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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
E*TRADE GROUP, INC.,
TURBO ACQUISITION CORP.
AND
TELEBANC FINANCIAL CORPORATION
May 31, 1999
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TABLE OF CONTENTS
Page
ARTICLE I THE MERGER..............................................................................................2
1.1 The Merger......................................................................................2
1.2 Closing; Effective Time.........................................................................2
1.3 Effect of the Merger............................................................................2
1.4 Certificate of Incorporation; Bylaws............................................................2
1.5 Directors and Officers..........................................................................3
1.6 Effect on Capital Stock.........................................................................3
1.7 Surrender of Certificates.......................................................................4
1.8 No Further Ownership Rights in Company Capital Stock............................................6
1.9 Lost, Stolen or Destroyed Certificates..........................................................6
1.10 Tax and Accounting Consequences.................................................................6
1.11 Withholding Rights..............................................................................6
1.12 Taking of Necessary Action; Further Action......................................................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY..............................................................7
2.1 Organization, Standing and Power................................................................7
2.2 Capital Structure...............................................................................7
2.3 Authority.......................................................................................8
2.4 SEC Documents; Financial Statements.............................................................9
2.5 Absence of Certain Changes.....................................................................10
2.6 Absence of Undisclosed Liabilities.............................................................11
2.7 Litigation.....................................................................................11
2.8 Restrictions on Business Activities............................................................11
2.9 Compliance With Laws...........................................................................11
2.10 Title to Property..............................................................................11
2.11 Intellectual Property..........................................................................12
2.12 Environmental Matters..........................................................................13
2.13 Taxes..........................................................................................14
2.14 Employee Benefit Plans.........................................................................15
2.15 Employee Matters...............................................................................18
2.16 Interested Party Transactions..................................................................19
2.17 Insurance......................................................................................19
2.18 Regulatory Matters.............................................................................19
2.19 Material Contracts.............................................................................21
2.20 Banking Business...............................................................................22
2.21 Year 2000 Compliance...........................................................................23
2.22 Opinion of Financial Advisor...................................................................23
2.23 Company Affiliates.............................................................................23
2.24 State Takeover Statutes; Charter Provisions....................................................23
2.25 Tax and Accounting Treatment...................................................................24
2.26 Brokers' and Finders' Fees.....................................................................24
2.27 Representations Complete.......................................................................24
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT.............................................................24
3.1 Organization, Standing and Power...............................................................24
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3.2 Capital Structure..............................................................................25
3.3 Authority......................................................................................25
3.4 SEC Documents; Financial Statements............................................................27
3.5 Absence of Undisclosed Liabilities.............................................................27
3.6 Litigation.....................................................................................27
3.7 Compliance With Laws...........................................................................27
3.8 Year 2000 Compliance...........................................................................28
3.9 Tax Treatment..................................................................................28
3.10 Broker's and Finders' Fees.....................................................................28
3.11 Representations Complete.......................................................................28
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME...................................................................28
4.1 Conduct of Business............................................................................28
4.2 Conduct of Business of Company.................................................................29
4.3 Conduct of Parent..............................................................................32
4.4 No Solicitation................................................................................32
ARTICLE V ADDITIONAL AGREEMENTS..................................................................................33
5.1 Registration Statement; Proxy Statements.......................................................33
5.2 Meeting of Stockholders........................................................................36
5.3 Access to Information..........................................................................37
5.4 Confidentiality................................................................................37
5.5 Public Disclosure..............................................................................37
5.6 Consents; Cooperation..........................................................................37
5.7 Reasonable Best Efforts and Further Assurances.................................................38
5.8 Blue Sky Laws..................................................................................38
5.9 Listing of Additional Shares; Nasdaq Quotation.................................................38
5.10 Pooling Accounting.............................................................................39
5.11 Affiliate Agreements...........................................................................39
5.12 Tax Treatment..................................................................................39
5.13 Company Options................................................................................39
5.14 Form S-8.......................................................................................40
5.15 Employees; Employee Benefit Matters............................................................40
5.16 Director and Officer Indemnification...........................................................41
5.17 Comfort Letters................................................................................42
5.18 Stockholder Litigation.........................................................................42
5.19 Company Debt Securities........................................................................42
ARTICLE VI CONDITIONS TO THE MERGER..............................................................................43
6.1 Conditions to Obligations of Each Party to Effect the Merger...................................43
6.2 Additional Conditions to Obligations of Company................................................44
6.3 Additional Conditions to the Obligations of Parent and Merger Sub..............................44
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER....................................................................46
7.1 Termination....................................................................................46
7.2 Effect of Termination..........................................................................47
7.3 Expenses and Termination Fees..................................................................47
7.4 Amendment......................................................................................48
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7.5 Extension; Waiver..............................................................................48
ARTICLE VIII GENERAL PROVISIONS..................................................................................49
8.1 Non-Survival at Effective Time.................................................................49
8.2 Notices........................................................................................49
8.3 Interpretation.................................................................................50
8.4 Counterparts...................................................................................50
8.5 Entire Agreement; Nonassignability; Parties in Interest........................................50
8.6 Severability...................................................................................51
8.7 Remedies Cumulative............................................................................51
8.8 Governing Law..................................................................................51
8.9 Rules of Construction..........................................................................51
8.10 Definitions; Etc...............................................................................51
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EXHIBITS
Exhibit A - Form of Certificate of Merger
Exhibit B - Form of Company Affiliate Agreement
Exhibit C - Form of Parent Affiliate Agreement
Exhibit D - Form of Management Continuity Agreement
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the
"Agreement") is made and entered into as of May 31, 1999, by and among E*TRADE
Group, Inc., a Delaware corporation ("Parent"), Turbo Acquisition Corp., a
Delaware corporation and wholly owned subsidiary of Parent ("Merger Sub"), and
Telebanc Financial Corporation, a Delaware corporation ("Company").
RECITALS
A. The Board of Directors of Company has unanimously (i)
determined that it is advisable and fair to, and in the best interests of,
Company and its stockholders that, upon the terms and subject to the conditions
of this Agreement, Merger Sub merge with and into Company, with Company being
the surviving corporation (the "Merger"), (ii) approved this Agreement, the
Merger and the other transactions contemplated hereby and (iii) determined to
recommend the approval of this Agreement and the Merger by the stockholders of
Company.
B. The Board of Directors of Parent has (i) determined that
the Merger is advisable and in the best interests of Parent and its stockholders
and (ii) approved this Agreement, the Merger and the other transactions
contemplated hereby.
C. Pursuant to the Merger, among other things, the outstanding
shares of Common Stock, par value $.01 per share ("Company Common Stock"), of
Company shall be converted into the right to receive the consideration set forth
herein.
D. The parties intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code"), and to cause the Merger to qualify as a
"reorganization" under the provisions of Sections 368(a)(1)(A) and 368(a)(2)(E)
of the Code, and as a pooling of interests for financial accounting purposes.
E. Concurrently with the execution of this Agreement and as an
inducement to Parent and Merger Sub to enter into this Agreement, (a) Company
and Parent have entered into a stock option agreement dated the date hereof (the
"Option Agreement") providing for the purchase by Parent of newly-issued shares
of Company Common Stock under certain circumstances, and (b) certain affiliates
of Company have on the date hereof entered into Stockholder Agreements the
("Stockholder Agreements") pursuant to which they have agreed among other
things, to vote the shares of Company Common Stock over which such persons have
voting power to approve this Agreement and the Merger;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
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ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section
1.2) and subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Delaware General Corporation Law ("Delaware Law"),
Merger Sub shall be merged with and into Company, the separate corporate
existence of Merger Sub shall cease and Company shall continue as the surviving
corporation. Company as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "Surviving Corporation."
1.2 Closing; Effective Time. The consummation of the Merger
(the "Closing") shall take place as soon as practicable, and in any event not
later than two (2) business days, after the satisfaction or waiver of each of
the conditions set forth in Article VI hereof or at such other time as the
parties hereto may agree (the "Closing Date"). The Closing shall take place at
the offices of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, Two Embarcadero Place, 0000 Xxxx
Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000, or at such other location as the parties
hereto may agree in writing. The Merger shall become effective on the Closing
Date, as set forth in the Certificate of Merger in the form attached hereto as
Exhibit A (the "Certificate of Merger"), which shall be filed with the Secretary
of State of the State of Delaware on the Closing Date. The term "Effective Time"
shall be the date and time when the Merger becomes effective on the Closing
Date, as set forth in the Certificate of Merger.
1.3 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of Delaware Law. At and after the Effective Time, the
Merger shall have the effects set forth in Sections 259 and 261 of the Delaware
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, all the property, rights, privileges, powers and franchises
of Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of
Incorporation of Company, as in effect immediately prior to the Effective Time,
shall be the Certificate of Incorporation of the Surviving Corporation;
provided, however, that immediately after the Effective Time the Certificate of
Incorporation of the Surviving Corporation shall be amended and restated so as
to read in its entirety like the Certificate of Incorporation of Merger Sub with
Article I of the Certificate of Incorporation amended to read as follows: "The
name of the corporation is Telebanc Financial Corporation."
(b) The Bylaws of Company, as in effect immediately prior
to the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended; provided, however, that immediately after the Effective Time
the Bylaws of the Surviving Corporation shall be amended and restated so as to
read like the Bylaws of Merger Sub.
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1.5 Directors and Officers. At the Effective Time, the
directors of Merger Sub shall be the initial directors of the Surviving
Corporation, until their successors are duly elected or appointed and qualified.
The officers of Company at the Effective Time shall be the initial officers of
Surviving Corporation, until their respective successors are duly elected or
appointed and qualified.
1.6 Effect on Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, Merger Sub, Company
or the holders of any of the following securities:
(a) Conversion of Company Capital Stock. Each share of
Company Common Stock issued and outstanding immediately prior to the Effective
Time (other than any shares of Company Common Stock to be cancelled pursuant to
Section 1.6(b)) will be converted automatically into the right to receive 2.1
shares (the "Exchange Ratio") of Parent Common Stock, par value $.01 per share
("Parent Common Stock"), upon surrender of the certificate representing such
share of Company Common Stock in the manner provided in Section 1.7 (or, in the
case of a lost, stolen or destroyed certificate, upon delivery of an affidavit
and, if required, bond, in the manner provided in Section 1.9).
(b) Cancellation of Company Capital Stock Owned by Parent,
Merger Sub or Company. Each share of Company Common Stock that is owned by
Company as treasury stock and each share of Company Common Stock owned by Parent
or Merger Sub or any direct or indirect wholly owned Subsidiary (as defined
below) of Parent, Merger Sub or Company immediately prior to the Effective Time
shall be canceled and extinguished without any conversion thereof.
(c) Company Stock Option Plans. At the Effective Time,
Company's 1994 Stock Option Plan, 1997 Stock Option Plan and 1998 Stock
Incentive Plan, as amended (collectively, the "Company Stock Option Plans"), and
all options to purchase Company Common Stock then outstanding under the Company
Stock Option Plans or pursuant to option agreements listed on Schedule 1.6(c)
attached hereto (collectively, "Company Options") shall be assumed by Parent in
accordance with Section 5.13.
(d) Unvested Company Common Stock. If any shares of
Company Common Stock outstanding immediately prior to the Effective Time are
unvested or are subject to a repurchase option, risk of forfeiture or other
condition under the Company Employee Stock Ownership Plan, any applicable
restricted stock purchase agreement, or other agreement with Company or under
which Company has any rights, then (unless such condition terminates by virtue
of the Merger pursuant to the express term of such agreement) the shares of
Parent Common Stock issued in exchange for such shares of Parent Common Stock
will also be unvested and subject to the same repurchase option, risk of
forfeiture or other condition, and the certificates representing such shares of
Parent Common Stock may accordingly be marked with appropriate legends. Company
shall take all action that may be necessary to ensure that, from and after the
Effective Time, Parent is entitled to exercise any such repurchase option or
other right set forth in any such restricted stock purchase agreement or other
agreement.
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(e) Capital Stock of Merger Sub. At the Effective Time,
each share of Common Stock, par value $.001 per share, of Merger Sub ("Merger
Sub Common Stock") issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one validly issued, fully paid
and nonassessable share of Common Stock, par value $.001 per share, of the
Surviving Corporation, and the Surviving Corporation shall become a wholly owned
Subsidiary of Parent. Each stock certificate of Merger Sub evidencing ownership
of any such shares shall continue to evidence ownership of such shares of
capital stock of the Surviving Corporation.
(f) Adjustments to Exchange Ratio. The Exchange Ratio
shall be appropriately adjusted to reflect the effect of any stock split,
reverse split, stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock or Company Common Stock),
reorganization, recapitalization or other like change with respect to Parent
Common Stock or Company Common Stock occurring after the date hereof and prior
to the Effective Time and of any increase in the number of shares of Company
Common Stock outstanding resulting from any failure of Section 2.2 to be correct
on the date hereof or by Company to comply with its covenants under Section 4.2
of this Agreement, so as to provide Parent the same economic effect as
contemplated by this Agreement prior to such stock split, reverse split, stock
dividend, reorganization, recapitalization, like change or increase.
(g) Fractional Shares. No fraction of a share of Parent
Common Stock will be issued, but in lieu thereof each holder of shares of
Company Capital Stock who would otherwise be entitled to a fraction of a share
of Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock to be received by such holder) shall receive from Parent an amount of cash
(rounded to the nearest whole cent) equal to the product of (i) such fraction,
multiplied by (ii) the average of the closing sale prices for a share of Parent
Common Stock as quoted on the Nasdaq National Market over the five (5) most
recent trading days that Parent Common Stock has traded ending on the last full
trading day prior to the date on which the Effective Time occurs.
1.7 Surrender of Certificates.
(a) Exchange Agent. Parent's transfer agent or another
institution selected by Parent and reasonably acceptable to Company shall act as
exchange agent (the "Exchange Agent") in the Merger.
(b) Parent to Provide Common Stock and Cash. Prior to the
Effective Time, Parent shall deposit with the Exchange Agent for exchange in
accordance with this Article I, through such reasonable procedures as Parent may
adopt, (i) the shares of Parent Common Stock issuable pursuant to Section 1.6(a)
in exchange for shares of Company Common Stock outstanding immediately prior to
the Effective Time and (ii) cash in an amount sufficient to permit payment of
cash in lieu of fractional shares pursuant to Section 1.6(g) and any dividend or
distribution to which holders of shares of Company Common Stock may be entitled
pursuant to Section 1.7(d).
(c) Exchange Procedures. Promptly after the Effective
Time, Parent shall cause to be mailed to each holder of record of a certificate
or certificates (the "Certificates")
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which immediately prior to the Effective Time represented outstanding shares of
Company Common Stock, whose shares were converted into the right to receive
shares of Parent Common Stock (and cash in lieu of fractional shares) pursuant
to Section 1.6, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon receipt of the Certificates by the Exchange Agent, and shall be in
such form and have such other provisions as Parent may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock (and cash
in lieu of fractional shares). Upon surrender of a Certificate for cancellation
to the Exchange Agent or to such other agent or agents as may be appointed by
Parent, together with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing the number of whole shares of Parent Common Stock and payment in
lieu of fractional shares which such holder has the right to receive pursuant to
Section 1.6 and any dividends or other distributions pursuant to Section 1.7(d),
and the Certificate so surrendered shall forthwith be canceled. Until so
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented shares of Company Common Stock will be deemed from and after the
Effective Time, for all corporate purposes, other than the payment of dividends,
to evidence the ownership of the number of full shares of Parent Common Stock
into which such shares of Company Common Stock shall have been so converted and
the right to receive an amount in cash in lieu of the issuance of any fractional
shares in accordance with Section 1.6 and any dividends or other distributions
pursuant to Section 1.7(d).
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock with a
record date after the Effective Time will be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock
represented thereby until the holder of record of such Certificate shall
surrender such Certificate. Subject to applicable law, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, at the time of such surrender, the amount of any
such dividends or other distributions with a record date after the Effective
Time theretofore payable (but for the provisions of this Section 1.7(d)) with
respect to such shares of Parent Common Stock.
(e) Transfers of Ownership. If any certificate for shares
of Parent Common Stock is to be issued by the Exchange Agent in a name other
than that in which the Certificate surrendered in exchange therefor is
registered, it will be a condition of the issuance thereof that the Certificate
so surrendered will be properly endorsed and otherwise in proper form for
transfer and that the person requesting such exchange will have paid to Parent
or any agent designated by it any transfer or other taxes required by reason of
the issuance of a check in any name other than that of the registered holder of
the Certificate surrendered, or established to the satisfaction of Parent or any
agent designated by it that such tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary
in this Section 1.7, none of the Exchange Agent, the Surviving Corporation or
any party hereto shall be liable to any person for any amount properly paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
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1.8 No Further Ownership Rights in Company Capital Stock.
All shares of Parent Common Stock issued (and cash in lieu of fractional shares
paid and any dividends or other distributions pursuant to Section 1.7(d)) upon
the surrender for exchange of shares of Company Common Stock in accordance with
the terms hereof shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Common Stock, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event
any Certificates shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof, such shares of
Parent Common Stock (and cash in lieu of fractional shares) as may be required
pursuant to Section 1.6; provided, however, that Parent may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Parent, the Surviving Corporation or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
1.10 Tax and Accounting Consequences. It is intended by
the parties hereto that the Merger shall qualify as a reorganization under the
provisions of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code and as a
pooling of interests for accounting purposes.
1.11 Withholding Rights. Parent and the Surviving
Corporation shall be entitled to deduct and withhold from the number of shares
of Parent Common Stock otherwise deliverable under this Agreement, and from any
other payments made pursuant to this Agreement, such amounts as Parent and the
Surviving Corporation are required to deduct and withhold with respect to such
delivery and payment under the Code or any provision of state, local, provincial
or foreign tax law. To the extent that amounts are so withheld, such withheld
amounts shall be treated for all purposes of this Agreement as having been
delivered and paid to the holder of shares of Company Common Stock in respect of
which such deduction and withholding was made by Parent and the Surviving
Corporation.
1.12 Taking of Necessary Action; Further Action. If, at
any time after the Effective Time, any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of Company and Merger Sub, the
officers and directors of Company, Parent and Merger Sub are fully authorized in
the name of their respective corporations or otherwise to take, and will take,
all such lawful and necessary action, so long as such action is not inconsistent
with this Agreement.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as disclosed in the document of even date herewith
delivered by Company to Parent prior to the execution and delivery of this
Agreement and referring to the representations and warranties in this Agreement
(the "Company Disclosure Schedule"), any exception so disclosed in the Company
Disclosure Schedule to specifically identify the Section of this Agreement to
which such exception relates, Company represents and warrants to Parent and
Merger Sub as follows:
2.1 Organization, Standing and Power. Each of Company and
its Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Company is
registered as a savings and loan holding company in accordance with the Home
Owners' Loan Act. Each of Company and its Subsidiaries has the corporate power
to own its properties and to carry on its business as now being conducted and as
proposed to be conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the failure to be so qualified and in
good standing would have a Material Adverse Effect (as defined in Section 8.10)
on Company. Company has made available to Parent a true and correct copy of the
certificate or articles of incorporation, as amended, and bylaws, as amended,
and any other charter or organizational documents, each as amended, of Company
and each of its Subsidiaries. Neither Company nor any of its Subsidiaries is in
violation of any of the provisions of its certificate or articles of
incorporation or bylaws or other charter or organizational documents, each as
amended. All of the outstanding shares of capital stock and voting securities of
each of Company's Subsidiaries owned, directly or indirectly, by Company are
duly authorized, validly issued, fully paid and nonassessable, and those shares
of capital stock and voting securities of each of Company's Subsidiaries owned
by Company, directly or indirectly, are free and clear of all liens, charges,
claims or encumbrances or rights of others. Except as disclosed in the Company
SEC Documents (as defined below), there are no outstanding subscriptions,
options, warrants, puts, calls, rights, exchangeable or convertible securities
or other commitments or agreements of any character relating to the issued or
unissued capital stock or other securities of any such Subsidiary, or otherwise
obligating Company or any such Subsidiary to issue, transfer, sell, purchase,
redeem or otherwise acquire any such securities. TeleBank is a federal savings
association existing under the laws of the United States. The deposit accounts
in TeleBank are insured by the Federal Deposit Insurance Corporation (the
"FDIC") through the Savings Association Insurance Fund to the fullest extent
permitted by law, and all premiums and assessments required in connection
therewith have been paid by TeleBank.
