<\/p>\n 7.5 Extension; Waiver…………………………………………… 48
\nARTICLE VIII GENERAL PROVISIONS………………………………………… 49
\n 8.1 Non-Survival at Effective Time……………………………….. 49
\n 8.2 Notices……………………………………………………. 49
\n 8.3 Interpretation……………………………………………… 50
\n 8.4 Counterparts……………………………………………….. 50
\n 8.5 Entire Agreement; Nonassignability; Parties in Interest…………. 50
\n 8.6 Severability……………………………………………….. 51
\n 8.7 Remedies Cumulative…………………………………………. 51
\n 8.8 Governing Law………………………………………………. 51
\n 8.9 Rules of Construction……………………………………….. 51
\n 8.10 Definitions; Etc……………………………………………. 51
\n<\/c><\/c><\/s><\/caption>\n<\/table>\n
3<\/p>\n
EXHIBITS<\/p>\n
Exhibit A – Form of Certificate of Merger
\nExhibit B – Form of Company Affiliate Agreement
\nExhibit C – Form of Parent Affiliate Agreement
\nExhibit D – Form of Management Continuity Agreement<\/p>\n
4<\/p>\n
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
\n ———————————————– <\/p>\n
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the “Agreement”)
\nis made and entered into as of May 31, 1999, by and among E*TRADE Group, Inc., a
\nDelaware corporation (“Parent”), Turbo Acquisition Corp., a Delaware corporation
\nand wholly owned subsidiary of Parent (“Merger Sub”), and Telebanc Financial
\nCorporation, a Delaware corporation (“Company”).<\/p>\n
RECITALS<\/p>\n
A. The Board of Directors of Company has unanimously (i) determined
\nthat it is advisable and fair to, and in the best interests of, Company and its
\nstockholders that, upon the terms and subject to the conditions of this
\nAgreement, Merger Sub merge with and into Company, with Company being the
\nsurviving corporation (the “Merger”), (ii) approved this Agreement, the Merger
\nand the other transactions contemplated hereby and (iii) determined to recommend
\nthe approval of this Agreement and the Merger by the stockholders of Company.<\/p>\n
B. The Board of Directors of Parent has (i) determined that the
\nMerger is advisable and in the best interests of Parent and its stockholders and
\n(ii) approved this Agreement, the Merger and the other transactions contemplated
\nhereby.<\/p>\n
C. Pursuant to the Merger, among other things, the outstanding shares
\nof Common Stock, par value $.01 per share (“Company Common Stock”), of Company
\nshall be converted into the right to receive the consideration set forth herein.<\/p>\n
D. The parties intend, by executing this Agreement, to adopt a plan
\nof reorganization within the meaning of Section 368 of the Internal Revenue Code
\nof 1986, as amended (the “Code”), and to cause the Merger to qualify as a
\n“reorganization” under the provisions of Sections 368(a)(1)(A) and 368(a)(2)(E)
\nof the Code, and as a pooling of interests for financial accounting purposes.<\/p>\n
E. Concurrently with the execution of this Agreement and as an
\ninducement to Parent and Merger Sub to enter into this Agreement, (a) Company
\nand Parent have entered into a stock option agreement dated the date hereof (the
\n“Option Agreement”) providing for the purchase by Parent of newly-issued shares
\nof Company Common Stock under certain circumstances, and (b) certain affiliates
\nof Company have on the date hereof entered into Stockholder Agreements the
\n(“Stockholder Agreements”) pursuant to which they have agreed among other
\nthings, to vote the shares of Company Common Stock over which such persons have
\nvoting power to approve this Agreement and the Merger;<\/p>\n
NOW, THEREFORE, in consideration of the foregoing and the
\nrepresentations, warranties, covenants and agreements set forth herein, and for
\nother good and valuable consideration, the receipt and sufficiency of which are
\nhereby acknowledged, the parties hereto agree as follows:<\/p>\n
ARTICLE I<\/p>\n
THE MERGER
\n ———-<\/p>\n
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
\n ———-
\nsubject to and upon the terms and conditions of this Agreement and the
\napplicable provisions of the Delaware General Corporation Law (“Delaware Law”),
\nMerger Sub shall be merged with and into Company, the separate corporate
\nexistence of Merger Sub shall cease and Company shall continue as the surviving
\ncorporation. Company as the surviving corporation after the Merger is
\nhereinafter sometimes referred to as the “Surviving Corporation.”<\/p>\n
1.2 Closing; Effective Time. The consummation of the Merger (the
\n ———————–
\n“Closing”) shall take place as soon as practicable, and in any event not later
\nthan two (2) business days, after the satisfaction or waiver of each of the
\nconditions set forth in Article VI hereof or at such other time as the parties
\nhereto may agree (the “Closing Date”). The Closing shall take place at the
\noffices of Brobeck, Phleger & Harrison LLP, Two Embarcadero Place, 2200 Geng
\nRoad, Palo Alto, California 94303, or at such other location as the parties
\nhereto may agree in writing. The Merger shall become effective on the Closing
\nDate, as set forth in the Certificate of Merger in the form attached hereto as
\nExhibit A (the “Certificate of Merger”), which shall be filed with the Secretary
\n———
\nof State of the State of Delaware on the Closing Date. The term “Effective Time”
\nshall be the date and time when the Merger becomes effective on the Closing
\nDate, as set forth in the Certificate of Merger.<\/p>\n
1.3 Effect of the Merger. At the Effective Time, the effect of the
\nMerger shall be as provided in this Agreement, the Certificate of Merger and the
\napplicable provisions of Delaware Law. At and after the Effective Time, the
\nMerger shall have the effects set forth in Sections 259 and 261 of the Delaware
\nLaw. Without limiting the generality of the foregoing, and subject thereto, at
\nthe Effective Time, all the property, rights, privileges, powers and franchises
\nof Company and Merger Sub shall vest in the Surviving Corporation, and all
\ndebts, liabilities and duties of Company and Merger Sub shall become the debts,
\nliabilities and duties of the Surviving Corporation.<\/p>\n
1.4 Certificate of Incorporation; Bylaws.
\n ————————————<\/p>\n
(a) At the Effective Time, the Certificate of Incorporation of
\nCompany, as in effect immediately prior to the Effective Time, shall be the
\nCertificate of Incorporation of the Surviving Corporation; provided, however,
\nthat immediately after the Effective Time the Certificate of Incorporation of
\nthe Surviving Corporation shall be amended and restated so as to read in its
\nentirety like the Certificate of Incorporation of Merger Sub with Article I of
\nthe Certificate of Incorporation amended to read as follows: “The name of the
\ncorporation is Telebanc Financial Corporation.”<\/p>\n
(b) The Bylaws of Company, as in effect immediately prior to the
\nEffective Time, shall be the Bylaws of the Surviving Corporation until
\nthereafter amended; provided, however, that immediately after the Effective Time
\n ——– ——-
\nthe Bylaws of the Surviving Corporation shall be amended and restated so as to
\nread like the Bylaws of Merger Sub.<\/p>\n
2<\/p>\n
1.5 Directors and Officers. At the Effective Time, the directors of
\nMerger Sub shall be the initial directors of the Surviving Corporation, until
\ntheir successors are duly elected or appointed and qualified. The officers of
\nCompany at the Effective Time shall be the initial officers of Surviving
\nCorporation, until their respective successors are duly elected or appointed and
\nqualified.<\/p>\n
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the
\n ———————–
\nMerger and without any action on the part of Parent, Merger Sub, Company or the
\nholders of any of the following securities:<\/p>\n
(a) Conversion of Company Capital Stock. Each share of Company
\n ———————————–
\nCommon Stock issued and outstanding immediately prior to the Effective Time
\n(other than any shares of Company Common Stock to be cancelled pursuant to
\nSection 1.6(b)) will be converted automatically into the right to receive 2.1
\nshares (the “Exchange Ratio”) of Parent Common Stock, par value $.01 per share
\n(“Parent Common Stock”), upon surrender of the certificate representing such
\nshare of Company Common Stock in the manner provided in Section 1.7 (or, in the
\ncase of a lost, stolen or destroyed certificate, upon delivery of an affidavit
\nand, if required, bond, in the manner provided in Section 1.9).<\/p>\n
(b) Cancellation of Company Capital Stock Owned by Parent, Merger
\n ————————————————————-
\nSub or Company. Each share of Company Common Stock that is owned by Company as
\n————–
\ntreasury stock and each share of Company Common Stock owned by Parent or Merger
\nSub or any direct or indirect wholly owned Subsidiary (as defined below) of
\nParent, Merger Sub or Company immediately prior to the Effective Time shall be
\ncanceled and extinguished without any conversion thereof.<\/p>\n
(c) Company Stock Option Plans. At the Effective Time, Company’s
\n ————————–
\n1994 Stock Option Plan, 1997 Stock Option Plan and 1998 Stock Incentive Plan, as
\namended (collectively, the “Company Stock Option Plans”), and all options to
\npurchase Company Common Stock then outstanding under the Company Stock Option
\nPlans or pursuant to option agreements listed on Schedule 1.6(c) attached hereto
\n —————
\n(collectively, “Company Options”) shall be assumed by Parent in accordance with
\nSection 5.13.<\/p>\n
(d) Unvested Company Common Stock. If any shares of Company Common
\n —————————–
\nStock outstanding immediately prior to the Effective Time are unvested or are
\nsubject to a repurchase option, risk of forfeiture or other condition under the
\nCompany Employee Stock Ownership Plan, any applicable restricted stock purchase
\nagreement, or other agreement with Company or under which Company has any
\nrights, then (unless such condition terminates by virtue of the Merger pursuant
\nto the express term of such agreement) the shares of Parent Common Stock issued
\nin exchange for such shares of Parent Common Stock will also be unvested and
\nsubject to the same repurchase option, risk of forfeiture or other condition,
\nand the certificates representing such shares of Parent Common Stock may
\naccordingly be marked with appropriate legends. Company shall take all action
\nthat may be necessary to ensure that, from and after the Effective Time, Parent
\nis entitled to exercise any such repurchase option or other right set forth in
\nany such restricted stock purchase agreement or other agreement.<\/p>\n
3<\/p>\n
(e) Capital Stock of Merger Sub. At the Effective Time, each share
\n —————————
\nof Common Stock, par value $.001 per share, of Merger Sub (“Merger Sub Common
\nStock”) issued and outstanding immediately prior to the Effective Time shall be
\nconverted into and exchanged for one validly issued, fully paid and
\nnonassessable share of Common Stock, par value $.001 per share, of the Surviving
\nCorporation, and the Surviving Corporation shall become a wholly owned
\nSubsidiary of Parent. Each stock certificate of Merger Sub evidencing ownership
\nof any such shares shall continue to evidence ownership of such shares of
\ncapital stock of the Surviving Corporation.<\/p>\n
(f) Adjustments to Exchange Ratio. The Exchange Ratio shall be
\n —————————–
\nappropriately adjusted to reflect the effect of any stock split, reverse split,
\nstock dividend (including any dividend or distribution of securities convertible
\ninto Parent Common Stock or Company Common Stock), reorganization,
\nrecapitalization or other like change with respect to Parent Common Stock or
\nCompany Common Stock occurring after the date hereof and prior to the Effective
\nTime and of any increase in the number of shares of Company Common Stock
\noutstanding resulting from any failure of Section 2.2 to be correct on the date
\nhereof or by Company to comply with its covenants under Section 4.2 of this
\nAgreement, so as to provide Parent the same economic effect as contemplated by
\nthis Agreement prior to such stock split, reverse split, stock dividend,
\nreorganization, recapitalization, like change or increase .<\/p>\n
(g) Fractional Shares. No fraction of a share of Parent Common
\nStock will be issued, but in lieu thereof each holder of shares of Company
\nCapital Stock who would otherwise be entitled to a fraction of a share of Parent
\nCommon Stock (after aggregating all fractional shares of Parent Common Stock to
\nbe received by such holder) shall receive from Parent an amount of cash (rounded
\nto the nearest whole cent) equal to the product of (i) such fraction, multiplied
\nby (ii) the average of the closing sale prices for a share of Parent Common
\nStock as quoted on the Nasdaq National Market over the five (5) most recent
\ntrading days that Parent Common Stock has traded ending on the last full trading
\nday prior to the date on which the Effective Time occurs.<\/p>\n
1.7 Surrender of Certificates.
\n ————————–<\/p>\n
(a) Exchange Agent. Parent’s transfer agent or another institution
\n ————–
\nselected by Parent and reasonably acceptable to Company shall act as exchange
\nagent (the “Exchange Agent”) in the Merger.<\/p>\n
(b) Parent to Provide Common Stock and Cash. Prior to the Effective
\n —————————————
\nTime, Parent shall deposit with the Exchange Agent for exchange in accordance
\nwith this Article I, through such reasonable procedures as Parent may adopt, (i)
\nthe shares of Parent Common Stock issuable pursuant to Section 1.6(a) in
\nexchange for shares of Company Common Stock outstanding immediately prior to the
\nEffective Time and (ii) cash in an amount sufficient to permit payment of cash
\nin lieu of fractional shares pursuant to Section 1.6(g) and any dividend or
\ndistribution to which holders of shares of Company Common Stock may be entitled
\npursuant to Section 1.7(d).<\/p>\n
(c) Exchange Procedures. Promptly after the Effective Time, Parent
\n ——————-
\nshall cause to be mailed to each holder of record of a certificate or
\ncertificates (the “Certificates”) <\/p>\n
4<\/p>\n
which immediately prior to the Effective Time represented outstanding shares of
\nCompany Common Stock, whose shares were converted into the right to receive
\nshares of Parent Common Stock (and cash in lieu of fractional shares) pursuant
\nto Section 1.6, (i) a letter of transmittal (which shall specify that delivery
\nshall be effected, and risk of loss and title to the Certificates shall pass,
\nonly upon receipt of the Certificates by the Exchange Agent, and shall be in
\nsuch form and have such other provisions as Parent may reasonably specify) and
\n(ii) instructions for use in effecting the surrender of the Certificates in
\nexchange for certificates representing shares of Parent Common Stock (and cash
\nin lieu of fractional shares). Upon surrender of a Certificate for cancellation
\nto the Exchange Agent or to such other agent or agents as may be appointed by
\nParent, together with such letter of transmittal, duly completed and validly
\nexecuted in accordance with the instructions thereto, the holder of such
\nCertificate shall be entitled to receive in exchange therefor a certificate
\nrepresenting the number of whole shares of Parent Common Stock and payment in
\nlieu of fractional shares which such holder has the right to receive pursuant to
\nSection 1.6 and any dividends or other distributions pursuant to Section 1.7(d),
\nand the Certificate so surrendered shall forthwith be canceled. Until so
\nsurrendered, each outstanding Certificate that, prior to the Effective Time,
\nrepresented shares of Company Common Stock will be deemed from and after the
\nEffective Time, for all corporate purposes, other than the payment of dividends,
\nto evidence the ownership of the number of full shares of Parent Common Stock
\ninto which such shares of Company Common Stock shall have been so converted and
\nthe right to receive an amount in cash in lieu of the issuance of any fractional
\nshares in accordance with Section 1.6 and any dividends or other distributions
\npursuant to Section 1.7(d).<\/p>\n
(d) Distributions With Respect to Unexchanged Shares. No dividends
\n ————————————————
\nor other distributions with respect to Parent Common Stock with a record date
\nafter the Effective Time will be paid to the holder of any unsurrendered
\nCertificate with respect to the shares of Parent Common Stock represented
\nthereby until the holder of record of such Certificate shall surrender such
\nCertificate. Subject to applicable law, following surrender of any such
\nCertificate, there shall be paid to the record holder of the certificates
\nrepresenting whole shares of Parent Common Stock issued in exchange therefor,
\nwithout interest, at the time of such surrender, the amount of any such
\ndividends or other distributions with a record date after the Effective Time
\ntheretofore payable (but for the provisions of this Section 1.7(d)) with respect
\nto such shares of Parent Common Stock.<\/p>\n
(e) Transfers of Ownership. If any certificate for shares of Parent
\n ———————-
\nCommon Stock is to be issued by the Exchange Agent in a name other than that in
\nwhich the Certificate surrendered in exchange therefor is registered, it will be
\na condition of the issuance thereof that the Certificate so surrendered will be
\nproperly endorsed and otherwise in proper form for transfer and that the person
\nrequesting such exchange will have paid to Parent or any agent designated by it
\nany transfer or other taxes required by reason of the issuance of a check in any
\nname other than that of the registered holder of the Certificate surrendered, or
\nestablished to the satisfaction of Parent or any agent designated by it that
\nsuch tax has been paid or is not payable.<\/p>\n
(f) No Liability. Notwithstanding anything to the contrary in this
\n ————
\nSection 1.7, none of the Exchange Agent, the Surviving Corporation or any party
\nhereto shall be liable to any person for any amount properly paid to a public
\nofficial pursuant to any applicable abandoned property, escheat or similar law.<\/p>\n
5<\/p>\n
1.8 No Further Ownership Rights in Company Capital Stock. All shares of
\n —————————————————-
\nParent Common Stock issued (and cash in lieu of fractional shares paid and any
\ndividends or other distributions pursuant to Section 1.7(d)) upon the surrender
\nfor exchange of shares of Company Common Stock in accordance with the terms
\nhereof shall be deemed to have been issued in full satisfaction of all rights
\npertaining to such shares of Company Common Stock, and there shall be no further
\nregistration of transfers on the records of the Surviving Corporation of shares
\nof Company Common Stock which were outstanding immediately prior to the
\nEffective Time. If, after the Effective Time, Certificates are presented to the
\nSurviving Corporation for any reason, they shall be canceled and exchanged as
\nprovided in this Article I.<\/p>\n
1.9 Lost, Stolen or Destroyed Certificates. In the event any
\n ————————————–
\nCertificates shall have been lost, stolen or destroyed, the Exchange Agent shall
\nissue in exchange for such lost, stolen or destroyed Certificates, upon the
\nmaking of an affidavit of that fact by the holder thereof, such shares of Parent
\nCommon Stock (and cash in lieu of fractional shares) as may be required pursuant
\nto Section 1.6; provided, however, that Parent may, in its discretion and as a
\n ——– ——-
\ncondition precedent to the issuance thereof, require the owner of such lost,
\nstolen or destroyed Certificates to deliver a bond in such sum as it may
\nreasonably direct as indemnity against any claim that may be made against
\nParent, the Surviving Corporation or the Exchange Agent with respect to the
\nCertificates alleged to have been lost, stolen or destroyed.<\/p>\n
1.10 Tax and Accounting Consequences. It is intended by the parties
\n ——————————-
\nhereto that the Merger shall qualify as a reorganization under the provisions of
\nSections 368(a)(1)(A) and 368(a)(2)(E) of the Code and as a pooling of interests
\nfor accounting purposes.<\/p>\n
1.11 Withholding Rights. Parent and the Surviving Corporation shall be
\n ——————
\nentitled to deduct and withhold from the number of shares of Parent Common Stock
\notherwise deliverable under this Agreement, and from any other payments made
\npursuant to this Agreement, such amounts as Parent and the Surviving Corporation
\nare required to deduct and withhold with respect to such delivery and payment
\nunder the Code or any provision of state, local, provincial or foreign tax law.
