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STOCK PURCHASE OPTION
THIS STOCK PURCHASE OPTION, dated as of August 11, 1998 (the
"Agreement"), is by and between Signal Corp., an Ohio corporation ("Signal"),
and FirstMerit Corporation, an Ohio corporation ("FirstMerit").
WHEREAS, Signal and FirstMerit propose to enter into an Agreement of
Affiliation and Plan of Merger, dated as of August 10, 1998 (the "Merger
Agreement"), providing for the merger of Signal with and into FirstMerit (the
"Merger"); and
WHEREAS, as a condition and inducement to FirstMerit to enter into the
Merger Agreement, FirstMerit has requested that Signal agree, and Signal has
agreed, to grant the option contained in the Agreement to FirstMerit;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, and covenants set forth in this Agreement and in
the Merger Agreement, Signal and FirstMerit agree as follows:
1. CERTAIN DEFINITIONS. In addition to the terms otherwise defined in
this Agreement, the following terms shall have the meanings set forth below:
(a) "Affiliate" and "Associate" shall have the meanings given
to them in Rule 12b-2 under the Exchange Act.
(b) "Beneficial ownership" and "beneficially own" shall have
the meanings given to them in Rule 13d-3 under the Exchange Act.
(c) "BHC Act" shall mean the Bank Holding Company Act of 1956,
as amended.
(d) "Capital Stock" shall mean all classes of equity shares of
Signal, including the Common Stock and any other classes of common or preferred
shares.
(e) "Common Stock" shall mean the shares of common stock,
without par value, of Signal.
(f) "Effective Time" shall have the meaning given to it in the
Merger Agreement.
(g) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(h) "Federal Reserve" shall mean the Board of Governors of the
Federal Reserve System.
(i) "Group" shall have the same meaning as the term "group" in
Section 13(d)(3) of the Exchange Act.
(j) "Option Shares" shall mean shares of Common Stock that are
subject to the Option.
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(k) "Person" shall have the meaning given to it in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
(l) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(m) "Significant Subsidiary" shall have the meaning given to
it in Rule 1.02 of Regulation S-X of the Securities and Exchange Commission.
2. GRANT OF OPTION. Subject to the terms and conditions set forth in
this Agreement, Signal hereby grants to FirstMerit an unconditional, irrevocable
option (the "Option") to purchase from time-to-time from Signal up to 19.9% of
its Capital Stock (without giving effect to any shares subject to or issued
pursuant to this Agreement), in shares of Common Stock (subject to adjustment
hereafter pursuant to Section 7), free and clear of all liens, claims, charges,
and encumbrances of any kind, at a purchase price per share (the "Purchase
Price") equal to $28 per share.
3. EXERCISE OF OPTION.
(a) Following the occurrence of a Purchase Event, FirstMerit
may exercise the Option, in whole or in part, at any time and from time to time
prior to the expiration of the right to exercise the Option (as provided in
Section 3(c)); except that (i) FirstMerit may not exercise the Option if, at the
time of exercise, it is in material breach of any term, condition, covenant,
representation or warranty of or contained within the Merger Agreement, and (ii)
any purchase of Option Shares upon exercise of the Option shall be subject to
compliance with applicable law, including the BHC Act and the regulations of the
Federal Reserve promulgated thereunder.
(b) As used herein, a "Purchase Event" means any of the
following events that occur after the date of this Agreement:
(i) Signal or any subsidiary of Signal, any of their
officers, directors, or authorized representatives or agents, without
the prior written consent of FirstMerit, shall have authorized,
recommended, or proposed, shall have publicly announced an intention to
authorize, recommend, or propose, or shall have entered into an
agreement to effect (a) a merger, consolidation or other business
combination involving Signal or any of its Significant Subsidiaries
with or into any person (other than a merger, consolidation, joint
venture, or other business combination with or into FirstMerit or any
subsidiary of FirstMerit, or a merger or consolidation of any
subsidiary of Signal with or into Signal or any other subsidiary of
Signal), (b) a sale, lease, or other disposition of assets or earning
power of Signal or any of its subsidiaries, in one or more
transactions, representing 20% or more of the consolidated assets or
earning power of Signal and its subsidiaries to any person (other than
FirstMerit or any subsidiary of FirstMerit), or (c) an issuance, sale,
or other disposition (whether by means of a merger, consolidation,
share exchange, or other transaction) of securities representing 20% or
more of the voting power of Signal or any of its Significant
Subsidiaries to any person (other than FirstMerit or any subsidiary of
FirstMerit) (any of the foregoing being an "Acquisition Transaction;"
except that, if FirstMerit has given its prior written consent to any
such transaction (which consent may be unreasonably withheld for any or
no reason), the transaction as to which FirstMerit has given its prior
written consent shall not be an "Acquisition Transaction");
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(ii) any person (other than FirstMerit or any
subsidiary of FirstMerit) shall have commenced (as such term is defined
in Rule 14d-2 under the Exchange Act), or shall have filed a
registration statement under the Securities Act with respect to, a
tender offer or exchange offer to acquire shares of Capital Stock such
that, upon consummation of the offer, such person would beneficially
