.
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) of Security First Stock immediately prior to
the Effective Time transmittal materials for use in exchanging such
shareholder's Security First Certificates for the consideration set forth in
this Article 2. FirstMerit shall cause the New Certificates into which shares of
a shareholder's Security First Common Stock
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are converted on the Effective Date and/or any check in respect of the
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 Security First Certificates representing such shares of
Security First Common 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 Security
First Common 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 Common Stock with a record date occurring after the Effective Time
shall be paid to the holder of any unsurrendered Security First Certificate
representing shares of Security First Common Stock converted in the Merger into
shares of such FirstMerit Common Stock until the holder thereof shall surrender
such Security First Certificate in accordance with this Article 2. After the
surrender of a Security First 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 Common Stock represented by such
Security First Certificate.
2.3.5. Any portion of the Exchange Fund that remains unclaimed
by the shareholders of Security First for twelve months after the Effective Time
shall be paid to FirstMerit by the Exchange Agent. Any shareholders of Security
First who have not theretofore complied with this Article 2 shall thereafter
look only to FirstMerit for payment of the shares of FirstMerit Common Stock,
cash in lieu of any fractional shares and unpaid dividends and distributions on
the FirstMerit Common Stock deliverable in respect of each share of Security
First Common Stock such shareholder holds as determined pursuant to this
Agreement, in each case, without any interest thereon.
2.4. RESERVED.
2.5. ANTI-DILUTION PROVISIONS. In the event FirstMerit changes (or
establishes a record date for changing) the number of shares of FirstMerit
Common 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 Common Stock and the record date therefor
shall be prior to the Effective Date, or exchanges FirstMerit Common Stock for a
different number or kind of shares or securities or is involved in any
transaction resulting in any of the foregoing, the Exchange Ratio shall be
proportionately adjusted.
2.6. TREASURY SHARES. Each of the shares of Security First 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.
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2.7. STOCK OPTIONS. The Security First Disclosure Letter (as
hereinafter defined) sets forth a list of each stock option outstanding on the
date of this Agreement (collectively, the "Security First Stock Options"), to
purchase Common Stock heretofore granted pursuant to the Security First 1987
Stock Option and Incentive Plan, 1996 Stock Option and Incentive Plan and the
First Kent Financial Corporation 1994 Stock Option Plan (the "Security First
Option Plans"). The Security First Disclosure Letter also sets forth with
respect to each Security First 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 Security First Option Plans. All rights under Security
First Stock Options shall be treated as provided in this Section.
Each Security First 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 Security First Option
Plans, except that: (a) the Surviving Corporation and its Compensation Committee
shall be substituted for Security First and the committee of Security First's
Board of Directors administering such Security First Option Plans, (b) from and
after the Effective Time, each such Security First Stock Option may be exercised
only for FirstMerit Common Stock notwithstanding any contrary provision of the
Security First Option Plans or stock option agreements executed in connection
therewith, (c) each such Security First 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 multiplying the Exchange Ratio by the number of
shares of Common Stock subject to such option immediately prior to the Effective
Time, and (d) the exercise price per share of FirstMerit Common Stock at which
each such Security First Stock Option is exercisable shall be the amount
(rounded up to the next whole cent) arrived at by dividing the exercise price
per share of Common Stock at which such Security First Stock Option is
exercisable immediately prior to the Effective Time by the Exchange Ratio;
provided, however, that, notwithstanding the foregoing, the Surviving
Corporation shall not issue or pay for any fractional share otherwise issuable
upon any exercise of a Security First Stock Option, as assumed and adjusted as
aforesaid.
In addition, notwithstanding clauses (c) and (d) of the immediately
preceding sentence, each Security First 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 Security First 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 Security First
Stock Options the benefits to be provided pursuant to this Section.
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2.8. SECURITY FIRST CONVERTIBLE DEBENTURES. The Security First
Disclosure Letter sets forth the terms of the Security First Debentures. Without
the written consent of FirstMerit, no additional Security First Debentures
shall, after the date of this Agreement, be issued. All rights under Security
First Debentures shall be treated as provided in this Section. As soon as
practicable after the date of this Agreement, Security First shall call and
redeem, pursuant to the terms of the Security First Debentures, all of the
outstanding Security First Debentures.
3. REPRESENTATIONS AND WARRANTIES OF FIRSTMERIT
FirstMerit hereby represents and warrants to Security First 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 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), 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. 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 80,000,000 shares of FirstMerit Common Stock and 7,000,000 shares of
preferred stock. As of December 31, 1997, (i) 68,127,314 shares of FirstMerit
Common Stock (including 6,159,750 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
preferred stock were issued and outstanding. Since December 31, 1997 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 December 31, 1997. Except as
contemplated by this Agreement, the FirstMerit Rights Plan (as hereinafter
defined) 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
Security
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First, such letter being identified by Security First executing a copy thereof),
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 voting of the capital stock of FirstMerit. All of the shares of
FirstMerit Common Stock issuable in exchange for the Security First 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.