\nTo the extent that amounts are so withheld, such withheld amounts shall be
\ntreated for all purposes of this Agreement as having been delivered and paid to
\nthe holder of shares of Company Common Stock in respect of which such deduction
\nand withholding was made by Parent and the Surviving Corporation.<\/p>\n
1.12 Taking of Necessary Action; Further Action. If, at any time after
\n ——————————————
\nthe Effective Time, any further action is necessary or desirable to carry out
\nthe purposes of this Agreement and to vest the Surviving Corporation with full
\nright, title and possession to all assets, property, rights, privileges, powers
\nand franchises of Company and Merger Sub, the officers and directors of Company,
\nParent and Merger Sub are fully authorized in the name of their respective
\ncorporations or otherwise to take, and will take, all such lawful and necessary
\naction, so long as such action is not inconsistent with this Agreement.<\/p>\n
6<\/p>\n
ARTICLE II<\/p>\n
REPRESENTATIONS AND WARRANTIES OF COMPANY
\n —————————————–<\/p>\n
Except as disclosed in the document of even date herewith delivered by
\nCompany to Parent prior to the execution and delivery of this Agreement and
\nreferring to the representations and warranties in this Agreement (the “Company
\nDisclosure Schedule”), any exception so disclosed in the Company Disclosure
\nSchedule to specifically identify the Section of this Agreement to which such
\nexception relates, Company represents and warrants to Parent and Merger Sub as
\nfollows:<\/p>\n
2.1 Organization, Standing and Power. Each of Company and its
\n ——————————–
\nSubsidiaries is a corporation duly organized, validly existing and in good
\nstanding under the laws of its jurisdiction of organization. Company is
\nregistered as a savings and loan holding company in accordance with the Home
\nOwners’ Loan Act. Each of Company and its Subsidiaries has the corporate power
\nto own its properties and to carry on its business as now being conducted and as
\nproposed to be conducted and is duly qualified to do business and is in good
\nstanding in each jurisdiction in which the failure to be so qualified and in
\ngood standing would have a Material Adverse Effect (as defined in Section 8.10)
\non Company. Company has made available to Parent a true and correct copy of the
\ncertificate or articles of incorporation, as amended, and bylaws, as amended,
\nand any other charter or organizational documents, each as amended, of Company
\nand each of its Subsidiaries. Neither Company nor any of its Subsidiaries is in
\nviolation of any of the provisions of its certificate or articles of
\nincorporation or bylaws or other charter or organizational documents, each as
\namended. All of the outstanding shares of capital stock and voting securities of
\neach of Company’s Subsidiaries owned, directly or indirectly, by Company are
\nduly authorized, validly issued, fully paid and nonassessable, and those shares
\nof capital stock and voting securities of each of Company’s Subsidiaries owned
\nby Company, directly or indirectly, are free and clear of all liens, charges,
\nclaims or encumbrances or rights of others. Except as disclosed in the Company
\nSEC Documents (as defined below), there are no outstanding subscriptions,
\noptions, warrants, puts, calls, rights, exchangeable or convertible securities
\nor other commitments or agreements of any character relating to the issued or
\nunissued capital stock or other securities of any such Subsidiary, or otherwise
\nobligating Company or any such Subsidiary to issue, transfer, sell, purchase,
\nredeem or otherwise acquire any such securities. TeleBank is a federal savings
\nassociation existing under the laws of the United States. The deposit accounts
\nin TeleBank are insured by the Federal Deposit Insurance Corporation (the
\n“FDIC”) through the Savings Association Insurance Fund to the fullest extent
\npermitted by law, and all premiums and assessments required in connection
\ntherewith have been paid by TeleBank.<\/p>\n
2.2 Capital Structure. The authorized capital stock of Company
\nconsists of 135,000,000 shares of Company Common Stock, and 500,000 shares of
\nPreferred Stock, par value $.01 per share (“Preferred Stock”), of which there
\nwere issued and outstanding as of the close of business on May 28, 1999,
\n16,857,835 shares of Company Common Stock and no shares of Preferred Stock.
\nThere are no other outstanding shares of capital stock or voting securities and
\nno outstanding commitments to issue any shares of capital stock or voting
\nsecurities after May 28, 1999 other than pursuant to the exercise of Company
\nOptions outstanding as of such date. All outstanding shares of Company Common
\nStock are duly authorized, validly issued, fully paid and non-assessable and are
\nfree and clear of any liens or <\/p>\n
7<\/p>\n
encumbrances other than any liens or encumbrances created by or imposed upon the
\nholders thereof, and are not subject to preemptive rights or rights of first
\nrefusal created by the Amended and Restated Certificate of Incorporation or
\nBylaws, each as amended, of Company or any agreement to which Company is a party
\nor by which it is bound. As of the close of business on May 28, 1999, Company
\nhas reserved an aggregate of 4,773,019 shares of Common Stock for issuance to
\nemployees, consultants and directors pursuant to the Company Stock Option Plans
\nand the Company Options, of which 218,092 shares have been issued pursuant to
\noption exercises or direct stock purchases or awards, 2,570,680 shares are
\nsubject to outstanding, unexercised options, and no shares are subject to
\noutstanding stock purchase rights. Since May 28, 1999, Company has not issued or
\ngranted additional options under the Company Stock Option Plans or otherwise.
\nCompany has not issued or granted any stock appreciation rights or performance
\nunits payable in stock of the Company that are currently outstanding. Except for
\n(i) the rights created pursuant to this Agreement, the Company Stock Option
\nPlans, the Company Options and the Option Agreement and (ii) Company’s right to
\nrepurchase any unvested shares under the Company Stock Option Plans, the Company
\nOptions or the Company Employee Stock Ownership Plan, there are no other
\noptions, warrants, calls, rights, commitments or agreements of any character to
\nwhich Company is a party or by which it is bound obligating Company to issue,
\ndeliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
\nrepurchased or redeemed, any shares of capital stock of Company or obligating
\nCompany to grant, extend, accelerate the vesting of, change the price of, or
\notherwise amend or enter into any such option, warrant, call, right, commitment
\nor agreement. Except for this Agreement and as provided by Section 5.11, there
\nare no contracts, commitments or agreements relating to voting, purchase or sale
\nof Company’s capital stock between or among Company and any of its stockholders.
\nThe terms of the Company Stock Option Plans permit the assumption of options to
\npurchase Company Common Stock as provided in this Agreement, without the consent
\nor approval of the holders of such securities or the Company stockholders. True
\nand complete copies of all material agreements and instruments, that are
\ncurrently in force or under which Company has any liability, relating to or
\nissued under the Company Stock Option Plans, the Company Options and the Company
\nEmployee Stock Ownership Plan have been provided to Parent and such agreements
\nand instruments have not been amended, modified or supplemented, and there are
\nno agreements to amend, modify or supplement such agreements or instruments in
\nany case from the form provided to Parent. All outstanding shares of Company
\nCommon Stock and all Company Options were issued in compliance with all
\napplicable federal and state securities laws.<\/p>\n
2.3 Authority. Assuming the filings and approvals described in
\nclauses (i) through (iv) of the last sentence of this Section are made or
\nobtained (as the case may be) and the condition set forth in Section 6.1(a) is
\nsatisfied, Company has all requisite corporate power and authority to enter into
\nthis Agreement and the Option Agreement and to consummate the transactions
\ncontemplated hereby and thereby. The execution and delivery of this Agreement
\nand the Option Agreement and the consummation of the transactions contemplated
\nhereby and thereby have been duly authorized by all necessary corporate action
\non the part of Company, subject only, as of the date of this Agreement, to the
\napproval of the Merger by Company’s stockholders as contemplated by Section
\n6.1(a). Each of this Agreement and the Option Agreement has been duly executed
\nand delivered by Company and constitutes the valid and binding obligation of
\nCompany, enforceable against Company in accordance with its terms, except as
\nsuch enforcement may be limited by (i) the effect of bankruptcy, insolvency,
\nreorganization, receivership, conservatorship, arrangement, moratorium or other
\nlaws affecting <\/p>\n
8<\/p>\n
or relating to the rights of creditors generally, or (ii) the rules governing
\nthe availability of specific performance, injunctive relief or other equitable
\nremedies and general principles of equity, regardless of whether considered in a
\nproceeding in equity or at law. Assuming the filings and approvals described in
\nclauses (i) through (iv) of the last sentence of this Section are made or
\nobtained (as the case may be) and the condition set forth in Section 6.1(a) is
\nsatisfied, the execution and delivery of this Agreement and the Option Agreement
\nby Company does not, and the consummation of the transactions contemplated
\nhereby and thereby will not, conflict with, or result in any violation of, or
\ndefault under (with or without notice or lapse of time, or both), or give rise
\nto a right of termination, cancellation or acceleration of any obligation or
\nloss of any benefit under, (i) any provision of the certificate or articles of
\nincorporation, bylaws, or other charter or organizational documents, each as
\namended, of Company or any of its Subsidiaries or (ii) any material mortgage,
\nindenture, lease, contract or other agreement or instrument, permit, concession,
\nfranchise, license, judgment, order, decree, statute, law, ordinance, rule or
\nregulation applicable to Company or any of its Subsidiaries or any of their
\nproperties or assets, except for any conflicts, violations, defaults or other
\noccurrences that would not (A) individually or in the aggregate have a Material
\nAdverse Effect on Company or any of its Subsidiaries or (B) prevent or
\nmaterially impair or delay the consummation of the Merger. No consent, approval,
\norder or authorization of, or registration, declaration or filing with, any
\ncourt, administrative agency or commission, self-regulatory organization (“SRO”)
\nor other foreign or domestic governmental or quasi-governmental authority or
\ninstrumentality (each of the foregoing, a “Governmental Entity”) is required by
\nor with respect to Company or any of its Subsidiaries in connection with the
\nexecution and delivery of this Agreement or the Option Agreement, the
\nperformance of Company’s obligations hereunder or thereunder or the consummation
\nof the transactions contemplated hereby or thereby, except for (i) the filing of
\nthe Certificate of Merger as provided in Section 1.2, (ii) the filing of
\napplications and notices with and the receipt of requisite approvals from the
\nOffice of Thrift Supervision (the “OTS”) with respect to the Merger, (iii) the
\nfiling with, and clearance by, the SEC of the Proxy Statement (as defined in
\nSection 5.1) relating to the Company Stockholders Meeting (as defined in Section
\n5.1), (iv) such notices, applications, consents, approvals, orders,
\nauthorizations, registrations, declarations and filings as may be required under
\napplicable federal or state securities laws or the securities laws of any
\nforeign country in connection with the Merger; and (v) such other consents,
\nauthorizations, filings, approvals and registrations which, if not obtained or
\nmade, would not have a Material Adverse Effect on Company and would not prevent,
\nor materially alter or delay, any of the transactions contemplated by this
\nAgreement or the Option Agreement. Company is not aware of any reason why the
\napprovals of all Governmental Entities necessary to permit consummation of the
\nMerger or the other transactions contemplated by this Agreement will not be
\nreceived without the imposition of a condition or requirement described in
\nSection 6.3(c).<\/p>\n
2.4 SEC Documents; Financial Statements. Company has furnished or made
\n ———————————–
\navailable (including via EDGAR) to Parent a true and complete copy of each
\nstatement, report, registration statement (with the prospectus in the form filed
\npursuant to Rule 424(b) of the Securities Act of 1933, as amended (the
\n“Securities Act”)), definitive proxy statement and other filings (including
\nexhibits, supplements and schedules thereto) filed with the SEC by Company since
\nJanuary 1, 1997, and, prior to the Effective Time, Company will have furnished
\nor made available (including via EDGAR) to Parent true and complete copies of
\nany additional documents filed with the SEC by Company prior to the Effective
\nTime (collectively, the <\/p>\n
9<\/p>\n
“Company SEC Documents”). As of their respective filing dates, the Company SEC
\nDocuments complied in all material respects with the requirements of the
\nSecurities Exchange Act of 1934, as amended (the “Exchange Act”), and the
\nSecurities Act, and none of the Company SEC Documents contained any untrue
\nstatement of a material fact or omitted to state a material fact required to be
\nstated therein or necessary to make the statements made therein, in light of the
\ncircumstances in which they were made, not misleading, except to the extent
\ncorrected by a subsequently filed Company SEC Document. The financial statements
\nof Company, including the notes thereto, included in the Company SEC Documents
\n(the “Company Financial Statements”) were complete and correct in all material
\nrespects as of their respective dates (except to the extent corrected by a
\nsubsequently filed Company SEC Document), complied as to form in all material
\nrespects with applicable accounting requirements and with the published rules
\nand regulations of the SEC with respect thereto as of their respective dates,
\nand have been prepared in accordance with generally accepted accounting
\nprinciples applied on a basis consistent throughout the periods indicated
\n(except as may be indicated in the notes thereto or, in the case of unaudited
\nstatements included in Quarterly Reports on Form 10-Q, as permitted by Form 10-Q
\nof the SEC). The Company Financial Statements fairly present the consolidated
\nfinancial condition and operating results of Company and its Subsidiaries at the
\ndates and during the periods indicated therein (subject, in the case of
\nunaudited statements, to normal and recurring year-end adjustments).<\/p>\n
2.5 Absence of Certain Changes. Since December 31, 1998 (the “Company
\n ————————–
\nBalance Sheet Date”), except as set forth in any Company SEC Document (but only
\nto the extent set forth therein), Company has conducted its business in the
\nordinary course consistent with past practice and there has not occurred: (i)
\nany change, event or condition (whether or not covered by insurance) that has
\nresulted in, or might reasonably be expected to result in, a Material Adverse
\nEffect on Company; (ii) any acquisition, sale or transfer of any material asset
\nof Company or any of its Subsidiaries other than in the ordinary course of
\nbusiness and consistent with past practice; (iii) any material change in
\naccounting methods or practices (including any change in depreciation or
\namortization policies or rates) by Company or any revaluation by Company of any
\nof its or any of its Subsidiaries’ assets, except as set forth in any Company
\nSEC Document (but only to the extent set forth therein); (iv) any declaration,
\nsetting aside, or payment of a dividend or other distribution with respect to
\nthe shares of Company, or any direct or indirect redemption, purchase or other