own 25% or more of the capital stock then outstanding;
(iii) any person (other than FirstMerit or any
subsidiary of FirstMerit, any subsidiary of Signal in a fiduciary
capacity in the ordinary course of such subsidiary's business, any
employee benefit plan or employee stock ownership plan of Signal or any
subsidiary of Signal, or any person organized, appointed, or
established by Signal or any subsidiary of Signal for or pursuant to
the terms of any such plan), alone or together with such person's
Affiliates, shall have acquired beneficial ownership of 20% or more of
the Capital Stock then outstanding, or any group (other than a group of
which FirstMerit or any subsidiary of FirstMerit, any subsidiary of
Signal in a fiduciary capacity in the ordinary course of such
subsidiary's business, any employee benefit plan or employee stock
ownership plan of Signal or any subsidiary of Signal, or any person
organized, appointed, or established by Signal or any subsidiary of
Signal for or pursuant to the terms of any such plan is a member) shall
have been formed, as reasonably determined in good faith by the Board
of Directors of FirstMerit, that beneficially owns 20% or more of the
Capital Stock (if any) then outstanding; or
(iv) the holders of Common Stock shall not have
approved the Merger Agreement at the meeting of such stockholders (or
any adjournment or postponement thereof) held for the purpose of voting
on the Merger Agreement, such meeting shall not have been held or shall
have been canceled (and not rescheduled) prior to termination of the
Merger Agreement, or Signal's Board of Directors shall have withdrawn
or modified in a manner adverse to FirstMerit the recommendation of
Signal's Board of Directors that Signal's stockholders vote in favor of
and approve the Merger and adopt the Merger Agreement, in each case
after any person (other than FirstMerit or any subsidiary of
FirstMerit) shall, after the date of this Agreement, have (a) publicly
announced a bona fide proposal, or publicly disclosed a bona fide
intention to make a bona fide proposal, to engage in an Acquisition
Transaction (or Signal shall have publicly disclosed receipt of such a
proposal) or (b) filed an application or given a notice, whether in
draft or final form, under the BHC Act or the Change in Bank Control
Act of 1978 for approval to engage in an Acquisition Transaction.
(c) Except as provided in the last sentence of this Section
3(c) and in Section 8(c), the right to exercise the Option shall terminate upon
the earliest to occur of (i) the Effective Time, (ii) 12 months after the first
occurrence of a Purchase Event, and (iii) termination of the Merger Agreement in
accordance with its terms prior to the occurrence of a Purchase Event. The
rights set forth in Sections 9 and 11 shall not terminate when the right to
exercise the Option terminates, but shall extend to such time as is provided in
Sections 9 or 11, respectively. Notwithstanding the termination of the right to
exercise the Option, FirstMerit shall be entitled to purchase those Option
Shares with respect to which it has exercised the Option prior to termination of
the right to exercise the Option.
(d) In the event FirstMerit wishes to exercise the Option, it
shall send to Signal a written notice (the date on which the notice is sent
being herein referred to as the "Notice Date") specifying (i) the number of
Option Shares that it intends to purchase pursuant to such exercise and (ii) a
place and date not earlier than seven business days nor later than 15 business
days from the Notice Date for the closing of such purchase (the "Closing Date").
Notwithstanding the foregoing, if the closing of such purchase cannot
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be consummated by reason of any applicable judgment, decree, order, law, or
regulation, the Closing Date shall be extended and occur not earlier than three
business days nor later than 15 business days after such restriction on
consummation has expired or been terminated. If prior notification to or
approval by the Federal Reserve or any other regulatory authority is required in
connection with such purchase and sale, FirstMerit shall promptly file and
expeditiously process the notice or application for approval (and Signal shall
cooperate with FirstMerit in the filing and processing thereof), and the Closing
Date shall be extended and occur not earlier than three business days nor later
than 15 business days after the date on which (x) any required notification
period has expired or been terminated or (y) such approval has been obtained, as
the case may be, and, in either event, any requisite waiting period has expired.
(e) Notwithstanding Section 3(d), in no event shall any
Closing Date be more than 18 months after the Notice Date, and, if the Closing
Date has not occurred within 18 months after the related Notice Date due to the
failure to obtain any required approval by the Federal Reserve or any other
regulatory authority, the exercise of the Option on the Notice Date shall be
deemed to have been rescinded. In the event (i) FirstMerit receives official
notice that an approval of the Federal Reserve or any other regulatory authority
required for the purchase and sale of the Option Shares will not be issued or
granted or (ii) a Closing Date has not occurred within 18 months after the
related Notice Date due to the failure to obtain any such required approval,
FirstMerit shall be entitled to exercise the Option in connection with the
resale of the Option Shares pursuant to a registration statement as provided in
Section 10.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, FirstMerit shall pay to Signal in
immediately available funds, by wire transfer to a bank account designated by
Signal, an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased on the Closing Date.