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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 Common Stock to be issued in the Merger
(the "Registration Statement") will, at the time it becomes effective and at the
time of the Security First Meeting (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 Security First, or any amendments or
supplements thereto, required to be mailed to Security First'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 Security First
Meeting, 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 Security First 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 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
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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 and the DGCL, (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
Thrift Supervision ("OTS"), (vi) filings with, and approval by, the Office of
the Comptroller of the Currency (the "OCC"), (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, 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, Security
First 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.
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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 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 Security First 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
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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 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,
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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
April 5, 1998 (the "Security First 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 Security First Common Stock (other than shares of Security First
Common Stock held in a fiduciary, trust, custodial or agency capacity by a bank
or trust subsidiary of FirstMerit) which in the aggregate, represent 1% or more
of the outstanding shares of Security First Common Stock.
3.16. FEES. Except for the fees paid and payable to Xxxxxx Xxxxxxx &
Co. Incorporated, 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, and (iii) authorized and approved the Merger in accordance with
applicable takeover laws (if any) with the result that they will not apply to
the consummation of the Merger and acquisition of shares of FirstMerit Common
Stock by the holders of Security First Common Stock pursuant to this Agreement.
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 and restated, dated July 18, 1996,
between FirstMerit and FirstMerit Bank, N.A., 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
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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."
4. REPRESENTATIONS AND WARRANTIES OF SECURITY FIRST
Security First hereby represents and warrants to FirstMerit that:
4.1. CORPORATE ORGANIZATION. Security First is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware 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 Security First. Security First is
registered as a savings and loan holding company with the OTS. Security First
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.
Security First has delivered to FirstMerit as attachments to the Security First
Disclosure Letter true and complete copies of its Certificate of Incorporation
and its Bylaws (the "Corporate Governance Documents") as currently in effect.
4.2. AUTHORITY. Security First has the requisite corporate power and
authority to execute and deliver this Agreement and, except for any required
approval of Security First's shareholders and the approval of the 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 Security First and no other corporate proceedings on the
part of Security First are necessary to authorize this Agreement or to
consummate the transactions so contemplated, except for approval by the
shareholders of Security First as provided in Section 6.1(a). This Agreement has
been duly executed and delivered by, and constitutes a valid and binding
obligation of, Security First, enforceable against
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Security First 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. Section 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 Security First
consists of 20,000,000 shares of Security First Common Stock and 1,000,000
shares of serial preferred, par value $.01 per share. As of the date of this
Agreement, (i) 7,555,044 shares of Security First Common Stock were validly
issued and outstanding, fully paid and nonassessable and not issued in violation
of any preemptive right of any Security First shareholder and no shares of
serial preferred were issued. As of the date of this Agreement, there were
88,324 treasury shares and outstanding Security First Stock Options to purchase
374,892 shares of Security First Common Stock, and there were outstanding
Security First 6.25% Convertible Subordinated Debentures ("Security First
Debentures") to covert into 878,048 shares of Security First Common Stock, all
of which are currently redeemable by Security First at 100% of the original
principal amount. Except as contemplated by this Agreement, the Security First
Stock Purchase Option or in the Security First Disclosure Letter (which is a
letter attached hereto as Exhibit 4.3, dated the date of this Agreement, from
Security First to FirstMerit, such letter being identified by FirstMerit
executing a copy thereof), there are no shares of capital stock of Security
First 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 Security
First obligating, or which may obligate, Security First to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock of Security First or obligating, or which may obligate, Security First 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 Security First Disclosure Letter, there
are no voting trusts or other similar agreements, arrangements, or commitments
to which Security First or any Security First Subsidiary (as hereinafter
defined) is a party with respect to the voting of the capital stock of Security
First.
4.4. SUBSIDIARIES. The Security First Disclosure Letter sets forth, as
of the date of this Agreement, the name and state of incorporation of each
subsidiary of Security First (collectively, the "Security First Subsidiaries")
and the authorized capital stock of each Security First Subsidiary. Except as
set forth in the Security First Disclosure Letter, each of the Security First
Subsidiaries is a bank, savings association 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 Security First. Each
of the Security First Subsidiaries has the requisite corporate power and
authority
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to own, lease and operate its properties and assets and to carry on its
businesses as they are now being conducted. Security First has delivered to
FirstMerit as attachments to the Security First Disclosure Letter true and
complete copies of the Security First Subsidiaries' articles of incorporation
and code of regulations (charter or bylaws), each as currently in effect.
Except as set forth in the Security First Disclosure Letter, as of the
date of this Agreement, all outstanding shares of capital stock of each Security
First Subsidiary are owned by Security First or another Security First
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 Security First Disclosure Letter, as of the
date of this Agreement, neither Security First nor any Security First 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
Security First Subsidiary obligating, or which may obligate, any Security First
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
Security First 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 Security First or any
Security First Subsidiary provided by Security First for inclusion in the
Registration Statement will, at the time it becomes effective and at the time of
the Security First Meeting, 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 Security
First or any Security First Subsidiary provided in writing by Security First for
inclusion in the Proxy Statement will, at the time of the mailing of the Proxy
Statement, and at the time of the Security First Meeting, 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
Security First 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 Security First 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 Security First or any
Security First Subsidiary provided by Security First 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.