\nacquisition by Company of any of its shares of capital stock; (v) any material
\ncontract entered into by Company or any of its Subsidiaries, other than in the
\nordinary course of business and as made available to Parent, or any material
\namendment or termination of, or default under, any material contract to which
\nCompany or any of its Subsidiaries is a party or by which it is bound; (vi) any
\namendment or change to the Certificate of Incorporation or Bylaws of Company;
\n(vii) any material increase in or modification of the compensation or benefits
\npayable or to become payable by Company or any of its Subsidiaries to any of
\ntheir respective directors, officers or employees, other than (in the case of
\nnon-executive officer employees) in the ordinary course of business consistent
\nwith past practice; (viii) any material change in the interest rate risk
\nmanagement and hedging policies, procedures or practices of Company or any of
\nits Subsidiaries, or any failure to comply with such policies, procedures and
\npractices; or (ix) any negotiation or agreement by Company or any of its
\nSubsidiaries to do any of the things described in the preceding clauses (i)
\nthrough (vii) (other than negotiations with Parent and its representatives
\nregarding the transactions contemplated by this Agreement).<\/p>\n
10<\/p>\n
2.6 Absence of Undisclosed Liabilities. None of Company or any of its
\nSubsidiaries has any material obligations or liabilities of any nature (matured
\nor unmatured, fixed or contingent) other than (i) those set forth or adequately
\nprovided for in the consolidated balance sheet (and the related notes thereto)
\nof Company and its Subsidiaries included in Company’s Annual Report on Form 10-
\nK\/A for the fiscal year ended December 31, 1998 (the “Company Balance Sheet”),
\n(ii) those incurred in the ordinary course of business consistent with past
\npractice since the Company Balance Sheet Date and which have not had and are not
\nreasonably likely to have a Material Adverse Effect on Company, and (iii) those
\nincurred in connection with the execution of this Agreement.<\/p>\n
2.7 Litigation. There is no private or governmental action, suit,
\n ———-
\nproceeding, claim, arbitration, inquiry, examination, inspection or, to the
\nknowledge of Company or any of its Subsidiaries, investigation pending by or
\nbefore any Governmental Entity, agency, court or tribunal, foreign or domestic
\nor, to the knowledge of Company or any of its Subsidiaries, threatened against
\nCompany or any of its Subsidiaries or any of their respective properties or any
\nof their respective officers or directors (in their capacities as such) that,
\nindividually or in the aggregate, could reasonably be expected to prevent,
\nenjoin, alter or materially delay any of the transactions contemplated hereby or
\ncould reasonably be expected to have a Material Adverse Effect on Company. There
\nis no judgment, decree or order against Company or any of its Subsidiaries, or,
\nto the knowledge of Company and its Subsidiaries, any of their respective
\ndirectors or officers (in their capacities as such), that, individually or in
\nthe aggregate, could reasonably be expected to prevent, enjoin, alter or
\nmaterially delay any of the transactions contemplated by this Agreement or could
\nreasonably be expected to have a Material Adverse Effect on Company.<\/p>\n
2.8 Restrictions on Business Activities. There is no agreement,
\n ———————————–
\njudgment, injunction, order or decree binding upon Company or any of its
\nSubsidiaries which has or could reasonably be expected to have the effect of
\nprohibiting or materially impairing any current or currently proposed business
\npractice of Company or any of its Subsidiaries, any acquisition of property by
\nCompany or any of its Subsidiaries or the conduct of business by Company or any
\nof its Subsidiaries as currently conducted or as described in any Company SEC
\nDocument as proposed to be conducted by Company or any of its Subsidiaries.<\/p>\n
2.9 Compliance With Laws. Each of Company and its Subsidiaries has
\n ——————–
\ncomplied in all material respects with all applicable federal, state, local,
\nself-regulatory and foreign laws, statutes, ordinances, rules and regulations,
\nand is not in violation in any material respect of, and has not received any
\nnotices of material violation with respect to, its respective certificate or
\narticles of incorporation or bylaws or other charter or organizational
\ndocuments, or any federal, state, local, self-regulatory or foreign statute,
\nlaw, ordinance, rule or regulation applicable to the conduct of its business or
\nthe ownership or operation of its business.<\/p>\n
2.10 Title to Property. Company and its Subsidiaries have good, valid
\n —————–
\nand marketable title to all of their respective properties, interests in
\nproperties and assets, real and personal, reflected in the Company Balance Sheet
\nor acquired after the Company Balance Sheet Date (except properties, interests
\nin properties and assets sold or otherwise disposed of since the Company Balance
\nSheet Date in the ordinary course of business and except for any real property
\nthat Company or any of its Subsidiaries has acquired in the ordinary course of
\nbusiness by <\/p>\n
11<\/p>\n
foreclosure or by deed in lieu thereof), or in the case of leased properties and
\nassets, valid leasehold interests in the leased properties and assets, free and
\nclear of all mortgages, liens, pledges, charges or encumbrances of any kind or
\ncharacter, except (i) the lien of current taxes not yet due and payable, (ii)
\nrecorded easements, covenants, conditions and other restrictions of record as do
\nnot and will not materially detract from or interfere with the use of the
\nproperties subject thereto or affected thereby, or otherwise materially impair
\nbusiness operations involving such properties and (iii) liens securing debt
\nwhich is reflected on the Company Balance Sheet. There are no defaults (or
\nevents that, with notice or lapse of time or both, would constitute defaults) by
\nCompany or its Subsidiaries with respect to the liens securing debt which is
\nreflected on the Company Balance Sheet. With respect to any properties or assets
\nleased by Company or any of its Subsidiaries, there are no defaults (or events
\nthat, with notice or lapse of time or both, would constitute defaults) by
\nCompany or its Subsidiaries, or to the knowledge of Company, any other party to
\nthe leases of such properties or assets. There are no outstanding options,
\nrights of first refusal or similar rights to purchase the properties and\/or
\nassets owned by Company or any of its Subsidiaries. All properties used in the
\noperations of Company and its Subsidiaries are reflected in the Company Balance
\nSheet to the extent generally accepted accounting principles require the same to
\nbe reflected. Schedule 2.10 identifies each parcel of real property owned or
\n ————-
\nleased by Company or any of its Subsidiaries.<\/p>\n
2.11 Intellectual Property.
\n ———————<\/p>\n
(a) Company and its Subsidiaries own, or are licensed or otherwise
\npossess legally enforceable and unencumbered rights to use all patents,
\ntrademarks, trade names, service marks, domain names, database rights,
\ncopyrights, and any applications therefor, maskworks, net lists, technology,
\nknow-how, trade secrets, inventory, ideas, algorithms, processes, computer
\nsoftware programs or applications (in both source code and object code form),
\nand tangible or intangible proprietary information or material (“Intellectual
\nProperty”) that are used or currently proposed to be used by Company and its
\nSubsidiaries in their respective businesses as currently conducted or as
\ncurrently proposed to be conducted by Company and its Subsidiaries. Company has
\nnot (i) licensed any of its Intellectual Property in source code form to any
\nparty or (ii) entered into any exclusive agreements relating to its Intellectual
\nProperty.<\/p>\n
(b) Schedule 2.11 lists (i) all patents and patent applications and
\n ————-
\nall registered and unregistered trademarks, trade names and service marks,
\nregistered and unregistered copyrights, and maskworks included in the
\nIntellectual Property, including the jurisdictions in which each such
\nIntellectual Property right has been issued or registered or in which any
\napplication for such issuance and registration has been filed, (ii) all material
\nlicenses, sublicenses and other agreements as to which Company is a party and
\npursuant to which any person is authorized to use any Intellectual Property
\n(excluding commercially available, off-the-shelf software), and (iii) all
\nmaterial licenses, sublicenses and other agreements as to which Company is a
\nparty and pursuant to which Company is authorized to use any third-party
\npatents, trademarks or copyrights, including software (“Third Party Intellectual
\nProperty Rights”), which are incorporated in, are, or form a part of any Company
\nproduct or service (excluding commercially available, off-the-shelf software).
\nNo royalties or other continuing payment obligations are due in respect of Third
\nParty Intellectual Property Rights.<\/p>\n
12<\/p>\n
(c) To the knowledge of Company, there is no unauthorized use,
\ndisclosure, infringement or misappropriation of any material Intellectual
\nProperty rights of Company or any of its Subsidiaries, or any Intellectual
\nProperty right of any third party to the extent licensed by or through Company
\nor any of its Subsidiaries, by any third party, including any employee or former
\nemployee of Company or any of its Subsidiaries. Neither Company nor any of its
\nSubsidiaries has entered into any agreement to indemnify any other person
\nagainst any charge of infringement of any Intellectual Property .<\/p>\n
(d) None of Company or its Subsidiaries is, nor will any of them be
\nas a result of the execution and delivery of this Agreement or the performance
\nof its obligations under this Agreement, in material breach of any license,
\nsublicense or other agreement relating to any Intellectual Property or Third
\nParty Intellectual Property Rights.<\/p>\n
(e) All patents, registered trademarks, service marks and
\ncopyrights held by Company and its Subsidiaries are valid and subsisting.
\nNeither Company nor any of its Subsidiaries (i) has been sued in any suit,
\naction or proceeding which involves a claim of infringement of any patents,
\ntrademarks, service marks, copyrights or violation of any trade secret or other
\nproprietary right of any third party or (ii) has brought any action, suit or
\nproceeding for infringement of Intellectual Property or breach of any license or
\nagreement involving Intellectual Property against any third party. The
\nmarketing, licensing or sale of the products or services of Company and its
\nSubsidiaries does not infringe any patent, trademark, service mark, copyright,
\ntrade secret or other proprietary right of any third party.<\/p>\n
(f) Company has secured valid written assignments from all
\nconsultants and employees who contributed to the creation or development of
\nIntellectual Property of the rights to such contributions that Company does not
\nalready own by operation of law.<\/p>\n
(g) Company has taken reasonable steps consistent with prevailing
\nindustry practice to protect and preserve the confidentiality of all
\nIntellectual Property not otherwise protected by patents, patent applications or
\ncopyright (“Confidential Information”). All use, disclosure or appropriation of
\nConfidential Information owned by Company or any of its Subsidiaries by or to a
\nthird party has been pursuant to the terms of a written agreement between
\nCompany and such third party. All use, disclosure or appropriation by Company
\nand its Subsidiaries of Confidential Information not owned by Company or any
\nsuch Subsidiary has been pursuant to the terms of a written agreement between
\nCompany and the owner of such Confidential Information, or is otherwise lawful.<\/p>\n
2.12 Environmental Matters.
\n ——————— <\/p>\n
(a) The following terms shall be defined as follows:<\/p>\n
(i) “Environmental and Safety Laws” shall mean any federal,
\nstate or local laws, ordinances, codes, regulations, rules, policies and orders
\nthat are intended to assure the protection of the environment, or that classify,
\nregulate, call for the remediation of, require reporting with respect to, or
\nlist or define air, water, groundwater, solid waste, hazardous or toxic<\/p>\n
13<\/p>\n
substances, materials, wastes, pollutants or contaminants, or which are intended
\nto assure the safety of employees, workers or other persons, including the
\npublic.<\/p>\n
(ii) “Hazardous Materials” shall mean any toxic or hazardous
\nsubstance, material or waste or any pollutant or contaminant, or infectious or
\nradioactive substance or material, including without limitation, those
\nsubstances, materials and wastes defined in or regulated under any Environmental
\nand Safety Laws .<\/p>\n
(iii) “Property” shall mean all real property leased or owned by
\nCompany or its Subsidiaries either currently or in the past.<\/p>\n
(iv) “Facilities” shall mean all buildings and improvements on
\nthe Property of Company or its Subsidiaries.<\/p>\n
(b) Company represents and warrants as follows, in each case
\n(except clauses (iii) and (iv) below) to its knowledge or the knowledge of any
\nof its Subsidiaries: (i) no methylene chloride or asbestos is contained in or
\nhas been used at or released from the Facilities; (ii) all Hazardous Materials
\nhave been disposed of in accordance with all Environmental and Safety Laws;
\n(iii) Company and its Subsidiaries have received no notice (verbal or written)
\nof any noncompliance of the Facilities or its past or present operations with
\nEnvironmental and Safety Laws; (iv) no notices, administrative actions or suits
\nare pending or, to the knowledge of Company or any of its Subsidiaries,
\nthreatened relating to a violation of any Environmental and Safety Laws; (v)
\nneither Company nor any of its Subsidiaries is liable as a responsible party
\nunder the federal Comprehensive Environmental Response, Compensation and
\nLiability Act (CERCLA), or state analog statute, arising out of events occurring
\nprior to the Effective Time; (vi) there have not been in the past, and are not
\nnow, any Hazardous Materials on, under or migrating to or from the Facilities or
\nany Property; (vii) there have not been in the past, and are not now, any
\nunderground tanks or underground improvements at, on or under any Property
\nincluding without limitation, treatment or storage tanks, sumps, or water, gas
\nor oil wells; (viii) there are no polychlorinated biphenyls (PCBs) deposited,
\nstored, disposed of or located on the Property or Facilities or any equipment on
\nthe Property containing PCBs at levels in excess of 50 parts per million; (ix)
\nthere is no formaldehyde on the Property or in the Facilities, nor any
\ninsulating material containing urea formaldehyde in the Facilities; (x) the
\nFacilities and Company’s and its Subsidiaries’ uses and activities therein have
\nat all times complied with all Environmental and Safety Laws; and (xi) Company
\nand its Subsidiaries have all the permits and licenses required to be issued
\nunder Environmental and Safety Laws and are in full compliance with the terms
\nand conditions of those permits.<\/p>\n
2.13 Taxes. Company and each of its Subsidiaries, and any
\n —–
\nconsolidated, combined, unitary or aggregate group for Tax (as defined below)
\npurposes of which Company or any of its Subsidiaries is or has been a member
\nhave properly completed and timely filed all Tax Returns (as defined below)
\nrequired to be filed by them and have paid all Taxes shown thereon to be due,
\nother than any Taxes for which adequate reserves under generally accepted
\naccounting principles have been recorded in the Financial Statements. Company
\nhas provided adequate accruals in accordance with generally accepted accounting
\nprinciples in its financial statements for any Taxes that have not been paid,
\nwhether or not shown as being due on any Tax Returns. Company has no material
\nliability for unpaid Taxes accruing after the date of its latest Financial<\/p>\n
14<\/p>\n
Statements other than Taxes arising in the ordinary course of its business.