(b) On each Closing Date, simultaneous with the delivery of
immediately available funds as provided in Section 4(a), Signal shall deliver to
FirstMerit a certificate or certificates representing the Option Shares being
purchased, and FirstMerit shall deliver to issuer a letter in which FirstMerit
agrees not to sell or otherwise dispose of such Option Shares in violation of
applicable law or the provisions of this Agreement.
(c) Certificates for the Option Shares shall be endorsed with
a restrictive legend substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF THE STOCK PURCHASE OPTION DATED AS OF AUGUST
11, 1998. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER
HEREOF WITHOUT CHARGE UPON RECEIPT BY SIGNAL OF A WRITTEN REQUEST
THEREFOR.
It is understood and agreed that the reference in the foregoing legend to
restrictions arising under the Securities Act shall be removed, by delivery of a
substitute certificate or certificates without such reference, if FirstMerit
delivers to Signal a copy of an opinion of counsel in form and substance
reasonably satisfactory to Signal, to the effect that an exemption is available
for the transaction under the Securities Act.
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5. REPRESENTATIONS AND WARRANTIES OF SIGNAL. Signal hereby represents
and warrants to FirstMerit as follows:
(a) DUE AUTHORIZATION. Signal has all requisite corporate
power and authority to enter into this Agreement and, subject to obtaining the
approvals, if any, contemplated by this Agreement or required by law, to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Signal. This Agreement has been duly executed and delivered by Signal and
constitutes a valid and binding obligation of Signal, enforceable against Signal
in accordance with its terms.
(b) AUTHORIZED STOCK. Signal has heretofore taken, and until
termination of the right to exercise the option shall hereafter take, all
corporate and other action necessary to authorize and reserve, and, subject to
obtaining the governmental and other approvals and consents contemplated by this
Agreement and as may be required by law, to permit it to issue, all of the
Option Shares, including any additional shares of Common Stock, that may be
issued pursuant to Section 7. The Option Shares, including any such additional
shares of Common Stock, upon issuance pursuant hereto, shall be duly and validly
issued, fully paid, and nonassessable, and shall be delivered free and clear of
all liens, claims, charges, and encumbrances of any kind, including any
preemptive rights of any stockholder of Signal.
Signal will not, by charter amendment or otherwise, avoid or
seek to avoid the observance or performance of any of its obligations or
representations in this Agreement.
(c) NO CONFLICTS. Except as disclosed pursuant to the Merger
Agreement, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in a violation of or default under, (i) any provision of the corporate
governance documents of Signal or any subsidiary of Signal or (ii), subject to
obtaining the approvals, if any, contemplated by this Agreement or required by
law, any loan or credit agreement, note, mortgage, indenture, lease, or other
agreement, obligation, instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule, or regulation applicable
to Signal or any subsidiary of Signal or their respective properties or assets,
which conflict, violation, or default would have a material adverse effect on
Signal.
6. REPRESENTATIONS AND WARRANTIES OF FIRSTMERIT. FirstMerit hereby
represents and warrants to Signal that:
(a) DUE AUTHORIZATION. FirstMerit has all requisite corporate
power and authority to enter into this Agreement and, subject to obtaining the
approvals referred to in this Agreement, to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of FirstMerit. This
Agreement has been duly executed and delivered by FirstMerit and constitutes a
valid and binding obligation of FirstMerit, enforceable against FirstMerit in
accordance with its terms.
(b) NO CONFLICTS. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in a violation of or default under, (i) any provision
of the Articles of Incorporation or Code of Regulations of FirstMerit or any
subsidiary of FirstMerit or (ii), subject to obtaining the approvals referred to
in this Agreement or
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required by law, any loan or credit agreement, note, mortgage, indenture, lease,
or other agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule, or regulation
applicable to FirstMerit or any subsidiary of FirstMerit or their respective
properties or assets, which conflict, violation, or default would have a
material adverse effect on FirstMerit.
(c) PURCHASE NOT FOR DISTRIBUTION. Any Option Shares acquired
by FirstMerit upon exercise of the Option will not be taken with a view to the
public distribution thereof and will not be transferred or otherwise disposed of
except in a transaction registered or exempt from registration under the
Securities Act.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
(a) In the event of any change in the Common Stock by reason
of a stock dividend, split-up, recapitalization, combination, exchange of
shares, or similar transaction, the type and number of shares or securities
subject to the option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
any such transaction, so that FirstMerit shall receive upon exercise of the
Option the number and class of shares, other securities or property that
FirstMerit would have received in respect of the Option Shares if the Option had
been exercised and the Option Shares had been issued to FirstMerit immediately
prior to such event or the record date therefor, as applicable.