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4.6. CONSENT AND APPROVALS; NO VIOLATION. Except as set forth in the
Security First Disclosure Letter, neither the execution and delivery of this
Agreement by Security First, nor the consummation by Security First of the
transactions contemplated hereby, nor compliance by Security First 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 Security
First or any of the Security First 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 Security
First or any Security First 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 Security
First Disclosure Letter or which, individually or in the aggregate, will not
have a Material Adverse Effect on Security First, (c) violate any judgment,
ruling, order, writ, injunction, decree, statute, rule or regulation applicable
to Security First or any Security First 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 Security First, 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 and the DGCL, (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 OTS, (vi) filings with, and approval by the
OCC, (vii) filings and approvals pursuant to any applicable State Takeover
Approvals, or (viii) 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 Security First nor restrict Security First's
legal authority to execute and deliver this Agreement and consummate the
transactions contemplated hereby.
4.7. REPORTS AND FINANCIAL STATEMENTS. Since March 31, 1997, Security
First 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 "Security First Reports"). Security First has
previously made available or furnished, or, with respect to Security First
Reports filed after the date of this Agreement, will promptly furnish,
FirstMerit with true and complete copies of each of the Security First 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 Security First
Disclosure Letter, the Security First Reports complied, or, with respect to
Security First 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 Security First 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
Security First included in the Security First Reports (the "Security First
Financial Statements") have been prepared in accordance with generally
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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 Security First and the Security First 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 Security First Disclosure
Letter, Security First and each Security First 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 Security First. Except as set forth in the
Security First Disclosure Letter, Security First and each Security First
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 and
reports. The Security First Disclosure Letter sets forth, as of the date of this
Agreement, the following information with respect to Security First and each
Security First 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 Security First
Disclosure Letter, there are no liens for federal, state, local or foreign taxes
upon the assets of Security First or of any Security First 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 Security First Disclosure Letter, neither Security First nor
any of the Security First 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 Security First or any of the
Security First Subsidiaries in respect of any material deficiencies for any tax,
assessment, or government charges. After the date of this Agreement, Security
First will promptly notify FirstMerit of (i) the commencement or threat of any
such action or proceeding involving an amount of taxes material to Security
First and its subsidiaries taken as a whole, and (ii) the receipt by Security
First or the Security First 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 Security
First or the Security First Subsidiaries, whether or not described in Section
3(3) of ERISA ("Security First Employee Plans"), are identified in the Security
First Disclosure Letter. Security First has previously delivered or made
available to FirstMerit copies of all Security First Employee Plans, in each
case as in effect on the date of this Agreement.
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All of Security First Employee Plans have been maintained, operated and
administered in substantial compliance with their terms, and Security First, all
of the Security First Subsidiaries and all of the Security First 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 Security First Employee Plan which is a pension plan (as defined in Section
3(2) of ERISA): (a) except as set forth in the Security First 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 Security
First 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 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 Security First Disclosure Letter, no
Security First 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 Security First or any Security First 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 Security First Disclosure Letter, all
employees of Security First and the Security First 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 Security First
Disclosure Letter or disclosed in the Security First Reports, neither Security
First nor any Security First 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 Security First, (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 Security First, (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 Security First Financial Statements relating to the borrowing
of money by Security First or the guarantee by Security First 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
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agreement or amendment thereto that would be required to be filed as an exhibit
to a Form 10-K filed by Security First with the Commission (the agreements
and other documents referred to in clauses (a) through (e) of this sentence,
collectively, the "Security First Contracts"). Except as stated in the
Security First Disclosure Letter, neither Security First nor any Security First
Subsidiary is in default under any Security First Contract, which default is
reasonably likely to have, either individually or in the aggregate, a Material
Adverse Effect on Security First, 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
Security First Disclosure Letter or disclosed in Security First Reports filed by
Security First with the Commission prior to the date of this Agreement, since
March 31, 1997 to the date of this Agreement, there has not been any change in
the financial condition, results of operations or business of Security First and
the Security First Subsidiaries that either individually or in the aggregate has
had a Material Adverse Effect on Security First.
4.12. LITIGATION. Except as disclosed in the Security First Disclosure
Letter or in Security First Reports filed by the Security First 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 Security First,
threatened against or affecting Security First or any Security First Subsidiary
which, either individually or in the aggregate, is having, or insofar as
reasonably can be foreseen will have, a Material Adverse Effect on Security
First, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator, outstanding against Security First or any
Security First Subsidiary having, or which, insofar as reasonably can be
foreseen, in the future would have, any such effect.
4.13. COMPLIANCE WITH LAWS AND ORDERS. Except as disclosed in the
Security First Disclosure Letter or in Security First Reports filed by Security
First with the Commission prior to the date of this Agreement, the businesses of
Security First and the Security First Subsidiaries are not being conducted, and
have not been conducted since March 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 Security First 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 Security First. Except as set
forth in the Security First Disclosure Letter, no investigation or review by any
Governmental Entity with respect to Security First or any of the Security First
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 Security First, 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 Security First.