2.2 Capital Structure. The authorized capital stock of
Company consists of 135,000,000 shares of Company Common Stock, and 500,000
shares of Preferred Stock, par value $.01 per share ("Preferred Stock"), of
which there were issued and outstanding as of the close of business on May 28,
1999, 16,857,835 shares of Company Common Stock and no shares of Preferred
Stock. There are no other outstanding shares of capital stock or voting
securities and no outstanding commitments to issue any shares of capital stock
or voting securities after May 28, 1999 other than pursuant to the exercise of
Company Options outstanding as of such date. All outstanding shares of Company
Common Stock are duly authorized, validly issued, fully paid and non-assessable
and are free and clear of any liens or
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encumbrances other than any liens or encumbrances created by or imposed upon the
holders thereof, and are not subject to preemptive rights or rights of first
refusal created by the Amended and Restated Certificate of Incorporation or
Bylaws, each as amended, of Company or any agreement to which Company is a party
or by which it is bound. As of the close of business on May 28, 1999, Company
has reserved an aggregate of 4,773,019 shares of Common Stock for issuance to
employees, consultants and directors pursuant to the Company Stock Option Plans
and the Company Options, of which 218,092 shares have been issued pursuant to
option exercises or direct stock purchases or awards, 2,570,680 shares are
subject to outstanding, unexercised options, and no shares are subject to
outstanding stock purchase rights. Since May 28, 1999, Company has not issued or
granted additional options under the Company Stock Option Plans or otherwise.
Company has not issued or granted any stock appreciation rights or performance
units payable in stock of the Company that are currently outstanding. Except for
(i) the rights created pursuant to this Agreement, the Company Stock Option
Plans, the Company Options and the Option Agreement and (ii) Company's right to
repurchase any unvested shares under the Company Stock Option Plans, the Company
Options or the Company Employee Stock Ownership Plan, there are no other
options, warrants, calls, rights, commitments or agreements of any character to
which Company is a party or by which it is bound obligating Company to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of capital stock of Company or obligating
Company to grant, extend, accelerate the vesting of, change the price of, or
otherwise amend or enter into any such option, warrant, call, right, commitment
or agreement. Except for this Agreement and as provided by Section 5.11, there
are no contracts, commitments or agreements relating to voting, purchase or sale
of Company's capital stock between or among Company and any of its stockholders.
The terms of the Company Stock Option Plans permit the assumption of options to
purchase Company Common Stock as provided in this Agreement, without the consent
or approval of the holders of such securities or the Company stockholders. True
and complete copies of all material agreements and instruments, that are
currently in force or under which Company has any liability, relating to or
issued under the Company Stock Option Plans, the Company Options and the Company
Employee Stock Ownership Plan have been provided to Parent and such agreements
and instruments have not been amended, modified or supplemented, and there are
no agreements to amend, modify or supplement such agreements or instruments in
any case from the form provided to Parent. All outstanding shares of Company
Common Stock and all Company Options were issued in compliance with all
applicable federal and state securities laws.
2.3 Authority. Assuming the filings and approvals
described in clauses (i) through (iv) of the last sentence of this Section are
made or obtained (as the case may be) and the condition set forth in Section
6.1(a) is satisfied, Company has all requisite corporate power and authority to
enter into this Agreement and the Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Option Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Company, subject only, as of the date of this
Agreement, to the approval of the Merger by Company's stockholders as
contemplated by Section 6.1(a). Each of this Agreement and the Option Agreement
has been duly executed and delivered by Company and constitutes the valid and
binding obligation of Company, enforceable against Company in accordance with
its terms, except as such enforcement may be limited by (i) the effect of
bankruptcy, insolvency, reorganization, receivership, conservatorship,
arrangement, moratorium or other laws affecting
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or relating to the rights of creditors generally, or (ii) the rules governing
the availability of specific performance, injunctive relief or other equitable
remedies and general principles of equity, regardless of whether considered in a
proceeding in equity or at law. Assuming the filings and approvals described in
clauses (i) through (iv) of the last sentence of this Section are made or
obtained (as the case may be) and the condition set forth in Section 6.1(a) is
satisfied, the execution and delivery of this Agreement and the Option Agreement
by Company does not, and the consummation of the transactions contemplated
hereby and thereby will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both), or give rise
to a right of termination, cancellation or acceleration of any obligation or
loss of any benefit under, (i) any provision of the certificate or articles of
incorporation, bylaws, or other charter or organizational documents, each as
amended, of Company or any of its Subsidiaries or (ii) any material mortgage,
indenture, lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Company or any of its Subsidiaries or any of their
properties or assets, except for any conflicts, violations, defaults or other
occurrences that would not (A) individually or in the aggregate have a Material
Adverse Effect on Company or any of its Subsidiaries or (B) prevent or
materially impair or delay the consummation of the Merger. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
court, administrative agency or commission, self-regulatory organization ("SRO")
or other foreign or domestic governmental or quasi-governmental authority or
instrumentality (each of the foregoing, a "Governmental Entity") is required by
or with respect to Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement or the Option Agreement, the
performance of Company's obligations hereunder or thereunder or the consummation
of the transactions contemplated hereby or thereby, except for (i) the filing of
the Certificate of Merger as provided in Section 1.2, (ii) the filing of
applications and notices with and the receipt of requisite approvals from the
Office of Thrift Supervision (the "OTS") with respect to the Merger, (iii) the
filing with, and clearance by, the SEC of the Proxy Statement (as defined in
Section 5.1) relating to the Company Stockholders Meeting (as defined in Section
5.1), (iv) such notices, applications, consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal or state securities laws or the securities laws of any
foreign country in connection with the Merger; and (v) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not have a Material Adverse Effect on Company and would not prevent,
or materially alter or delay, any of the transactions contemplated by this
Agreement or the Option Agreement. Company is not aware of any reason why the
approvals of all Governmental Entities necessary to permit consummation of the
Merger or the other transactions contemplated by this Agreement will not be
received without the imposition of a condition or requirement described in
Section 6.3(c).
2.4 SEC Documents; Financial Statements. Company has
furnished or made available (including via XXXXX) to Parent a true and complete
copy of each statement, report, registration statement (with the prospectus in
the form filed pursuant to Rule 424(b) of the Securities Act of 1933, as amended
(the "Securities Act")), definitive proxy statement and other filings (including
exhibits, supplements and schedules thereto) filed with the SEC by Company since
January 1, 1997, and, prior to the Effective Time, Company will have furnished
or made available (including via XXXXX) to Parent true and complete copies of
any additional documents filed with the SEC by Company prior to the Effective
Time (collectively, the
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"Company SEC Documents"). As of their respective filing dates, the Company SEC
Documents complied in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Securities Act, and none of the Company SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the extent
corrected by a subsequently filed Company SEC Document. The financial statements
of Company, including the notes thereto, included in the Company SEC Documents
(the "Company Financial Statements") were complete and correct in all material
respects as of their respective dates (except to the extent corrected by a
subsequently filed Company SEC Document), complied as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto as of their respective dates,
and have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent throughout the periods indicated
(except as may be indicated in the notes thereto or, in the case of unaudited
statements included in Quarterly Reports on Form 10-Q, as permitted by Form 10-Q
of the SEC). The Company Financial Statements fairly present the consolidated
financial condition and operating results of Company and its Subsidiaries at the
dates and during the periods indicated therein (subject, in the case of
unaudited statements, to normal and recurring year-end adjustments).
2.5 Absence of Certain Changes. Since December 31, 1998
(the "Company Balance Sheet Date"), except as set forth in any Company SEC
Document (but only to the extent set forth therein), Company has conducted its
business in the ordinary course consistent with past practice and there has not
occurred: (i) any change, event or condition (whether or not covered by
insurance) that has resulted in, or might reasonably be expected to result in, a
Material Adverse Effect on Company; (ii) any acquisition, sale or transfer of
any material asset of Company or any of its Subsidiaries other than in the
ordinary course of business and consistent with past practice; (iii) any
material change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by Company or any revaluation by
Company of any of its or any of its Subsidiaries' assets, except as set forth in
any Company SEC Document (but only to the extent set forth therein); (iv) any
declaration, setting aside, or payment of a dividend or other distribution with
respect to the shares of Company, or any direct or indirect redemption, purchase
or other acquisition by Company of any of its shares of capital stock; (v) any
material contract entered into by Company or any of its Subsidiaries, other than
in the ordinary course of business and as made available to Parent, or any
material amendment or termination of, or default under, any material contract to
which Company or any of its Subsidiaries is a party or by which it is bound;
(vi) any amendment or change to the Certificate of Incorporation or Bylaws of
Company; (vii) any material increase in or modification of the compensation or
benefits payable or to become payable by Company or any of its Subsidiaries to
any of their respective directors, officers or employees, other than (in the
case of non-executive officer employees) in the ordinary course of business
consistent with past practice; (viii) any material change in the interest rate
risk management and hedging policies, procedures or practices of Company or any
of its Subsidiaries, or any failure to comply with such policies, procedures and
practices; or (ix) any negotiation or agreement by Company or any of its
Subsidiaries to do any of the things described in the preceding clauses (i)
through (vii) (other than negotiations with Parent and its representatives
regarding the transactions contemplated by this Agreement).
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2.6 Absence of Undisclosed Liabilities. None of Company or
any of its Subsidiaries has any material obligations or liabilities of any
nature (matured or unmatured, fixed or contingent) other than (i) those set
forth or adequately provided for in the consolidated balance sheet (and the
related notes thereto) of Company and its Subsidiaries included in Company's
Annual Report on Form 10-K/A for the fiscal year ended December 31, 1998 (the
"Company Balance Sheet"), (ii) those incurred in the ordinary course of business
consistent with past practice since the Company Balance Sheet Date and which
have not had and are not reasonably likely to have a Material Adverse Effect on
Company, and (iii) those incurred in connection with the execution of this
Agreement.
2.7 Litigation. There is no private or governmental action,
suit, proceeding, claim, arbitration, inquiry, examination, inspection or, to
the knowledge of Company or any of its Subsidiaries, investigation pending by
or before any Governmental Entity, agency, court or tribunal, foreign or
domestic or, to the knowledge of Company or any of its Subsidiaries, threatened
against Company or any of its Subsidiaries or any of their respective
properties or any of their respective officers or directors (in their
capacities as such) that, individually or in the aggregate, could reasonably be
expected to prevent, enjoin, alter or materially delay any of the transactions
contemplated hereby or could reasonably be expected to have a Material Adverse
Effect on Company. There is no judgment, decree or order against Company or any
of its Subsidiaries, or, to the knowledge of Company and its Subsidiaries, any
of their respective directors or officers (in their capacities as such), that,
individually or in the aggregate, could reasonably be expected to prevent,
enjoin, alter or materially delay any of the transactions contemplated by this
Agreement or could reasonably be expected to have a Material Adverse Effect on
Company.
2.8 Restrictions on Business Activities. There is no
agreement, judgment, injunction, order or decree binding upon Company or any of
its Subsidiaries which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any current or currently proposed business
practice of Company or any of its Subsidiaries, any acquisition of property by
Company or any of its Subsidiaries or the conduct of business by Company or any
of its Subsidiaries as currently conducted or as described in any Company SEC
Document as proposed to be conducted by Company or any of its Subsidiaries.
2.9 Compliance With Laws. Each of Company and its
Subsidiaries has complied in all material respects with all applicable federal,
state, local, self-regulatory and foreign laws, statutes, ordinances, rules and
regulations, and is not in violation in any material respect of, and has not
received any notices of material violation with respect to, its respective
certificate or articles of incorporation or bylaws or other charter or
organizational documents, or any federal, state, local, self-regulatory or
foreign statute, law, ordinance, rule or regulation applicable to the conduct of
its business or the ownership or operation of its business.
2.10 Title to Property. Company and its Subsidiaries have
good, valid and marketable title to all of their respective properties,
interests in properties and assets, real and personal, reflected in the Company
Balance Sheet or acquired after the Company Balance Sheet Date (except
properties, interests in properties and assets sold or otherwise disposed of
since the Company Balance Sheet Date in the ordinary course of business and
except for any real property that Company or any of its Subsidiaries has
acquired in the ordinary course of business by
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foreclosure or by deed in lieu thereof), or in the case of leased properties and
assets, valid leasehold interests in the leased properties and assets, free and
clear of all mortgages, liens, pledges, charges or encumbrances of any kind or
character, except (i) the lien of current taxes not yet due and payable, (ii)
recorded easements, covenants, conditions and other restrictions of record as do
not and will not materially detract from or interfere with the use of the
properties subject thereto or affected thereby, or otherwise materially impair
business operations involving such properties and (iii) liens securing debt
which is reflected on the Company Balance Sheet. There are no defaults (or
events that, with notice or lapse of time or both, would constitute defaults) by
Company or its Subsidiaries with respect to the liens securing debt which is
reflected on the Company Balance Sheet. With respect to any properties or assets
leased by Company or any of its Subsidiaries, there are no defaults (or events
that, with notice or lapse of time or both, would constitute defaults) by
Company or its Subsidiaries, or to the knowledge of Company, any other party to
the leases of such properties or assets. There are no outstanding options,
rights of first refusal or similar rights to purchase the properties and/or
assets owned by Company or any of its Subsidiaries. All properties used in the
operations of Company and its Subsidiaries are reflected in the Company Balance
Sheet to the extent generally accepted accounting principles require the same to
be reflected. Schedule 2.10 identifies each parcel of real property owned or
leased by Company or any of its Subsidiaries.
2.11 Intellectual Property.
(a) Company and its Subsidiaries own, or are licensed or
otherwise possess legally enforceable and unencumbered rights to use all
patents, trademarks, trade names, service marks, domain names, database rights,
copyrights, and any applications therefor, maskworks, net lists, technology,
know-how, trade secrets, inventory, ideas, algorithms, processes, computer
software programs or applications (in both source code and object code form),
and tangible or intangible proprietary information or material ("Intellectual
Property") that are used or currently proposed to be used by Company and its
Subsidiaries in their respective businesses as currently conducted or as
currently proposed to be conducted by Company and its Subsidiaries. Company has
not (i) licensed any of its Intellectual Property in source code form to any
party or (ii) entered into any exclusive agreements relating to its Intellectual
Property.
(b) Schedule 2.11 lists (i) all patents and patent
applications and all registered and unregistered trademarks, trade names and
service marks, registered and unregistered copyrights, and maskworks included in
the Intellectual Property, including the jurisdictions in which each such
Intellectual Property right has been issued or registered or in which any
application for such issuance and registration has been filed, (ii) all material
licenses, sublicenses and other agreements as to which Company is a party and
pursuant to which any person is authorized to use any Intellectual Property
(excluding commercially available, off-the-shelf software), and (iii) all
material licenses, sublicenses and other agreements as to which Company is a
party and pursuant to which Company is authorized to use any third-party
patents, trademarks or copyrights, including software ("Third Party Intellectual
Property Rights"), which are incorporated in, are, or form a part of any Company
product or service (excluding commercially available, off-the-shelf software).
No royalties or other continuing payment obligations are due in respect of Third
Party Intellectual Property Rights.
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(c) To the knowledge of Company, there is no
unauthorized use, disclosure, infringement or misappropriation of any material
Intellectual Property rights of Company or any of its Subsidiaries, or any
Intellectual Property right of any third party to the extent licensed by or
through Company or any of its Subsidiaries, by any third party, including any
employee or former employee of Company or any of its Subsidiaries. Neither
Company nor any of its Subsidiaries has entered into any agreement to indemnify
any other person against any charge of infringement of any Intellectual
Property.
(d) None of Company or its Subsidiaries is, nor will any
of them be as a result of the execution and delivery of this Agreement or the
performance of its obligations under this Agreement, in material breach of any
license, sublicense or other agreement relating to any Intellectual Property or
Third Party Intellectual Property Rights.
(e) All patents, registered trademarks, service marks
and copyrights held by Company and its Subsidiaries are valid and subsisting.
Neither Company nor any of its Subsidiaries (i) has been sued in any suit,
action or proceeding which involves a claim of infringement of any patents,
trademarks, service marks, copyrights or violation of any trade secret or other
proprietary right of any third party or (ii) has brought any action, suit or
proceeding for infringement of Intellectual Property or breach of any license or
agreement involving Intellectual Property against any third party. The
marketing, licensing or sale of the products or services of Company and its
Subsidiaries does not infringe any patent, trademark, service xxxx, copyright,
trade secret or other proprietary right of any third party.
(f) Company has secured valid written assignments from
all consultants and employees who contributed to the creation or development of
Intellectual Property of the rights to such contributions that Company does not
already own by operation of law.
(g) Company has taken reasonable steps consistent with
prevailing industry practice to protect and preserve the confidentiality of all
Intellectual Property not otherwise protected by patents, patent applications or
copyright ("Confidential Information"). All use, disclosure or appropriation of
Confidential Information owned by Company or any of its Subsidiaries by or to a
third party has been pursuant to the terms of a written agreement between
Company and such third party. All use, disclosure or appropriation by Company
and its Subsidiaries of Confidential Information not owned by Company or any
such Subsidiary has been pursuant to the terms of a written agreement between
Company and the owner of such Confidential Information, or is otherwise lawful.
2.12 Environmental Matters.
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any
federal, state or local laws, ordinances, codes, regulations, rules, policies
and orders that are intended to assure the protection of the environment, or
that classify, regulate, call for the remediation of, require reporting with
respect to, or list or define air, water, groundwater, solid waste, hazardous or
toxic
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substances, materials, wastes, pollutants or contaminants, or which are
intended to assure the safety of employees, workers or other persons, including
the public.
(ii) "Hazardous Materials" shall mean any toxic or
hazardous substance, material or waste or any pollutant or contaminant, or
infectious or radioactive substance or material, including without limitation,
those substances, materials and wastes defined in or regulated under any
Environmental and Safety Laws.
(iii) "Property" shall mean all real property leased
or owned by Company or its Subsidiaries either currently or in the past.
(iv) "Facilities" shall mean all buildings and
improvements on the Property of Company or its Subsidiaries.
(b) Company represents and warrants as follows, in each
case (except clauses (iii) and (iv) below) to its knowledge or the knowledge of
any of its Subsidiaries: (i) no methylene chloride or asbestos is contained in
or has been used at or released from the Facilities; (ii) all Hazardous
Materials have been disposed of in accordance with all Environmental and Safety
Laws; (iii) Company and its Subsidiaries have received no notice (verbal or
written) of any noncompliance of the Facilities or its past or present
operations with Environmental and Safety Laws; (iv) no notices, administrative
actions or suits are pending or, to the knowledge of Company or any of its
Subsidiaries, threatened relating to a violation of any Environmental and Safety
Laws; (v) neither Company nor any of its Subsidiaries is liable as a responsible
party under the federal Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA), or state analog statute, arising out of events occurring
prior to the Effective Time; (vi) there have not been in the past, and are not
now, any Hazardous Materials on, under or migrating to or from the Facilities or
any Property; (vii) there have not been in the past, and are not now, any
underground tanks or underground improvements at, on or under any Property
including without limitation, treatment or storage tanks, sumps, or water, gas
or oil xxxxx; (viii) there are no polychlorinated biphenyls (PCBs) deposited,
stored, disposed of or located on the Property or Facilities or any equipment on
the Property containing PCBs at levels in excess of 50 parts per million; (ix)
there is no formaldehyde on the Property or in the Facilities, nor any
insulating material containing urea formaldehyde in the Facilities; (x) the
Facilities and Company's and its Subsidiaries' uses and activities therein have
at all times complied with all Environmental and Safety Laws; and (xi) Company
and its Subsidiaries have all the permits and licenses required to be issued
under Environmental and Safety Laws and are in full compliance with the terms
and conditions of those permits.