(b) In the event that Signal enters into an agreement (i) to
consolidate with or merge into any person (other than FirstMerit or any
subsidiary of FirstMerit), and Signal shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) pursuant to which any person
(other than FirstMerit or any subsidiary of FirstMerit) shall merge into Signal,
and Signal shall be the continuing or surviving corporation, but outstanding
shares of Common Stock shall be changed into or exchanged for stock, other
securities, property, or cash, or (iii) to sell, lease, or otherwise transfer
assets of Signal or any of its subsidiaries, in one or more transactions,
representing more than 50% of the consolidated assets or earning power of Signal
and its subsidiaries to any person (other than FirstMerit or any subsidiary of
FirstMerit), then, and in each such case, the agreement governing such
transaction shall make proper provisions so that upon the consummation of any
such transaction and upon the terms and conditions set forth herein, FirstMerit
may, in its discretion, convert the Option into the right to receive, at the
election of FirstMerit, either from the Acquiring Corporation or from any person
that controls the Acquiring Corporation, or Signal in the case of a merger
described in clause (ii), the number and class of shares, other securities or
property that FirstMerit would have received in respect of the Option Shares if
the Option had been exercised and the Option Shares had been issued to
FirstMerit immediately prior to the consummation of such transaction, the
distribution of the proceeds thereof to Signal's stockholders, or the record
date therefor, as applicable.
(c) For purposes of this Agreement, "Acquiring Corporation"
means (i) the continuing or surviving corporation in a merger or consolidation
involving Signal in which Signal is not the continuing or surviving corporation,
(ii) Signal in a merger in which Signal is the continuing or surviving
corporation in a transaction described in Section 7(b)(ii), and (iii) the
transferee of more than 50% of the consolidated assets or earning power of
Signal and its subsidiaries. The provisions of Sections 7 through 12 shall apply
with appropriate adjustments to any securities for which the Option becomes
exercisable pursuant to this Section 7.
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8. REPURCHASE OF OPTION AT REQUEST OF FIRSTMERIT.
(a) At the request of FirstMerit at any time during the period
beginning upon the first occurrence of a Repurchase Event and ending 12 months
thereafter, Signal shall repurchase from FirstMerit the Option (unless the
Option shall have expired or been terminated) and all shares of Common Stock,
purchased by FirstMerit upon exercise of the Option that are beneficially owned
by FirstMerit at the Request Date. The date on which FirstMerit requests that
Signal repurchase the Option or Option Shares under this Section 8 is referred
to as the "Request Date". Such repurchase shall be at an aggregate price (the
"Put Consideration") equal to the sum of:
(x) the aggregate Purchase Price paid by FirstMerit
for all shares of Common Stock, if any, purchased upon exercise of the
Option that are beneficially owned by FirstMerit on the Request Date;
(y) the excess, if any, of the Applicable Price (as
defined below) over the Purchase Price paid by FirstMerit for each
share of Common Stock with respect to which the Option has been
exercised that are beneficially owned by FirstMerit on the Request
Date, multiplied by the number of such shares; and
(z) the excess, if any, of the Applicable Price over
the Purchase Price (adjusted pursuant to Section 7), multiplied by the
number of Option Shares with respect to which the Option has not been
exercised; provided that, in the case of Option Shares with respect to
which the Option has been exercised but the Closing Date has not
occurred, the Closing Date shall be suspended and the Option shall be
treated, for purposes of this clause (z), as if it had not been
exercised.
(b) If FirstMerit exercises its rights under this Section 7,
Signal shall, within 10 business days after the Request Date, pay the Put
Consideration to FirstMerit in immediately available funds, by wire transfer to
a bank account designated by FirstMerit; FirstMerit shall, against receipt of
the payment therefor, surrender to Signal the Option and the certificates
evidencing the shares of Common Stock, if any, purchased upon exercise of the
Option that are beneficially owned by FirstMerit on the Request Date; and
FirstMerit shall warrant that it has sole record and beneficial ownership of
such shares, free and clear of all liens, claims, charges, and encumbrances of
any kind.
Notwithstanding the foregoing, if Signal is prohibited from
repurchasing the Option or any or all Option Shares or from paying all or any
portion of the Put Consideration by reason of any applicable judgment, decree,
order, law, or regulation, Signal shall immediately repurchase or pay that
portion of the Option and Option Shares or Put Consideration that it is not
prohibited from repurchasing or paying, shall from time to time thereafter
immediately repurchase or pay such further portion of the Put Consideration that
it is not then prohibited from repurchasing or paying, and, in all cases, shall
pay the balance of the Option and Option Shares or Put Consideration within 10
business days after such prohibition has expired or been terminated. Upon
receipt of a partial payment of the Put Consideration, FirstMerit shall
surrender a portion of the Option and/or Option Shares, as selected by
FirstMerit, corresponding (as closely as practicable) to the portion of the Put
Consideration received by FirstMerit.