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4.14. AGREEMENTS WITH REGULATORS. As of the date of this Agreement,
except as disclosed in the Security First Disclosure Letter, neither Security
First nor any Security First 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 Security First 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 Security First
Disclosure Letter, there are no (i) material violations, or (ii) violations with
respect to which refunds or restitutions which are material in amount to
Security First and the Security First Subsidiaries taken as a whole may be
required, cited in any compliance report to Security First or any Security First
Subsidiary as a result of an examination by any regulatory authority.
4.15. SECURITY FIRST OWNERSHIP OF STOCK. Except as disclosed in the
Security First Disclosure Letter, as of the date of this Agreement, neither
Security First 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 Security First) which in the aggregate,
represent 5% or more of the outstanding shares of FirstMerit Common Stock.
4.16. FEES. Except for fees paid and payable to Xxxxxxx Xxxx & Company
("Xxxxxxx Xxxx"), neither Security First nor any Security First 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. SECURITY FIRST ACTION. The Board of Directors of Security First
(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 Security First and its
shareholders, (ii) authorized and approved this Agreement, the Security First
Stock Purchase Option and the transactions contemplated hereby and thereby,
including the Merger, (iii) directed that the Merger Agreement be submitted for
consideration by Security First's shareholders entitled to vote thereon at the
Security First Meeting, and (iv) authorized and approved the Security First
Stock Purchase Option and the Merger Agreement in accordance with applicable
takeover laws (if any) with the result that they will not apply to the
consummation of the Merger and the acquisition by FirstMerit of shares of
Security First Common Stock pursuant to the Merger, the Security First Stock
Purchase Option or any of the transactions contemplated by this Agreement or the
Security First Stock Purchase Option. Xxxxxxx Xxxx, Security First's financial
advisor, has provided the Board of Directors of Security First 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
Security First.
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4.18. VOTE REQUIRED. The affirmative vote of the holders of a majority
of the outstanding shares of Security First Common Stock entitled to vote
thereon is the only vote of the holders of any class or series of Security First
capital stock necessary to approve this Agreement and the transactions
contemplated hereby, unless FirstMerit has exercised its rights to acquire the
Security First Common Stock under the Security First Stock Purchase Option.
4.19. CONDUCT OF SECURITY FIRST TO DATE. Except as disclosed in the
Security First Disclosure Letter and in the Security First Reports filed with
the Commission prior to the date of this Agreement, from and after March 31,
1997, to the date of this Agreement: (a) Security First and the Security First
Subsidiaries have carried on their respective businesses in the ordinary and
usual course consistent with their current practices, (b) Security First has not
issued or sold any of its capital stock (except shares of Security First Common
Stock issued upon exercise of Security First Stock Options or under the Security
First Debentures), or any corporate debt securities which would be classified as
long-term debt on the balance sheets of Security First, (c) Security First has
not granted any option for the purchase of its capital stock (other than
pursuant to the Security First Stock Purchase Option), effected any stock split,
or otherwise changed its authorized capitalization, (d) Security First 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) Security First 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 Security First, (f) neither Security
First nor any Security First Subsidiary has sold, assigned, transferred, or
otherwise disposed of to a third party (i) equity securities in or issued by any
Security First Subsidiary, (ii) branch offices of any Security First 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 Security First nor any Security First
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 Security First nor any Security First
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 Security First 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 Security First nor any
Security First Subsidiary, has entered into any material transaction, contract,
lease, agreement or commitment requiring the approval of the Board of Directors
of Security First or any Security First 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 Security First or any
Security First Subsidiary, and (j) no Security First Subsidiary has entered into
any material transaction, contract, lease, agreement or commitment outside the
ordinary 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.
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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. Section 9601, et seq.; the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. Section 6901, et seq.; the Clean Air Act, as
amended, 42 U.S.C. Section 7401, et seq.; the Federal Water Pollution
Control Act, as amended, 33 U.S.C. Section 1251 et seq.; the Toxic
Substances Control Act, as amended, 125 U.S.C. Section 9601, et seq.;
the Emergency Planning and Community Right to Know Act, 42 U.S.C.
Section 11001, et seq.; the Safe Drinking Water Act, 42 U.S.C. Section
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 Security First, as the case may be, or any of their
subsidiaries.
Except as set forth in Security First Disclosure Letter, to the best of Security
First's knowledge: (i) neither Security First nor any of the Security First
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
Security First; and (ii) none of the Loan Portfolio Properties and Other
Properties Owned by Security First or any of the Security First Subsidiaries has
been since such properties have been owned, operated or managed by Security
First or any of the Security First 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
Security First. Except as set forth in Security First Disclosure Letter, there
are no actions, suits, demands, notices, claims, investigations or proceedings
pending, or to the best of Security First's knowledge threatened, relating to
the liability of the Loan Portfolio Properties and Other Properties Owned by
Security First or the Security First Subsidiaries under any Environmental Law,
including, without limitation, any
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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 Security First 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 Security First and
the Security First 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, Security First or
any of the Security First Subsidiaries (such transactions are referred to herein
as "Acquisition Transactions"), provided, however, that nothing contained in
this Section shall prohibit:
(i) Security First or any Security First 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 Security First, after
consultation with and based upon the opinion of Silver, Xxxxxxxx & Xxxx, L.L.P.
determines in good faith that such action is required for the directors of
Security First to fulfill their fiduciary duties and obligations to the Security
First shareholders and other constituencies under Delaware 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, Security
First 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 Security First 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 Security First, after consultation with and based upon the opinion
of Silver, Xxxxxxxx & Taff, L.L.P. determines in good faith that such action is
required for the directors of Security First to fulfill their fiduciary duties
and obligations to the Security First shareholders and other constituencies
under Delaware law, taking into consideration the sale process engaged in
connection with the transactions contemplated hereby.