2.13 Taxes. Company and each of its Subsidiaries, and
any consolidated, combined, unitary or aggregate group for Tax (as defined
below) purposes of which Company or any of its Subsidiaries is or has been a
member have properly completed and timely filed all Tax Returns (as defined
below) required to be filed by them and have paid all Taxes shown thereon to be
due, other than any Taxes for which adequate reserves under generally accepted
accounting principles have been recorded in the Financial Statements. Company
has provided adequate accruals in accordance with generally accepted accounting
principles in its financial statements for any Taxes that have not been paid,
whether or not shown as being due on any Tax Returns. Company has no material
liability for unpaid Taxes accruing after the date of its latest Financial
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Statements other than Taxes arising in the ordinary course of its business.
Except as disclosed in the SEC Documents, there is (i) no material claim for
Taxes that is a lien against the property of Company or any of its Subsidiaries
or is being asserted against Company or any of its Subsidiaries other than liens
for Taxes not yet due and payable, (ii) Company has not been notified and has no
other knowledge that any audit of any Tax Return of Company or any of its
Subsidiaries is being conducted by a Tax authority, (iii) no extension of the
statute of limitations on the assessment of any Taxes granted by Company or any
of its Subsidiaries and currently in effect, and (iv) there is no agreement,
contract or arrangement to which Company or any of its Subsidiaries is a party
that may result in the payment of any amount that would not be deductible by
reason of Sections 280G or 404 of the Code. Company has not been and will not be
required to include any material adjustment in Taxable income for any Tax period
(or portion thereof) pursuant to Section 481 or 263A of the Code or any
comparable provision under state or foreign Tax laws as a result of
transactions, events or accounting methods employed prior to the Merger (based
on facts known as of the date of this Agreement). Neither Company nor any of its
Subsidiaries has filed or will file any consent to have the provisions of
paragraph 341(f)(2) of the Code (or comparable provisions of any state Tax laws)
apply to Company or any of its Subsidiaries. Neither Company nor any of its
Subsidiaries is a party to any currently effective Tax sharing or Tax allocation
agreement. Neither Company nor any of its Subsidiaries owes any amount under any
Tax sharing or Tax allocation agreement. Neither Company nor any of its
Subsidiaries has filed any disclosures under Section 6662 or comparable
provisions of state, local or foreign law to prevent the imposition of penalties
with respect to any Tax reporting position taken on any Tax Return. Neither
Company nor any of its Subsidiaries has within the last six (6) years been a
member of a consolidated, combined or unitary group of which Company was not the
ultimate parent corporation. Company and each of its Subsidiaries have in their
possession receipts for any Taxes paid to foreign Tax authorities. For purposes
of this Agreement, the following terms have the following meanings: "Tax" (and,
with correlative meaning, "Taxes" and "Taxable") means (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
Governmental Entity (a "Tax authority") responsible for the imposition of any
such tax (domestic or foreign), (ii) any liability for the payment of any
amounts of the type described in (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any Taxable period and
(iii) any liability for the payment of any amounts of the type described in (i)
or (ii) as a result of any express or implied obligation to indemnify any other
person. As used herein, "Tax Return" shall mean any return, statement, report or
form (including, without limitation, estimated Tax returns and reports,
withholding Tax returns and reports and information reports and returns)
required to be filed with respect to Taxes.
2.14 Employee Benefit Plans.
(a) Schedule 2.14 lists, with respect to Company, any
Subsidiary of Company and any trade or business (whether or not incorporated)
which is treated as a single employer with Company (an "ERISA Affiliate") within
the meaning of Section 414(b), (c), (m) or (o) of the Code, (i) all material
employee benefit plans (as defined in Section 3(3) of the
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Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
maintained by Company or any ERISA Affiliate, (ii) any other material
supplemental retirement, severance, sabbatical, employee relocation, cafeteria
benefit (Code Section 125) or dependent care (Code Section 129), life insurance
or accident insurance plans, programs or arrangements maintained by Company or
any ERISA Affiliate, (iii) all other material bonus, pension, profit sharing,
savings, deferred compensation or incentive plans, programs or arrangements
maintained by Company or any ERISA Affiliate, (iv) other material fringe or
employee benefit plans, programs or arrangements maintained by Company or any
ERISA Affiliate that apply to senior management of Company and that do not
generally apply to all employees, and (v) any current or former employment or
executive compensation or severance agreements, written or otherwise, maintained
by Company or any ERISA Affiliate as to which unsatisfied obligations of Company
of greater than fifty thousand dollars ($50,000) remain for the benefit of, or
relating to, any present or former employee, consultant or director of Company
(together, the "Company Employee Plans").
(b) Company has made available to Parent a copy of each
of the Company Employee Plans and related plan documents (including trust
documents, insurance policies or contracts, employee booklets, summary plan
descriptions and other authorizing documents, and any material employee
communications relating thereto, if applicable) and has, with respect to each
Company Employee Plan which is subject to ERISA reporting requirements, provided
copies of the Form 5500 reports filed for the last three plan years. Any Company
Employee Plan intended to be qualified under Section 401(a) of the Code has
either obtained from the Internal Revenue Service a favorable determination
letter as to its qualified status under the Code, including all amendments to
the Code effected by the Tax Reform Act of 1986 and subsequent legislation, or
has applied to the Internal Revenue Service for such a determination letter
prior to the expiration of the requisite period under applicable Treasury
Regulations or Internal Revenue Service pronouncements in which to apply for
such determination letter and to make any amendments necessary to obtain a
favorable determination. Company has also furnished Parent with a copy of the
most recent Internal Revenue Service determination letter issued with respect to
each such Company Employee Plan, and nothing has occurred since the issuance of
each such letter which could reasonably be expected to cause the loss of the
tax-qualified status of any Company Employee Plan subject to Code Section
401(a). Company has also furnished or made available to Parent copies of all
registration statements and prospectuses filed with the SEC, OTS or other
governmental authority or distributed to employees or their beneficiaries in
connection with each Company Employee Plan.
(c) (i) Except as required by law, none of the Company
Employee Plans promises or provides retiree medical or other retiree welfare
benefits to any person, other than a benefit that could be terminated without
further liability; (ii) there has been no "prohibited transaction," as such term
is defined in Section 406 of ERISA and Section 4975 of the Code, with respect to
any Company Employee Plan, which could reasonably be expected to have, in the
aggregate, a Material Adverse Effect; (iii) each Company Employee Plan has been
administered in accordance with its terms and in compliance with the
requirements prescribed by any and all statutes, rules and regulations
(including ERISA and the Code), except as would not have, in the aggregate, a
Material Adverse Effect, and Company and each Subsidiary or ERISA Affiliate have
performed all obligations required to be performed by them under, and are not in
any material respect in default under or violation of, any of the Company
Employee Plans; (iv)
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neither Company nor any ERISA Affiliate is subject to any material liability or
penalty under Sections 4976 through 4980 of the Code or Title I of ERISA with
respect to any of the Company Employee Plans; (v) all material contributions
required to be made by Company or any Subsidiary or ERISA Affiliate to any
Company Employee Plan have been made on or before their due dates and the
amounts accrued in the Company Financial Statements for contributions to each
Company Employee Plan for the current plan years have been determined in
accordance with generally accepted accounting principles consistently applied;
(vi) with respect to each Company Employee Plan, no "reportable event" within
the meaning of Section 4043 of ERISA (excluding any such event for which the
thirty (30) day notice requirement has been waived under the regulations to
Section 4043 of ERISA) nor any event described in Section 4062, 4063 or 4041 of
ERISA has occurred; and (vii) each Company Employee Plan can be amended,
terminated or otherwise discontinued after the Effective Time in accordance with
its terms, without liability to Parent or Company in excess of the amount
accrued with respect to such plan on the Company Financial Statements (other
than ordinary administrative expenses typically incurred in a termination
event). With respect to each Company Employee Plan subject to ERISA as either an
employee pension plan within the meaning of Section 3(2) of ERISA or an employee
welfare benefit plan within the meaning of Section 3(1) of ERISA, Company has
prepared in good faith and timely filed all requisite governmental reports
(which were true and correct in all material respects as of the date filed) and
has properly and timely filed and distributed or posted all material notices and
reports to employees required to be filed, distributed or posted with respect to
each such Company Employee Plan. No suit, administrative proceeding, action or
other litigation has been brought, or to the best knowledge of Company is
threatened, against or with respect to any such Company Employee Plan, including
any audit or examination by the IRS or United States Department of Labor. No
payment or benefit which will or may be made by Company to any employee will be
characterized as an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Code. Neither Company nor any ERISA Affiliate is a party to,
or has ever been a party to, or has made any contribution to or otherwise
incurred any obligation under, any "multiemployer plan" as defined in Section
3(37) of ERISA. Neither Company nor any Company Subsidiary or ERISA Affiliate
currently maintains, sponsors, participates in or contributes to, nor has it
within the last seven (7) years maintained, established, sponsored, participated
in, or contributed to, any pension plan (within the meaning of Section 3(2) of
ERISA) which is subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of
ERISA or Section 412 of the Code.
(d) With respect to each Company Employee Plan, Company
and each of its United States Subsidiaries have complied (except to the extent
that any such failure to comply would not, in the aggregate, have a Material
Adverse Effect on Company or any of its Subsidiaries) with (i) the applicable
health care continuation and notice provisions of Section 602 of ERISA and
Section 4980B of the Code ("COBRA") and the regulations thereunder, (ii) the
applicable requirements of the Family Medical and Leave Act of 1993 and the
regulations thereunder, and (iii) the applicable requirements of the Health
Insurance Portability and Accountability Act of 1996.
(e) The consummation of the transactions contemplated by
this Agreement will not (i) entitle any current or former employee or other
service provider of Company, any Company Subsidiary or any other ERISA Affiliate
to severance benefits or any other payment, except as expressly provided in this
Agreement, or (ii) accelerate the time of
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payment or vesting, or increase the amount of compensation due any such
employee or service provider.
(f) There has been no amendment to, or written
interpretation or announcement (whether or not written) by Company or any ERISA
Affiliate relating to, or change in participation or coverage under, any Company
Employee Plan which would materially increase the expense of maintaining such
Plan above the level of expense incurred with respect to that Plan for the most
recent fiscal year included in Company's financial statements.
(g) No employee of Company or any of its Subsidiaries
has elected to defer (i) the receipt of any cash payable to such employee or
(ii) the issuance of any securities of Company to such employee, in either case
under the Company Stock Option Plans or the Company Options.
2.15 Employee Matters.
(a) Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby or thereby will (i)
result in any payment (including, without limitation, severance, unemployment
compensation, golden parachute, bonus or otherwise) becoming due to any director
or employee of Company or any of its Subsidiaries, (ii) materially increase any
benefits otherwise payable by Company or (iii) result in the acceleration of the
time of payment or vesting of any such benefits.
(b) Company and each of its Subsidiaries are in
compliance in all material respects with all currently applicable laws and
regulations respecting employment, discrimination in employment, terms and
conditions of employment, wages, hours and occupational safety and health and
employment practices, and is not engaged in any unfair labor practice. Company
and each of its Subsidiaries has withheld all material amounts required by law
or by agreement to be withheld from the wages, salaries, and other payments to
employees, and is not liable for any material arrears of wages or any material
taxes or any material penalty for failure to comply with any of the foregoing.
Company is not liable for any material payment to any trust or other fund or to
any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
employees (other than routine payments to be made in the normal course of
business and consistent with past practice). To the knowledge of Company and its
Subsidiaries, there are no pending claims against Company or any of its
Subsidiaries under any workers compensation plan or policy or for long term
disability other than routine claims for benefits. There are no controversies
pending or, to the knowledge of Company or any of its Subsidiaries, threatened
between Company or any of its Subsidiaries, on the one hand, and any of their
respective employees, on the other hand, which controversies have or could
reasonably be expected to result in an action, suit, proceeding, claim,
arbitration or investigation before any agency, court or tribunal, foreign or
domestic. Neither Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or other labor union contract; nor does Company
know of any activities or proceedings of any labor union to organize any such
employees. To the best of Company's knowledge, no employees of Company are in
violation in any material respect of any term of any employment contract, patent
disclosure agreement, noncompetition agreement, or any restrictive covenant to a
former employer relating to the right of any such employee to be
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employed by Company because of the nature of the business conduced or presently
proposed to be conducted by Company or to the use of trade secrets or
proprietary information of others. Except as disclosed in the Company SEC
Documents filed prior to the date of this Agreement, Company does not have any
employment agreement with any of its officers or other employees. As of the date
hereof, no employees (other than clerical or solely administrative employees) of
Company have given notice to Company, nor is Company otherwise aware, that any
such employee intends to terminate his or her employment with Company.
(c) All employees of Company or any of its Subsidiaries
engaged in the business of, acting as, or performing the duties of a registered
representative, registered principal or similar registered personnel or agent
(under the definition of such terms in the rules of the National Association of
Securities Dealers, Inc. (the "NASD")), any other SRO or any state which has
jurisdiction over Company or any of its Subsidiaries (if applicable) are
properly registered to act in the capacity of a registered representative,
registered principal or similar registered personnel or agent under the rules of
the NASD, any other SRO or any state which has jurisdiction over Company or any
of its Subsidiaries (if applicable).
2.16 Interested Party Transactions. Except as disclosed in
the Company SEC Documents filed prior to the date of this Agreement, there have
been no transactions of the type required to be disclosed pursuant to Items 402
and 404 of Regulation S-K under the Securities Act and the Exchange Act.
2.17 Insurance. Company and each of its Subsidiaries
have policies of insurance and bonds of the type and in amounts customarily
carried by persons conducting businesses or owning assets similar to those of
Company and its Subsidiaries. There is no material claim pending under any of
such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and Company and its
Subsidiaries are otherwise in compliance in all material respects with the terms
of such policies and bonds. Company has no knowledge of any threatened
termination of, or material premium increase with respect to, any of such
policies.
2.18 Regulatory Matters.
(a) Company and each of its Subsidiaries have obtained
all authorizations, consents, licenses, permits (temporary or otherwise),
orders, approvals, waivers, franchises and other rights ("Governmental Permits")
of Governmental Entities (i) pursuant to which Company or any of its
Subsidiaries currently operates or holds any interest in any of its properties
or (ii) that is required for the operation of Company's or any of its
Subsidiaries' business or the holding of any such interest, and all of such
Governmental Permits are in full force and effect, except where the failure to
obtain or have any such Governmental Permits could not reasonably be expected to
have a Material Adverse Effect on Company. There are no circumstances of which
Company is aware which indicate that any such Governmental Permits may be
revoked or not renewed or withdrawn or amended, in whole or in part (except in
each case to an immaterial or beneficial extent). Schedule 2.18(a) sets forth a
true and complete list of all Governmental Permits held by Company or any of its
Subsidiaries.
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(b) Company and its Subsidiaries have complied, and are
in compliance, in all material respects with all applicable federal, state,
local and self-regulatory laws, statutes, licensing requirements, rules, and
regulations. Each of Company and its Subsidiaries has, and is in compliance in
all material respects with, all Governmental Permits necessary to conduct their
businesses, including, but not limited to, Governmental Permits of the OTS, the
FDIC, the SEC, the NASD, the NASD Regulation, Inc., the Nasdaq Stock Market, or
any state or foreign securities or prosecutorial authority. Neither Company nor
any of its Subsidiaries has received any notice from any Governmental Entity (i)
asserting that Company or any of its Subsidiaries is not in compliance with any
of the statutes, regulations, or ordinances that such Governmental Entity
enforces or (ii) restricting or disqualifying their activities (except for
restrictions generally imposed by law, rule, regulation or administrative policy
on banking organizations generally). After giving effect to the Merger, all
Governmental Permits of the Surviving Corporation and its Subsidiaries shall
continue to be valid and in full force and effect to the same extent as they
presently are for Company and its Subsidiaries, except for any conditions or
restrictions imposed on Parent, Company or a Subsidiary in approvals issued by a
Governmental Entity in connection with the Merger. There is no order issued,
investigation or proceeding pending or (to Company's knowledge) threatened, or
notice served, with respect to any violation of any law, statute, ordinance,
order, writ, decree, rule, or regulation issued by any Governmental Entity
applicable to either Company or any of its Subsidiaries or any of their
respective directors, officers or employees.
(c) Neither Company nor any of its Subsidiaries is a
party or subject to, any agreement, consent decree or order, or other
understanding or arrangement with, or any directive of any Governmental Entity
which imposes any material restrictions on, or otherwise affects in any material
respect, the conduct of the business of Company or any of its Subsidiaries.
Schedule 2.18(c) sets forth all compliance or enforcement proceedings or, to the
knowledge of Company, investigations or inquiries convened, and all fines,
sanctions and other measures imposed by any Governmental Entity or body against,
concerning or relating to Company, any of its Subsidiaries, or any of their
current respective directors, officers or employees.
(d) Each of Company and its Subsidiaries, to the extent
required to so register (the "Broker-Dealers"), is duly registered as a
broker-dealer with the SEC and under all applicable state, federal, foreign or
related laws and, to the extent required, is a member of the NASD and a member
of SIPC. None of the Broker-Dealers has exceeded in any material respect the
business activities enumerated in any membership agreements or other limitations
imposed in connection with its registrations, forms (including Form BDs and
reports filed with the NASD or any other Governmental Entity. The information
contained in such registrations, forms and reports was true and complete in all
material respects as of the date of the filing thereof with the SEC. Each such
registration is in full force and effect on the date hereof.
(e) Each of Company and its Subsidiaries, to the extent
required to so register (the "Advisers"), is duly registered as an investment
adviser under the Investment Advisers Act of 1940, as amended (the "Advisers
Act"), and under all state, federal and foreign investment adviser or related
laws pursuant to which it is required to be so registered. The information
contained in forms and reports filed by any Advisors (including Form ADVs) was
or will be true and complete in all material respects as of the time of the
filing thereof with the SEC. Each such registration is in full force and effect
on the date hereof.
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2.19 Material Contracts.
(a) Except for the contracts described in or filed as an
exhibit to the Company SEC Documents, neither Company nor any of its
Subsidiaries is a party to or bound by any of the following (together with the
foregoing contracts described in or filed as an exhibit to the Company SEC
Documents, collectively, the "Material Contracts"):
(i) any contract of participation with any other
bank in any loan in excess of $500,000 or any sales of assets of Company or its
Subsidiaries with recourse of any kind to Company or any of its Subsidiaries
except the sale of mortgage loans, servicing rights, repurchase or reverse
repurchase agreements, securities or other financial transactions in the
ordinary course of business;
(ii) any agreement providing for the sale or
servicing of any loan or other asset which constitutes a "recourse arrangement"
with respect to credit quality under applicable regulation or policy promulgated
by a Governmental Entity (except for agreements for the sale of guaranteed
portions of loans guaranteed in part by the U.S. Small Business Administration
and related servicing agreements);
(iii) any contract or agreement for the acquisition
of the securities or any material portion of the assets of any other person or
entity in each case outside the ordinary course of business;
(iv) any contract or agreement for the purchase of
materials, supplies, equipment or services involving in the case of any such
contract or agreement more than one million dollars ($1,000,000) over the life
of the contract;
(v) any contract, agreement or instrument that
expires or may be renewed at the option of any person other than Company or its
Subsidiaries so as to expire more than one year after the date of this Agreement
that involve payment of more than one million dollars ($1,000,000) per year;
(vi) any material trust indenture, mortgage,
promissory note, loan agreement or other contract, agreement or instrument for
the borrowing of money, any currency exchange, commodities or other hedging
arrangement (other than deposit contracts, Federal Home Loan Bank advances and
other agreements entered into in the ordinary course of Company's business) or
any leasing transaction of the type required to be capitalized in accordance
with generally accepted accounting principles;
(vii) any contract or agreement for capital
expenditures in excess of one million dollars ($1,000,000) in the aggregate;
(viii) any contract or agreement limiting the
freedom of Company or any of its Subsidiaries to engage in any line of business
or to compete with any other Person as that term is defined in the Exchange Act,
or under the constitution, laws, rules or regulations of any SRO, or any
confidentiality, secrecy or non-disclosure contract or agreement;
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(ix) any contract or agreement involving payments
during any twelve-month period of one million dollars ($1,000,000) or more,
pursuant to which Company or any of its Subsidiaries is a lessor of any
machinery, equipment, motor vehicles, office furniture, fixtures or other
personal property;
(x) any contract or agreement with any person with
whom Company or any of its Subsidiaries does not deal at arm's length within the
meaning of the Code;
(xi) any agreement of guarantee, support,
indemnification, assumption or endorsement of, or any similar commitment with
respect to, the obligations, liabilities (whether accrued, absolute, contingent
or otherwise) or indebtedness of any other Person other than those entered into
in the ordinary course of operating a banking business; or
(xii) any material agreement which would be
terminable other than by Company or its Subsidiaries as a result of the
consummation of the transactions contemplated by this Agreement.