If prior notification to or approval by the Federal Reserve or any
other regulatory authority is required in connection with the payment of all or
any portion of the Put Consideration, Signal shall pay
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from time to time that portion of the Put Consideration that it is not
prohibited from paying and shall promptly file and expeditiously process the
required notice or application for approval (and FirstMerit shall cooperate with
Signal in the filing of any such notice or application and the obtaining of any
such approval), and Signal shall pay the Put Consideration within 10 business
days after the date on which, as the case may be, (i) any required notification
period has expired or been terminated or (ii) such approval has been obtained.
(c) If the Federal Reserve or any other regulatory authority
disapproves of the repurchase by Signal of all or any part of the Option or
Option Shares pursuant to this Section 8, Signal shall promptly give notice of
such disapproval to FirstMerit, and FirstMerit shall have the right to exercise
the Option as to the number of Option Shares for which the Option was
exercisable at the Request Date less the number of shares as to which payment
has been made. If the Option shall have terminated prior to the date of such
notice or shall be scheduled to terminate at any time before the expiration of a
period ending on the thirtieth business day after the date of such notice,
FirstMerit shall nevertheless have the right so to exercise the Option or
exercise its right under Section 11 until the expiration of such period of 30
business days. Notwithstanding anything herein to the contrary, Signal shall not
be obligated to repurchase the Option or any Option Shares on more than one
occasion.
(d) For purposes of this Agreement, the "Applicable Price"
means the highest of (i) the highest price per share to be paid by any person
(other than FirstMerit or one of its subsidiaries) for shares of Common Stock or
the highest consideration per share to be received by holders of Common Stock,
in each case pursuant to an agreement for a merger, consolidation, joint
venture, or other business combination with Signal entered into after the date
hereof and on or prior to the Request Date, (ii) the highest closing sales price
per share of Common Stock reported on The Nasdaq Stock Market National Market
System of the National Association of Securities Dealers Automated Quotation
System ("Nasdaq") (or, if transactions in Common Stock are not reported on
Nasdaq, the highest bid price quoted on the principal trading market on which
the Common Stock is traded as reported by a recognized source) during the 60
business days preceding the Request Date, and (iii) in the event of the sale by
Signal or its subsidiaries, in one or more transactions, of assets or earning
power aggregating more than 50% of the consolidated assets or earning power of
Signal and its subsidiaries to any person (other than FirstMerit or any
subsidiary of FirstMerit), the sum of the price paid for such assets or earning
power and the current value of the remaining assets of Signal and its
subsidiaries divided by the number of shares of Common Stock outstanding at the
time of the sale. The value of any consideration other than cash that is
offered, paid, or received pursuant to clauses (i) or (iii) of this Section
8(d), and the value of the remaining assets of Signal and its subsidiaries
referred to in clause (iii), shall be determined in good faith by an independent
nationally recognized investment banking firm mutually acceptable to FirstMerit
and Signal, which determination shall be conclusive for all purposes of this
Agreement.
(e) As used herein, a "Repurchase Event" means the
consummation of an Acquisition Transaction, provided, that, the percentage for
purposes of Section 3(b)(i)(b) shall be 50% and the percentages for purposes of
Section 3(b)(i)(c) shall be 40%.
(f) Notwithstanding anything in this Agreement to the
contrary, the Put Consideration payable to FirstMerit, determined in accordance
with Subsection (a) of this Section, shall be adjusted so that in no event will
the aggregate Put Consideration payable to FirstMerit pursuant to the terms of
this Section 8 exceed the aggregate Purchase Price paid by FirstMerit pursuant
to the Option, plus $20,000,000.
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9. REPURCHASE OF OPTION AT REQUEST OF SIGNAL.
(a) Except to the extent that FirstMerit shall have previously
exercised its rights under Section 8, at the request of Signal during the
six-month period commencing 12 months following the first occurrence of a
Repurchase Event, Signal may repurchase from FirstMerit, and FirstMerit shall
sell to Signal, all (but not less than all) of the shares of Common Stock
purchased by FirstMerit upon exercise of the Option that are beneficially owned
by FirstMerit on the Call Date at a price (the "Call Consideration") equal to
the greater of (x) 110% of the Current Market Price and (y) the sum of (a) the
Purchase Price paid by FirstMerit for such shares plus (b) FirstMerit's pretax
per share carrying cost, multiplied in either case by the number of shares being
repurchased. The date on which Signal requests that FirstMerit sell the Option
Shares under this Section 9 is referred to as the "Call Date."
Notwithstanding the foregoing, FirstMerit may, within 30 days
following Signal's notice of its intention to purchase shares pursuant to this
Section 9, deliver an Offeror's Notice pursuant to Section 11, in which case the
provisions of Section 11 and not those of this Section 9 shall control.