\nExcept as disclosed in the SEC Documents, there is (i) no material claim for
\nTaxes that is a lien against the property of Company or any of its Subsidiaries
\nor is being asserted against Company or any of its Subsidiaries other than liens
\nfor Taxes not yet due and payable, (ii) Company has not been notified and has no
\nother knowledge that any audit of any Tax Return of Company or any of its
\nSubsidiaries is being conducted by a Tax authority, (iii) no extension of the
\nstatute of limitations on the assessment of any Taxes granted by Company or any
\nof its Subsidiaries and currently in effect, and (iv) there is no agreement,
\ncontract or arrangement to which Company or any of its Subsidiaries is a party
\nthat may result in the payment of any amount that would not be deductible by
\nreason of Sections 280G or 404 of the Code. Company has not been and will not be
\nrequired to include any material adjustment in Taxable income for any Tax period
\n(or portion thereof) pursuant to Section 481 or 263A of the Code or any
\ncomparable provision under state or foreign Tax la ws as a result of
\ntransactions, events or accounting methods employed prior to the Merger (based
\non facts known as of the date of this Agreement). Neither Company nor any of its
\nSubsidiaries has filed or will file any consent to have the provisions of
\nparagraph 341(f)(2) of the Code (or comparable provisions of any state Tax laws)
\napply to Company or any of its Subsidiaries. Neither Company nor any of its
\nSubsidiaries is a party to any currently effective Tax sharing or Tax allocation
\nagreement. Neither Company nor any of its Subsidiaries owes any amount under any
\nTax sharing or Tax allocation agreement. Neither Company nor any of its
\nSubsidiaries has filed any disclosures under Section 6662 or comparable
\nprovisions of state, local or foreign law to prevent the imposition of penalties
\nwith respect to any Tax reporting position taken on any Tax Return. Neither
\nCompany nor any of its Subsidiaries has within the last six (6) years been a
\nmember of a consolidated, combined or unitary group of which Company was not the
\nultimate parent corporation. Company and each of its Subsidiaries have in their
\npossession receipts for any Taxes paid to foreign Tax authorities. For purposes
\nof this Agreement, the following terms have the following meanings: “Tax” (and,
\nwith correlative meaning, “Taxes” and “Taxable”) means (i) any net income,
\nalternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
\nvalorem, transfer, franchise, profits, license, withholding, payroll,
\nemployment, excise, severance, stamp, occupation, premium, property,
\nenvironmental or windfall profit tax, custom, duty or other tax, governmental
\nfee or other like assessment or charge of any kind whatsoever, together with any
\ninterest or any penalty, addition to tax or additional amount imposed by any
\nGovernmental Entity (a “Tax authority”) responsible for the imposition of any
\nsuch tax (domestic or foreign), (ii) any liability for the payment of any
\namounts of the type described in (i) as a result of being a member of an
\naffiliated, consolidated, combined or unitary group for any Taxable period and
\n(iii) any liability for the payment of any amounts of the type described in (i)
\nor (ii) as a result of any express or implied obligation to indemnify any other
\nperson. As used herein, “Tax Return” shall mean any return, statement, report or
\nform (including, without limitation, estimated Tax returns and reports,
\nwithholding Tax returns and reports and information reports and returns)
\nrequired to be filed with respect to Taxes.<\/p>\n
2.14 Employee Benefit Plans.
\n ———————–<\/p>\n
(a) Schedule 2.14 lists, with respect to Company, any Subsidiary of
\n ————-
\nCompany and any trade or business (whether or not incorporated) which is treated
\nas a single employer with Company (an “ERISA Affiliate”) within the meaning of
\nSection 414(b), (c), (m) or (o) of the Code, (i) all material employee benefit
\nplans (as defined in Section 3(3) of the <\/p>\n
15<\/p>\n
Employee Retirement Income Security Act of 1974, as amended (“ERISA”)),
\nmaintained by Company or any ERISA Affiliate, (ii) any other material
\nsupplemental retirement, severance, sabbatical, employee relocation, cafeteria
\nbenefit (Code Section 125) or dependent care (Code Section 129), life insurance
\nor accident insurance plans, programs or arrangements maintained by Company or
\nany ERISA Affiliate, (iii) all other material bonus, pension, profit sharing,
\nsavings, deferred compensation or incentive plans, programs or arrangements
\nmaintained by Company or any ERISA Affiliate, (iv) other material fringe or
\nemployee benefit plans, programs or arrangements maintained by Company or any
\nERISA Affiliate that apply to senior management of Company and that do not
\ngenerally apply to all employees, and (v) any current or former employment or
\nexecutive compensation or severance agreements, written or otherwise, maintained
\nby Company or any ERISA Affiliate as to which unsatisfied obligations of Company
\nof greater than fifty thousand dollars ($50,000) remain for the benefit of, or
\nrelating to, any present or former employee, consultant or director of Company
\n(together, the “Company Employee Plans”).<\/p>\n
(b) Company has made available to Parent a copy of each of the
\nCompany Employee Plans and related plan documents (including trust documents,
\ninsurance policies or contracts, employee booklets, summary plan descriptions
\nand other authorizing documents, and any material employee communications
\nrelating thereto, if applicable) and has, with respect to each Company Employee
\nPlan which is subject to ERISA reporting requirements, provided copies of the
\nForm 5500 reports filed for the last three plan years. Any Company Employee Plan
\nintended to be qualified under Section 401(a) of the Code has either obtained
\nfrom the Internal Revenue Service a favorable determination letter as to its
\nqualified status under the Code, including all amendments to the Code effected
\nby the Tax Reform Act of 1986 and subsequent legislation, or has applied to the
\nInternal Revenue Service for such a determination letter prior to the expiration
\nof the requisite period under applicable Treasury Regulations or Internal
\nRevenue Service pronouncements in which to apply for such determination letter
\nand to make any amendments necessary to obtain a favorable determination.
\nCompany has also furnished Parent with a copy of the most recent Internal
\nRevenue Service determination letter issued with respect to each such Company
\nEmployee Plan, and nothing has occurred since the issuance of each such letter
\nwhich could reasonably be expected to cause the loss of the tax-qualified status
\nof any Company Employee Plan subject to Code Section 401(a). Company has also
\nfurnished or made available to Parent copies of all registration statements and
\nprospectuses filed with the SEC, OTS or other governmental authority or
\ndistributed to employees or their beneficiaries in connection with each Company
\nEmployee Plan.<\/p>\n
(c) (i) Except as required by law, none of the Company Employee
\nPlans promises or provides retiree medical or other retiree welfare benefits to
\nany person, other than a benefit that could be terminated without further
\nliability; (ii) there has been no “prohibited transaction,” as such term is
\ndefined in Section 406 of ERISA and Section 4975 of the Code, with respect to
\nany Company Employee Plan, which could reasonably be expected to have, in the
\naggregate, a Material Adverse Effect; (iii) each Company Employee Plan has been
\nadministered in accordance with its terms and in compliance with the
\nrequirements prescribed by any and all statutes, rules and regulations
\n(including ERISA and the Code), except as would not have, in the aggregate, a
\nMaterial Adverse Effect, and Company and each Subsidiary or ERISA Affiliate have
\nperformed all obligations required to be performed by them under, and are not in
\nany material respect in default under or violation of, any of the Company
\nEmployee Plans; (iv) <\/p>\n
16<\/p>\n
neither Company nor any ERISA Affiliate is subject to any material liability or
\npenalty under Sections 4976 through 4980 of the Code or Title I of ERISA with
\nrespect to any of the Company Employee Plans; (v) all material contributions
\nrequired to be made by Company or any Subsidiary or ERISA Affiliate to any
\nCompany Employee Plan have been made on or before their due dates and the
\namounts accrued in the Company Financial Statements for contributions to each
\nCompany Employee Plan for the current plan years have been determined in
\naccordance with generally accepted accounting principles consistently applied;
\n(vi) with respect to each Company Employee Plan, no “reportable event” within
\nthe meaning of Section 4043 of ERISA (excluding any such event for which the
\nthirty (30) day notice requirement has been waived under the regulations to
\nSection 4043 of ERISA) nor any event described in Section 4062, 4063 or 4041 of
\nERISA has occurred; and (vii) each Company Employee Plan can be amended,
\nterminated or otherwise discontinued after the Effective Time in accordance with
\nits terms, without liability to Parent or Company in excess of the amount
\naccrued with respect to such plan on the Company Financial Statements (other
\nthan ordinary administrative expenses typically incurred in a termination
\nevent). With respect to each Company Employee Plan subject to ERISA as either an
\nemployee pension plan within the meaning of Section 3(2) of ERISA or an employee
\nwelfare benefit plan within the meaning of Section 3(1) of ERISA, Company has
\nprepared in good faith and timely filed all requisite governmental reports
\n(which were true and correct in all material respects as of the date filed) and
\nhas properly and timely filed and distributed or posted all material notices and
\nreports to employees required to be filed, distributed or posted with respect to
\neach such Company Employee Plan. No suit, administrative proceeding, action or
\nother litigation has been brought, or to the best knowledge of Company is
\nthreatened, against or with respect to any such Company Employee Plan, including
\nany audit or examination by the IRS or United States Department of Labor. No
\npayment or benefit which will or may be made by Company to any employee will be
\ncharacterized as an “excess parachute payment” within the meaning of Section
\n280G(b)(1) of the Code. Neither Company nor any ERISA Affiliate is a party to,
\nor has ever been a party to, or has made any contribution to or otherwise
\nincurred any obligation under, any “multiemployer plan” as defined in Section
\n3(37) of ERISA. Neither Company nor any Company Subsidiary or ERISA Affiliate
\ncurrently maintains, sponsors, participates in or contributes to, nor has it
\nwithin the last seven (7) years maintained, established, sponsored, participated
\nin, or contributed to, any pension plan (within the meaning of Section 3(2) of
\nERISA) which is subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of
\nERISA or Section 412 of the Code.<\/p>\n
(d) With respect to each Company Employee Plan, Company and each of
\nits United States Subsidiaries have complied (except to the extent that any such
\nfailure to comply would not, in the aggregate, have a Material Adverse Effect on
\nCompany or any of its Subsidiaries) with (i) the applicable health care
\ncontinuation and notice provisions of Section 602 of ERISA and Section 4980B of
\nthe Code (“COBRA”) and the regulations thereunder, (ii) the applicable
\nrequirements of the Family Medical and Leave Act of 1993 and the regulations
\nthereunder, and (iii) the applicable requirements of the Health Insurance
\nPortability and Accountability Act of 1996.<\/p>\n
(e) The consummation of the transactions contemplated by this
\nAgreement will not (i) entitle any current or former employee or other service
\nprovider of Company, any Company Subsidiary or any other ERISA Affiliate to
\nseverance benefits or any other payment, except as expressly provided in this
\nAgreement, or (ii) accelerate the time of <\/p>\n
17<\/p>\n
payment or vesting, or increase the amount of compensation due any such employee
\nor service provider.<\/p>\n
(f) There has been no amendment to, or written interpretation or
\nannouncement (whether or not written) by Company or any ERISA Affiliate relating
\nto, or change in participation or coverage under, any Company Employee Plan
\nwhich would materially increase the expense of maintaining such Plan above the
\nlevel of expense incurred with respect to that Plan for the most recent fiscal
\nyear included in Company’s financial statements.<\/p>\n
(g) No employee of Company or any of its Subsidiaries has elected
\nto defer (i) the receipt of any cash payable to such employee or (ii) the
\nissuance of any securities of Company to such employee, in either case under the
\nCompany Stock Option Plans or the Company Options.<\/p>\n
2.15 Employee Matters.
\n —————- <\/p>\n
(a) Neither the execution and delivery of this Agreement nor the
\nconsummation of the transactions contemplated hereby or thereby will (i) result
\nin any payment (including, without limitation, severance, unemployment
\ncompensation, golden parachute, bonus or otherwise) becoming due to any director
\nor employee of Company or any of its Subsidiaries, (ii) materially increase any
\nbenefits otherwise payable by Company or (iii) result in the acceleration of the
\ntime of payment or vesting of any such benefits.<\/p>\n
(b) Company and each of its Subsidiaries are in compliance in all
\nmaterial respects with all currently applicable laws and regulations respecting
\nemployment, discrimination in employment, terms and conditions of employment,
\nwages, hours and occupational safety and health and employment practices, and is
\nnot engaged in any unfair labor practice. Company and each of its Subsidiaries
\nhas withheld all material amounts required by law or by agreement to be withheld
\nfrom the wages, salaries, and other payments to employees, and is not liable for
\nany material arrears of wages or any material taxes or any material penalty for
\nfailure to comply with any of the foregoing. Company is not liable for any
\nmaterial payment to any trust or other fund or to any governmental or
\nadministrative authority, with respect to unemployment compensation benefits,
\nsocial security or other benefits or obligations for employees (other than
\nroutine payments to be made in the normal course of business and consistent with
\npast practice). To the knowledge of Company and its Subsidiaries, there are no
\npending claims against Company or any of its Subsidiaries under any workers
\ncompensation plan or policy or for long term disability other than routine
\nclaims for benefits. There are no controversies pending or, to the knowledge of
\nCompany or any of its Subsidiaries, threatened between Company or any of its
\nSubsidiaries, on the one hand, and any of their respective employees, on the
\nother hand, which controversies have or could reasonably be expected to result
\nin an action, suit, proceeding, claim, arbitration or investigation before any
\nagency, court or tribunal, foreign or domestic. Neither Company nor any of its
\nSubsidiaries is a party to any collective bargaining agreement or other labor
\nunion contract; nor does Company know of any activities or proceedings of any
\nlabor union to organize any such employees. To the best of Company’s knowledge,
\nno employees of Company are in violation in any material respect of any term of
\nany employment contract, patent disclosure agreement, noncompetition agreement,
\nor any restrictive covenant to a former employer relating to the right of any
\nsuch employee to be <\/p>\n
18<\/p>\n
employed by Company because of the nature of the business conduced or presently
\nproposed to be conducted by Company or to the use of trade secrets or
\nproprietary information of others. Except as disclosed in the Company SEC
\nDocuments filed prior to the date of this Agreement, Company does not have any
\nemployment agreement with any of its officers or other employees. As of the date
\nhereof, no employees (other than clerical or solely administrative employees) of
\nCompany have given notice to Company, nor is Company otherwise aware, that any
\nsuch employee intends to terminate his or her employment with Company.<\/p>\n
(c) All employees of Company or any of its Subsidiaries engaged in
\nthe business of, acting as, or performing the duties of a registered
\nrepresentative, registered principal or similar registered personnel or agent
\n(under the definition of such terms in the rules of the National Association of
\nSecurities Dealers, Inc. (the “NASD”)), any other SRO or any state which has
\njurisdiction over Company or any of its Subsidiaries (if applicable) are
\nproperly registered to act in the capacity of a registered representative,
\nregistered principal or similar registered personnel or agent under the rules of
\nthe NASD, any other SRO or any state which has jurisdiction over Company or any
\nof its Subsidiaries (if applicable).<\/p>\n
2.16 Interested Party Transactions. Except as disclosed in the Company
\n —————————–
\nSEC Documents filed prior to the date of this Agreement, there have been no
\ntransactions of the type required to be disclosed pursuant to Items 402 and 404
\nof Regulation S-K under the Securities Act and the Exchange Act.<\/p>\n
2.17 Insurance. Company and each of its Subsidiaries have policies of
\n ———
\ninsurance and bonds of the type and in amounts customarily carried by persons
\nconducting businesses or owning assets similar to those of Company and its
\nSubsidiaries. There is no material claim pending under any of such policies or
\nbonds as to which coverage has been questioned, denied or disputed by the
\nunderwriters of such policies or bonds. All premiums due and payable under all
\nsuch policies and bonds have been paid and Company and its Subsidiaries are
\notherwise in compliance in all material respects with the terms of such policies
\nand bonds. Company has no knowledge of any threatened termination of, or
\nmaterial premium increase with respect to, any of such policies.<\/p>\n
2.18 Regulatory Matters.
\n —————— <\/p>\n
(a) Company and each of its Subsidiaries have obtained all
\nauthorizations, consents, licenses, permits (temporary or otherwise), orders,
\napprovals, waivers, franchises and other rights (“Governmental Permits”) of
\nGovernmental Entities (i) pursuant to which Company or any of its Subsidiaries
\ncurrently operates or holds any interest in any of its properties or (ii) that
\nis required for the operation of Company’s or any of its Subsidiaries’ business
\nor the holding of any such interest, and all of such Governmental Permits are in
\nfull force and effect, except where the failure to obtain or have any such
\nGovernmental Permits could not reasonably be expected to have a Material Adverse
\nEffect on Company. There are no circumstances of which Company is aware which
\nindicate that any such Governmental Permits may be revoked or not renewed or
\nwithdrawn or amended, in whole or in part (except in each case to an immaterial
\nor beneficial extent). Schedule 2.18(a) sets forth a true and complete list of
\n —————-
\nall Governmental Permits held by Company or any of its Subsidiaries.<\/p>\n
19<\/p>\n
(b) Company and its Subsidiaries have complied, and are in
\ncompliance, in all material respects with all applicable federal, state, local
\nand self-regulatory laws, statutes, licensing requirements, rules, and
\nregulations. Each of Company and its Subsidiaries has, and is in compliance in
\nall material respects with, all Governmental Permits necessary to conduct their
\nbusinesses, including, but not limited to, Governmental Permits of the OTS, the
\nFDIC, the SEC, the NASD, the NASD Regulation, Inc., the Nasdaq Stock Market, or
\nany state or foreign securities or prosecutorial authority. Neither Company nor
\nany of its Subsidiaries has received any notice from any Governmental Entity (i)
\nasserting that Company or any of its Subsidiaries is not in compliance with any
\nof the statutes, regulations, or ordinances that such Governmental Entity
\nenforces or (ii) restricting or disqualifying their activities (except for
\nrestrictions generally imposed by law, rule, regulation or administrative policy
\non banking organizations generally). After giving effect to the Merger, all
\nGovernmental Permits of the Surviving Corporation and its Subsidiaries shall
\ncontinue to be valid and in full force and effect to the same extent as they
\npresently are for Company and its Subsidiaries, except for any conditions or
\nrestrictions imposed on Parent, Company or a Subsidiary in approvals issued by a
\nGovernmental Entity in connection with the Merger. There is no order issued,
\ninvestigation or proceeding pending or (to Company’s knowledge) threatened, or
\nnotice served, with respect to any violation of any law, statute, ordinance,
\norder, writ, decree, rule, or regulation issued by any Governmental Entity
\napplicable to either Company or any of its Subsidiaries or any of their
\nrespective directors, officers or employees.<\/p>\n
(c) Neither Company nor any of its Subsidiaries is a party or
\nsubject to, any agreement, consent decree or order, or other understanding or
\narrangement with, or any directive of any Governmental Entity which imposes any
\nmaterial restrictions on, or otherwise affects in any material respect, the
\nconduct of the business of Company or any of its Subsidiaries. Schedule 2.18(c)
\n —————-
\nsets forth all compliance or enforcement proceedings or, to the knowledge of
\nCompany, investigations or inquiries convened, and all fines, sanctions and
\nother measures imposed by any Governmental Entity or body against, concerning or
\nrelating to Company, any of its Subsidiaries, or any of their current respective
\ndirectors, officers or employees.<\/p>\n
(d) Each of Company and its Subsidiaries, to the extent required to
\nso register (the “Broker-Dealers”), is duly registered as a broker-dealer with
\nthe SEC and under all applicable state, federal, foreign or related laws and, to
\nthe extent required, is a member of the NASD and a member of SIPC. None of the
\nBroker-Dealers has exceeded in any material respect the business activities
\nenumerated in any membership agreements or other limitations imposed in
\nconnection with its registrations, forms (including Form BDs and reports filed
\nwith the NASD or any other Governmental Entity. The information contained in
\nsuch registrations, forms and reports was true and complete in all material
\nrespects as of the date of the filing thereof with the SEC. Each such
\nregistration is in full force and effect on the date hereof.<\/p>\n
(e) Each of Company and its Subsidiaries, to the extent required to
\nso register (the “Advisers”), is duly registered as an investment adviser under
\nthe Investment Advisers Act of 1940, as amended (the “Advisers Act”), and under
\nall state, federal and foreign investment adviser or related laws pursuant to
\nwhich it is required to be so registered. The information contained in forms and
\nreports filed by any Advisors (including Form ADVs) was or will be true and
\ncomplete in all material respects as of the time of the filing thereof with the
\nSEC. Each such registration is in full force and effect on the date hereof.<\/p>\n