(b) Each of Company and its Subsidiaries has
performed all of the material obligations required to be performed by it and is
entitled to all accrued benefits under, and is not alleged to be in default in
respect of, each Material Contract to which it is a party or by which it is
bound. Each of the Material Contracts is in full force and effect, unamended,
and there exists no default or event of default or event, occurrence, condition
or act, with respect to Company or any of its Subsidiaries or, to Company's
knowledge, with respect to any other contracting party, which, with the giving
of notice, the lapse of the time or the happening of any other event or
condition, would become a default or event of default under any Material
Contract. True, correct and complete copies of all Material Contracts have been
made available to Parent or filed as an exhibit to the Company SEC Documents.
2.20 Banking Business.
(a) Schedule 2.20(a) lists all exchange traded on
over-the-counter equity, interest rate, foreign exchange or other swap, forward,
future, option, cap, floor or collar or any other contract that is not included
on the balance sheet and is a derivative contract (including various
combinations thereof) to which Company or any of its Subsidiaries is a party and
has agreed to enter. Further, with respect to Company, Schedule 2.20(a) lists
all securities owned by Company and its Subsidiaries that are referred to as
"structured rates," "high risk mortgage derivatives," "capped floating rate
notes," or "capped floating rate mortgage derivatives," or similar securities.
All swaps, caps, floors, option agreements, futures and forward contracts and
other similar risk management arrangements, whether entered into for Company's
own account, or for the account of one or more of Company's Subsidiaries or
their customers, were entered into (i) in accordance with all applicable laws,
rules, regulations and regulatory policies and (ii) with counterparties believed
to be financially responsible at the time; and each of them constitutes the
valid and legally binding obligation of Company or one of its Subsidiaries,
enforceable in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity
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principles), and are in full force and effect. Neither Company nor any of its
Subsidiaries, nor to Company's knowledge any other party thereto, is in breach
of any of its obligations under such agreement or arrangement.
(b) Schedule 2.20(b) lists each investment security held
by Company and any of its Subsidiaries on the date indicated thereon. Such
Schedule sets forth, with respect to each such investment security: (i) the
issues thereof; (ii) the outstanding balance, face amount or number of shares;
(iii) the maturity, if applicable; (iv) the title of the issue; and (v) the
classification under SFAS No. 115.
(c) Schedule 2.20(c) sets forth as of the date indicated
thereon a true and complete description of (i) by type and classification, if
any, each loan, lease, interest in a pool of loans, other extension of credit or
commitment to extend credit by Company or any of its Subsidiaries; (ii) by type
and classification, all loans, leases, interests in pools of loans, other
extensions of credit and commitments to extend credit of Company or its
Subsidiaries that have been classified by regulators or auditors (external or
internal) as "Watch List," "Specially Mentioned," "Substandard," "Doubtful,"
"Loss" or any comparable classification; and (iii) each asset of TeleBank that
as of March 31, 1999 was classified as "Other Real Estate Owned" and the book
value thereof.
(d) TeleBank has received a rating of "Satisfactory" in
its most recent Community Reinvestment Act examination. TeleBank has not been
advised of any supervisory concerns regarding its or Company's compliance with
the Community Reinvestment Act.
2.21 Year 2000 Compliance. Company and Company's
Subsidiaries have taken reasonable steps necessary to address the software,
accounting and record-keeping issues raised in order to be Year 2000 compliant
in all material respects (within the meaning of SEC, OTS, Federal Financial
Institution's Examination Council and SRO requirements) on or before the end of
1999, and Company does not expect the future cost of addressing such issues to
be material. Neither Company nor any of Company's Subsidiaries has received a
rating of less than satisfactory from any bank regulatory agency with respect to
Year 2000 compliance. Company and Company's Subsidiaries are in compliance with
all guidelines provided by the OTS and the Federal Financial Institution's
Examination Council regarding Year 2000 issues.
2.22 Opinion of Financial Advisor. Company has been
advised in writing by its financial advisor, Xxxxxxx, Xxxxx & Co., that in such
advisor's opinion, as of the date hereof, the Exchange Ratio is fair, from a
financial point of view, to the stockholders of Company.
2.23 Company Affiliates. Schedule 2.23 contains a true
and complete list of all persons who, to Company's knowledge, may be deemed to
be an Affiliate (as defined below) of Company. For purposes of this Agreement,
persons and/or entities deemed affiliates of an entity within the meaning of
Rule 144 of the Rules and Regulations of the SEC promulgated under the
Securities Act for purposes of Accounting Series, Releases 130 and 135, as
amended, of the SEC are referred to as "Affiliates."
2.24 State Takeover Statutes; Charter Provisions. The
Board of Directors of Company has taken all actions so that neither (a) the
restrictions contained in Section 203 of the
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Delaware Law applicable to a "business combination" (as defined in such Section
203) nor (b) the restrictions contained in Article 11 of Company's Amended and
Restated Certificate of Incorporation applicable to a "business combination" (as
defined in such Article 11) will apply to the execution, delivery or performance
of this Agreement, the Stockholder Agreements or the Option Agreement or the
consummation of the Merger or the other transactions contemplated by this
Agreement, the Stockholder Agreements or the Option Agreement. No other state
takeover statute is applicable to the Merger, this Agreement, the Option
Agreement, the Stockholder Agreements or the transactions contemplated hereby or
thereby.
2.25 Tax and Accounting Treatment. Neither Company nor,
to Company's knowledge, any of its directors or officers has taken any action
that would interfere with Parent's or the Surviving Corporation's ability to
account for the Merger as a pooling of interests or would prevent the Merger
from constituting a transaction qualifying as a reorganization within the
meaning of Section 368(a) of the Code. Neither Company nor, to Company's
knowledge, any of its directors or officers has knowledge of any agreement, plan
or other circumstance relating to Company or any of its Affiliates that would
interfere with Parent's or the Surviving Corporation's ability to account for
the Merger as a pooling of interests or prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
2.26 Brokers' and Finders' Fees. Company has not
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or investment bankers' fees or any
similar charges in connection with this Agreement or any transaction
contemplated hereby, other than under its engagement letter with Xxxxxxx, Sachs
& Co. (a true and complete copy of which has been furnished to Parent).
2.27 Representations Complete. None of the representations or
warranties made by Company herein or in any schedule hereto, including the
Company Disclosure Schedule, or certificate furnished by Company pursuant to
this Agreement, or the Company SEC Documents, when all such documents are read
together in their entirety, contains or will contain at the Effective Time any
untrue statement of a material fact, or omits or will omit at the Effective
Time to state any material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances under which
made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
Except as disclosed in the document of even date herewith
delivered by Parent to Company prior to the execution and delivery of this
Agreement and referring to the representations and warranties in this Agreement
(the "Parent Disclosure Schedule"), any exception so disclosed in the Parent
Disclosure Schedule to specifically identify the Section of this Agreement to
which such exception relates, Parent represents and warrants to Company as
follows:
3.1 Organization, Standing and Power. Each of Parent and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Parent and Merger
Sub have all requisite corporate power and
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authority to enter into this Agreement and the Option Agreement and to
consummate the transactions contemplated hereby and thereby.
3.2 Capital Structure. The authorized capital stock of Parent
consists of 300,000,000 shares of Parent Common Stock and 1,000,000 shares of
Parent's preferred stock, par value $.01 per share ("Parent Preferred Stock"),
of which there were issued and outstanding as of the close of business on May
20, 1999, 116,741,621 shares of Parent Common Stock (before giving effect to the
2-for-1 split of Parent Common Stock which became effective on May 21, 1999) and
no shares of Parent Preferred Stock. There are no other outstanding shares of
capital stock or voting securities and no outstanding commitments to issue any
shares of capital stock or voting securities after May 20, 1999, other than
shares issued pursuant to the Parent stock split described above and other than
pursuant to the exercise of options outstanding as of such date under Parent's
1993 Stock Option Plan and 1996 Stock Incentive Plan (collectively, the "Parent
Stock Option Plans"). All outstanding shares of Parent Common Stock are duly
authorized, validly issued, fully paid and non-assessable and are free and clear
of any liens or encumbrances other than any liens or encumbrances created by or
imposed upon the holders thereof, and are not subject to preemptive rights or
rights of first refusal created by statute, the Certificate of Incorporation or
Bylaws, each as amended, of Parent or any agreement to which Parent is a party
or by which it is bound. As of the close of business on May 20, 1999, Parent had
reserved an aggregate of 17,704,144 shares of Common Stock for issuance to
employees, consultants and directors pursuant to the Parent Stock Option Plans,
of which 15,096,000 shares are subject to outstanding, unexercised options, and
an aggregate of 675,000 shares are available for issuance under the Parent's
1996 Stock Purchase Plan. Parent has not issued or granted any stock
appreciation rights or performance units under the Parent Stock Option Plans or
otherwise. Except for (i) the rights created pursuant to this Agreement and the
Parent Stock Option Plans (including options thereunder) and (ii) Parent's right
to repurchase any unvested shares under the Parent Stock Option Plans, there are
no other options, warrants, calls, rights, commitments or agreements of any
character to which Parent is a party or by which it is bound obligating Parent
to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of capital stock of Parent or
obligating Parent to grant, extend, accelerate the vesting of, change the price
of, or otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement. There are no contracts, commitments or agreements
relating to voting, purchase or sale of Parent's capital stock between or among
Parent and any of its stockholders. True and complete copies of all material
agreements and instruments relating to or issued under the Parent Stock Option
Plans have been provided or made available to Company and such agreements and
instruments have not been amended, modified or supplemented, and there are no
agreements to amend, modify or supplement such agreements or instruments in any
case from the form provided or made available to Company. All outstanding shares
of Parent Common Stock and all options to purchase Parent Common Stock were
issued in compliance with all applicable federal and state securities laws. The
shares of Parent Common Stock to be issued pursuant to Section 1.6 hereof, when
issued in accordance with this Agreement, will be duly authorized, validly
issued, fully paid and non-assessable, and free and clear of any liens or
encumbrances other than liens or encumbrances created by or imposed upon the
holders thereof.
3.3 Authority. Assuming the filings and approvals described in
clauses (i) through (vii) of the last sentence of this Section are made or
obtained (as the case may be) and that the condition set forth in Section 6.1(a)
is satisfied, the execution and delivery of this
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Agreement and the Option Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Parent and Merger Sub, as applicable. This
Agreement and the Option Agreement each has been duly executed and delivered by
Parent and Merger Sub, as applicable, and constitutes the valid and binding
obligations of Parent and Merger Sub, enforceable against them in accordance
with its terms, except as such enforcement may be limited by (i) the effect of
bankruptcy, insolvency, reorganization, receivership, conservatorship,
arrangement, moratorium or other laws affecting or relating to the rights of
creditors generally, or (ii) the rules governing the availability of specific
performance, injunctive relief or other equitable remedies and general
principles of equity, regardless of whether considered in a proceeding in equity
or at law. Assuming the filings and approvals described in clauses (i) through
(vii) of the last sentence of this Section are made or obtained (as the case may
be) and that the condition set for in Section 6.1(a) is satisfied, the execution
and delivery of this Agreement and the Option Agreement do not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a benefit under, (i) any provision of
the Certificate of Incorporation or Bylaws of Parent or Merger Sub, as amended,
or (ii) any material mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or Merger Sub
or their respective properties or assets, except for any conflicts, violations,
defaults or other occurrences that would not (A) individually or in the
aggregate have a Material Adverse Effect on Parent or any of its Subsidiaries or
(B) prevent or materially impair or delay the consummation of the Merger. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity, is required by or with respect to Parent
or Merger Sub in connection with the execution and delivery of this Agreement or
the Option Agreement by Parent and Merger Sub or the consummation by Parent and
Merger Sub of the transactions contemplated hereby, except for (i) the filing of
the Certificate of Merger as provided in Section 1.2 hereof, (ii) the filing of
applications and notices with and the receipt of requisite approval from, as
applicable, the OTS and the FDIC with respect to the Merger, (iii) the filing
with, and declaration of effectiveness or clearance by, the SEC and the NASD of
the Registration Statement and, if applicable, a Proxy Statement relating to any
Parent Stockholder Approval, (iv) the filing of a Form 8-K with the SEC and the
NASD within 15 days after the Closing Date, (v) any filings or applications as
may be required under applicable federal, SRO or state securities laws or the
securities laws of any foreign country, (vi) the filing with the Nasdaq National
Market of a Notification Form for Listing of Additional Shares with respect to
the shares of Parent Common Stock issuable upon conversion of the Company Common
Stock in the Merger and upon exercise of the options under the Company Stock
Option Plans assumed by Parent, (vii) the filing of a registration statement on
Form S-8 with the SEC, or other applicable form covering the shares of Parent
Common Stock issuable pursuant to outstanding options under the Company Stock
Option Plans assumed by Parent, and (viii) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made, would not
have a Material Adverse Effect on Parent and would not prevent or materially
alter or delay any of the transactions contemplated by this Agreement. Parent is
not aware of any reason why the approvals of all Governmental Entities necessary
to permit consummation of the Merger or the other transactions contemplated
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by this Agreement will not be received without the imposition of a condition or
requirement described in Section 6.1(d).
3.4 SEC Documents; Financial Statements. Parent has made
available (including via XXXXX) to Company each statement, report, registration
statement (with the prospectus in the form filed pursuant to Rule 424(b) of the
Securities Act), definitive proxy statement, and other filings (including
exhibits, supplements and schedules thereto) filed with the SEC by Parent since
December 31, 1996, (collectively, the "Parent SEC Documents"). As of their
respective filing dates, the Parent SEC Documents complied in all material
respects with the requirements of the Exchange Act and the Securities Act, and
none of the Parent SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading, except to the extent corrected by a
subsequently filed Parent SEC Document. The financial statements of Parent,
including the notes thereto, included in the Parent SEC Documents (the "Parent
Financial Statements") were complete and correct in all material respects as of
their respective dates (except to the extent corrected by a subsequently filed
Parent SEC Document), complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto as of their respective dates, and have been
prepared in accordance with generally accepted accounting principles applied on
a basis consistent throughout the periods indicated (except as may be indicated
in the notes thereto or, in the case of unaudited statements included in
Quarterly Reports on Form 10-Q, as permitted by Form 10-Q of the SEC). The
Parent Financial Statements fairly present the consolidated financial condition
and operating results of Parent and its Subsidiaries at the dates and during the
periods indicated therein (subject, in the case of unaudited statements, to
normal and recurring year-end adjustments).
3.5 Absence of Undisclosed Liabilities. Parent has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
consolidated balance sheet of Parent and its Subsidiaries or in the related
notes to the consolidated financial statements included in Parent's Annual
Report on Form 10-K for the period ended September 25, 1998 (the "Parent Balance
Sheet"), (ii) those disclosed in Parent SEC Documents filed subsequent to the
Parent Balance Sheet Date, and (iii) those incurred in the ordinary course of
business consistent with past practice since the Parent Balance Sheet Date and
which have not had and are not reasonably likely to have a Material Adverse
Effect on Parent.
3.6 Litigation. There is no judgment, decree or order against
Parent or any of its Subsidiaries or, to the knowledge of Parent, any of their
respective directors or officers (in their capacities as such) that could
prevent, enjoin, alter or materially delay any of the transactions contemplated
by this Agreement.
3.7 Compliance With Laws. Each of Parent and its Subsidiaries
has complied in all material respects with all applicable federal, state, local,
self-regulatory and foreign laws, statutes, ordinances, rules and regulations,
and is not in violation in any material respect of, and has not received any
notices of material violation with respect to, its respective certificate or
articles of incorporation or bylaws or other charter or organizational
documents, or any federal,
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state, local, self-regulatory or foreign statute, law, ordinance, rule
or regulation applicable to the conduct of its business or the ownership or
operation of its business.
3.8 Year 2000 Compliance. Parent and its Subsidiaries have
taken reasonable steps necessary to address the software, accounting and
record-keeping issues raised in order to be Year 2000 compliant in all material
respects (within the meaning of SEC and any applicable SRO requirements) on or
before the end of 1999, and Parent does not expect the future cost of addressing
such issues to be material. Parent and its Subsidiaries are in compliance with
all guidelines provided by the SEC and any applicable SRO regarding Year 2000
issues.
3.9 Tax Treatment. Neither Parent nor any of its directors or
officers has taken any action that would prevent the Merger from constituting a
transaction qualifying as a reorganization within the meaning of Section 368(a)
of the Code. Neither Parent nor, to Parent's knowledge, any of its affiliates or
agents is aware of any agreement, plan or other circumstance that would prevent
the Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code.
3.10 Broker's and Finders' Fees. Parent has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar charges
in connection with this Agreement or any transaction contemplated hereby, other
than the fees and expenses of BancBoston Xxxxxxxxx Xxxxxxxx Inc. (which will be
borne by Parent).
3.11 Representations Complete. None of the representations or
warranties made by Parent and Merger Sub herein or in any Schedule hereto,
including the Parent Disclosure Schedule, or certificate furnished by Parent
pursuant to this Agreement, or the Parent SEC Documents, when all such documents
are read together in their entirety, contains or will contain at the Effective
Time any untrue statement of a material fact, or omits or will omit at the
Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, Company agrees (except to the extent expressly
contemplated by this Agreement or as consented to in writing by Parent), to
carry on its and its Subsidiaries' business in the ordinary course in
substantially the same manner as heretofore conducted, to pay and to cause its
Subsidiaries to pay debts and Taxes when due subject to good faith disputes over
such debts or Taxes, to pay or perform other obligations when due, and to use
all commercially reasonable best efforts consistent with past practice and
policies to preserve intact its and its Subsidiaries' present business
organizations, keep available the services of its and its Subsidiaries' present
executive officers and key employees and preserve its and its Subsidiaries'
relationships with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with it or its Subsidiaries, to the end that its
and its Subsidiaries' goodwill and ongoing businesses shall be
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unimpaired at the Effective Time. Each of Company and Parent agrees to promptly
notify the other of any event or occurrence not in the ordinary course of its or
its Subsidiaries' business, and of any event which could have a Material Adverse
Effect on it or any of its Subsidiaries.