Notwithstanding any contrary provision of this Section 9, Signal's rights under
this Section 9 shall be suspended (with any such rights being extended
accordingly) during any period in which the exercise of such rights would
subject FirstMerit to liability pursuant to Section 16(b) of the Exchange Act.
(b) If Signal exercises its rights under this Section 9 and
FirstMerit does not deliver an Offeror's Notice or sell shares of Common Stock
to a third party pursuant to the Offeror's Notice, Signal shall, within 10
business days after the thirtieth day following Signal's notice of its intention
to purchase shares pursuant to this Section 9 or, if applicable, within 10
business days after abandonment of the transaction covered by the Offeror's
Notice, pay the Call Consideration in immediately available funds, by wire
transfer to a bank account designated by FirstMerit; FirstMerit shall surrender
to Signal the certificates evidencing the shares of Common Stock purchased upon
exercise of the option that are beneficially owned by FirstMerit on the Call
Date; and FirstMerit shall warrant that it has sole record and beneficial
ownership of such shares, free and clear of all liens, claims, charges, and
encumbrances of any kind.
(c) As used herein, (i) "Current Market Price" means the
average closing sales price per share of Common Stock reported on Nasdaq (or if
the Common Stock is not reported on Nasdaq, the highest bid price quoted on the
principal trading market on which such shares are traded as reported by a
recognized source) for the 10 business days preceding the Call Date, and (ii)
"FirstMerit's pretax per share carrying cost" shall be the amount equal to the
interest on the aggregate Purchase Price paid for the shares of Common Stock
being repurchased pursuant to this Section 9 from the date of purchase to the
date of repurchase at the rate of interest announced by Signal as its prime or
base lending or reference rate during such period, less any dividends received
on the shares being repurchased, divided by the number of shares being
repurchased.
10. REGISTRATION RIGHTS. If requested by FirstMerit at any time and
from time to time within (a) the period beginning upon the first exercise of the
Option and ending 18 months thereafter or (b) the period beginning upon the
occurrence of either of the events set forth in clauses (i) and (ii) of Section
3(e), or the receipt by FirstMerit of official notice that an approval of the
Federal Reserve or any other regulatory authority required for a repurchase
pursuant to Section 8(c) will not be issued or granted, and ending 30 business
days thereafter (but solely as to shares of Common Stock with respect to which
the required approval was not received), Signal shall prepare and file a
registration statement under the Securities Act, if such registration is
necessary, in order to permit the sale or other disposition of any or
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all shares of Common Stock or other securities that have been purchased by or
are issuable to FirstMerit upon exercise of the Option in accordance with the
intended method of sale or other disposition stated by FirstMerit, including, if
applicable, a "shelf" registration statement under Rule 415 under the Securities
Act or any successor provision, and Signal shall use its best efforts to qualify
such shares or other securities under any applicable state securities laws.
FirstMerit shall use all reasonable efforts to cause, and to cause any
underwriters of any sale or other disposition to cause, any sale or other
disposition pursuant to registration statement to be effected on a widely
distributed basis. Signal shall use all reasonable efforts to cause such
registration statement to become effective, to obtain all consents or waivers of
other parties that are required therefor, and to keep such registration
statement effective for such period (not in excess of 180 days from the day such
registration statement first becomes effective) as may be reasonably necessary
to effect such sale or other disposition. In the event that FirstMerit requests
Signal to file a registration statement following the failure to obtain an
approval required for an exercise of the Option as described in Section 3(e),
the closing of the sale or other disposition of Common Stock pursuant to such
registration statement shall occur substantially simultaneously with the
exercise of the Option.
The obligations of Signal hereunder to file a registration statement
and to maintain its effectiveness may be suspended for one or more periods of
time not exceeding 90 days in the aggregate if the Board of Directors of Signal
determines that the filing of such registration statement or the maintenance of
its effectiveness would require disclosure of non-public information that would
materially and adversely affect Signal. Any registration statement prepared and
filed under this Section 10, and any sale covered thereby, shall be at Signal's
expense, except for underwriting discounts or commissions, brokers' fees, and
the fees and disbursements of FirstMerit's counsel related thereto. FirstMerit
shall provide all information reasonably requested by Signal for inclusion in
any registration statement to be filed hereunder, and shall make all necessary
representations and warranties with respect to the accuracy and completeness
thereof and shall hold Signal harmless with respect to any liability therefor.
If, during the time periods referred to in the first sentence of this
Section 10, Signal effects a registration under the Securities Act of any Common
Stock for its own account or for the account of any stockholder of Signal (other
than a registration on Form X-0, Xxxx X-0, or any successor form), Signal shall
afford FirstMerit the right to participate in such registration, and such
participation shall not affect the obligation of Signal to effect the
registration statement for FirstMerit under this Section 10; provided that, if
the managing underwriters of such offering advise Signal in writing that, in
their opinion, the number of shares of Common Stock requested to be included in
such registration exceeds the number that can be sold in such offering, Signal
shall include the shares requested to be included in the offering by FirstMerit
pro rata with the shares intended to be included in the offering by Signal. In
connection with the registration pursuant to this Section 10, Signal and
FirstMerit shall provide each other and any underwriter of the offering with
customary representations, warranties, covenants, indemnification, and
contribution in connection with such registration.