20<\/p>\n
2.19 Material Contracts.
\n —————— <\/p>\n
(a) Except for the contracts described in or filed as an exhibit to
\nthe Company SEC Documents, neither Company nor any of its Subsidiaries is a
\nparty to or bound by any of the following (together with the foregoing contracts
\ndescribed in or filed as an exhibit to the Company SEC Documents, collectively,
\nthe “Material Contracts”):<\/p>\n
(i) any contract of participation with any other bank in any
\nloan in excess of $500,000 or any sales of assets of Company or its Subsidiaries
\nwith recourse of any kind to Company or any of its Subsidiaries except the sale
\nof mortgage loans, servicing rights, repurchase or reverse repurchase
\nagreements, securities or other financial transactions in the ordinary course of
\nbusiness;<\/p>\n
(ii) any agreement providing for the sale or servicing of any
\nloan or other asset which constitutes a “recourse arrangement” with respect to
\ncredit quality under applicable regulation or policy promulgated by a
\nGovernmental Entity (except for agreements for the sale of guaranteed portions
\nof loans guaranteed in part by the U.S. Small Business Administration and
\nrelated servicing agreements);<\/p>\n
(iii) any contract or agreement for the acquisition of the
\nsecurities or any material portion of the assets of any other person or entity
\nin each case outside the ordinary course of business;<\/p>\n
(iv) any contract or agreement for the purchase of materials,
\nsupplies, equipment or services involving in the case of any such contract or
\nagreement more than one million dollars ($1,000,000) over the life of the
\ncontract;<\/p>\n
(v) any contract, agreement or instrument that expires or
\nmay be renewed at the option of any person other than Company or its
\nSubsidiaries so as to expire more than one year after the date of this Agreement
\nthat involve payment of more than one million dollars ($1,000,000) per year;<\/p>\n
(vi) any material trust indenture, mortgage, promissory note,
\n loan agreement or other contract, agreement or instrument for the borrowing
\n of money, any currency exchange, commodities or other hedging arrangement
\n (other than deposit contracts, Federal Home Loan Bank advances and other
\n agreements entered into in the ordinary course of Company’s business) or
\n any leasing transaction of the type required to be capitalized in
\n accordance with generally accepted accounting principles;<\/p>\n
(vii) any contract or agreement for capital expenditures in
\nexcess of one million dollars ($1,000,000) in the aggregate;<\/p>\n
(viii) any contract or agreement limiting the freedom of
\nCompany or any of its Subsidiaries to engage in any line of business or to
\ncompete with any other Person as that term is defined in the Exchange Act, or
\nunder the constitution, laws, rules or regulations of any SRO, or any
\nconfidentiality, secrecy or non-disclosure contract or agreement;<\/p>\n
21<\/p>\n
(ix) any contract or agreement involving payments during any
\ntwelve-month period of one million dollars ($1,000,000) or more, pursuant to
\nwhich Company or any of its Subsidiaries is a lessor of any machinery,
\nequipment, motor vehicles, office furniture, fixtures or other personal
\nproperty;<\/p>\n
(x) any contract or agreement with any person with whom
\nCompany or any of its Subsidiaries does not deal at arm’s length within the
\nmeaning of the Code;<\/p>\n
(xi) any agreement of guarantee, support, indemnification,
\nassumption or endorsement of, or any similar commitment with respect to, the
\nobligations, liabilities (whether accrued, absolute, contingent or otherwise) or
\nindebtedness of any other Person other than those entered into in the ordinary
\ncourse of operating a banking business; or<\/p>\n
(xii) any material agreement which would be terminable other
\nthan by Company or its Subsidiaries as a result of the consummation of the
\ntransactions contemplated by this Agreement.<\/p>\n
(b) Each of Company and its Subsidiaries has performed all of the
\nmaterial obligations required to be performed by it and is entitled to all
\naccrued benefits under, and is not alleged to be in default in respect of, each
\nMaterial Contract to which it is a party or by which it is bound. Each of the
\nMaterial Contracts is in full force and effect, unamended, and there exists no
\ndefault or event of default or event, occurrence, condition or act, with respect
\nto Company or any of its Subsidiaries or, to Company’s knowledge, with respect
\nto any other contracting party, which, with the giving of notice, the lapse of
\nthe time or the happening of any other event or condition, would become a
\ndefault or event of default under any Material Contract. True, correct and
\ncomplete copies of all Material Contracts have been made available to Parent or
\nfiled as an exhibit to the Company SEC Documents.<\/p>\n
2.20 Banking Business.
\n —————- <\/p>\n
(a) Schedule 2.20(a) lists all exchange traded on over-the-counter
\n —————-
\nequity, interest rate, foreign exchange or other swap, forward, future, option,
\ncap, floor or collar or any other contract that is not included on the balance
\nsheet and is a derivative contract (including various combinations thereof) to
\nwhich Company or any of its Subsidiaries is a party and has agreed to enter.
\nFurther, with respect to Company, Schedule 2.20(a) lists all securities owned by
\n —————-
\nCompany and its Subsidiaries that are referred to as “structured rates,” “high
\nrisk mortgage derivatives,” “capped floating rate notes,” or “capped floating
\nrate mortgage derivatives,” or similar securities. All swaps, caps, floors,
\noption agreements, futures and forward contracts and other similar risk
\nmanagement arrangements, whether entered into for Company’s own account, or for
\nthe account of one or more of Company’s Subsidiaries or their customers, were
\nentered into (i) in accordance with all applicable laws, rules, regulations and
\nregulatory policies and (ii) with counterparties believed to be financially
\nresponsible at the time; and each of them constitutes the valid and legally
\nbinding obligation of Company or one of its Subsidiaries, enforceable in
\naccordance with its terms (except as enforceability may be limited by applicable
\nbankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
\nsimilar laws of general applicability relating to or affecting creditors’ rights
\nor by general equity <\/p>\n
22<\/p>\n
principles), and are in full force and effect. Neither Company nor any of its
\nSubsidiaries, nor to Company’s knowledge any other party thereto, is in breach
\nof any of its obligations under such agreement or arrangement.<\/p>\n
(b) Schedule 2.20(b) lists each investment security held by Company
\n —————-
\nand any of its Subsidiaries on the date indicated thereon. Such Schedule sets
\nforth, with respect to each such investment security: (i) the issues thereof;
\n(ii) the outstanding balance, face amount or number of shares; (iii) the
\nmaturity, if applicable; (iv) the title of the issue; and (v) the classification
\nunder SFAS No. 115.<\/p>\n
(c) Schedule 2.20(c) sets forth as of the date indicated thereon a
\n —————-
\ntrue and complete description of (i) by type and classification, if any, each
\nloan, lease, interest in a pool of loans, other extension of credit or
\ncommitment to extend credit by Company or any of its Subsidiaries; (ii) by type
\nand classification, all loans, leases, interests in pools of loans, other
\nextensions of credit and commitments to extend credit of Company or its
\nSubsidiaries that have been classified by regulators or auditors (external or
\ninternal) as “Watch List,” “Specially Mentioned,” “Substandard,” “Doubtful,”
\n“Loss” or any comparable classification; and (iii) each asset of TeleBank that
\nas of March 31, 1999 was classified as “Other Real Estate Owned” and the book
\nvalue thereof.<\/p>\n
(d) TeleBank has received a rating of “Satisfactory” in its most
\nrecent Community Reinvestment Act examination. TeleBank has not been advised of
\nany supervisory concerns regarding its or Company’s compliance with the
\nCommunity Reinvestment Act.<\/p>\n
2.21 Year 2000 Compliance. Company and Company’s Subsidiaries have
\n ——————–
\ntaken reasonable steps necessary to address the software, accounting and record-
\nkeeping issues raised in order to be Year 2000 compliant in all material
\nrespects (within the meaning of SEC, OTS, Federal Financial Institution’s
\nExamination Council and SRO requirements) on or before the end of 1999, and
\nCompany does not expect the future cost of addressing such issues to be
\nmaterial. Neither Company nor any of Company’s Subsidiaries has received a
\nrating of less than satisfactory from any bank regulatory agency with respect to
\nYear 2000 compliance. Company and Company’s Subsidiaries are in compliance with
\nall guidelines provided by the OTS and the Federal Financial Institution’s
\nExamination Council regarding Year 2000 issues.<\/p>\n
2.22 Opinion of Financial Advisor. Company has been advised in writing
\n —————————-
\nby its financial advisor, Goldman, Sachs & Co., that in such advisor’s opinion,
\nas of the date hereof, the Exchange Ratio is fair, from a financial point of
\nview, to the stockholders of Company.<\/p>\n
2.23 Company Affiliates. Schedule 2.23 contains a true and complete
\n ——————
\nlist of all persons who, to Company’s knowledge, may be deemed to be an
\nAffiliate (as defined below) of Company. For purposes of this Agreement, persons
\nand\/or entities deemed affiliates of an entity within the meaning of Rule 144 of
\nthe Rules and Regulations of the SEC promulgated under the Securities Act for
\npurposes of Accounting Series, Releases 130 and 135, as amended, of the SEC are
\nreferred to as “Affiliates.”<\/p>\n
2.24 State Takeover Statutes; Charter Provisions. The Board of
\n ——————————————-
\nDirectors of Company has taken all actions so that neither (a) the restrictions
\ncontained in Section 203 of the <\/p>\n
23<\/p>\n
Delaware Law applicable to a “business combination” (as defined in such Section
\n203) nor (b) the restrictions contained in Article 11 of Company’s Amended and
\nRestated Certificate of Incorporation applicable to a “business combination” (as
\ndefined in such Article 11) will apply to the execution, delivery or performance
\nof this Agreement, the Stockholder Agreements or the Option Agreement or the
\nconsummation of the Merger or the other transactions contemplated by this
\nAgreement, the Stockholder Agreements or the Option Agreement. No other state
\ntakeover statute is applicable to the Merger, this Agreement, the Option
\nAgreement, the Stockholder Agreements or the transactions contemplated hereby or
\nthereby.<\/p>\n
2.25 Tax and Accounting Treatment. Neither Company nor, to Company’s
\n —————————-
\nknowledge, any of its directors or officers has taken any action that would
\ninterfere with Parent’s or the Surviving Corporation’s ability to account for
\nthe Merger as a pooling of interests or would prevent the Merger from
\nconstituting a transaction qualifying as a reorganization within the meaning of
\nSection 368(a) of the Code. Neither Company nor, to Company’s knowledge, any of
\nits directors or officers has knowledge of any agreement, plan or other
\ncircumstance relating to Company or any of its Affiliates that would interfere
\nwith Parent’s or the Surviving Corporation’s ability to account for the Merger
\nas a pooling of interests or prevent the Merger from qualifying as a
\nreorganization within the meaning of Section 368(a) of the Code.<\/p>\n
2.26 Brokers’ and Finders’ Fees. Company has not incurred, nor will it
\n ————————–
\nincur, directly or indirectly, any liability for brokerage or finders’ fees or
\nagents’ commissions or investment bankers’ fees or any similar charges in
\nconnection with this Agreement or any transaction contemplated hereby, other
\nthan under its engagement letter with Goldman, Sachs & Co. (a true and complete
\ncopy of which has been furnished to Parent).<\/p>\n
2.27 Representations Complete. None of the representations or
\n ————————
\nwarranties made by Company herein or in any schedule hereto, including the
\nCompany Disclosure Schedule, or certificate furnished by Company pursuant to
\nthis Agreement, or the Company SEC Documents, when all such documents are read
\ntogether in their entirety, contains or will contain at the Effective Time any
\nuntrue statement of a material fact, or omits or will omit at the Effective Time
\nto state any material fact necessary in order to make the statements contained
\nherein or therein, in the light of the circumstances under which made, not
\nmisleading.<\/p>\n
ARTICLE III<\/p>\n
REPRESENTATIONS AND WARRANTIES OF PARENT
\n —————————————-<\/p>\n
Except as disclosed in the document of even date herewith delivered by
\nParent to Company prior to the execution and delivery of this Agreement and
\nreferring to the representations and warranties in this Agreement (the “Parent
\nDisclosure Schedule”), any exception so disclosed in the Parent Disclosure
\nSchedule to specifically identify the Section of this Agreement to which such
\nexception relates, Parent represents and warrants to Company as follows:<\/p>\n
3.1 Organization, Standing and Power. Each of Parent and Merger Sub is
\n ——————————–
\na corporation duly organized, validly existing and in good standing under the
\nlaws of its jurisdiction of organization. Parent and Merger Sub have all
\nrequisite corporate power <\/p>\n
24<\/p>\n
and authority to enter into this Agreement and the Option Agreement and to
\nconsummate the transactions contemplated hereby and thereby.<\/p>\n
3.2 Capital Structure. The authorized capital stock of Parent consists
\n —————–
\nof 300,000,000 shares of Parent Common Stock and 1,000,000 shares of Parent’s
\npreferred stock, par value $.01 per share (“Parent Preferred Stock”), of which
\nthere were issued and outstanding as of the close of business on May 20, 1999,
\n116,741,621 shares of Parent Common Stock (before giving effect to the 2-for-1
\nsplit of Parent Common Stock which became effective on May 21, 1999) and no
\nshares of Parent Preferred Stock. There are no other outstanding shares of
\ncapital stock or voting securities and no outstanding commitments to issue any
\nshares of capital stock or voting securities after May 20, 1999, other than
\nshares issued pursuant to the Parent stock split described above and other than
\npursuant to the exercise of options outstanding as of such date under Parent’s
\n1993 Stock Option Plan and 1996 Stock Incentive Plan (collectively, the “Parent
\nStock Option Plans”). All outstanding shares of Parent Common Stock are duly
\nauthorized, validly issued, fully paid and non-assessable and are free and clear
\nof any liens or encumbrances other than any liens or encumbrances created by or
\nimposed upon the holders thereof, and are not subject to preemptive rights or
\nrights of first refusal created by statute, the Certificate of Incorporation or
\nBylaws, each as amended, of Parent or any agreement to which Parent is a party
\nor by which it is bound. As of the close of business on May 20, 1999, Parent had
\nreserved an aggregate of 17,704,144 shares of Common Stock for issuance to
\nemployees, consultants and directors pursuant to the Parent Stock Option Plans,
\nof which 15,096,000 shares are subject to outstanding, unexercised options, and
\nan aggregate of 675,000 shares are available for issuance under the Parent’s
\n1996 Stock Purchase Plan. Parent has not issued or granted any stock
\nappreciation rights or performance units under the Parent Stock Option Plans or
\notherwise. Except for (i) the rights created pursuant to this Agreement and the
\nParent Stock Option Plans (including options thereunder) and (ii) Parent’s right
\nto repurchase any unvested shares under the Parent Stock Option Plans, there are
\nno other options, warrants, calls, rights, commitments or agreements of any
\ncharacter to which Parent is a party or by which it is bound obligating Parent
\nto issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
\nsold, repurchased or redeemed, any shares of capital stock of Parent or
\nobligating Parent to grant, extend, accelerate the vesting of, change the price
\nof, or otherwise amend or enter into any such option, warrant, call, right,
\ncommitment or agreement. There are no contracts, commitments or agreements
\nrelating to voting, purchase or sale of Parent’s capital stock between or among
\nParent and any of its stockholders. True and complete copies of all material
\nagreements and instruments relating to or issued under the Parent Stock Option