4.2 Conduct of Business of Company. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, except as expressly contemplated by this
Agreement, Company shall not do, cause or permit any of the following, or allow,
cause or permit any of its Subsidiaries to do, cause or permit any of the
following, without the prior written consent of Parent:
(a) Charter Documents. Cause or permit any amendment,
modification, alteration or rescission of its certificate or articles of
incorporation, bylaws or other charter or organizational documents;
(b) Dividends; Changes in Capital Stock. Declare or pay
any dividends on or make any other distributions (whether in cash, stock or
property) in respect of any of its capital stock (other than (i) the Stock
Split, as defined below, (ii) dividends or distributions by any wholly owned
Subsidiary of Company to Company or another wholly owned Subsidiary thereof and
(iii) any dividends or distributions by non-wholly owned Subsidiaries of Company
to the extent described in Section 4.2(b) of the Company Disclosure Schedule) or
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or repurchase or otherwise acquire, directly or
indirectly, any shares of its capital stock except from former employees,
directors and consultants in accordance with agreements providing for the
repurchase of shares in connection with any termination of service to it or its
Subsidiaries;
(c) Options. Grant any options, stock appreciation
rights or other rights to acquire securities other than as permitted in clause
(e) below or accelerate, amend or change the period of exercisability or vesting
of options or other rights granted under its stock plans or authorize cash
payments in exchange for any options or other rights granted under any of such
plans;
(d) Material Contracts. Enter into any contract or
commitment, or violate, amend or otherwise modify or waive any of the terms of
any of its contracts, other than in the ordinary course of business consistent
with past practice and in no event shall such contract, commitment, amendment,
modification or waiver involve payments by Company or any of its Subsidiaries of
amounts in excess of five hundred thousand dollars ($500,000);
(e) Issuance of Securities. Issue, deliver or sell or
authorize or propose the issuance, delivery or sale of, or purchase or propose
the purchase of, any shares of its capital stock or securities convertible into,
or subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities, other than (i) the issuance of shares of Company Common
Stock pursuant to the exercise of Company Options outstanding under the Company
Stock Option Plans as of the date of this Agreement and (ii) the issuance of
shares of Company Common Stock pursuant to the exercise of warrants outstanding
as of the date of this Agreement and disclosed in the Company SEC Documents;
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(f) Intellectual Property. Transfer to any person or
entity any rights to its Intellectual Property other than the transfer of
non-exclusive rights to its Intellectual Property in the ordinary course of
business consistent with past practice;
(g) Exclusive Rights. Enter into or amend any agreements
pursuant to which any other party is granted exclusive marketing or other
exclusive rights of any type or scope with respect to any of its products or
technology;
(h) Dispositions. Sell, lease, license or otherwise
dispose of or encumber any of its properties or assets which are material,
individually or in the aggregate, to the business of Company and its
Subsidiaries (taken as a whole), except in the ordinary course of business
consistent with past practice and except for the sale of real estate owned in
accordance with current policies of Company with respect thereto;
(i) Indebtedness. Other than in the ordinary course of
business (including creation of deposit liabilities, entry into repurchase
agreements, purchases or sales of federal funds, Federal Home Loan Bank
advances, and sales of certificates of deposit) consistent with past practice
(A) incur any indebtedness for borrowed money, (B) assume, guarantee, endorse or
otherwise as an accommodation become responsible for the obligations of any
other Person or (C) cancel, release, assign or modify any material amount of
indebtedness of any other person or entity;
(j) Leases. Enter into any operating lease in excess of
five hundred thousand dollars ($500,000) per year;
(k) Payment of Obligations. Pay, discharge or satisfy in
an amount in excess of five hundred thousand dollars ($500,000) in any one case
or one million ($1,000,000) in the aggregate, any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise) arising
other than in the ordinary course of business, other than the payment, discharge
or satisfaction of liabilities reflected or reserved against in the Company
Financial Statements;
(l) Capital Expenditures. Make any capital expenditures,
capital additions or capital improvements except (i) in the ordinary course of
business and consistent with past practice that do not exceed five hundred
thousand dollars ($500,000) in any one case or one million ($1,000,000) in the
aggregate and (ii) existing commitments under contracts or agreements disclosed
on the Company Disclosure Schedule with respect to Section 2.19;
(m) Insurance. Materially reduce the amount of any
material insurance coverage provided by existing insurance policies;
(n) Employee Benefit Plans; New Hires; Pay Increases.
(A) Adopt or amend any employee benefit or stock purchase or option plan (except
as required by law or as provided in Section 5.15(b)), or (B) hire any new
director level or executive officer level employee, pay any special bonus or
special remuneration to any employee or director, or, other than, with respect
to non-executive officer employees, in the ordinary course of business
consistent with past practice, increase the salaries or wage rates of its
employees;
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(o) Severance Arrangements. Grant any severance or
termination pay (i) to any director or officer or (ii) to any other employee
except payments made pursuant to written plans or agreements outstanding, or
written Company policies in effect, on the date hereof (in each case furnished
to Parent prior to the date of this Agreement);
(p) Lawsuits. Commence any action, suit or proceeding
other than (i) in the ordinary course of business, (ii) in such cases where it
in good faith determines that failure to commence suit would result in the
material impairment of a valuable aspect of its business, provided that it
consults with Parent prior to the filing of such a suit, or (iii) in respect of
a breach of this Agreement;
(q) Acquisitions. Acquire or agree to acquire by merging
or consolidating with, or by purchasing a substantial portion of the assets of,
or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to Company, or acquire or agree to acquire any equity securities
of any corporation, partnership, limited liability company, association or
business organization which securities acquired or agreed to be acquired would
constitute greater than five percent (5%) of the outstanding securities of such
entity;
(r) Taxes. Other than in the ordinary course of business
or as required by applicable law, rule or regulation, make or change any
material election in respect of Taxes, adopt or change any accounting method in
respect of Taxes, enter into any material closing agreement, settle any material
claim or assessment in respect of Taxes, or consent to any extension or waiver
of the limitation period applicable to any material claim or assessment in
respect of Taxes;
(s) Revaluation. Revalue any of its assets, including
without limitation writing down the value of inventory or writing off notes or
accounts receivable, other than in the ordinary course of business or as
required by applicable law, rule or regulation;
(t) Accounting Policies and Procedures. Make any
material change to its accounting methods, principles, policies, procedures or
practices, except as may be required by GAAP, Regulation S-X promulgated by the
SEC the OTS or the FDIC;
(u) Year 2000 Compliance. Fail to carry forward in all
material respects Company's Year 2000 assessment and compliance program, as made
available to Parent by Company;
(v) Risk Management. Except as required by applicable
law or regulation, or written rule, instruction or directive by a Governmental
Entity which is furnished to Parent promptly following receipt thereof: (i) make
any material change to its asset/liability management, loan, investment or other
material banking policies; (ii) implement or adopt any material change in its
interest rate risk management and hedging policies, procedures or practices;
(iii) fail to follow its existing policies or practices with respect to managing
its exposure to interest rate risk; or (iv) fail to use commercially reasonable
means to avoid any material increase in its aggregate exposure to interest rate
risk;
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(w) Loans. Make any loan or advance or purchase any
whole loan or interest in an pool of loans other than in accordance with lending
policies as in effect on the date hereof;
(x) Affiliate Credit. Grant or commit to grant any
extension of credit or amend the terms of any such credit outstanding on the
date hereof to any executive officer, director or holder of 10% or more of the
outstanding capital stock of Company, or any Affiliate of such person, if such
credit would exceed $100,000;
(y) Domain Name. Change domain names or fail to renew
existing domain name registrations on a timely basis; or
(z) Other. Take or agree in writing or otherwise to
take, any of the actions described in Sections 4.2(a) through (y) above, or (i)
any action which would make any of its representations or warranties contained
in this Agreement materially untrue or materially incorrect or prevent it from
performing or cause it not to perform its covenants hereunder in any material
respect, (ii) any action that will result in any of the conditions to the Merger
as set forth in Article VI not being satisfied or in violation of any provision
of this Agreement or the Option Agreement, except, in every case, as may be
required by applicable law, or (iii) any other action that would materially
adversely delay or materially adversely impair the ability of Company to
consummate the Merger.
4.3 Conduct of Parent. During the period from the date
of this Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or the Option Agreement or with
Company's prior written consent, Parent shall not: (a) take any action that will
result in any of the conditions to the Merger set forth in Article VI not being
satisfied or in a violation of any provision of this Agreement or the Option
Agreement, except, in every case, as may be required by applicable law; or (b)
take any other action that would materially adversely delay or materially
adversely impair the ability of Parent to consummate the Merger.
4.4 No Solicitation. Company and its Subsidiaries and
the officers, directors, employees, agents, representatives and advisors of
Company and its Subsidiaries (collectively, Company's "Representatives") will
not, directly or indirectly, (i) take any action to solicit, initiate, encourage
(including by way of furnishing non-public information or furnishing any
information, other than as required by applicable law, rules or regulations, in
a manner which could reasonably be expected to assist a third party in
formulating a Takeover Proposal), take any other action designed to facilitate
or agree to any Takeover Proposal (as defined in Section 7.3(f) hereof) or (ii)
subject to the next sentence, engage in negotiations with, or disclose any
nonpublic information relating to Company or any of its Subsidiaries to any
person that has advised Company that it may be considering making, or that has
made, a Takeover Proposal, or whose efforts to formulate a Takeover Proposal
would be assisted thereby; provided, nothing herein shall prohibit Company's
Board of Directors from taking and disclosing to Company's stockholders a
position with respect to an unsolicited tender offer pursuant to Rules 14d-9 and
14e-2 promulgated under the Exchange Act. Notwithstanding the immediately
preceding sentence, if an unsolicited written Takeover Proposal shall be
received by the Board of Directors of Company, then, to the extent the Board of
Directors of Company believes in good faith (after
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written advice from its financial advisor) that such Takeover Proposal would, if
consummated, result in a transaction more favorable to Company's stockholders
from a financial point of view than the transaction contemplated by this
Agreement (any such more favorable Takeover Proposal being referred to in this
Agreement as a "Superior Proposal") and the Board of Directors of Company
determines in good faith after advice from outside legal counsel that it is
necessary for the Board of Directors of Company to comply with its fiduciary
duties to stockholders under applicable law, Company and its Representatives may
furnish in connection therewith information to the party making such Superior
Proposal and engage in negotiations with such party, and such actions shall not
be considered a breach of this Section 4.4 or any other provisions of this
Agreement; provided that in each such event Company notifies Parent of such
determination by the Company Board of Directors and provides Parent with a true
and complete copy of the Superior Proposal received from such third party, and
provides (or has provided) Parent with all documents containing or referring to
non-public information of Company that are supplied to such third party;
provided, further, that Company provides such non-public information pursuant to
a non-disclosure agreement at least as restrictive on such third party as the
Confidentiality Agreement (as defined in Section 5.4) is on Parent; provided,
further, however, that Company shall not, and shall not permit any of its
officers, directors, employees or other representatives to agree to or endorse
any Takeover Proposal or withdraw its recommendation of the Merger unless
Company has provided Parent at least five (5) days prior notice thereof. Company
will promptly (and in any event within 24 hours) notify Parent after receipt of
any Takeover Proposal or any notice that any person is considering making a
Takeover Proposal or any request for non-public information relating to Company
or any of its Subsidiaries or for access to the properties, books or records of
Company or any of its Subsidiaries by any person that has advised Company that
it may be considering making, or that has made, a Takeover Proposal, or whose
efforts to formulate a Takeover Proposal would be assisted thereby (such notice
to include the identity of such person or persons), and will keep Parent fully
informed of the status and details of any such Takeover Proposal notice, request
or any correspondence or communications related thereto and shall provide Parent
with a true and complete copy of such Takeover Proposal notice or request or
correspondence or communications related thereto, if it is in writing, or a
complete written summary thereof, if it is not in writing. Company shall
immediately cease and cause to be terminated all existing discussion or
negotiations with any persons conducted heretofore with respect to a Takeover
Proposal.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Registration Statement; Proxy Statements.
(a) As soon as practicable after the execution of this
Agreement, Company and Parent shall prepare, and Company shall file with the SEC
preliminary proxy materials relating to a meeting of Company's stockholders to
consider the Merger (the "Company Stockholders Meeting") and the vote of the
stockholders of Company with respect to the Merger. In the event that Parent
fails to obtain the Parent Stockholder Approval at the June 25 Meeting (as
defined in Section 5.7), Parent shall file with the SEC preliminary proxy
materials (which may be contained in a joint proxy statement/prospectus together
with the
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preliminary proxy materials relating to the Company Stockholders Meeting)
relating to the Parent Stockholders Meeting (as defined in Section 7.1(f)) and
the vote of the stockholders of Parent with respect to the proposed increase in
authorized capital stock of Parent described in Section 6.1(a). As soon as
practicable following receipt of SEC comments on the proxy statement/ prospectus
(or joint proxy statement/prospectus or proxy statement for the Parent
Stockholders Meeting, as the case may be) to be sent to the stockholders of
Company in connection with the Company Stockholders Meeting and, if applicable,
the Stockholders of Parent in connection with the Parent Stockholders Meeting
(such proxy statement/prospectus or joint proxy statement/prospectus (as the
case may be), together with any amendments thereof or supplements thereto, in
each case in the form or forms sent as aforesaid, the "Proxy Statement"; and,
together with any separate proxy statement relating to the Parent Stockholders
Meeting, the "Proxy Statements"), Company shall file with the SEC definitive
proxy materials relating to the Company Stockholders Meeting and Parent shall
file with the SEC a registration statement on Form S-4 (or such other successor
form as shall be appropriate) pursuant to which the shares of Parent Common
Stock to be issued in the Merger will be registered with the SEC (the
"Registration Statement"), which shall include the Proxy Statement as a
prospectus, in connection with the registration under the Securities Act of the
shares of Parent Common Stock to be distributed to holders of Company Common
Stock pursuant to the Merger; in the event that Parent fails to obtain the
Parent Stockholder Approval at the June 25 Meeting, Parent shall also file with
the SEC definitive proxy materials relating thereto and shall include the Proxy
Statements (in the case of a joint proxy statement/prospectus) in the
Registration Statement. Each of Parent and Company shall use its reasonable best
efforts to have or cause the Registration Statement to become effective
(including clearing the Proxy Statement or Proxy Statements, as the case may be,
with the SEC) as promptly as practicable, and shall take any and all actions
required under any applicable federal or state securities laws or blue sky laws
in connection with the issuance of Parent Common Stock pursuant to the Merger.
Without limiting the generality of the foregoing, on the one hand, each of
Parent and Company shall (i) notify the other as promptly as practicable after
the receipt by it of any written or oral comments of the SEC on, or of any
written or oral request by the SEC or any other governmental official for
amendments or supplements to, or any other filing or supplemental or additional
information relating to, the Proxy Statement (or Proxy Statements, as the case
may be) or the Registration Statement, and shall promptly supply the other with
copies of all correspondence between it or any of its representatives, on the
one hand, and the SEC or any other governmental official, on the other hand,
with respect to any of the foregoing filings, and (ii) use all reasonable
efforts, after consultation with the other such party, to respond promptly to
any comments made by the SEC with respect to the Proxy Statement or Proxy
Statements, as the case may be (including each preliminary version thereof), and
the Registration Statement (including each amendment thereof and supplement
thereto). As promptly as practicable after the Registration Statement shall have
become effective, each of Company and Parent shall mail or cause to be mailed
its Proxy Statement (if any, in the case of Parent) to its stockholders.
(b) Parent and Company shall each cause the Registration
Statement and the Proxy Statement (or Proxy Statements, as the case may be) to
comply in all material respects with the Securities Act, the Exchange Act and
all other applicable federal and state securities law requirements. Each of
Parent and Company shall, and shall cause its respective representatives to,
fully cooperate with the other such party and its respective representatives in
the preparation of the Proxy Statement (or Proxy Statements, as the case may be)
and the
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Registration Statement, and shall provide promptly to the other such information
concerning it and its affiliates, directors, officers and stockholders as the
other may reasonably request in connection with the preparation of the Proxy
Statement or Proxy Statements, as the case may be, and the Registration
Statement. If at any time prior to the Effective Time Company or Parent shall
become aware of any fact, event or circumstance that is required to be set forth
in an amendment to the Registration Statement or a supplement to the Proxy
Statement (or Proxy Statements, as the case may be), Company or Parent, as the
case may be, shall promptly notify the other of such fact, event or circumstance
and the parties shall cooperate with each other in filing with the SEC or any
other governmental official, and (in the case of a supplement to the Proxy
Statement or Proxy Statements, as the case may be) mailing to stockholders of
Company, such amendment or supplement.
(c) The Proxy Statement (or Proxy Statements, as the
case may be) shall contain the unanimous recommendation of the Board of
Directors of Company that the Company stockholders approve this Agreement and
the Merger and the conclusion of the Board of Directors that the terms and
conditions of the Merger are advisable and fair to, and in the best interests
of, the stockholders of Company; provided that no such recommendation need be
included, and any such recommendation may be withdrawn if previously included,
if a Superior Proposal has been made and Company and Company's Board of
Directors withdraw or modify such recommendation in compliance with, and
otherwise have complied in all respects with, Section 4.4. Notwithstanding
anything to the contrary contained herein, Company shall not include in the
Proxy Statement any information with respect to Parent or its affiliates or
associates, the form and content of which information shall not have been
approved by Parent prior to such inclusion (which consent will not be
unreasonably withheld or delayed).
(d) In the event that a Proxy Statement relating to the
Parent Stockholders Meeting is required hereunder, such Proxy Statement shall
contain the unanimous recommendation of the Board of Directors of Parent that
the Parent stockholders approve the increase in authorized capital stock
described in Section 6.1(a); provided that such recommendation may be withdrawn
upon a notice of termination of this Agreement pursuant hereto.
(e) Company agrees that: (i) the information supplied by
Company for inclusion in the registration statement shall not at the time the
Registration Statement (including any amendments or supplements thereto) is
declared effective by the SEC or at the Effective Time 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 were made, not misleading, (ii) the
information supplied by Company for inclusion in the Proxy Statement relating to
the Company Stockholders Meeting shall not, on the date the Proxy Statement
relating to the Company Stockholders Meeting is first mailed to the stockholders
of Company or at the time of the Company Stockholders Meeting, contain any
statement which, at such time, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they are
made, not false or misleading, or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies for the Company Stockholders Meeting which has become
false or misleading; and (iii) if at any time prior to the Effective Time any
event or information should be
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discovered by Company which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement, Company shall
promptly inform Parent of such event or information. Notwithstanding the
foregoing, Company makes no representation, warranty or covenant with respect to
any information supplied by Parent or Merger Sub which is contained in any of
the foregoing documents.
(f) Parent agrees that: (i) the information supplied by
Parent for inclusion in the Registration Statement shall not at the time the
Registration Statement (including any amendments or supplements thereto) is
declared effective by the SEC or at the Effective Time 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 were made, not misleading; (ii) the
information supplied by Parent for inclusion in the Proxy Statement relating to
the Company Stockholders Meeting shall not, on the date such Proxy Statement is
first mailed to Company's stockholders or at the time of the Company
Stockholders Meeting, contain any statement which, at such time, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
under which it is made, not false or misleading, or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of proxies for the Company Stockholders Meeting
which has become false or misleading and (iii) if at any time prior to the
Effective Time any event or information should be discovered by Parent which
should be set forth in an amendment to the Registration Statement or in a
supplement to such Proxy Statement, Parent will promptly inform Company of such
event or information. Notwithstanding the foregoing, neither Parent nor Merger
Sub makes any representation, warranty or covenant with respect to any
information supplied by or on behalf of Company or any of its affiliates which
is contained in any of the foregoing documents.
5.2 Meeting of Stockholders. Company (and, if a Parent
Stockholders Meeting is required to be held hereunder, Parent) shall promptly
after the date hereof take all action necessary in accordance with Delaware Law
and its certificate of incorporation and bylaws, each as amended, to convene the
Company Stockholders Meeting (or Parent Stockholders Meeting, as the case may
be) within forty-five (45) days of the Registration Statement being declared
effective by the SEC (or, as applicable, the Proxy Statement relating to the
Parent Stockholders Meeting is cleared by the SEC). Company and Parent shall
consult with each other regarding the date of the Company Stockholders Meeting
and any Parent Stockholders Meeting. Company shall use its commercially
reasonable efforts to solicit from stockholders of Company proxies in favor of
the Merger and shall take all other action necessary or advisable to secure the
vote or consent of stockholders required to effect the Merger, provided that
such solicitation efforts need not be made (although all efforts required to
hold the Company Stockholders Meeting will continue to be required), if a
Superior Proposal has been made and Company and Company's Board of Directors
withdraw or modify such recommendation in compliance with, and otherwise have
complied in all respects with, Section 4.4. In the event that Parent is required
to seek the Parent Stockholders Approval at the Parent Stockholders Meeting
pursuant to Section 7.1(f), Parent shall use commercially reasonable efforts to
solicit from stockholders of Parent proxies in favor of the increase in
authorized capital stock described in Section 6.1(a), provided that such
solicitation efforts need not be made, and the Parent
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Stockholders Meeting need not be held, if there is a notice of termination of
this Agreement pursuant hereto.
5.3 Access to Information.
(a) At all times prior to the Effective Time, subject to
applicable law and the Confidentiality Agreement (as defined below), Company
shall afford Parent and its accountants, counsel and other representatives,
reasonable access during normal business hours to (i) all of Company's and its
Subsidiaries' properties, books, contracts, commitments and records, (ii) all
Tax Returns and work papers and all other information relating to Taxes of
Company and its Subsidiaries, and (iii) all other information concerning the
business, properties and personnel of Company and its Subsidiaries as Parent may
reasonably request. Company agrees to provide to Parent and its accountants,
counsel and other representatives copies of internal financial statements,
budgets, operating plans and projections promptly upon request.