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In the event Security First 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, Security First
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. Security First shall have
a continuing obligation to provide information to FirstMerit regarding any
additional or continuing contacts. Any writings received by Security First or
any officer, director or representative thereof, shall be immediately provided
to FirstMerit, regardless of such writing being marked confidential or
otherwise.
5.2. INTERIM OPERATIONS OF SECURITY FIRST. 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 Security
First Disclosure Letter, or as otherwise approved in writing by FirstMerit
(which shall not be unreasonably withheld):
5.2.1. CONDUCT OF BUSINESS. Security First shall, and shall
cause each of the Security First 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). Security First shall use all diligent efforts to (i) maintain and
preserve intact the business organization of Security First and each of the
Security First 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 Security First or the Security First 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 which FirstMerit has identified in writing to Security First as
"troubled," in a workout arrangement which conditions and terms shall be
satisfactory to Security First 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,
Security First 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 Security First and
each of the Security First 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. Security First shall not and shall
not permit any of the Security First 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 Security First nor
any Security First 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
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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
$500,000 as a residential loan or investment, or $1,000,000 as a commercial
loan, without first consulting with FirstMerit; provided, however, that nothing
in this paragraph shall prohibit Security First or any Security First Subsidiary
from honoring any contractual obligation in existence on the date of this
Agreement. Neither Security First nor any Security First 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 municipality within the United States of America.
Neither Security First nor any Security First Subsidiary shall
sell, assign, transfer or otherwise dispose of to a third party, (i) branch
offices of any Security First Subsidiary, or (ii) any of its material properties
or assets. Neither Security First nor any Security First 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
Security First nor any Security First 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 Security First and the Security First
Subsidiaries taken as a whole.
5.2.3. CAPITAL STOCK. Security First shall not, and shall not
permit any of the Security First Subsidiaries to, issue or sell any shares of
capital stock or any other securities of any of them (other than pursuant to
Security First Stock Options outstanding on the date of this Agreement and under
the Security First Debentures, or the exercise by FirstMerit of its rights under
the Security First 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 Security First nor any Security First
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. Security First shall not and shall not
permit any of the Security First 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) Security First's regular quarterly cash
dividends in the amount (subject to the next paragraph) of $.08 per share,
including an increase based upon historical practice to $.09 per share in May
1998 (to the extent legally permitted), and (b) dividends paid (to the extent
legally permitted) by any Security First Subsidiary to another Security First
Subsidiary or Security First with respect to such Security First Subsidiary's
capital stock. From the date of this Agreement
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to the earlier of the Effective Time or the termination of this Agreement,
Security First shall not, without the prior written consent of FirstMerit, make
any changes in its practice of setting dividend record or dividend payment
dates.
The parties agree to consult with respect to the last
quarterly dividend of Security First payable prior to the Effective Time with
the object of assuring that the shareholders of Security First receive an
equitable dividend distribution, taking into consideration the record and
payment dates of the last Security First dividend distribution and the first
FirstMerit dividend distribution following the Merger. It is the intent of the
parties that in the event that the Effective Date will occur shortly after the
record date for the FirstMerit dividend, that the last Security First dividend
to be paid prior to such time, will be grossed-up on an equitable basis so that
the Security First shareholders receive the economic benefit of such dividend.
5.2.5. EMPLOYEE PLANS, COMPENSATION AND BONUSES. Except as is
necessary to comply with the Code or as contemplated in this Agreement, or as
expressly set forth in the Security First Disclosure Letter regarding salary
increases, incentive pay or bonuses for periods after the date of this
Agreement, Security First shall not, and shall not permit any of the Security
First Subsidiaries to: adopt or amend any bonus, 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 Security First or any Security First
Subsidiary; increase the compensation or fringe benefits of any present or
former director, officer or employee, including the Senior Officers (as
hereinafter defined); pay any bonus, 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.
Pursuant to the terms of certain split-dollar life insurance
policies, the Security First officers will be entitled to purchase the
split-dollar life insurance policies held by Security First on their lives. The
names of the officers, amount and terms of the policies, and the cash
surrender/purchase price are listed on the schedule attached to the Security
First Disclosure Letter.
5.2.6. CONFORMING ACCOUNTING AND RESERVE POLICIES;
RESTRUCTURING EXPENSES.
(a) Notwithstanding that Security First 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, Security First 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,
Security First and FirstMerit shall consult and cooperate with each other with
respect to conforming, as specified in a notice from FirstMerit to Security
First, based upon such consultation, Security First's loan, accrual and reserve
policies to those policies of FirstMerit.