11. FIRST REFUSAL. At any time after the first occurrence of a Purchase
Event and prior to the later of (a) the expiration of 24 months following the
first purchase of shares of Common Stock upon exercise of the Option and (b) the
termination of the right to exercise the Option pursuant to Section 3(c), if
FirstMerit desires to sell, assign, transfer, or otherwise dispose of all or any
of the shares of Common Stock or other securities purchased by it upon exercise
of the Option, FirstMerit shall give Signal written notice of the proposed
transaction (an "Offeror's Notice"), identifying the proposed transferee,
accompanied by a copy of a binding offer to purchase such shares or other
securities signed by such
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transferee and setting forth the terms of the proposed transaction. An Offeror's
Notice shall be deemed an offer by FirstMerit to Signal, which may be accepted
within 10 business days after receipt of such Offeror's Notice by Signal, to
sell such shares or other securities to Signal on the same terms and conditions
and at the same price as those set forth in the Offeror's Notice for the
proposed transaction. The purchase of any such shares or other securities by
Signal shall be settled within 10 business days of the date of the acceptance of
the offer by Signal, and the purchase price shall be paid to FirstMerit in
immediately available funds. Notwithstanding the foregoing, if prior
notification to or approval by the Federal Reserve or any other regulatory
authority is required in connection with such purchase, Signal shall promptly
file and expeditiously process the required notice or application for approval
(and FirstMerit shall cooperate with Signal in the filing of any such notice or
application and the obtaining of any such approval), and the purchase of such
shares or other securities by Signal shall be settled within 10 business days
after the date on which, as the case may be, (a) any required notification
period has expired or been terminated or (b) such approval has been obtained.
In the event of the failure or refusal of Signal to purchase all the
shares or other securities covered by an Offeror's Notice, or if the Federal
Reserve or any other regulatory authority disapproves of Signal's proposed
purchase of such shares or other securities, FirstMerit may thereafter sell such
shares to the proposed transferee at no less than the price specified and on
terms no more favorable than those set forth in the Offeror's Notice. The
requirements of this Section 11 shall not apply to (x) any disposition as a
result of which the proposed transferee will purchase or acquire in such
transaction not more than 2% of the outstanding Common Stock, (y) any sale by
means of a public offering registered under the Securities Act in which steps
are taken to reasonably ensure that no purchaser will purchase or acquire more
than 2% of the outstanding Common Stock, or (z) any transfer to a wholly-owned
subsidiary of FirstMerit that agrees in writing to be bound by the terms hereof.
12. LISTING. If shares of Common Stock or any other securities to be
acquired upon exercise of the Option are quoted on Nasdaq, Signal, at the
request of FirstMerit, will thereafter, use reasonable efforts to cause the
Common Stock to continue to be so quoted.
13. DIVISION OF OPTION. This Agreement (and the Option granted hereby)
are exchangeable, without expense, at the option of FirstMerit, upon
presentation and surrender of this Agreement at the principal office of Signal,
for other Agreements providing for options of different denominations entitling
the Holder thereof to purchase in the aggregate the same number of shares of
Common Stock purchasable hereunder. The terms "Agreement" and "Option" as used
herein include any other Agreements and related options for which this Agreement
and the Option granted hereby may be exchanged. Upon receipt by Signal of
evidence reasonably satisfactory to it of the loss, theft, destruction, or
mutilation of this Agreement, and (in the case of loss, theft, or destruction)
of reasonably satisfactory indemnification, and (in the case of mutilation) upon
surrender and cancellation of this Agreement, Signal will execute and deliver a
new Agreement of like tenor and date. Any such new Agreement, when executed and
delivered, shall constitute an additional contractual obligation on the part of
Signal, whether or not the Agreement so lost, stolen, destroyed, or mutilated
shall at any time be enforceable by anyone.
14. FIRSTMERIT'S BREACH. Notwithstanding anything to the contrary
contained herein, all of Signal's obligations under this Agreement shall be
terminated and the Option shall not be exercisable if the Merger Agreement has
been terminated and FirstMerit was in material breach of any term, condition,
covenant, representation or warranty of or contained within the Merger Agreement
when it was terminated; provided, however, that Signal may not assert, for
purposes of this Section 14 only, a material
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breach of the Merger Agreement by FirstMerit if FirstMerit terminated the Merger
Agreement pursuant to the terms of the Merger Agreement and Signal failed to
notify FirstMerit, upon FirstMerit's written request prior to termination, of
the material breach; provided, further, however, that Signal may not assert, for
purposes of this Section 14 only, a material breach of the Merger Agreement by
FirstMerit if Signal terminated the Merger Agreement pursuant to the terms of
the Merger Agreement and all material breaches by FirstMerit were curable,
unless Signal provided written notice to FirstMerit of the material breaches and
an opportunity to cure as soon as reasonably practicable.