(b) Subject to compliance with applicable law, from the
date hereof until the Effective Time, each of Parent and Company shall confer on
a regular and frequent basis with one or more representatives of the other party
to report material operational matters and the general status of ongoing
operations.
(c) No information or knowledge obtained in any
investigation pursuant to this Section 5.3 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.4 Confidentiality. The parties acknowledge that each
of Parent and Company have previously executed a non-disclosure agreement dated
May 26, 1999 (the "Confidentiality Agreement"), which Confidentiality Agreement
shall continue in full force and effect in accordance with its terms, except to
the extent necessary to comply with the terms of this Agreement.
5.5 Public Disclosure. Unless otherwise permitted by
this Agreement, Parent and Company shall consult with each other before issuing
any press release or otherwise making any public statement or making any other
public (or non-confidential) disclosure (whether or not in response to an
inquiry) regarding the terms of this Agreement or any of the transactions
contemplated hereby, and neither shall issue any such press release or make any
such statement or disclosure without the prior approval of the other (which
approval shall not be unreasonably withheld or delayed), except as may be
required by law or by obligations pursuant to any listing agreement with any
national securities exchange or with the NASD, in which case the party proposing
to issue such press release or make such public statement or disclosure shall
use commercially reasonable efforts to consult with the other party before
issuing such press release or making such public statement or disclosure.
5.6 Consents; Cooperation. Each of Parent, Merger Sub
and Company will, and will cause their respective Subsidiaries to, take all
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on them with respect to the consummation of the
transactions contemplated by this Agreement and will promptly cooperate with and
furnish information to any party hereto necessary in connection with any such
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requirements imposed upon such other party in connection with the consummation
of the transactions contemplated by this Agreement and will take all reasonable
actions necessary to obtain (and will cooperate with the other parties hereto in
obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any Governmental Entity or other
person, required to be obtained or made in connection with the taking of any
action contemplated by this Agreement. Parent and Company shall have the right
to review in advance, and to the extent practicable each will consult the other
as to, in each case subject to applicable laws relating to the exchange of
information, all of the information which will appear in any filing made with,
or written materials submitted to, any third party or Governmental Entity in
connection with the transactions contemplated by this Agreement. In the event an
injunction or other order shall have been issued which prevents, alters or
delays the Merger or any other transaction contemplated hereby, each party
agrees to use its reasonable best efforts to have such injunction or other order
lifted. Parent and Company and their respective Subsidiaries shall cooperate and
use their respective reasonable best efforts to prepare all documentation, to
effect all filings and to obtain all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary to
consummate the transactions contemplated by this Agreement, including without
limitation the OTS, the NASD (the "NASD Approval") and any applicable state
approval ("State Approval") and to consult with the other party with respect to
obtaining such permits, consents, approvals and authorizations. Each of Parent
and Company agrees, upon request, to furnish the other party with all
information concerning itself, its Subsidiaries, directors, officers and
shareholders and such other matters as may be reasonably necessary or advisable
in connection with any filing, notice or application made by or on behalf of
such other party or any of its Subsidiaries to any third party or Governmental
Entity.
5.7 Reasonable Best Efforts and Further Assurances. Each
of the parties to this Agreement shall use its reasonable best efforts to effect
the transactions contemplated hereby and to fulfill and cause to be fulfilled
the conditions to Closing under this Agreement including, without limitation,
Parent using reasonable best efforts to obtain the Parent Stockholder Approval
at the meeting of Parent's stockholders scheduled to be held on June 25, 1999 or
at any adjournment or postponement thereof (the "June 25 Meeting"). Each party
hereto, at the reasonable request of another party hereto, shall execute and
deliver such other instruments and do and perform such other acts and things as
may be necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
5.8 Blue Sky Laws. Parent shall take such steps as may
be necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable to the issuance of the shares of Parent
Common Stock in connection with the Merger. Company shall use its best efforts
to assist Parent as may be necessary to comply with the securities and blue sky
laws of all jurisdictions which are applicable in connection with the issuance
of the shares of Parent Common Stock in connection with the Merger.
5.9 Listing of Additional Shares; Nasdaq Quotation.
Prior to the Effective Time, Parent shall file with the Nasdaq National Market a
Notification Form for Listing of Additional Shares with respect to the shares of
Parent Common Stock issuable upon conversion of the Company Common Stock in the
Merger. Company and Parent agree to continue the quotation of Company Common
Stock and Parent Common Stock, respectively, on the Nasdaq
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National Market during the term of the Agreement so that, to the extent
necessary, appraisal rights will not be available to stockholders of Company
under Section 262 of the Delaware Law.
5.10 Pooling Accounting. Parent and Company shall each
use its reasonable best efforts to cause the business combination to be effected
by the Merger to be accounted for as a pooling of interests under generally
accepted accounting principles and applicable SEC rules and regulations. Each of
Parent and Company shall use its reasonable best efforts to cause its Affiliates
not to take any action that would adversely affect the ability of Parent or the
Surviving Corporation to account for the business combination to be effected by
the Merger as a pooling of interests.
5.11 Affiliate Agreements.
(a) Schedule 2.23 sets forth those persons who may be
deemed Affiliates of Company. Company shall provide Parent with such information
and documents as Parent shall reasonably request for purposes of reviewing such
list. Prior to the Effective Time, Company shall use its reasonable best efforts
to obtain and deliver or cause to be delivered to Parent a duly executed Company
Affiliate Agreement in the form attached hereto as Exhibit B (a "Company
Affiliate Agreement") from the persons identified in Schedule 2.23 as soon as
practicable (and in any event within three business days) after the execution
hereof (to the extent not executed heretofore) and from any other person as soon
as practicable after the date on which such person becomes an Affiliate of
Company. Parent and Merger Sub shall be entitled to place appropriate legends on
the certificates evidencing shares of Parent Common Stock to be received by such
Affiliates of Company pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for Parent Common
Stock, in each of the foregoing cases in accordance with the terms of such
Company Affiliate Agreement.
(b) Schedule 5.11(b) sets forth those persons who may be
deemed Affiliates of Parent. Parent shall provide Company with such information
and documents as Company shall reasonably request for purposes of reviewing such
list. Parent shall use its reasonable best efforts to deliver or cause to be
delivered to Company a duly executed Parent Affiliate Agreement in the form of
Exhibit C attached hereto (the "Parent Affiliate Agreements") from the persons
identified in Schedule 5.11(b) as soon as practicable (and in any event within
three business days) after the execution hereof (to the extent not executed
heretofore) and from any other person as soon as practicable after the date on
which such person becomes an Affiliate of Parent. 5.12 Tax Treatment. The
parties shall use their reasonable best efforts to cause the Merger to qualify
as a "reorganization" within the meaning of Section 368(a) of the Code.
5.12 Tax Treatment. The parties shall use their reasonable
best efforts to cause the Merger to qualify as a "reorganization" within the
meaning of Section 368(a) of the Code.
5.13 Company Options.
(a) At the Effective Time, the Company Stock Option
Plans, the Company Options and each outstanding option to purchase shares of
Company Common Stock under the Company Stock Option Plans, whether vested or
unvested, will be assumed by Parent. Company represents and warrants to Parent
that Schedule 5.13 hereto sets forth a true and complete list as of the date
hereof of all holders of outstanding options under the Company Stock
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Option Plans and all other Company Options, including the number of shares of
Company capital stock subject to each such option, the exercise or vesting
schedule, the exercise price per share and the term of each such option. On the
Closing Date, Company shall deliver to Parent an updated Schedule 5.13 hereto
current as of such date. Each such option so assumed by Parent under this
Agreement shall continue to have, and be subject to, the same terms and
conditions set forth in the Company Stock Option Plans, the Company Options and
the applicable stock option agreements, immediately prior to the Effective Time,
except that (i) such option will be exercisable for that number of whole shares
of Parent Common Stock equal to the product of the number of shares of Company
Common Stock that were issuable upon exercise of such option immediately prior
to the Effective Time multiplied by the Exchange Ratio and rounded down to the
nearest whole number of shares of Parent Common Stock, and (ii) the per share
exercise price for the shares of Parent Common Stock issuable upon exercise of
such assumed option will be equal to the quotient determined by dividing the
exercise price per share of Company Common Stock at which such option was
exercisable immediately prior to the Effective Time by the Exchange Ratio,
rounded up to the nearest whole cent, subject to any adjustments necessary to
protect the status of any option as an incentive stock option as defined in
Section 422 of the Code. It is the intention of the parties that the options so
assumed by Parent qualify, to the maximum extent permissible following the
Effective Time as incentive stock options as defined in Section 422 of the Code
to the extent such options qualified as incentive stock options prior to the
Effective Time. As soon as practicable (and in any event within thirty (30)
business days after the Effective Time, Parent will issue to each person who,
immediately prior to the Effective Time was a holder of an outstanding option
under the Company Stock Option Plans or a Company Option a document, in form and
substance submitted to Company at least ten (10) days before the Closing Date
and reasonably satisfactory to Company, evidencing the foregoing assumption of
such option by Parent. All Company Options assumed by Parent hereunder will be
exercisable in accordance with their terms without regard to whether such
document has been delivered to the holder thereof.
(b) All outstanding rights of Company which it may hold
immediately prior to the Effective Time to repurchase unvested shares of Company
Common Stock (the "Repurchase Options") shall be assigned to Parent in the
Merger and shall thereafter be exercisable by Parent upon the same terms and
conditions in effect immediately prior to the Effective Time, except that the
shares purchasable pursuant to the Repurchase Options and the purchase price per
shall be adjusted to reflect the Exchange Ratio.
5.14 Form S-8. Parent agrees to use its reasonable best
efforts to file as soon as practicable after the Effective Time (and in any
event no later than twenty (20) business days after the Effective Time), a
registration statement on Form S-8 covering the shares of Parent Common Stock
issuable pursuant to outstanding options under the Company Stock Option Plans
assumed by Parent. Company shall cooperate with and assist Parent in the
preparation of such registration statement.
5.15 Employees; Employee Benefit Matters.
(a) Concurrently with the execution of this Agreement,
each of the individuals set forth on Schedule 5.15(a) shall have delivered to
Parent an executed Management Continuity Agreement in the form of Exhibit D
attached hereto.
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(b) If required by Parent in writing delivered to
Company not less than five (5) business days before Closing, Company shall, on
or before the day immediately prior to the Closing Date, terminate the Company
401(k) Plan (the "Plan") and no further contributions shall be made to the Plan.
Company shall provide to Parent (i) certified copies of resolutions adopted by
the Board of Directors of Company authorizing the termination and (ii) an
executed amendment to the Plan in form and substance reasonably satisfactory to
Parent to conform the plan document for the Plan with all applicable
requirements of the Code and regulations thereunder relating to the
tax-qualified status of the Plan.
(c) To the extent permissible under the applicable
provisions of the Code and ERISA and the terms of any employee benefit plans
sponsored or maintained by Parent or its Subsidiaries, (i) for purposes of
crediting periods of service for eligibility to participate and vesting,
employees of Company and its Subsidiaries shall receive full credit for purposes
of eligibility and vesting, and periods of service with Company and any
Subsidiary before the Effective Time shall be treated as if such service had
been with Parent and (ii) individuals who are employees of Company or any of its
Subsidiaries at the Effective Time and who become employees of Parent or any
Subsidiary thereof shall be eligible to participate in any employee benefit plan
(within the meaning of ERISA Section 3(3)) (except for the Parent 401(k) Plan
and Parent Stock Option Plans) maintained by Parent or any Subsidiary thereof on
the same terms and conditions as apply generally to other employees of Parent or
any of its Subsidiaries.
(d) Parent will or will cause the Surviving Corporation
or Telebank to offer a position of at-will employment on Parent's customary
employment terms (except to the extent Management Continuity Agreements in the
form of Exhibit D are in effect) to each of Company's and its Subsidiaries'
personnel as of the Effective Time at their existing employment location as of
the Effective Time.
(e) Company agrees to use commercially reasonable
efforts to cause each of its employees and officers to enter into proprietary
information agreements, in substantially the form previously provided by Parent
to Company, as soon as practicable.
5.16 Director and Officer Indemnification.
(a) Parent agrees not to cause or allow the Surviving
Corporation to modify, and to cause the Surviving Corporation to honor, any
rights to indemnification or exculpation from liabilities for acts or omissions
occurring at or prior to the Effective Time now existing in favor of the
officers and directors of Company and its Subsidiaries as provided in their
respective certificates of incorporation or by-laws (or comparable
organizational documents) and any indemnification agreements of Company.
(b) For four years after the Effective Time, Parent will
cause the Surviving Corporation to use commercially reasonable efforts to
provide officers' and directors' liability insurance in respect of acts or
omissions occurring at or prior to the Effective Time covering each such person
currently covered by Company's officers' and directors' liability insurance
policy on terms reasonably comparable to those of such policy in effect on the
date hereof, provided that in satisfying its obligation under this paragraph,
Parent shall not be obligated to cause the Surviving Corporation to pay premiums
in excess of 150% of the amount
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per annum Company paid in its last full fiscal year, which amount has been
disclosed in writing to Parent, and if the Surviving Corporation is unable to
obtain the insurance required by this paragraph, it shall obtain as much
comparable insurance as possible for an annual premium equal to such maximum
amount.
(c) Parent will not permit the Surviving Corporation to
merge or consolidate with any other person unless the Surviving Corporation will
ensure that the surviving or resulting entity assumes the obligations imposed by
this Section 5.16.
5.17 Comfort Letters.
(a) Parent shall use its reasonable best efforts to
cause to be delivered to Company a procedures letter of Parent's independent
auditors, dated a date within two (2) business days before the date on which the
Registration Statement shall become effective and addressed to Parent and
Company, in form reasonably satisfactory to Company and customary in scope and
substance for letters delivered by independent public accountants in accordance
with Opinion 16 of the Accounting Principles Board and Statement of Accounting
Standards No. 72 in connection with registration statements similar to the
Registration Statement.
(b) Company shall use its reasonable best efforts to
cause to be delivered to Parent a procedures letter of Company's independent
auditors, dated a date within two (2) business days before the date on which the
Registration Statement shall become effective and addressed to Parent and
Company, in form reasonably satisfactory to Parent and customary in scope and
substance for letters delivered by independent public accountants in accordance
with Opinion 16 of the Accounting Principles Board and Statement of Accounting
Standards No. 72 in connection with registration statements similar to the
Registration Statement.
5.18 Stockholder Litigation. Unless and until Company
has withdrawn its recommendation of the Merger in compliance with Section 4.4,
Company shall give Parent the opportunity to participate in or, in the event
Parent is named in any such litigation, to lead, in each case at its own
expense, the defense of any stockholder litigation against Company and/or its
directors relating to the transactions contemplated by this Agreement and the
Option Agreement. In the event Parent is leading any such stockholder
litigation, Company shall be given the opportunity to participate at its own
expense in the defense of such stockholder litigation.
5.19 Company Debt Securities. As required by all
contracts and agreements relating to Company's outstanding 11-1/2% Subordinated
Notes due 2004, 11.00% Junior Subordinated Deferrable Interest Debentures, 9.0%
Junior Subordinated Deferrable Interest Debentures (Series A), and 9.5% Senior
Subordinated Notes due March 31, 2004, Parent shall: (a) expressly assume, by
supplemental indenture or as otherwise required by such contracts and
agreements, all obligations under such contracts and agreements and the
performance of the covenants and conditions of Company to be performed and
observed therein; (b) maintain compliance with all applicable capital
requirements, financial tests and other financial ratios contained therein; and
(c) deliver all such certificates and opinions as required therein.
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ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect
the Merger. The respective obligations of each party to this Agreement to
consummate and effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by agreement of all the parties hereto:
(a) Stockholder Approvals. This Agreement and the Merger
shall have been approved and adopted by the holders of two-thirds (2/3) of the
shares of Company Common Stock outstanding as of the record date set for the
Company Stockholders Meeting, and an increase in the number of authorized shares
of Parent Common Stock sufficient to allow consummation of the Merger and the
transactions contemplated hereby shall have been approved and adopted by the
holders of a majority of the shares of Parent Common Stock outstanding as of the
record date set for a meeting to be held for such purpose (the "Parent
Stockholder Approval").
(b) Registration Statement Effective. The SEC shall have
declared the Registration Statement effective. No stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have been
issued, and no proceeding for that purpose, and no similar proceeding shall have
been initiated by the SEC in respect of the Proxy Statement; and all requests
for additional information on the part of the SEC shall have been complied with
to the reasonable satisfaction of the parties hereto.
(c) No Injunctions or Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint or prohibition preventing the consummation of the Merger shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending; nor shall there be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the Merger, which prevents or prohibits the consummation of
the Merger. In the event an injunction or other order shall have been issued,
each party agrees to use its commercially reasonable efforts to have such
injunction or other order lifted.
(d) Listing of Additional Shares. The filing with the
Nasdaq National Market of a Notification Form for Listing of Additional Shares
with respect to the shares of Parent Common Stock issuable upon conversion of
the Company Common Stock in the Merger and upon exercise of the options under
the Company Stock Option Plans assumed by Parent, shall have been made.
(e) Pooling Letters. Parent shall have received letters,
each dated the Closing Date, from Deloitte & Touche, L.L.P., Parent's
independent auditors, and Xxxxxx Xxxxxxxx LLP, Company's independent auditors,
to the effect that the Merger qualifies for pooling of interests accounting
treatment if consummated in accordance with this Agreement.
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6.2 Additional Conditions to Obligations of Company. The
obligations of Company to consummate and effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by Company:
(a) Representations, Warranties and Covenants. (i) The
representations and warranties of Parent in this Agreement shall be true and
correct in all respects (ignoring for this purpose all materiality or Material
Adverse Effect qualifications in such representations and warranties) when made
and as of the Effective Time as though such representations and warranties were
made on and as of such time (other than (A) representations and warranties
expressly made as of an earlier date, which shall have been true and correct as
of such earlier date, and (B) failures to be true and correct that do not, in
the aggregate, constitute a Material Adverse Effect on Parent) and (ii) Parent
and Merger Sub shall have performed and complied in all material respects with
all covenants, obligations and conditions of this Agreement required to be
performed and complied with by them at or prior to the Effective Time.
(b) Certificate of Parent. Company shall have been
provided with a certificate executed on behalf of Parent by its President and
its Chief Financial Officer certifying that the condition set forth in Section
6.2(a) has been fulfilled.
(c) Governmental Approval. Parent, Company and Merger
Sub and their respective Subsidiaries shall have timely obtained from each
Governmental Entity all approvals, waivers and consents, if any, necessary for
consummation of or in connection with the Merger and the other transactions
contemplated hereby, including such approvals, waivers and consents as may be
required under the Home Owners Loan Act, the Securities Act, the Exchange Act,
any SRO constitution or rules or any state Blue Sky laws.
(d) Tax Opinion. Company shall have received a written
opinion of Xxxxx & Xxxxxxx L.L.P. (or if such firm is unable to, or fails to
timely deliver, such opinion, Xxxxxxx, Phleger & Xxxxxxxx LLP) dated as of the
Closing Date to the effect that the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code, and such opinion shall not
have been withdrawn. In rendering such opinion, counsel shall be entitled to
rely upon, among other things, reasonable assumptions as well as representations
of Parent, Merger Sub and Company.
6.3 Additional Conditions to the Obligations of Parent
and Merger Sub. The obligations of Parent and Merger Sub to consummate and
effect the Merger shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, by Parent:
(a) Representations, Warranties and Covenants. (i) The
representations and warranties of Company in this Agreement shall be true and
correct in all respects (ignoring for this purpose all materiality or Material
Adverse Effect qualifications in such representations and warranties) when made
and as of the Effective Time as though such representations and warranties were
made on and as of such time (other than (A) representations and warranties
expressly made as of an earlier date and (B) failures to be true and correct
that do
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not, in the aggregate, constitute a Material Adverse Effect on Company) and (ii)
Company shall have performed and complied in all material respects with all
covenants, obligations and conditions of this Agreement required to be performed
and complied with by it at or prior to the Effective Time.
(b) Certificate of Company. Parent shall have been
provided with a certificate executed on behalf of Company by its President and
Chief Financial Officer certifying that the condition set forth in Section
6.3(a) has been fulfilled.