\nPlans have been provided or made available to Company and such agreements and
\ninstruments have not been amended, modified or supplemented, and there are no
\nagreements to amend, modify or supplement such agreements or instruments in any
\ncase from the form provided or made available to Company. All outstanding shares
\nof Parent Common Stock and all options to purchase Parent Common Stock were
\nissued in compliance with all applicable federal and state securities laws. The
\nshares of Parent Common Stock to be issued pursuant to Section 1.6 hereof, when
\nissued in accordance with this Agreement, will be duly authorized, validly
\nissued, fully paid and non-assessable, and free and clear of any liens or
\nencumbrances other than liens or encumbrances created by or imposed upon the
\nholders thereof.<\/p>\n
3.3 Authority. Assuming the filings and approvals described in clauses
\n ———
\n(i) through (vii) of the last sentence of this Section are made or obtained (as
\nthe case may be) and that the condition set forth in Section 6.1(a) is
\nsatisfied, the execution and delivery of this <\/p>\n
25<\/p>\n
Agreement and the Option Agreement and the consummation of the transactions
\ncontemplated hereby and thereby have been duly authorized by all necessary
\ncorporate action on the part of Parent and Merger Sub, as applicable. This
\nAgreement and the Option Agreement each has been duly executed and delivered by
\nParent and Merger Sub, as applicable, and constitutes the valid and binding
\nobligations of Parent and Merger Sub, enforceable against them in accordance
\nwith its terms, except as such enforcement may be limited by (i) the effect of
\nbankruptcy, insolvency, reorganization, receivership, conservatorship,
\narrangement, moratorium or other laws affecting or relating to the rights of
\ncreditors generally, or (ii) the rules governing the availability of specific
\nperformance, injunctive relief or other equitable remedies and general
\nprinciples of equity, regardless of whether considered in a proceeding in equity
\nor at law. Assuming the filings and approvals described in clauses (i) through
\n(vii) of the last sentence of this Section are made or obtained (as the case may
\nbe) and that the condition set for in Section 6.1(a) is satisfied, the execution
\nand delivery of this Agreement and the Option Agreement do not, and the
\nconsummation of the transactions contemplated hereby will not, conflict with, or
\nresult in any violation of, or default under (with or without notice or lapse of
\ntime, or both), or give rise to a right of termination, cancellation or
\nacceleration of any obligation or loss of a benefit under, (i) any provision of
\nthe Certificate of Incorporation or Bylaws of Parent or Merger Sub, as amended,
\nor (ii) any material mortgage, indenture, lease, contract or other agreement or
\ninstrument, permit, concession, franchise, license, judgment, order, decree,
\nstatute, law, ordinance, rule or regulation applicable to Parent or Merger Sub
\nor their respective properties or assets, except for any conflicts, violations,
\ndefaults or other occurrences that would not (A) individually or in the
\naggregate have a Material Adverse Effect on Parent or any of its Subsidiaries or
\n(B) prevent or materially impair or delay the consummation of the Merger. No
\nconsent, approval, order or authorization of, or registration, declaration or
\nfiling with, any Governmental Entity, is required by or with respect to Parent
\nor Merger Sub in connection with the execution and delivery of this Agreement or
\nthe Option Agreement by Parent and Merger Sub or the consummation by Parent and
\nMerger Sub of the transactions contemplated hereby, except for (i) the filing of
\nthe Certificate of Merger as provided in Section 1.2 hereof, (ii) the filing of
\napplications and notices with and the receipt of requisite approval from, as
\napplicable, the OTS and the FDIC with respect to the Merger, (iii) the filing
\nwith, and declaration of effectiveness or clearance by, the SEC and the NASD of
\nthe Registration Statement and, if applicable, a Proxy Statement relating to any
\nParent Stockholder Approval, (iv) the filing of a Form 8-K with the SEC and the
\nNASD within 15 days after the Closing Date, (v) any filings or applications as
\nmay be required under applicable federal, SRO or state securities laws or the
\nsecurities laws of any foreign country, (vi) the filing with the Nasdaq National
\nMarket of a Notification Form for Listing of Additional Shares with respect to
\nthe shares of Parent Common Stock issuable upon conversion of the Company Common
\nStock in the Merger and upon exercise of the options under the Company Stock
\nOption Plans assumed by Parent, (vii) the filing of a registration statement on
\nForm S-8 with the SEC, or other applicable form covering the shares of Parent
\nCommon Stock issuable pursuant to outstanding options under the Company Stock
\nOption Plans assumed by Parent, and (viii) such other consents, authorizations,
\nfilings, approvals and registrations which, if not obtained or made, would not
\nhave a Material Adverse Effect on Parent and would not prevent or materially
\nalter or delay any of the transactions contemplated by this Agreement. Parent is
\nnot aware of any reason why the approvals of all Governmental Entities necessary
\nto permit consummation of the Merger or the other transactions contemplated <\/p>\n
26<\/p>\n
by this Agreement will not be received without the imposition of a condition or
\nrequirement described in Section 6.1(d).<\/p>\n
3.4 SEC Documents; Financial Statements. Parent has made available
\n ———————————–
\n(including via EDGAR) to Company each statement, report, registration statement
\n(with the prospectus in the form filed pursuant to Rule 424(b) of the Securities
\nAct), definitive proxy statement, and other filings (including exhibits,
\nsupplements and schedules thereto) filed with the SEC by Parent since December
\n31, 1996, (collectively, the “Parent SEC Documents”). As of their respective
\nfiling dates, the Parent SEC Documents complied in all material respects with
\nthe requirements of the Exchange Act and the Securities Act, and none of the
\nParent SEC Documents contained any untrue statement of a material fact or
\nomitted to state a material fact required to be stated therein or necessary to
\nmake the statements made therein, in light of the circumstances in which they
\nwere made, not misleading, except to the extent corrected by a subsequently
\nfiled Parent SEC Document. The financial statements of Parent, including the
\nnotes thereto, included in the Parent SEC Documents (the “Parent Financial
\nStatements”) were complete and correct in all material respects as of their
\nrespective dates (except to the extent corrected by a subsequently filed Parent
\nSEC Document), complied as to form in all material respects with applicable
\naccounting requirements and with the published rules and regulations of the SEC
\nwith respect thereto as of their respective dates, and have been prepared in
\naccordance with generally accepted accounting principles applied on a basis
\nconsistent throughout the periods indicated (except as may be indicated in the
\nnotes thereto or, in the case of unaudited statements included in Quarterly
\nReports on Form 10-Q, as permitted by Form 10-Q of the SEC). The Parent
\nFinancial Statements fairly present the consolidated financial condition and
\noperating results of Parent and its Subsidiaries at the dates and during the
\nperiods indicated therein (subject, in the case of unaudited statements, to
\nnormal and recurring year-end adjustments).<\/p>\n
3.5 Absence of Undisclosed Liabilities. Parent has no material
\n ———————————-
\nobligations or liabilities of any nature (matured or unmatured, fixed or
\ncontingent) other than (i) those set forth or adequately provided for in the
\nconsolidated balance sheet of Parent and its Subsidiaries or in the related
\nnotes to the consolidated financial statements included in Parent’s Annual
\nReport on Form 10-K for the period ended September 25, 1998 (the “Parent Balance
\nSheet”), (ii) those disclosed in Parent SEC Documents filed subsequent to the
\nParent Balance Sheet Date, and (iii) those incurred in the ordinary course of
\nbusiness consistent with past practice since the Parent Balance Sheet Date and
\nwhich have not had and are not reasonably likely to have a Material Adverse
\nEffect on Parent .<\/p>\n
3.6 Litigation. There is no judgment, decree or order against Parent
\n ———-
\nor any of its Subsidiaries or, to the knowledge of Parent, any of their
\nrespective directors or officers (in their capacities as such) that could
\nprevent, enjoin, alter or materially delay any of the transactions contemplated
\nby this Agreement.<\/p>\n
3.7 Compliance With Laws. Each of Parent and its Subsidiaries has
\n ——————–
\ncomplied in all material respects with all applicable federal, state, local,
\nself-regulatory and foreign laws, statutes, ordinances, rules and regulations,
\nand is not in violation in any material respect of, and has not received any
\nnotices of material violation with respect to, its respective certificate or
\narticles of incorporation or bylaws or other charter or organizational
\ndocuments, or any federal, <\/p>\n
27<\/p>\n
state, local, self-regulatory or foreign statute, law, ordinance, rule or
\nregulation applicable to the conduct of its business or the ownership or
\noperation of its business.<\/p>\n
3.8 Year 2000 Compliance. Parent and its Subsidiaries have taken
\n ——————–
\nreasonable steps necessary to address the software, accounting and record-
\nkeeping issues raised in order to be Year 2000 compliant in all material
\nrespects (within the meaning of SEC and any applicable SRO requirements) on or
\nbefore the end of 1999, and Parent does not expect the future cost of addressing
\nsuch issues to be material. Parent and its Subsidiaries are in compliance with
\nall guidelines provided by the SEC and any applicable SRO regarding Year 2000
\nissues.<\/p>\n
3.9 Tax Treatment. Neither Parent nor any of its directors or officers
\n ————-
\nhas taken any action that would prevent the Merger from constituting a
\ntransaction qualifying as a reorganization within the meaning of Section 368(a)
\nof the Code. Neither Parent nor, to Parent’s knowledge, any of its affiliates or
\nagents is aware of any agreement, plan or other circumstance that would prevent
\nthe Merger from qualifying as a reorganization within the meaning of Section
\n368(a) of the Code.<\/p>\n
3.10 Broker’s and Finders’ Fees. Parent has not incurred, nor will it
\n ————————–
\nincur, directly or indirectly, any liability for brokerage or finders’ fees or
\nagents’ commissions or investment bankers’ fees or any similar charges in
\nconnection with this Agreement or any transaction contemplated hereby, other
\nthan the fees and expenses of BancBoston Robertson Stephens Inc. (which will be
\nborne by Parent).<\/p>\n
3.11 Representations Complete. None of the representations or
\n ————————
\nwarranties made by Parent and Merger Sub herein or in any Schedule hereto,
\nincluding the Parent Disclosure Schedule, or certificate furnished by Parent
\npursuant to this Agreement, or the Parent SEC Documents, when all such documents
\nare read together in their entirety, contains or will contain at the Effective
\nTime any untrue statement of a material fact, or omits or will omit at the
\nEffective Time to state any material fact necessary in order to make the
\nstatements contained herein or therein, in the light of the circumstances under
\nwhich made, not misleading.<\/p>\n
ARTICLE IV<\/p>\n
CONDUCT PRIOR TO THE EFFECTIVE TIME
\n ———————————–<\/p>\n
4.1 Conduct of Business. During the period from the date of this
\n ——————-
\nAgreement and continuing until the earlier of the termination of this Agreement
\nor the Effective Time, Company agrees (except to the extent expressly
\ncontemplated by this Agreement or as consented to in writing by Parent), to
\ncarry on its and its Subsidiaries’ business in the ordinary course in
\nsubstantially the same manner as heretofore conducted, to pay and to cause its
\nSubsidiaries to pay debts and Taxes when due subject to good faith disputes over
\nsuch debts or Taxes, to pay or perform other obligations when due, and to use
\nall commercially reasonable best efforts consistent with past practice and
\npolicies to preserve intact its and its Subsidiaries’ present business
\norganizations, keep available the services of its and its Subsidiaries’ present
\nexecutive officers and key employees and preserve its and its Subsidiaries’
\nrelationships with customers, suppliers, distributors, licensors, licensees, and
\nothers having business dealings with it or its Subsidiaries, to the end that its
\nand its Subsidiaries’ goodwill and ongoing businesses shall be <\/p>\n
28<\/p>\n
unimpaired at the Effective Time. Each of Company and Parent agrees to promptly
\nnotify the other of any event or occurrence not in the ordinary course of its or
\nits Subsidiaries’ business, and of any event which could have a Material Adverse
\nEffect on it or any of its Subsidiaries.<\/p>\n
4.2 Conduct of Business of Company. During the period from the date of
\n ——————————
\nthis Agreement and continuing until the earlier of the termination of this
\nAgreement or the Effective Time, except as expressly contemplated by this
\nAgreement, Company shall not do, cause or permit any of the following, or allow,
\ncause or permit any of its Subsidiaries to do, cause or permit any of the
\nfollowing, without the prior written consent of Parent:<\/p>\n
(a) Charter Documents. Cause or permit any amendment,
\n —————–
\nmodification, alteration or rescission of its certificate or articles of
\nincorporation, bylaws or other charter or organizational documents;<\/p>\n
(b) Dividends; Changes in Capital Stock. Declare or pay any
\n ———————————–
\ndividends on or make any other distributions (whether in cash, stock or
\nproperty) in respect of any of its capital stock (other than (i) the Stock
\nSplit, as defined below, (ii) dividends or distributions by any wholly owned
\nSubsidiary of Company to Company or another wholly owned Subsidiary thereof and
\n(iii) any dividends or distributions by non-wholly owned Subsidiaries of Company
\nto the extent described in Section 4.2(b) of the Company Disclosure Schedule) or
\nsplit, combine or reclassify any of its capital stock or issue or authorize the
\nissuance of any other securities in respect of, in lieu of or in substitution
\nfor shares of its capital stock, or repurchase or otherwise acquire, directly or
\nindirectly, any shares of its capital stock except from former employees,
\ndirectors and consultants in accordance with agreements providing for the
\nrepurchase of shares in connection with any termination of service to it or its
\nSubsidiaries;<\/p>\n
(c) Options. Grant any options, stock appreciation rights or other
\n ——-
\nrights to acquire securities other than as permitted in clause (e) below or
\naccelerate, amend or change the period of exercisability or vesting of options
\nor other rights granted under its stock plans or authorize cash payments in
\nexchange for any options or other rights granted under any of such plans;<\/p>\n
(d) Material Contracts. Enter into any contract or commitment, or
\n ——————
\nviolate, amend or otherwise modify or waive any of the terms of any of its
\ncontracts, other than in the ordinary course of business consistent with past
\npractice and in no event shall such contract, commitment, amendment,
\nmodification or waiver involve payments by Company or any of its Subsidiaries of
\namounts in excess of five hundred thousand dollars ($500,000);<\/p>\n
(e) Issuance of Securities. Issue, deliver or sell or authorize or
\n ———————-
\npropose the issuance, delivery or sale of, or purchase or propose the purchase
\nof, any shares of its capital stock or securities convertible into, or
\nsubscriptions, rights, warrants or options to acquire, or other agreements or
\ncommitments of any character obligating it to issue any such shares or other
\nconvertible securities, other than (i) the issuance of shares of Company Common
\nStock pursuant to the exercise of Company Options outstanding under the Company
\nStock Option Plans as of the date of this Agreement and (ii) the issuance of
\nshares of Company Common Stock pursuant to the exercise of warrants outstanding
\nas of the date of this Agreement and disclosed in the Company SEC Documents;<\/p>\n
29<\/p>\n
(f) Intellectual Property. Transfer to any person or entity any