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(b) In addition, from and after the date of this Agreement to
the Effective Time, Security First and FirstMerit shall consult and cooperate
with each other with respect to determining, as specified in a notice from
FirstMerit to Security First, 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) Security First and FirstMerit shall consult and cooperate
with each other with respect to determining, as specified in a notice from
FirstMerit to Security First, 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 Security First, Security First shall promptly establish
and take such reserves and accruals as FirstMerit shall request to conform, on a
mutually satisfactory basis, Security First'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 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 Security First 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 Security First 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 Security First, (ii) all conditions to the obligations of
Security First 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. Security First shall not
approve or allow any holder of a Security First Stock Option to elect or receive
a cash payment in lieu of the right to receive or exercise a Security First
Stock Option.
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
Security First (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.
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5.4. EMPLOYMENT MATTERS.
(a) As of the Effective Time, FirstMerit agrees to enter into
employment and related agreements with Messrs. Xxxxxxx X. Xxxxxxxxx, Xxxxxx X.
Xxxxxxx and Xxxxxxx X. Xxxxxxxxx substantially in the form and upon the terms
indicated on Exhibits 5.4(a)-1 through (a)-3 hereto, provided such persons have
not terminated their employment with Security First at or prior to the Effective
Time ("Employment Agreements" or "Employment Agreement"), and conditioned upon
the agreement of each to the cancellation of their current employment and
related agreements with Security First.
(b) As of the Effective Time, Security First will pay the financial
obligations of Security First and the Security First Subsidiaries, as
applicable, with regard to the employment and severance agreements with Xxxxx X.
Xxxxxxx and Xxxx X. Xxxxxx, and FirstMerit will assume and pay, to the extent
such obligations can be assumed or benefits thereunder provided as a matter of
law, but conditional upon receipt of a release of FirstMerit regarding matters
related to employment and termination of employment. The total due them at the
Effective Date is $415,000 and $254,000 respectively. FirstMerit acknowledges
that the consummation of the Merger will constitute a change in status for these
officers entitling each of them to terminate employment for involuntary
termination under their employment arrangements. The parties listed herein will
not be provided any separation benefits.
(c) FirstMerit agrees to pay as separation monies to employees of
Security First and the Security First 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 365-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(b). Such
employees will also be entitled to any other benefits, if any, required by law.
FirstMerit is not required to hire any employees of Security First or
the Security First Subsidiaries, but may if it so desires. All persons employed
(except for the persons with written employment contracts) by FirstMerit and its
Subsidiaries as of the Effective Time will remain "at will" employees, meaning
that their employment can be terminated for any or no reason.
Notwithstanding anything contained herein to the contrary, no third
party shall have a right to enforce the provisions of Sections 5.4(a), (b) or
(c) or assert any claim hereunder.
(d) Following the Effective Time, the employee benefit programs to be
available and applicable to the persons who were employees of Security First and
the Security First Subsidiaries, and who become employees of FirstMerit and/or
its subsidiaries, are as follows:
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(i) Defined Benefit Retirement and Pension Plans. At the
Effective Time (i) each Security First employee shall be credited with their
past service for eligibility and vesting purposes (but not for benefit accrual
purposes) as of the Effective Date of the Merger, and (ii) each Security First
employee who satisfies the age and service eligibility requirements of the
FirstMerit defined benefit plan (including the past service credit referred to
in (i) above) shall be eligible to participate in the FirstMerit defined benefit
plan and accrue benefits thereunder on and after the date of the Merger in
accordance with the provisions thereof.
(ii) Savings Plans. Security First has a qualified, tax-exempt
profit sharing plan with a cash-or-deferred feature qualifying under Section
401(k) of the Code ("Security First 401K Plan"). With respect to the Security
First 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 Security First employees who become
employees of FirstMerit or any of its current Subsidiaries, for purposes of the
FirstMerit 401K Plan, with all service with Security First or any of the
Security First Subsidiaries for purposes of determining their eligibility to
participate in such plan and the vested portion of their respective accrued
benefits under such plan.
(iii) Health Care Plans. At such time on or after the
Effective Time as FirstMerit shall deem appropriate, FirstMerit and its
Subsidiaries will provide Security First and Security First Subsidiaries
employees hired by FirstMerit with such coverage under the FirstMerit health
care plan as they then provide their employees, with all service with Security
First or any of the Security First Subsidiaries credited for purposes of
determining such employee's eligibility to participate in such plan and without
any "prior existing condition" exclusion. The Security First health care plans
will be continued until the employees so hired can participate in the FirstMerit
health care plans.
No benefits currently provided Security First or the Security
First 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.
(viii) First Kent Financial Corporation Options and Restricted
Stock. Security First assumed certain obligations related to stock options and
restricted stock that had been issued by First Kent Financial Corporation
("First Kent") when First Kent was merged with and into Security First. Security
First has represented that some of these options and the restricted stock will
vest over the next two years if the holders thereof have a position with the
Surviving Corporation as an employee, director or advisory director. FirstMerit
agrees to establish a non-compensated local advisory board and to appoint each
holder of an unvested option or restricted stock to such advisory board for the
purpose of allowing them to vest and exercise their options and restricted
stock. FirstMerit agrees to allow or to take such action necessary at the
request of a holder, to effectuate a change in an option from an incentive to a
non-qualified option, if such is necessary to keep such option from being
forfeited.