(c) Governmental Approval. Parent, Company and Merger
Sub and their respective Subsidiaries shall have timely obtained from each
Governmental Entity all approvals, waivers and consents, if any, necessary for
consummation of or in connection with the Merger and the other transactions
contemplated hereby, including such approvals, waivers and consents as may be
required under the Home Owners Loan Act, the Securities Act, the Exchange Act,
any SRO constitution or rules, or any state Blue Sky laws; provided, however,
that none of the preceding shall be deemed obtained or made if it shall impose a
non-customary condition or restriction that Parent reasonably determines in good
faith could reasonably be expected to result in a Material Adverse Effect on
Parent or the Surviving Corporation.
(d) Third Party Consents. Parent shall have been
furnished with evidence satisfactory to it of the consent or approval of those
persons whose consent or approval shall be required in connection with the
Merger under any Material Contract of Company or any of its Subsidiaries or
otherwise, the failure of which to obtain could reasonably be expected to have a
Material Adverse Effect on Parent or the Surviving Corporation.
(e) Injunctions or Restraints on Conduct of Business. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint provision limiting or restricting Parent's conduct or operation of the
business of Company and its Subsidiaries, following the Merger shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission, SRO or other Governmental Entity, domestic or foreign, seeking the
foregoing be pending.
(f) No Material Adverse Effect. There shall not have
occurred since the date hereof any Material Adverse Effect on Company.
(g) Tax Opinion. Parent shall have received a written
opinion of Xxxxxxx, Phleger & Xxxxxxxx LLP (or if such firm is unable to, or
fails to timely deliver, such opinion, Xxxxx & Xxxxxxx L.L.P.) dated as of the
Closing Date to the effect that the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code, and such opinion shall not
have been withdrawn. In rendering such opinion, counsel shall be entitled to
rely upon, among other things, reasonable assumptions as well as representations
of Parent, Merger Sub and Company.
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ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. At any time prior to the Effective
Time, whether before or after approval of the matters presented in connection
with the Merger by the stockholders of Company, this Agreement may be
terminated:
(a) by mutual consent of Parent and Company;
(b) by either Parent or Company, if, the Closing shall
not have occurred on or before December 31, 1999 (provided that the right to
terminate this Agreement under this Section 7.1(b) shall not be available to any
party whose action or failure to act has been the cause of or resulted in the
failure of the Merger to occur on or before such date and such action or failure
to act constitutes a breach of this Agreement);
(c) by Parent, if (i) Company shall breach any of its
representations, warranties or obligations hereunder to an extent that would
cause the condition set forth in Section 6.3(a) not to be satisfied and such
breach shall not have been cured within ten (10) business days of receipt by
Company of written notice of such breach (provided that the right to terminate
this Agreement by Parent shall not be available to Parent if Parent is at that
time in material breach of this Agreement), (ii) the Board of Directors of
Company shall have withdrawn or modified its recommendation of this Agreement or
the Merger or any transaction contemplated hereby in a manner adverse to Parent
or shall have resolved to do any of the foregoing, (iii) Company shall have
failed to comply with the Option Agreement or with Section 4.4 or Section 5.2 of
this Agreement, or (iv) the Board of Directors of Company shall have
recommended, endorsed, accepted or agreed to a Takeover Proposal or shall have
resolved to do so;
(d) by Company, if Parent shall breach any of its
representations, warranties or obligations hereunder to an extent that would
cause the condition set forth in Section 6.2(a) not to be satisfied and such
breach shall not have been cured within ten (10) business days following receipt
by Parent of written notice of such breach (provided that the right to terminate
this Agreement by Company shall not be available to Company where Company is at
that time in material breach of this Agreement);
(e) by Parent if a Trigger Event (as defined in Section
7.3(e)) or Takeover Proposal shall have occurred and the Board of Directors of
Company, in connection therewith, does not within five (5) business days of such
occurrence (i) reconfirm its approval and recommendation of this Agreement and
the transactions contemplated hereby and (ii) reject such Takeover Proposal or
Trigger Event; or
(f) by either Parent or Company if (i) any permanent
injunction or other order of a court or other competent authority preventing the
consummation of the Merger shall have become final and nonappealable, (ii) if
any required approval of the stockholders of Company shall not have been
obtained by reason of the failure to obtain the required vote upon a vote held
at a duly held meeting of stockholders of Company or at any adjournment thereof
or (iii) if the Parent Stockholder Approval shall not have been obtained at the
June 25 Meeting and
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the Parent Stockholder Approval is not obtained at a meeting of Parent's
stockholders, or any postponement or adjournment thereof, to be held on or about
the day of the Company Stockholders Meeting (the "Parent Stockholders Meeting").
7.2 Effect of Termination. In the event of termination
of this Agreement as provided in Section 7.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of Parent,
Merger Sub or Company or their respective officers, directors, stockholders or
affiliates, except to the extent that such termination results from the breach
by a party hereto of any of its representations, warranties or covenants set
forth in this Agreement; provided that (a) the provisions of Section 5.4
(Confidentiality), Section 7.3 (Expenses and Termination Fees), Section 8.8
(Governing Law) and this Section 7.2 shall remain in full force and effect and
survive any termination of this Agreement and (b) nothing herein shall relieve
any party from liability for fraud or willful breach in connection with this
Agreement or the transactions contemplated hereby.
7.3 Expenses and Termination Fees.
(a) Subject to subsections (b), (c), (d), (e) and (f) of
this Section 7.3, whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby (including, without limitation, the fees and expenses of its
advisers, brokers, finders, agents, accountants and legal counsel) shall be paid
by the party incurring such expense, it being understood and agreed that
expenses incurred in connection with printing the Proxy Materials and the
Registration Statement, and registration and filing fees incurred in connection
with the Registration Statement, the Proxy Materials and the listing of
additional shares pursuant to Section 6.1(d) and filing fees associated with
compliance with applicable OTS requirements in connection with the Merger shall
be deemed to be incurred equally by Company and Parent.
(b) In the event that (i) Parent shall terminate this
Agreement pursuant to Section 7.1(e), (ii) Parent shall terminate this Agreement
pursuant to Section 7.1(c)(ii), (iii) or (iv), (iii) either Parent or Company
shall terminate this Agreement pursuant to Section 7.1(f)(ii) following a
failure of the stockholders of Company to approve this Agreement and, prior to
the time of the Company Stockholders Meeting, there shall have been a Trigger
Event or a Takeover Proposal with respect to Company, then in the case of each
of (i) through (iii) Company shall reimburse Parent for all of the out-of-pocket
costs and expenses incurred by Parent in connection with this Agreement and the
transactions contemplated hereby (including, without limitation, the reasonable
fees and expenses of its advisors, accountants and legal counsel), and, in
addition to any other remedies Parent may have, Company shall promptly pay to
Parent cash in an amount equal to fifty-four million dollars ($54,000,000) (the
"Termination Fee").
(c) In the event that (i) Parent or Company shall
terminate this Agreement pursuant to Section 7.1(b) and, prior to the time of
such termination, there shall have been a Trigger Event or a Takeover Proposal
with respect to Company or (ii) Parent shall terminate this Agreement pursuant
to Section 7.1(c)(i), Company shall promptly reimburse Parent for all of the
reasonable out-of-pocket costs and expenses incurred by Parent in connection
with this Agreement and the transactions contemplated hereby (including, without
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limitation, the fees and expenses of its advisors, accountants and legal
counsel), and, in the event a definite agreement or letter of intent is entered
by Company with respect to a Takeover Proposal, a Takeover Proposal is
consummated or a Trigger Event results in a Person or group of Persons within
the meaning of Section 13(d) of the Exchange Act and the regulations thereunder
beneficially owning forty percent (40%), or results in a Person together with
any other Persons acting in concert within the meaning of Part 574 of the OTS
rules and regulations beneficially owning forty percent (40%), or more of the
voting power of Company within nine (9) months of the later of (x) such
termination of this Agreement and (y) the payment of the above-described
expenses, Company shall also promptly pay to Parent the Termination Fee.
(d) In the event that Parent or Company shall terminate
this Agreement pursuant to Section 7.1(f)(iii), then Parent shall promptly
reimburse Company for all of the reasonable out-of-pocket costs and expenses
incurred by Company in connection with this Agreement and the transactions
contemplated hereby (including, without limitation, the fees and expenses of its
advisors, accountants and legal counsel).
(e) As used herein, a "Trigger Event" shall occur if any
Person (as that term is defined in Section 13(d) of the Exchange Act and the
regulations promulgated thereunder) acquires securities representing twenty
percent (20%) or more, or commences a tender or exchange offer, open market
purchase program or other publicly announced initiative following the successful
consummation of which the offeror and its affiliate would beneficially own
securities representing twenty percent (20%) or more, of the voting power of
Company.
(f) For purposes of this Agreement, "Takeover Proposal"
means any offer or proposal for, or any indication of interest in, a merger or
other business combination involving Company or any of its Subsidiaries or the
acquisition of twenty percent (20%) or more of the outstanding shares of capital
stock, or a significant portion of the assets of, Company or any of its
Subsidiaries, other than the transactions contemplated by this Agreement.
7.4 Amendment. The boards of directors of the parties
hereto may cause this Agreement to be amended at any time by execution of an
instrument in writing signed on behalf of each of the parties hereto; provided
that an amendment made subsequent to adoption of the Agreement by the
stockholders of Company or Merger Sub shall not (i) alter or change the amount
or kind of consideration to be received on conversion of the Company Common
Stock, or (ii) alter or change any of the terms and conditions of the Agreement
if such alteration or change would materially adversely affect the holders of
Company Common Stock or Merger Sub Common Stock.
7.5 Extension; Waiver. At any time prior to the
Effective Time any party hereto may, to the extent legally allowed, (i) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (ii) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
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ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival at Effective Time. The representations,
warranties and agreements set forth in this Agreement shall terminate at the
Effective Time, except that the agreements set forth in Article I, Section 5.4
(Confidentiality), 5.14 (Form S-8), 5.16 (Director and Officer Indemnification),
5.7 (Reasonable Best Efforts and Further Assurances), 7.3 (Expenses and
Termination Fees) and this Article VIII shall survive the Effective Time.
8.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally
or by commercial delivery service, or mailed by registered or certified mail
(return receipt requested) or sent via facsimile (with confirmation of receipt)
to the parties at the following address (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
E*TRADE Group, Inc.
Four Embarcadero Place
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
Two Embarcadero Place
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxx X. Mo, Esq.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
and
Xxxxxxx, Phleger & Xxxxxxxx LLP
Spear Street Tower
Xxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: J. Xxxxxxx Xxxxxxxx, Esq.
Xxxxx X. Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
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(b) if to Company, to:
Telebanc Financial Corporation
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Attention: President
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Xxxxx & Xxxxxxx L.L.P.
Columbia Square
000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Xxxxxx Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
8.3 Interpretation. When a reference is made in this
Agreement to Exhibits or Schedules, such reference shall be to an Exhibit or
Schedule to this Agreement unless otherwise indicated. The words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
phrases "the date of this Agreement", "the date hereof", and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to the
date set forth in the first paragraph of this Agreement. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
8.4 Counterparts. This Agreement may be executed in two
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
8.5 Entire Agreement; Nonassignability; Parties in
Interest. This Agreement and the documents and instruments and other agreements
specifically referred to herein or delivered pursuant hereto, including the
Exhibits, the Schedules, including the Company Disclosure Schedule and the
Parent Disclosure Schedule, (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, except for the Confidentiality Agreement,
which shall continue in full force and effect, and shall survive any termination
of this Agreement or the Closing, in accordance with its terms; (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as set forth in Sections 1.6(a)-(c)-(d)-(f)-(g) (Effect on Capital
Stock), 1.7 (Surrender of
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Certificates) and 5.16 (Director and Officer Indemnification); and (c) shall not
be assigned by operation of law or otherwise except as otherwise specifically
provided.
8.6 Severability. In the event that any provision of
this Agreement, or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void, invalid or unenforceable, the
remainder of this Agreement will continue in full force and effect and the
application of such provision to other persons or circumstances will be
interpreted so as reasonably to effect the intent of the parties hereto. The
parties further agree to replace such illegal, void, invalid or unenforceable
provision of this Agreement with a legal, valid and enforceable provision that
will achieve, to the extent possible, the economic, business and other purposes
of such illegal, void, invalid or unenforceable provision.
8.7 Remedies Cumulative. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy.
8.8 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware without
reference to such state's principles of conflicts of law. Each of the parties
hereto irrevocably consents to the exclusive jurisdiction of any court located
within the State of Delaware in connection with any matter based upon or arising
out of this Agreement or the matters contemplated herein, agrees that process
may be served upon them in any manner authorized by the laws of the State of
Delaware for such persons and waives and covenants not to assert or plead any
objection which they might otherwise have to such jurisdiction and such process.
8.9 Rules of Construction. The parties hereto agree that
they have been represented by counsel during the negotiation, preparation and
execution of this Agreement and, therefore, waive the application of any law,
regulation, holding or rule of construction providing that ambiguities in an
agreement or other document will be construed against the party drafting such
agreement or document.
8.10 Definitions; Etc.
(a) For purposes of this Agreement, (i) "Material
Adverse Effect" means, with respect to any person or entity, any event, change,
condition or effect that is, or could be reasonably expected to be, materially
adverse to the condition (financial or otherwise), properties, assets
(including, without limitation, intangible assets), liabilities, business,
operations or results of operations of such person or entity and its
Subsidiaries, taken as a whole; provided, however, that in no event shall a
decrease in such person's or entity's stock price in and of itself be considered
a "Material Adverse Effect", (ii) "Subsidiary" means, with respect to any party,
any corporation, partnership or other organization or entity, whether
incorporated or unincorporated, in which such party has, directly or indirectly,
a fifty percent (50%) or greater interest, and (iii) any reference to a party's
"knowledge" means the actual knowledge of such party's executive officers and
directors.
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(b) The parties acknowledge that, insofar as Company's
Board of Directors has declared and approved a 2-for-1 split of Company Common
Stock payable to its stockholders of record as of the close of business on May
28, 1999 (the "Stock Split"), the Exchange Ratio and all share numbers herein
representing numbers of shares of Company Common Stock do not give effect to the
Stock Split and shall be deemed to be proportionally adjusted for the Stock
Split upon the effectiveness thereof. Notwithstanding anything herein to the
contrary, consummation of the Stock Split shall not be deemed a breach of this
Agreement.
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IN WITNESS WHEREOF, Company, Parent and Merger Sub have caused
this Agreement to be executed and delivered by their respective officers
thereunto duly authorized, all as of the date first written above.
TELEBANC FINANCIAL CORPORATION
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
E*TRADE GROUP, INC.
By: /s/ XXXXXXXX X. XXXXXXXX
-------------------------------
Name: XXXXXXXX X. XXXXXXXX
-----------------------------
Title: CHIEF EXECUTIVE OFFICER
----------------------------
TURBO ACQUISITION CORP.
By: /s/ XXXXXXXX X. XXXXXXXX
-------------------------------
Name: XXXXXXXX X. XXXXXXXX
-----------------------------
Title:
----------------------------
59
IN WITNESS WHEREOF, Company, Parent and Merger Sub have caused
this Agreement to be executed and delivered by their respective officers
thereunto duly authorized, all as of the date first written above.
TELEBANC FINANCIAL CORPORATION
By: /s/ XXXXXXXX X. XXXXXX
-------------------------------
Name: Xxxxxxxx X. Xxxxxx
-----------------------------
Title: President & Chief Executive Officer
------------------------------------
E*TRADE GROUP, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
TURBO ACQUISITION CORP.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
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EXHIBIT A
CERTIFICATE OF MERGER
OF
TURBO ACQUISITION CORP.
WITH AND INTO
TELEBANC FINANCIAL CORPORATION
The undersigned, Telebanc Financial Corporation, DOES HEREBY
CERTIFY:
FIRST: That the names and states of incorporation of each of the
constituent corporations are as follows:
Name State of Incorporation
---- ----------------------
Telebanc Financial Corporation Delaware
Turbo Acquisition Corp. Delaware
SECOND:That the Agreement and Plan of Merger and Reorganization
(the "Merger Agreement") has been approved, adopted, certified, executed and
acknowledged by each of the constituent corporations in accordance with the
requirements of Section 251 of the General Corporation Law of Delaware (the
"DGCL").
THIRD: That the name of the surviving corporation of the merger
is Telebanc Financial Corporation, a Delaware corporation.
FOURTH:That the Certificate of Incorporation in the form attached
hereto shall be the certificate of incorporation of the surviving corporation.
FIFTH: That the Merger Agreement is on file at the principal
place of business of the surviving corporation, the address of which is 0000
Xxxxx Xxxxxxxx Xxxxxx, Xxxxxxxxx, XX 00000-0000.
SIXTH: That a copy of the Merger Agreement will be furnished on
request and without cost to any stockholder of any constituent corporation.
SEVENTH: That the Merger shall become effective upon the filing
of this Certificate of Merger with the Secretary of State of the State of
Delaware.
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IN WITNESS WHEREOF, Telebanc Financial Corporation has caused
this Certificate of Merger to be executed in its corporate name this ______ day
of ____________, 1999.
TELEBANC FINANCIAL CORPORATION
By:
-------------------------------------
[Name, Title]
ATTEST
By:
------------------------------
[Name], Secretary
62
EXHIBIT B
STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT (this "Agreement") is made and entered
into as of May 31, 1999 between E*TRADE Group, Inc., a Delaware corporation
("Parent"), and the undersigned stockholder ("Stockholder") of Telebanc
Financial Corporation, a Delaware corporation ("Company"). Capitalized terms
used and not otherwise defined herein shall have the respective meanings set
forth in the Reorganization Agreement described below.
RECITALS
WHEREAS, pursuant to an Agreement and Plan of Merger and
Reorganization dated as of May 31, 1999 by and among Parent, Turbo Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger
Sub") and Company (such agreement as it may be amended is hereinafter referred
to as the "Reorganization Agreement"). Parent has agreed to acquire the
outstanding securities of Company pursuant to a statutory merger of Merger Sub
with and into Company (the "Merger") in which each outstanding share of capital
stock of Company (the "Company Capital Stock") will be converted into shares of
common stock of Parent (the "Parent Shares") at the exchange rate set forth in
the Reorganization Agreement (the "Transaction");
WHEREAS, in order to induce Parent to enter into the
Reorganization Agreement and consummate the Transaction, Company has agreed to
use its reasonable best efforts to cause each stockholder of Company who is an
affiliate of Company to execute and deliver to Parent a Stockholder Agreement
upon the terms set forth herein; and
WHEREAS, Stockholder is the registered and beneficial owner of
such number of shares of the outstanding capital stock of Company as is
indicated on the signature page of this Agreement (the "Shares").
NOW, THEREFORE, the parties agree as follows:
1. Agreement to Retain Shares.
1.1 Transfer and Encumbrance.
(a) Stockholder is the beneficial owner of the Shares. The Shares
constitute Stockholder's entire interest in the outstanding capital stock and
voting securities of Company. The Shares are, and will be at all times up until
the Expiration Date, free and clear of any liens, claims, options, charges or
other encumbrances. Stockholder's principal residence or place of business is
accurately set forth on the signature page hereto.
(b) Stockholder agrees not to transfer (except as may be
specifically required by court order or by operation of law, in which case any
such transferee shall agree to be bound hereby), sell, exchange, pledge or
otherwise dispose of or encumber any Shares or any New
63
Shares (as defined below), or to make any offer or agreement relating thereto,
at any time prior to the Expiration Date. As used herein, the term "Expiration
Date" shall mean the earlier to occur of (i) the Effective Time or (ii)
termination of the Reorganization Agreement in accordance with the terms
thereof.
1.2 New Shares. Stockholder agrees that any shares of capital
stock or voting securities of Company that Stockholder purchases or with respect
to which Stockholder otherwise acquires beneficial ownership after the date of
this Agreement and prior to the Expiration Date ("New Shares") shall be subject
to the terms and conditions of this Agreement to the same extent as if they
constituted Shares.