\n ———————
\nrights to its Intellectual Property other than the transfer of non-exclusive
\nrights to its Intellectual Property in the ordinary course of business
\nconsistent with past practice;<\/p>\n
(g) Exclusive Rights. Enter into or amend any agreements pursuant
\n —————-
\nto which any other party is granted exclusive marketing or other exclusive
\nrights of any type or scope with respect to any of its products or technology;<\/p>\n
(h) Dispositions. Sell, lease, license or otherwise dispose of or
\n ————
\nencumber any of its properties or assets which are material, individually or in
\nthe aggregate, to the business of Company and its Subsidiaries (taken as a
\nwhole), except in the ordinary course of business consistent with past practice
\nand except for the sale of real estate owned in accordance with current policies
\nof Company with respect thereto;<\/p>\n
(i) Indebtedness. Other than in the ordinary course of business
\n ————
\n(including creation of deposit liabilities, entry into repurchase agreements,
\npurchases or sales of federal funds, Federal Home Loan Bank advances, and sales
\nof certificates of deposit) consistent with past practice (A) incur any
\nindebtedness for borrowed money, (B) assume, guarantee, endorse or otherwise as
\nan accommodation become responsible for the obligations of any other Person or
\n(C) cancel, release, assign or modify any material amount of indebtedness of any
\nother person or entity;<\/p>\n
(j) Leases. Enter into any operating lease in excess of five
\n ——
\nhundred thousand dollars ($500,000) per year;<\/p>\n
(k) Payment of Obligations. Pay, discharge or satisfy in an amount
\n ———————-
\nin excess of five hundred thousand dollars ($500,000) in any one case or one
\nmillion ($1,000,000) in the aggregate, any claim, liability or obligation
\n(absolute, accrued, asserted or unasserted, contingent or otherwise) arising
\nother than in the ordinary course of business, other than the payment, discharge
\nor satisfaction of liabilities reflected or reserved against in the Company
\nFinancial Statements;<\/p>\n
(l) Capital Expenditures. Make any capital expenditures, capital
\n ——————–
\nadditions or capital improvements except (i) in the ordinary course of business
\nand consistent with past practice that do not exceed five hundred thousand
\ndollars ($500,000) in any one case or one million ($1,000,000) in the aggregate
\nand (ii) existing commitments under contracts or agreements disclosed on the
\nCompany Disclosure Schedule with respect to Section 2.19;<\/p>\n
(m) Insurance. Materially reduce the amount of any material
\n ———
\ninsurance coverage provided by existing insurance policies;<\/p>\n
(n) Employee Benefit Plans; New Hires; Pay Increases. (A) Adopt or
\n ————————————————
\namend any employee benefit or stock purchase or option plan (except as required
\nby law or as provided in Section 5.15(b)), or (B) hire any new director level or
\nexecutive officer level employee, pay any special bonus or special remuneration
\nto any employee or director, or, other than, with respect to non-executive
\nofficer employees, in the ordinary course of business consistent with past
\npractice, increase the salaries or wage rates of its employees;<\/p>\n
30<\/p>\n
(o) Severance Arrangements. Grant any severance or termination pay
\n ———————-
\n(i) to any director or officer or (ii) to any other employee except payments
\nmade pursuant to written plans or agreements outstanding, or written Company
\npolicies in effect, on the date hereof (in each case furnished to Parent prior
\nto the date of this Agreement);<\/p>\n
(p) Lawsuits. Commence any action, suit or proceeding other than
\n ——–
\n(i) in the ordinary course of business, (ii) in such cases where it in good
\nfaith determines that failure to commence suit would result in the material
\nimpairment of a valuable aspect of its business, provided that it consults with
\nParent prior to the filing of such a suit, or (iii) in respect of a breach of
\nthis Agreement;<\/p>\n
(q) Acquisitions. Acquire or agree to acquire by merging or
\n ————
\nconsolidating with, or by purchasing a substantial portion of the assets of, or
\nby any other manner, any business or any corporation, partnership, association
\nor other business organization or division thereof, or otherwise acquire or
\nagree to acquire any assets which are material, individually or in the
\naggregate, to Company, or acquire or agree to acquire any equity securities of
\nany corporation, partnership, limited liability company, association or business
\norganization which securities acquired or agreed to be acquired would constitute
\ngreater than five percent (5%) of the outstanding securities of such entity;<\/p>\n
(r) Taxes. Other than in the ordinary course of business or as
\n —–
\nrequired by applicable law, rule or regulation, make or change any material
\nelection in respect of Taxes, adopt or change any accounting method in respect
\nof Taxes, enter into any material closing agreement, settle any material claim
\nor assessment in respect of Taxes, or consent to any extension or waiver of the
\nlimitation period applicable to any material claim or assessment in respect of
\nTaxes;<\/p>\n
(s) Revaluation. Revalue any of its assets, including without
\n ———–
\nlimitation writing down the value of inventory or writing off notes or accounts
\nreceivable, other than in the ordinary course of business or as required by
\napplicable law, rule or regulation;<\/p>\n
(t) Accounting Policies and Procedures. Make any material change
\n ———————————-
\nto its accounting methods, principles, policies, procedures or practices, except
\nas may be required by GAAP, Regulation S-X promulgated by the SEC the OTS or the
\nFDIC;<\/p>\n
(u) Year 2000 Compliance. Fail to carry forward in all material
\n ——————–
\nrespects Company’s Year 2000 assessment and compliance program, as made
\navailable to Parent by Company;<\/p>\n
(v) Risk Management. Except as required by applicable law or
\n —————
\nregulation, or written rule, instruction or directive by a Governmental Entity
\nwhich is furnished to Parent promptly following receipt thereof: (i) make any
\nmaterial change to its asset\/liability management, loan, investment or other
\nmaterial banking policies; (ii) implement or adopt any material change in its
\ninterest rate risk management and hedging policies, procedures or practices;
\n(iii) fail to follow its existing policies or practices with respect to managing
\nits exposure to interest rate risk; or (iv) fail to use commercially reasonable
\nmeans to avoid any material increase in its aggregate exposure to interest rate
\nrisk;<\/p>\n
31<\/p>\n
(w) Loans. Make any loan or advance or purchase any whole loan or
\n —–
\ninterest in an pool of loans other than in accordance with lending policies as
\nin effect on the date hereof;<\/p>\n
(x) Affiliate Credit. Grant or commit to grant any extension of
\n —————-
\ncredit or amend the terms of any such credit outstanding on the date hereof to
\nany executive officer, director or holder of 10% or more of the outstanding
\ncapital stock of Company, or any Affiliate of such person, if such credit would
\nexceed $100,000;<\/p>\n
(y) Domain Name. Change domain names or fail to renew existing
\n ———–
\ndomain name registrations on a timely basis; or<\/p>\n
(z) Other. Take or agree in writing or otherwise to take, any of
\n —–
\nthe actions described in Sections 4.2(a) through (y) above, or (i) any action
\nwhich would make any of its representations or warranties contained in this
\nAgreement materially untrue or materially incorrect or prevent it from
\nperforming or cause it not to perform its covenants hereunder in any material
\nrespect, (ii) any action that will result in any of the conditions to the Merger
\nas set forth in Article VI not being satisfied or in violation of any provision
\nof this Agreement or the Option Agreement, except, in every case, as may be
\nrequired by applicable law, or (iii) any other action that would materially
\nadversely delay or materially adversely impair the ability of Company to
\nconsummate the Merger.<\/p>\n
4.3 Conduct of Parent. During the period from the date of this
\n —————–
\nAgreement and continuing until the Effective Time, except as expressly
\ncontemplated or permitted by this Agreement or the Option Agreement or with
\nCompany’s prior written consent, Parent shall not: (a) take any action that will
\nresult in any of the conditions to the Merger set forth in Article VI not being
\nsatisfied or in a violation of any provision of this Agreement or the Option
\nAgreement, except, in every case, as may be required by applicable law; or (b)
\ntake any other action that would materially adversely delay or materially
\nadversely impair the ability of Parent to consummate the Merger.<\/p>\n
4.4 No Solicitation. Company and its Subsidiaries and the officers,
\n —————
\ndirectors, employees, agents, representatives and advisors of Company and its
\nSubsidiaries (collectively, Company’s “Representatives”) will not, directly or
\nindirectly, (i) take any action to solicit, initiate, encourage (including by
\nway of furnishing non-public information or furnishing any information, other
\nthan as required by applicable law, rules or regulations, in a manner which
\ncould reasonably be expected to assist a third party in formulating a Takeover
\nProposal), take any other action designed to facilitate or agree to any Takeover
\nProposal (as defined in Section 7.3(f) hereof) or (ii) subject to the next
\nsentence, engage in negotiations with, or disclose any nonpublic information
\nrelating to Company or any of its Subsidiaries to any person that has advised
\nCompany that it may be considering making, or that has made, a Takeover
\nProposal, or whose efforts to formulate a Takeover Proposal would be assisted
\nthereby; provided, nothing herein shall prohibit Company’s Board of Directors
\n ——–
\nfrom taking and disclosing to Company’s stockholders a position with respect to
\nan unsolicited tender offer pursuant to Rules 14d-9 and 14e-2 promulgated under
\nthe Exchange Act. Notwithstanding the immediately preceding sentence, if an
\nunsolicited written Takeover Proposal shall be received by the Board of
\nDirectors of Company, then, to the extent the Board of Directors of Company
\nbelieves in good faith (after <\/p>\n
32<\/p>\n
written advice from its financial advisor) that such Takeover Proposal would, if
\nconsummated, result in a transaction more favorable to Company’s stockholders
\nfrom a financial point of view than the transaction contemplated by this
\nAgreement (any such more favorable Takeover Proposal being referred to in this
\nAgreement as a “Superior Proposal”) and the Board of Directors of Company
\ndetermines in good faith after advice from outside legal counsel that it is
\nnecessary for the Board of Directors of Company to comply with its fiduciary
\nduties to stockholders under applicable law, Company and its Representatives may
\nfurnish in connection therewith information to the party making such Superior
\nProposal and engage in negotiations with such party, and such actions shall not
\nbe considered a breach of this Section 4.4 or any other provisions of this
\nAgreement; provided that in each such event Company notifies Parent of such
\n ——–
\ndetermination by the Company Board of Directors and provides Parent with a true
\nand complete copy of the Superior Proposal received from such third party, and
\nprovides (or has provided) Parent with all documents containing or referring to
\nnon-public information of Company that are supplied to such third party;
\nprovided, further, that Company provides such non-public information pursuant to
\n——– ——-
\na non-disclosure agreement at least as restrictive on such third party as the
\nConfidentiality Agreement (as defined in Section 5.4) is on Parent; provided,
\n ——–
\nfurther, however, that Company shall not, and shall not permit any of its
\n——-
\nofficers, directors, employees or other representatives to agree to or endorse
\nany Takeover Proposal or withdraw its recommendation of the Merger unless
\nCompany has provided Parent at least five (5) days prior notice thereof. Company
\nwill promptly (and in any event within 24 hours) notify Parent after receipt of
\nany Takeover Proposal or any notice that any person is considering making a
\nTakeover Proposal or any request for non-public information relating to Company
\nor any of its Subsidiaries or for access to the properties, books or records of
\nCompany or any of its Subsidiaries by any person that has advised Company that
\nit may be considering making, or that has made, a Takeover Proposal, or whose
\nefforts to formulate a Takeover Proposal would be assisted thereby (such notice
\nto include the identity of such person or persons), and will keep Parent fully
\ninformed of the status and details of any such Takeover Proposal notice, request
\nor any correspondence or communications related thereto and shall provide Parent
\nwith a true and complete copy of such Takeover Proposal notice or request or
\ncorrespondence or communications related thereto, if it is in writing, or a
\ncomplete written summary thereof, if it is not in writing. Company shall
\nimmediately cease and cause to be terminated all existing discussion or
\nnegotiations with any persons conducted heretofore with respect to a Takeover
\nProposal.<\/p>\n
ARTICLE V<\/p>\n
ADDITIONAL AGREEMENTS
\n ———————<\/p>\n
5.1 Registration Statement; Proxy Statements.
\n —————————————- <\/p>\n
(a) As soon as practicable after the execution of this Agreement,
\nCompany and Parent shall prepare, and Company shall file with the SEC
\npreliminary proxy materials relating to a meeting of Company’s stockholders to
\nconsider the Merger (the “Company Stockholders Meeting”) and the vote of the
\nstockholders of Company with respect to the Merger. In the event that Parent
\nfails to obtain the Parent Stockholder Approval at the June 25 Meeting (as
\ndefined in Section 5.7), Parent shall file with the SEC preliminary proxy
\nmaterials (which may be contained in a joint proxy statement\/prospectus together
\nwith the <\/p>\n
33<\/p>\n
preliminary proxy materials relating to the Company Stockholders Meeting)
\nrelating to the Parent Stockholders Meeting (as defined in Section 7.1(f)) and
\nthe vote of the stockholders of Parent with respect to the proposed increase in
\nauthorized capital stock of Parent described in Section 6.1(a). As soon as
\npracticable following receipt of SEC comments on the proxy statement\/ prospectus
\n(or joint proxy statement\/prospectus or proxy statement for the Parent
\nStockholders Meeting, as the case may be) to be sent to the stockholders of
\nCompany in connection with the Company Stockholders Meeting and, if applicable,
\nthe Stockholders of Parent in connection with the Parent Stockholders Meeting
\n(such proxy statement\/prospectus or joint proxy statement\/prospectus (as the
\ncase may be), together with any amendments thereof or supplements thereto, in
\neach case in the form or forms sent as aforesaid, the “Proxy Statement”; and,
\ntogether with any separate proxy statement relating to the Parent Stockholders
\nMeeting, the “Proxy Statements”), Company shall file with the SEC definitive
\nproxy materials relating to the Company Stockholders Meeting and Parent shall
\nfile with the SEC a registration statement on Form S-4 (or such other successor
\nform as shall be appropriate) pursuant to which the shares of Parent Common
\nStock to be issued in the Merger will be registered with the SEC (the
\n“Registration Statement”), which shall include the Proxy Statement as a
\nprospectus, in connection with the registration under the Securities Act of the
\nshares of Parent Common Stock to be distributed to holders of Company Common
\nStock pursuant to the Merger; in the event that Parent fails to obtain the
\nParent Stockholder Approval at the June 25 Meeting, Parent shall also file with
\nthe SEC definitive proxy materials relating thereto and shall include the Proxy
\nStatements (in the case of a joint proxy statement\/prospectus) in the
\nRegistration Statement. Each of Parent and Company shall use its reasonable best
\nefforts to have or cause the Registration Statement to become effective
\n(including clearing the Proxy Statement or Proxy Statements, as the case may be,
\nwith the SEC) as promptly as practicable, and shall take any and all actions
\nrequired under any applicable federal or state securities laws or blue sky laws
\nin connection with the issuance of Parent Common Stock pursuant to the Merger.