15. MISCELLANEOUS.
(a) EXPENSES. Except as otherwise provided in Section 10, each
of the parties hereto shall bear and pay all expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants, and counsel.
(b) WAIVER AND AMENDMENT. Any provision of this Agreement may
be waived at any time by the party that is entitled to the benefits of such
provision, but such waiver shall only be effective if in writing and signed by
the party entitled to the benefits of such provision. This Agreement may not be
modified, amended, altered, or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto.
(c) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARY;
SEVERABILITY. Except as otherwise set forth in the Merger Agreement, this
Agreement, the Merger Agreement, and the other documents and instruments
referred to therein and herein (a) constitute the entire agreement and
understanding, and supersede all prior agreements and understandings, both
written and oral, between the parties with respect to their subject matter and
(b) are not intended to confer upon any person other than the parties hereto any
rights or remedies. If any term, provision, covenant, or restriction of this
Agreement is held by a court of competent jurisdiction or a federal or state
regulatory agency to be invalid, void, or unenforceable, the other terms,
provisions, covenants, and restrictions of this Agreement shall remain in full
force and effect and shall not be affected, impaired, or invalidated. If for any
reason such court or regulatory agency determines that the Option does not
permit FirstMerit to acquire, or does not require Signal to repurchase, the full
number of shares of Common Stock as provided in Sections 3 and 8 (as adjusted
pursuant to Section 7), it is the express intention of Signal to allow
FirstMerit to acquire, or to require Signal to repurchase, such lesser number of
shares as may be permissible without any amendment or modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Ohio without regard to any
applicable conflicts of law rules.
(e) DESCRIPTIVE HEADINGS. The descriptive headings contained
herein are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation), or mailed by registered or
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certified mail (return receipt requested) to the parties at the following
addresses (or at such other address as shall be specified by like notice):
TO SIGNAL: TO FIRSTMERIT:
Xxxx X. Xxxxx, Chairman, Xxxx X. Xxxxxxx, Chairman and
and Chief Executive Officer Chief Executive Officer
Signal Corp. FirstMerit Corporation
000 Xxxx Xxxxxxx Xxxxxx III Xxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxx, Xxxx 00000 Xxxxx, Xxxx 00000
WITH A COPY TO: WITH COPIES TO:
Xxxxxxx X. Xxxxxxx, P.C. Xxxxx X. Xxxxxx, Senior Vice President
Silver, Xxxxxxxx & Xxxx, L.L.P. FirstMerit Corporation
0000 Xxx Xxxx Xxx., X.X. III Xxxxxxx Xxxxx, 0xx Xxxxx
Xxxxx 000 Xxxxx, Xxxx 00000
Xxxxxxxxxx, X.X. 00000
Xxxxx X. O'Xxxx
Xxxxxx & XxXxxxxx, L.P.A.
000 Xxxxx Xxxxxxxx Xxxxx
Xxxxx, Xxxx 00000
(g) COUNTERPARTS. This Agreement and any amendments hereto may
be executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that both Parties need not sign the same counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party. Subject to the preceding sentence,
this Agreement shall be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
(i) FURTHER ASSURANCES. In the event of any exercise of the
Option by FirstMerit, Signal and FirstMerit shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
(j) SPECIFIC PERFORMANCE. This Agreement may be enforced by
either party through specific performance, injunctive relief, and other
equitable relief. Both parties hereby waive any requirement for the securing or
posting of any bond in connection with the obtaining of any such equitable
relief and agree that this provision is without prejudice to any other rights
that the parties hereto may have for any failure to perform this Agreement. Both
parties acknowledge that damages would be an inadequate remedy for a breach of
this Agreement by either party.
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IN WITNESS WHEREOF, Signal and FirstMerit have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of the
day and year first written above.
FirstMerit Corporation
Attest:
/s/ Xxxxx X. Xxxxxx By: /s/ Xxxx X. Xxxxxxx
-------------------------------- --------------------------
Xxxxx X. Xxxxxx, Secretary Xxxx X. Xxxxxxx, Chairman and
Chief Executive Officer
[KCO:option.WPD]
ACKNOWLEDGMENT
STATE OF OHIO )
) SS:
COUNTY OF SUMMIT )
BE IT REMEMBERED that on this 11th day of August, 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 11th day
of August, 1998.
/s/ Xxxxx X. X'Xxxx
------------------------------------
Xxxxx X. X'Xxxx, Notary Public
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Signal Corp.
Attest:
/s/ Xxx Xxxx By: /s/ Xxxx X. Xxxxx
-------------------------------- ------------------------------
Xxx Xxxx, Asst. Secretary Xxxx X. Xxxxx, Chairman and
Chief Executive Officer