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5.5. ACCESS, INFORMATION AND CONFIDENTIALITY. Upon reasonable notice,
Security First and each of the Security First 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), customer information, properties, personnel and
such other information and documents of Security First and each of the Security
First Subsidiaries. FirstMerit shall have a right with the prior notice to
Security First to have environmental assessments conducted on any properties
owned, managed or controlled by Security First and the Security First
Subsidiaries. Security First shall not be required to 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 Security First or
FirstMerit from disclosing information in any document filed with the
Commission, FRB, OTS, OCC and other Governmental Entities and bodies nor shall
it in any way restrict FirstMerit's right to exercise the Security First 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 Security First's business strategies, may only be
disclosed with the prior approval of Security First, 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
Security First 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 Security First Subsidiary that is a bank or savings association shall also
file all reports required to be filed with the FRB, the OTS and the OCC 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
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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. Security First shall use its
diligent efforts to (i) exempt Security First, this Agreement, the Security
First Stock Purchase Option and the Merger from the requirements of any state
takeover law (including without limitation, statutes relating to business
combinations, control share acquisitions and merger moratoriums) and from any
provisions under its Corporate Governance Documents, as applicable, by action of
Security First'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
Tenth and the limitations of liability of Article Eleventh of of Security
First's Certificate of Incorporation, including advancement of expenses (subject
to applicable requirements for delivery of an undertaking), copies of which are
attached hereto as Exhibit 5.8, which are provided to Security First's and its
subsidiaries' directors, officers and employees, for matters occurring prior to
the Effective Time. Moreover, indemnification of directors, officers and
employees of Security First and Security First 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 three years following the Effective Time,
FirstMerit will maintain in effect the current insurance policies maintained by
Security First (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. Security First 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.
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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 Security First acquired or to be acquired by the
Surviving Corporation, Security First 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 Security
First 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 Security First shall use its
diligent efforts to avoid the filing of, resist or resolve such suit. FirstMerit
and Security First 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 (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, Security First 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
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issuance of the FirstMerit Common Stock pursuant to the Merger. Security First
shall promptly furnish FirstMerit all information concerning Security First, the
Security First 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 Security First, will as soon
as practicable prepare and file the Proxy Statement with the Commission, and
take such other action so that Security First may promptly after the
effectiveness of the Registration Statement mail the Proxy Statement to Security
First's shareholders. FirstMerit and Security First shall cooperate and consult
with each other in the preparation of the Proxy Statement and Security First
shall promptly furnish FirstMerit all information concerning Security First, the
Security First 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 Security First will cause its respective
independent auditors to issue a letter addressed to both FirstMerit and Security
First, 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 March 31, 1997 for Security First and December 31, 1997 for FirstMerit, 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 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 Security First.
(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 Security First and other requests
for regulatory consents and approvals with the appropriate regulatory agencies
as contemplated by this Agreement; (ii) all
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expenses for its own legal counsel and all other expenses incurred in connection
with the registration of the FirstMerit Common 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 Security First 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 Security
First 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 Security First and FirstMerit shall identify
to the other party each additional person whom it reasonably believes to have
thereafter become its Affiliate.
(b) Each of Security First 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 Security First) 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. SECURITY FIRST SHAREHOLDER MEETING. Security First 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 Common Stock
(the "Security First 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
Security First under Delaware law and to the provisions of Section 5.1 of this
Agreement, the Board of Directors of Security First shall recommend that the
holders of the Common Stock vote in favor of and approve the Merger and adopt
this Agreement at the Security First Meeting.
5.15. POOLING AND TAX-FREE REORGANIZATION TREATMENT. Neither FirstMerit
nor Security First shall intentionally take or cause to be taken nor fail to
take any action, whether before or after the Effective Time, which would
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 Security First Stock Purchase
Option.
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5.16. MERGERS OF SUBSIDIARIES. The Board of Directors of FirstMerit
intends, contemporaneously with the merger of Security First with and into
FirstMerit, to merge the Security First Subsidiaries (not including the
non-banking subsidiaries) with and into FirstMerit Bank, N.A., a wholly owned
subsidiary of FirstMerit.
Security First shall cause such of the Security First Subsidiaries as
FirstMerit may request to enter into definitive merger or consolidation
agreements with FirstMerit Bank, N.A., providing for the merger or consolidation
of the Security First Subsidiaries with or into FirstMerit Bank, N.A.; provided,
however, that, in all cases, the obligation of Security First 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
Security First in this Agreement shall not be deemed to be untrue or breached,
(ii) Security First 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. Security First shall cause the Security First 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 Security First 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 Security First 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 Security First 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 Security First and the applicable Security
First 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 Security First.
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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 Common 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.
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 Security First'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, OTS, OCC 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,
Security First, the FirstMerit Subsidiaries and the Security First 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.
(f) FirstMerit shall have received a letter, dated the date of the
Closing, from Coopers & Xxxxxxx 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.