2. Agreement to Vote Shares. Prior to the Expiration Date, at
every meeting of the stockholders of Company at which any of the following is
considered or voted upon, and at every adjournment thereof, and on every action
or approval by written resolution of the stockholders of Company with respect to
any of the following, Stockholder shall vote the Shares and any New Shares in
favor of approval and adoption of the Reorganization Agreement and of the
Transaction. Notwithstanding the foregoing, nothing in this Agreement shall
limit or restrict Stockholder from acting in his capacity as a director or
officer of Company, to the extent applicable, it being understood that this
Agreement shall apply to Stockholder solely in his capacity as a stockholder of
Company.
3. Irrevocable Proxy. Stockholder hereby agrees to timely deliver
to Parent a duly executed proxy in the form attached hereto as Annex A (the
"Proxy"), such Proxy to cover the Shares and all New Shares in respect of which
Stockholder is entitled to vote at each meeting of the stockholders of Company
(including, without limitation, each written consent in lieu of a meeting). In
the event that Stockholder is unable to provide any such Proxy in a timely
manner, Stockholder hereby grants Parent a power of attorney to execute and
deliver such Proxy for and on behalf of Stockholder, such power of attorney,
which being coupled with an interest, shall survive any death, disability,
bankruptcy, or any other such impediment of Stockholder. Upon the execution of
this Agreement by Stockholder, Stockholder hereby revokes any and all prior
proxies or powers of attorney given by Stockholder with respect to the Shares
and agrees not to grant any subsequent proxies or powers of attorney with
respect to the Shares until after the Expiration Date.
4. Representations, Warranties and Covenants of Stockholder.
Stockholder hereby represents, warrants and covenants to Parent as follows:
(a) Stockholder has full power and legal capacity to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Stockholder and constitutes the valid and binding
obligation of Stockholder, enforceable against Stockholder in accordance with
its terms. Except as may be limited by (i) the effect of bankruptcy, insolvency,
conservatorship, arrangement, moratorium or other laws affecting or relating to
the rights of creditors generally, or (ii) the rules governing the availability
of specific performance, injunctive relief or other equitable remedies and
general principles of equity, regardless of whether considered in a proceeding
in equity or at law, the execution and delivery of this Agreement by Stockholder
does not, and the performance of Stockholder's obligations
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64
hereunder will not, result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or give
to others any right to terminate, amend, accelerate or cancel any right or
obligation under, or result in the creation of any lien or encumbrance on any
Shares or New Shares pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Stockholder is a party or by which Stockholder or the Shares or New
Shares are or will be bound or affected.
(b) Except to the same extent Company is permitted to do so
pursuant to Section 4.4 of the Reorganization Agreement, until the Expiration
Date, Stockholder will not (and will use Stockholder's reasonable best efforts
to cause Company, its affiliates, officers, directors and employees and any
investment banker, attorney, accountant or other agent retained by Stockholder,
Company or any of the same, not to, except to the extent otherwise permitted
under Section 4.3 of the Reorganization Agreement): (i) initiate or solicit,
directly or indirectly, any proposal, plan or offer to acquire all or any
material part of the business or properties or capital stock of Company, whether
by merger, purchase of assets, tender offer or otherwise, or to liquidate
Company or otherwise distribute to the stockholders of Company all or any
substantial part of the business, properties or capital stock of Company (each,
an "Acquisition Proposal"); (ii) initiate, directly or indirectly, any contact
with any person in an effort to or with a view towards soliciting any
Acquisition Proposal; (iii) furnish information concerning Company's business,
properties or assets to any corporation, partnership, person or other entity or
group (other than Parent, or any associate, agent or representative of Parent)
under any circumstances that could reasonably be expected to relate to an actual
or potential Acquisition Proposal; or (iv) negotiate or enter into discussions
or an agreement, directly or indirectly, with any entity or group with respect
of any potential Acquisition Proposal. In the event Stockholder shall receive or
become aware of any Acquisition Proposal subsequent to the date hereof,
Stockholder shall promptly inform Parent as to any such matter and the details
thereof to the extent possible without breaching any other agreement to which
such Stockholder is a party or violating its fiduciary duties.
(c) Stockholder understands and agrees that if Stockholder
attempts to transfer, vote or provide any other person with the authority to
vote any of the Shares other than in compliance with this Agreement, Company
shall not, and Stockholder hereby unconditionally and irrevocably instructs
Company to not, permit any such transfer on its books and records, issue a new
certificate representing any of the Shares or record such vote unless and until
Stockholder shall have complied with the terms of this Agreement. Stockholder
further understands and agrees that Parent may elect to not permit the transfer
of shares of Parent Common Stock or the issuance of a new certificate
representing such shares unless and until such a transfer can be made without
adversely affecting the ability of Parent or the Surviving Corporation to
account for the business combination to be effected by the Merger as a pooling
of interests.
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5. Additional Documents. Stockholder hereby covenants and agrees
to execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of Parent, to carry out the purpose and intent of this
Agreement.
6. Consent and Waiver. Stockholder hereby gives any consents or
waivers that are reasonably required for the consummation of the Transaction
under the terms of any agreement to which Stockholder is a party or pursuant to
any rights Stockholder may have.
7. Termination. This Agreement and the Proxy delivered in
connection herewith shall terminate and shall have no further force or effect as
of the Expiration Date.
8. Confidentiality. Stockholder agrees (i) to hold any
information regarding this Agreement and the Transaction in strict confidence,
and (ii) not to divulge any such information to any third person, except to the
extent any of the same is hereafter publicly disclosed by Parent.
9. Miscellaneous.
9.1 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, then the remainder of the terms, provisions, covenants
and restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
9.2 Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by either
of the parties without the prior written consent of the other. This Agreement is
intended to bind Stockholder solely as a securityholder of Company only with
respect to the specific matters set forth herein.
9.3 Amendment and Modification. This Agreement may not be
modified, amended, altered or supplemented except by the execution and delivery
of a written agreement executed by the parties hereto.
9.4 Specific Performance; Injunctive Relief. The parties hereto
acknowledge that Parent will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
Stockholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to Parent upon any such violation, Parent
shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to Parent at law
or in equity and Stockholder hereby waives any and all defenses which could
exist in its favor in connection with such enforcement and waives any
requirement for the security or posting of any bond in connection with such
enforcement.
9.5 Notices. All notices, requests, demands or other
communications that are required or may be given pursuant to the terms of this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed by registered or certified mail, postage prepaid, or
sent by facsimile transmission, as follows:
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66
(a) If to Stockholder, at the address set forth below
Stockholder's signature at the end hereof.
(b) if to Parent, to:
E*TRADE Group, Inc.
Four Embarcadero Place
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
Facsimile No: (000) 000-0000
Telephone No: (000) 000-0000
with a copy to:
Xxxxxxx, Phleger & Xxxxxxxx LLP
0000 Xxxx Xxxx
Xxx Xxxxxxxxxxx Xxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxx X. Mo, Esq.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
and
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
Spear Street Tower
Xxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: J. Xxxxxxx Xxxxxxxx, Esq.
Xxxxx X. Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
or to such other address as any party hereto or any Indemnified Person may
designate for itself by notice given as herein provided.
9.6 Governing Law. This Agreement shall be governed by, construed
and enforced in accordance with the internal laws of the State of Delaware
without giving effect to the principles of conflicts of law thereof.
9.7 Entire Agreement. This Agreement and the Proxy contain the
entire understanding of the parties in respect of the subject matter hereof, and
supersede all prior negotiations and understandings between the parties with
respect to such subject matter.
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9.8 Counterpart. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
9.9 Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction or interpretation of this
Agreement.
(SIGNATURE PAGE FOLLOWS)
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IN WITNESS WHEREOF, the parties have caused this Company
Agreement to be executed as of the date first above written.
E*TRADE GROUP, INC. STOCKHOLDER
By:
-------------------------------- ------------------------------------
Name: (Signature)
------------------------------
Title:
-----------------------------
------------------------------------
(Signature of Spouse)
------------------------------------
(Print Name of Stockholder)
------------------------------------
(Print Street Address)
------------------------------------
(Print City, State and Zip)
------------------------------------
(Print Telephone Number)
------------------------------------
(Social Security or Tax I.D. Number)
Total Number of Shares of Company Common Stock owned on the date hereof:
Common Stock:
----------------------------
State of Residence:
----------------------
SIGNATURE PAGE TO STOCKHOLDER AGREEMENT
69
EXHIBIT C
COMPANY AFFILIATE AGREEMENT
May 31, 1999
E*TRADE Group, Inc.
Four Embarcadero Place
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000
Ladies and Gentlemen:
Pursuant to the terms of an Agreement and Plan of Merger and
Reorganization, dated as of May 31, 1999 (the "Reorganization Agreement"), by
and among E*TRADE Group, Inc., a Delaware corporation ("Parent"), Turbo
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and Telebanc Financial Corporation, a Delaware
corporation ("Company"), Parent has agreed to acquire Company through the merger
of Merger Sub with and into Company (the "Transaction").
The undersigned has been advised that as of the date hereof the
undersigned may be deemed to be (but does not hereby admit to be) an "affiliate"
of Company, as the term "affiliate" is (i) defined for purposes of paragraphs
(c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "SEC") promulgated
under the Securities Act of 1933, as amended (the "Securities Act"), and/or (ii)
used in and for purposes of Accounting Series Releases 130, 135 and 146 and
Staff Accounting Bulletin Two, as amended, of the SEC.
The undersigned understands that the representations, warranties
and covenants set forth herein will be relied upon by Parent, other stockholders
of Parent, Merger Sub, Company and their respective counsel and accounting
firms. Except to the extent written notification to the contrary is received by
Parent from the undersigned prior to the consummation of the Transaction, the
representations and warranties contained herein shall be accurate at all times
from the date hereof through the Effective Time (as defined in the
Reorganization Agreement).
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The undersigned hereby represents and warrants to and agrees with
Parent that in the event the undersigned receives any shares of Parent Common
Stock as a result of the Transaction:
1. The undersigned has power and authority to execute and deliver
this letter agreement and to make the representations and warranties set forth
herein and to perform [its] [his] [her] obligations hereunder;
2. The undersigned has carefully read this letter agreement and
the Reorganization Agreement and, to the extent the undersigned felt necessary,
discussed the requirements of such documents and other applicable limitations
upon [its] [his] [her] ability to sell, transfer, pledge or otherwise dispose of
Parent Common Stock with [its] [his] [her] counsel or counsel for the Company;
3. The undersigned is the owner of the number of shares of Parent
Common Stock (the "Shares") set forth below, and did not acquire any of the
Shares in contemplation of the Transaction.
4. The undersigned will not make any sale, transfer, pledge or
other disposition of Parent Common Stock (i) in violation of the Securities Act
or the Rules and Regulations or (ii) to a transferee that has not agreed in
writing to be bound hereby;
5. The undersigned has been advised that the issuance of Parent
Common Stock to the undersigned in connection with the Transaction has been or
will be registered with the Commission under the Securities Act on a
Registration Statement on Form S-4. However, the undersigned has also been
advised that, since at the time the Transaction was or will be submitted for a
vote of the stockholders of the Company the undersigned may be deemed to be or
have been an affiliate of the Company and the distribution by the undersigned of
any Parent Common Stock has not been registered under the Securities Act, the
undersigned may not sell, transfer, or otherwise dispose of Parent Common Stock
issued to [it] [him] [her] in the Transaction unless (i) such sale, transfer, or
other disposition has been registered under the Securities Act, (ii) such sale,
transfer, or other disposition is made in conformity with the volume and other
limitations of Rule 145 or (iii) in the opinion of counsel reasonably acceptable
to Parent (it being understood that the law firms of Xxxxx & Xxxxxxx LLP and
Xxxxxxx, Phleger & Xxxxxxxx LLP are deemed to be reasonably satisfactory to
Parent), such sale, transfer, or other disposition is otherwise exempt from
registration under the Securities Act;
6. The undersigned understands that, except as provided in the
Reorganization Agreement, Parent is under no obligation to register the sale,
transfer, or other disposition of Parent Common Stock by the undersigned or on
[its] [his] [her] behalf under the Securities Act or to take any other action
necessary in order to make compliance with an exemption from such registration
available;
7. The undersigned also understands that Parent may impose stop
transfer instructions or elect to not permit the transfer of shares of Parent
Common Stock or the issuance of a new certificate representing such shares
unless and until such a transfer can be made without adversely affecting the
ability of Parent or the surviving corporation to account for the business
2
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combination to be effected by the Transaction as a pooling of interests, and
that there will be placed on the certificates for Parent Common Stock issued to
[it] [him] [her], or any substitutions therefor, a legend stating in substance:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE WERE ISSUED
IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, APPLIES. THE SECURITIES
EVIDENCED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED MAY 31, 1999
BETWEEN THE REGISTERED HOLDER HEREOF AND E*TRADE GROUP, INC., A
COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF
E*TRADE GROUP, INC.;
8. The undersigned also understands that, unless the sale,
transfer, or other disposition by [it] [him] [her] of Parent Common Stock issued
to [it] [him] [her] has been registered under the Securities Act or is a sale
made in conformity with the provisions of Rule 145, Parent reserves the right to
put the following legend on the certificates issued to any transferee of the
undersigned:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE WERE
ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION
TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, APPLIES, AND WERE NOT ACQUIRED BY THE HOLDER WITH A
VIEW TO TRANSFER, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF
1933, AS AMENDED. THE SECURITIES EVIDENCED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR
OTHERWISE DISPOSED OF, UNLESS SUCH SALE, TRANSFER, OR OTHER
DISPOSAL IS MADE IN CONNECTION WITH AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY
APPLICABLE STATE SECURITIES LAWS OR IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT, THE RULES AND REGULATIONS
IN EFFECT THEREUNDER AND ANY APPLICABLE STATE SECURITIES LAWS";
9. Except for the Reorganization Agreement and as provided by
Section 5.10 thereof, there are no contracts, commitments or agreements relating
to voting, purchase or sale of Company's capital stock (i) between or among
Company and any of its stockholders and (ii) between or among any of Company's
stockholders.
3
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10. Any other provisions of this letter agreement to the contrary
notwithstanding, except as set forth below, during the 30-day period immediately
preceding the Effective Time, the undersigned has not engaged and will not
engage, and after the Effective Time until such time as results covering at
least 30 days of combined operations of the Company and Parent have been
published by Parent, in the form of a quarterly earnings report, an effective
registration statement filed with the Commission, a report to the Commission on
Form 10-K, 10-Q, or 8-K, or any other public filing or announcement which
includes such combined results of operations (the period commencing 30 days
prior to the Effective Time and ending on the date of the publication of the
post-Transaction financial results is referred to herein as the "Pooling
Period"), the undersigned will not engage, in any sale, transfer, or other
disposition of, or reduce the undersigned's risk in respect of, any of the
following:
a. any shares of Parent Common Stock which the undersigned may
acquire in connection with the Transaction, or any securities which may
be paid as a dividend or otherwise distributed thereon or with respect
thereto or issued or delivered in exchange or substitution therefore (all
such shares and other securities being referred to herein, collectively,
as "Restricted Securities"), or any option, right or other interest with
respect to any Restricted Securities;
b. the shares of Company Common Stock and options or warrants to
purchase Company Common Stock beneficially owned by the undersigned; or
c. any shares of Company Common Stock or any other equity
securities of the Company which the undersigned purchases or otherwise
acquires after the execution of this letter agreement;
11. As promptly as practicable after the Effective Time, Parent
will publish results covering at least 30 days of combined operations of the
Company and Parent in the form of a quarterly earnings report, an effective
registration statement filed with the Commission, a report to the Commission on
Form 10-K, 10-Q, 8-K, or any other public filing or announcement which includes
such combined results of operations; provided, however, that Parent will under
no circumstance be obligated to publish such results earlier than that time at
which Parent publishes results for its first full fiscal quarter during which
such 30 days of combined operations occurs.
12. This Company Affiliate Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the Sate of
Delaware without giving effect to the principles of conflicts of laws thereof
and may be executed in counterparts.
(SIGNATURE PAGE FOLLOWS)
4
73
Very truly yours,
-------------------------------------------
-------------------------------------------
(print name)
Number of Shares beneficially owned as of
the date hereof:
-----------------------------
Accepted as of __________ _____, 1999
E*TRADE GROUP, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
SIGNATURE PAGE TO COMPANY AFFILIATE AGREEMENT
74
EXHIBIT D
PARENT AFFILIATE AGREEMENT
May 31, 1999
E*TRADE Group, Inc.
Four Embarcadero Place
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000
Ladies and Gentlemen:
Pursuant to the terms of an Agreement and Plan of Merger and
Reorganization, dated as of May 31, 1999 (the "Reorganization Agreement"), by
and among E*TRADE Group, Inc., a Delaware corporation ("Parent"), Turbo
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and Telebanc Financial Corporation, a Delaware
corporation ("Company"), Parent has agreed to acquire Company through the merger
of Merger Sub with and into Company (the "Transaction").
The undersigned has been advised that as of the date hereof the
undersigned may be deemed to be (but does not hereby admit to be) an "affiliate"
of Parent, as the term "affiliate" is (i) defined for purposes of paragraphs (c)
and (d) of Rule 145 of the rules and regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "SEC") promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), and/or (ii) used in
and for purposes of Accounting Series Releases 130, 135 and 146 and Staff
Accounting Bulletin Two, as amended, of the SEC.
The undersigned understands that the representations, warranties
and covenants set forth herein will be relied upon by Parent, other stockholders
of Parent, Merger Sub, Company and their respective counsel and accounting
firms. Except to the extent written notification to the contrary is received by
Parent from the undersigned prior to the consummation of the Transaction, the
representations and warranties contained herein shall be accurate at all times
from the date hereof through the Effective Time (as defined in the
Reorganization Agreement).
The undersigned represents and warrants to, and agrees with,
Parent that:
1. The undersigned has full power and legal capacity to execute
and deliver this Parent Affiliate Agreement and to make the representations and
warranties herein and to perform his, her or its obligations hereunder.
75
2. The undersigned has carefully read this Parent Affiliate
Agreement and the Reorganization Agreement and discussed their requirements and
other applicable limitations upon the ability of the undersigned to sell,
transfer or otherwise dispose of shares of Parent's common stock, par value $.01
per share ("Parent Common Stock"), to the extent the undersigned felt necessary,
with counsel for the undersigned or counsel for Parent.
3. The undersigned is the owner of the number of shares of Parent
Common Stock (the "Shares") set forth below, and did not acquire any of the
Shares in contemplation of the Transaction.
4. The undersigned shall vote the Shares in favor of approval and
adoption of any increase in authorized capital stock of Parent necessary to
consummate the Transaction.
5. During the period commencing 30 days prior to the closing of
the Transaction and ending at such time as results covering at least 30 days of
combined operations of Company and Parent have been published by Parent, in the
form of a quarterly earnings report, an effective registration statement filed
with the SEC, a report to the SEC on Form 10-K, 10-Q or 8-K or any other public
filing or announcement that includes such combined results of operations (the
date of which is referred to herein as the "Financial Results Publication
Date"), the undersigned has not and will not sell, transfer or otherwise dispose
of, or offer or agree to sell, transfer or otherwise dispose of, or in any other
way reduce the risk of the undersigned's ownership of or investment in, any
shares of Parent Common Stock which the undersigned currently owns or purchases
or otherwise acquires after the execution of this Parent Affiliate Agreement but
before the Financial Results Publication Date, or any securities which may be
paid as a dividend or otherwise distributed thereon or with respect thereto or
issued or delivered in exchange or substitution therefor (all such shares and
other securities being referred to herein, collectively, as "Restricted
Securities"), or any option, right or other interest with respect to any
Restricted Securities.
6. This Parent Affiliate Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the Sate of
Delaware without giving effect to the principles of conflicts of laws thereof
and may be executed in counterparts.
(SIGNATURE PAGE FOLLOWS)
2
76
Very truly yours,
-------------------------------------------
-------------------------------------------
(print name)
Number of Shares beneficially owned as of
the date hereof:
-----------------------------
Accepted as of __________ _____, 1999
E*TRADE GROUP, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
SIGNATURE PAGE TO COMPANY AFFILIATE AGREEMENT
77
EXHIBIT E
E*TRADE GROUP, INC.
MANAGEMENT CONTINUITY AGREEMENT
June 7, 1999
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