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6.2. CONDITIONS TO OBLIGATION OF SECURITY FIRST TO EFFECT THE MERGER.
The obligation of Security First 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 Security First 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) and (e) have been satisfied.
(d) Security First 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) 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.
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:
(a) Security First 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 Security First 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 Security First, individually
or in the aggregate, shall not have a Material Adverse Effect on Security First.
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(c) Since the date of this Agreement there shall not have been any
change in the financial condition, results of operations or business of Security
First and the subsidiaries of Security First that either individually or in the
aggregate would have a Material Adverse Effect on Security First, other than
change as a result of action taken under Section 5.2.6 and the second paragraph
of Section 5.4(a), and the responses thereto by Security First and the impact
thereof on the operating performance of Security First.
(d) Security First shall have furnished FirstMerit a certificate dated
the date of the Closing signed on behalf of Security First by the Chief
Executive Officer or President, and Chief Financial Officer of Security First,
that to the best of their knowledge and belief, the conditions set forth in
Sections 6.3(a), (b) and (c) have been satisfied. In addition, Security First
shall have furnished FirstMerit certificates, one dated the effective date of
the Registration Statement and Proxy, and one as of the Closing, signed on
behalf of Security First by the Chief Executive Officer or President, and Chief
Financial Officer of Security First, that to the best of their knowledge and
belief, that Security First participated in the preparation of the Registration
Statement and the Proxy Statement, including review and discussion of the
contents thereof, and nothing came to the attention of Security First that
caused it to believe that the Registration Statement or the Proxy Statement at
the time such documents became effective, and as of the date of Closing,
contained any untrue statement of a material fact or omitted 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.
(e) FirstMerit shall have received the opinion of legal counsel for
Security First 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 Security First'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
Security First:
(a) by mutual agreement of the parties by the vote of a majority of the
Board of Directors of each of FirstMerit and Security First;
(b) by the vote of a majority of the Board of Directors of either
FirstMerit or Security First if the Merger shall not have been consummated on or
before December 31, 1998, 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 Security First's
breach of their respective obligations under Sections 5.6 or 5.12(a), then on or
before March 31, 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 Security
First if any of the conditions specified in Sections 6.1 and 6.2 have not been
met or waived by Security First 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 Security First if any regulatory agency has denied approval of the
Merger and such denial has become final and non-appealable (regardless of
whether Security First is deemed to be a "party" to an application with respect
to the Merger); and
(f) by the vote of a majority of the Board of Directors of either
FirstMerit or Security First 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.
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 2.8, 5.4, 5.5, 5.8, 5.9,
5.10, 5.12(c), 5.13, 5.15, 5.16, 5.19 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 first sentence in the second paragraph of Section 5.5, and all
of Sections 5.12(c) 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 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 Security First, provided however, that any such amendment or
supplement to this Agreement made subsequent to the adoption of this Agreement
by the shareholders of Security First 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.
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7.5. ENTIRE AGREEMENT. This Agreement and the Security First Stock
Purchase Option, and the agreements referenced and contemplated therein and
thereby, contain the entire agreement among FirstMerit and Security First 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 Security First or FirstMerit
means a material adverse effect (other than as a result of changes (x)
in banking laws or regulations of general applicability 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
Security First and its Subsidiaries, or FirstMerit and its
Subsidiaries, as the case may be, taken as a whole, or on the ability
of Security First or FirstMerit, as the case may be, to consummate the
transactions contemplated hereby.
The effect of any action taken by Security First at the
written request of FirstMerit pursuant to Section 5.2.6 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 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, P.C. Xxxxx X. Xxxxxx, Senior Vice President
Silver, Xxxxxxxx & Xxxx, L.L.P. 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
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 Security First 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.
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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 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.
[Signature Pages Next]
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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
[KCO:2182441]
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
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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
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Exhibits to
Agreement of Affiliation and Plan of Merger
FirstMerit Corporation
and
Security First Corp.
Exhibit 1.1.2 Form of Certificate of Merger
Exhibit 1.1.4 Articles and Code of Regulations of FirstMerit
Exhibit 3.3 FirstMerit Disclosure Letter
Exhibit 3.15 Security First Stock Purchase Option
Exhibit 4.3 Security First Disclosure Letter
Schedule 5.4 Summary of Executive Employment Compensation
Exhibit 5.4(a) Employment Agreements
5.4(a)-1 X. Xxxxxxxxx
5.4(a)-2 X. Xxxxxxx
5.4(a)-3 X. Xxxxxxxxx
SERP Membership Agreements
5.4(a)-4 X. Xxxxxxxxx
5.4(a)-5 X. Xxxxxxx
Exhibit 5.4(b) Form of Change of Control Termination Agreement
Exhibit 5.4(c) FirstMerit Severance Policy
Exhibit 5.8 Indemnification Provisions
Exhibit 5.13(b)-1 Form of Affiliates Agreement for FirstMerit
Exhibit 5.13(b)-2 Form of Affiliates Agreement for Security First
Exhibit 6.2(d) Form of Xxxxxx & McDowell's Legal Opinion
Exhibit 6.3(e) Form of Silver Xxxxxxxx & Taff, L.L.P. Legal Opinion