\nWithout limiting the generality of the foregoing, on the one hand, each of
\nParent and Company shall (i) notify the other as promptly as practicable after
\nthe receipt by it of any written or oral comments of the SEC on, or of any
\nwritten or oral request by the SEC or any other governmental official for
\namendments or supplements to, or any other filing or supplemental or additional
\ninformation relating to, the Proxy Statement (or Proxy Statements, as the case
\nmay be) or the Registration Statement, and shall promptly supply the other with
\ncopies of all correspondence between it or any of its representatives, on the
\none hand, and the SEC or any other governmental official, on the other hand,
\nwith respect to any of the foregoing filings, and (ii) use all reasonable
\nefforts, after consultation with the other such party, to respond promptly to
\nany comments made by the SEC with respect to the Proxy Statement or Proxy
\nStatements, as the case may be (including each preliminary version thereof), and
\nthe Registration Statement (including each amendment thereof and supplement
\nthereto). As promptly as practicable after the Registration Statement shall have
\nbecome effective, each of Company and Parent shall mail or cause to be mailed
\nits Proxy Statement (if any, in the case of Parent) to its stockholders.<\/p>\n
(b) Parent and Company shall each cause the Registration Statement
\nand the Proxy Statement (or Proxy Statements, as the case may be) to comply in
\nall material respects with the Securities Act, the Exchange Act and all other
\napplicable federal and state securities law requirements. Each of Parent and
\nCompany shall, and shall cause its respective representatives to, fully
\ncooperate with the other such party and its respective representatives in the
\npreparation of the Proxy Statement (or Proxy Statements, as the case may be) and
\nthe <\/p>\n
34<\/p>\n
Registration Statement, and shall provide promptly to the other such information
\nconcerning it and its affiliates, directors, officers and stockholders as the
\nother may reasonably request in connection with the preparation of the Proxy
\nStatement or Proxy Statements, as the case may be, and the Registration
\nStatement. If at any time prior to the Effective Time Company or Parent shall
\nbecome aware of any fact, event or circumstance that is required to be set forth
\nin an amendment to the Registration Statement or a supplement to the Proxy
\nStatement (or Proxy Statements, as the case may be), Company or Parent, as the
\ncase may be, shall promptly notify the other of such fact, event or circumstance
\nand the parties shall cooperate with each other in filing with the SEC or any
\nother governmental official, and (in the case of a supplement to the Proxy
\nStatement or Proxy Statements, as the case may be) mailing to stockholders of
\nCompany, such amendment or supplement.<\/p>\n
(c) The Proxy Statement (or Proxy Statements, as the case may be)
\nshall contain the unanimous recommendation of the Board of Directors of Company
\nthat the Company stockholders approve this Agreement and the Merger and the
\nconclusion of the Board of Directors that the terms and conditions of the Merger
\nare advisable and fair to, and in the best interests of, the stockholders of
\nCompany; provided that no such recommendation need be included, and any such
\n ——–
\nrecommendation may be withdrawn if previously included, if a Superior Proposal
\nhas been made and Company and Company’s Board of Directors withdraw or modify
\nsuch recommendation in compliance with, and otherwise have complied in all
\nrespects with, Section 4.4. Notwithstanding anything to the contrary contained
\nherein, Company shall not include in the Proxy Statement any information with
\nrespect to Parent or its affiliates or associates, the form and content of which
\ninformation shall not have been approved by Parent prior to such inclusion
\n(which consent will not be unreasonably withheld or delayed).<\/p>\n
(d) In the event that a Proxy Statement relating to the Parent
\nStockholders Meeting is required hereunder, such Proxy Statement shall contain
\nthe unanimous recommendation of the Board of Directors of Parent that the Parent
\nstockholders approve the increase in authorized capital stock described in
\nSection 6.1(a); provided that such recommendation may be withdrawn upon a notice
\n ——–
\nof termination of this Agreement pursuant hereto.<\/p>\n
(e) Company agrees that: (i) the information supplied by Company
\nfor inclusion in the registration statement shall not at the time the
\nRegistration Statement (including any amendments or supplements thereto) is
\ndeclared effective by the SEC or at the Effective Time contain any untrue
\nstatement of a material fact or omit to state any material fact required to be
\nstated therein or necessary in order to make the statements therein, in light of
\nthe circumstances under which they were made, not misleading, (ii) the
\ninformation supplied by Company for inclusion in the Proxy Statement relating to
\nthe Company Stockholders Meeting shall not, on the date the Proxy Statement
\nrelating to the Company Stockholders Meeting is first mailed to the stockholders
\nof Company or at the time of the Company Stockholders Meeting, contain any
\nstatement which, at such time, is false or misleading with respect to any
\nmaterial fact, or omit to state any material fact necessary in order to make the
\nstatements made therein, in light of the circumstances under which they are
\nmade, not false or misleading, or omit to state any material fact necessary to
\ncorrect any statement in any earlier communication with respect to the
\nsolicitation of proxies for the Company Stockholders Meeting which has become
\nfalse or misleading; and (iii) if at any time prior to the Effective Time any
\nevent or information should be <\/p>\n
35<\/p>\n
discovered by Company which should be set forth in an amendment to the
\nRegistration Statement or a supplement to the Proxy Statement, Company shall
\npromptly inform Parent of such event or information. Notwithstanding the
\nforegoing, Company makes no representation, warranty or covenant with respect to
\nany information supplied by Parent or Merger Sub which is contained in any of
\nthe foregoing documents.<\/p>\n
(f) Parent agrees that: (i) the information supplied by Parent for
\ninclusion in the Registration Statement shall not at the time the Registration
\nStatement (including any amendments or supplements thereto) is declared
\neffective by the SEC or at the Effective Time contain any untrue statement of a
\nmaterial fact or omit to state any material fact required to be stated therein
\nor necessary in order to make the statements therein, in light of the
\ncircumstances under which they were made, not misleading; (ii) the information
\nsupplied by Parent for inclusion in the Proxy Statement relating to the Company
\nStockholders Meeting shall not, on the date such Proxy Statement is first mailed
\nto Company’s stockholders or at the time of the Company Stockholders Meeting,
\ncontain any statement which, at such time, is false or misleading with respect
\nto any material fact, or omit to state any material fact necessary in order to
\nmake the statements therein, in light of the circumstances under which it is
\nmade, not false or misleading, or omit to state any material fact necessary to
\ncorrect any statement in any earlier communication with respect to the
\nsolicitation of proxies for the Company Stockholders Meeting which has become
\nfalse or misleading and (iii) if at any time prior to the Effective Time any
\nevent or information should be discovered by Parent which should be set forth in
\nan amendment to the Registration Statement or in a supplement to such Proxy
\nStatement, Parent will promptly inform Company of such event or information.
\nNotwithstanding the foregoing, neither Parent nor Merger Sub makes any
\nrepresentation, warranty or covenant with respect to any information supplied by
\nor on behalf of Company or any of its affiliates which is contained in any of
\nthe foregoing documents.<\/p>\n
5.2 Meeting of Stockholders. Company (and, if a Parent Stockholders
\n ———————–
\nMeeting is required to be held hereunder, Parent) shall promptly after the date
\nhereof take all action necessary in accordance with Delaware Law and its
\ncertificate of incorporation and bylaws, each as amended, to convene the Company
\nStockholders Meeting (or Parent Stockholders Meeting, as the case may be) within
\nforty-five (45) days of the Registration Statement being declared effective by
\nthe SEC (or, as applicable, the Proxy Statement relating to the Parent
\nStockholders Meeting is cleared by the SEC). Company and Parent shall consult
\nwith each other regarding the date of the Company Stockholders Meeting and any
\nParent Stockholders Meeting. Company shall use its commercially reasonable
\nefforts to solicit from stockholders of Company proxies in favor of the Merger
\nand shall take all other action necessary or advisable to secure the vote or
\nconsent of stockholders required to effect the Merger, provided that such
\n ——–
\nsolicitation efforts need not be made (although all efforts required to hold the
\nCompany Stockholders Meeting will continue to be required), if a Superior
\nProposal has been made and Company and Company’s Board of Directors withdraw or
\nmodify such recommendation in compliance with, and otherwise have complied in
\nall respects with, Section 4.4. In the event that Parent is required to seek the
\nParent Stockholders Approval at the Parent Stockholders Meeting pursuant to
\nSection 7.1(f), Parent shall use commercially reasonable efforts to solicit from
\nstockholders of Parent proxies in favor of the increase in authorized capital
\nstock described in Section 6.1(a), provided that such solicitation efforts need
\n ——–
\nnot be made, and the Parent <\/p>\n
36<\/p>\n
Stockholders Meeting need not be held, if there is a notice of termination of
\nthis Agreement pursuant hereto.<\/p>\n
5.3 Access to Information.
\n ——————— <\/p>\n
(a) At all times prior to the Effective Time, subject to
\napplicable law and the Confidentiality Agreement (as defined below), Company
\nshall afford Parent and its accountants, counsel and other representatives,
\nreasonable access during normal business hours to (i) all of Company’s and its
\nSubsidiaries’ properties, books, contracts, commitments and records, (ii) all
\nTax Returns and work papers and all other information relating to Taxes of
\nCompany and its Subsidiaries, and (iii) all other information concerning the
\nbusiness, properties and personnel of Company and its Subsidiaries as Parent may
\nreasonably request. Company agrees to provide to Parent and its accountants,
\ncounsel and other representatives copies of internal financial statements,
\nbudgets, operating plans and projections promptly upon request.<\/p>\n
(b) Subject to compliance with applicable law, from the date hereof
\nuntil the Effective Time, each of Parent and Company shall confer on a regular
\nand frequent basis with one or more representatives of the other party to report
\nmaterial operational matters and the general status of ongoing operations.<\/p>\n
(c) No information or knowledge obtained in any investigation
\npursuant to this Section 5.3 shall affect or be deemed to modify any
\nrepresentation or warranty contained herein or the conditions to the obligations
\nof the parties to consummate the Merger.<\/p>\n
5.4 Confidentiality. The parties acknowledge that each of Parent and
\n —————
\nCompany have previously executed a non-disclosure agreement dated May 26, 1999
\n(the “Confidentiality Agreement”), which Confidentiality Agreement shall
\ncontinue in full force and effect in accordance with its terms, except to the
\nextent necessary to comply with the terms of this Agreement.<\/p>\n
5.5 Public Disclosure. Unless otherwise permitted by this Agreement,
\n —————–
\nParent and Company shall consult with each other before issuing any press
\nrelease or otherwise making any public statement or making any other public (or
\nnon-confidential) disclosure (whether or not in response to an inquiry)
\nregarding the terms of this Agreement or any of the transactions contemplated
\nhereby, and neither shall issue any such press release or make any such
\nstatement or disclosure without the prior approval of the other (which approval
\nshall not be unreasonably withheld or delayed), except as may be required by law
\nor by obligations pursuant to any listing agreement with any national securities
\nexchange or with the NASD, in which case the party proposing to issue such press
\nrelease or make such public statement or disclosure shall use commercially
\nreasonable efforts to consult with the other party before issuing such press
\nrelease or making such public statement or disclosure.<\/p>\n
5.6 Consents; Cooperation. Each of Parent, Merger Sub and Company
\n ———————
\nwill, and will cause their respective Subsidiaries to, take all reasonable
\nactions necessary to comply promptly with all legal requirements which may be
\nimposed on them with respect to the consummation of the transactions
\ncontemplated by this Agreement and will promptly cooperate with and furnish
\ninformation to any party hereto necessary in connection with any such<\/p>\n
37<\/p>\n
requirements imposed upon such other party in connection with the consummation
\nof the transactions contemplated by this Agreement and will take all reasonable
\nactions necessary to obtain (and will cooperate with the other parties hereto in
\nobtaining) any consent, approval, order or authorization of, or any
\nregistration, declaration or filing with, any Governmental Entity or other
\nperson, required to be obtained or made in connection with the taking of any
\naction contemplated by this Agreement. Parent and Company shall have the right
\nto review in advance, and to the extent practicable each will consult the other
\nas to, in each case subject to applicable laws relating to the exchange of
\ninformation, all of the information which will appear in any filing made with,
\nor written materials submitted to, any third party or Governmental Entity in
\nconnection with the transactions contemplated by this Agreement. In the event an
\ninjunction or other order shall have been issued which prevents, alters or
\ndelays the Merger or any other transaction contemplated hereby, each party
\nagrees to use its reasonable best efforts to have such injunction or other order
\nlifted. Parent and Company and their respective Subsidiaries shall cooperate and
\nuse their respective reasonable best efforts to prepare all documentation, to
\neffect all filings and to obtain all permits, consents, approvals and
\nauthorizations of all third parties and Governmental Entities necessary to
\nconsummate the transactions contemplated by this Agreement, including without
\nlimitation the OTS, the NASD (the “NASD Approval”) and any applicable state
\napproval (“State Approval”) and to consult with the other party with respect to
\nobtaining such permits, consents, approvals and authorizations. Each of Parent
\nand Company agrees, upon request, to furnish the other party with all
\ninformation concerning itself, its Subsidiaries, directors, officers and
\nshareholders and such other matters as may be reasonably necessary or advisable
\nin connection with any filing, notice or application made by or on behalf of
\nsuch other party or any of its Subsidiaries to any third party or Governmental
\nEntity.<\/p>\n
5.7 Reasonable Best Efforts and Further Assurances. Each of the
\n ———————————————-
\nparties to this Agreement shall use its reasonable best efforts to effect the
\ntransactions contemplated hereby and to fulfill and cause to be fulfilled the
\nconditions to Closing under this Agreement including, without limitation, Parent
\nusing reasonable best efforts to obtain the Parent Stockholder Approval at the
\nmeeting of Parent’s stockholders scheduled to be held on June 25, 1999 or at any
\nadjournment or postponement thereof (the “June 25 Meeting”). Each party hereto,
\nat the reasonable request of another party hereto, shall execute and deliver
\nsuch other instruments and do and perform such other acts and things as may be
\nnecessary or desirable for effecting completely the consummation of this
\nAgreement and the transactions contemplated hereby.<\/p>\n
5.8 Blue Sky Laws. Parent shall take such steps as may be necessary
\n ————-
\nto comply with the securities and blue sky laws of all jurisdictions which are
\napplicable to the issuance of the shares of Parent Common Stock in connection
\nwith the Merger. Company shall use its best efforts to assist Parent as may be
\nnecessary to comply with the securities and blue sky laws of all jurisdictions
\nwhich are applicable in connection with the issuance of the shares of Parent
\nCommon Stock in connection with the Merger.<\/p>\n
5.9 Listing of Additional Shares; Nasdaq Quotation. Prior to the
\n ———————————————-
\nEffective Time, Parent shall file with the Nasdaq National Market a Notification
\nForm for Listing of Additional Shares with respect to the shares of Parent
\nCommon Stock issuable upon conversion of the Company Common Stock in the Merger.
\nCompany and Parent agree to continue the quotation of Company Common Stock and
\nParent Common Stock, respectively, on the Nasdaq <\/p>\n
38<\/p>\n
National Market during the term of the Agreement so that, to the extent
\nnecessary, appraisal rights will not be available to stockholders of Company
\nunder Section 262 of the Delaware Law.<\/p>\n
5.10 Pooling Accounting. Parent and Company shall each use its
\n ——————
\nreasonable best efforts to cause the business combination to be effected by the
\nMerger to be accounted for as a pooling of interests under generally accepted
\naccounting principles and applicable SEC rules and regulations. Each of Parent
\nand Company shall use its reasonable best efforts to cause its Affiliates not to
\ntake any action that would adversely affect the ability of Parent or the
\nSurviving Corporation to account for the business combination to be effected by
\nthe Merger as a pooling of interests.<\/p>\n
5.11 Affiliate Agreements.
\n ——————– <\/p>\n
(a) Schedule 2.23 sets forth those persons who may be deemed
\n ————-
\nAffiliates of Company. Company shall provide Parent with such information and
\ndocuments as Parent shall reasonably request for purposes of reviewing such
\nlist. Prior to the Effective Time, Company shall use its reasonable best efforts
\nto obtain and deliver or cause to be delivered to Parent a duly executed Company
\nAffiliate Agreement in the form attached hereto as Exhibit B (a “Company
\n ———
\nAffiliate Agreement”) from the persons identified in Schedule 2.23 as soon as
\npracticable (and in any event within three business days) after the execution
\nhereof (to the extent not executed heretofore) and from any other person as soon
\nas practicable after the date on which such person becomes an Affiliate of
\nCompany. Parent and Merger Sub shall be entitled to place appropriate legends on
\nthe certificates evidencing shares of Parent Common Stock to be received by such
\nAffiliates of Company pursuant to the terms of this Agreement, and to issue
\nappropriate stop transfer instructions to the transfer agent for Parent Common
\nStock, in each of the foregoing cases in accordance with the terms of such
\nCompany Affiliate Agreement.<\/p>\n
(b) Schedule 5.11(b) sets forth those persons who may be deemed
\n —————-
\nAffiliates of Parent. Parent shall provide Company with such information and
\ndocuments as Company shall reasonably request for purposes of reviewing such
\nlist. Parent shall use its reasonable best efforts to deliver or cause to be
\ndelivered to Company a duly executed Parent Affiliate Agreement in the form of
\nExhibit C attached hereto (the “Parent Affiliate Agreements”) from the persons
\n———
\nidentified in Schedule 5.11(b) as soon as practicable (and in any event within
\nthree business days) after the execution hereof (to the extent not executed
\nheretofore) and from any other person as soon as practicable after the date on
\nwhich such person becomes an Affiliate of Parent.<\/p>\n
5.12 Tax Treatment. The parties shall use their reasonable best
\n ————–
\nefforts to cause the Merger to qualify as a “reorganization” within the meaning
\nof Section 368(a) of the Code.<\/p>\n
5.13 Company Options.
\n ————— <\/p>\n
(a) At the Effective Time, the Company Stock Option Plans, the
\nCompany Options and each outstanding option to purchase shares of Company Common
\nStock under the Company Stock Option Plans, whether vested or unvested, will be
\nassumed by Parent. Company represents and warrants to Parent that Schedule 5.13
\n ————-
\nhereto sets forth a true and complete list as of the date hereof of all holders
\nof outstanding options under the Company Stock <\/p>\n
39<\/p>\n
Option Plans and all other Company Options, including the number of shares of
\nCompany capital stock subject to each such option, the exercise or vesting
\nschedule, the exercise price per share and the term of each such option. On the
\nClosing Date, Company shall deliver to Parent an updated Schedule 5.13 hereto
\n ————-
\ncurrent as of such date. Each such option so assumed by Parent under this
\nAgreement shall continue to have, and be subject to, the same terms and
\nconditions set forth in the Company Stock Option Plans, the Company Options and
\nthe applicable stock option agreements, immediately prior to the Effective Time,
\nexcept that (i) such option will be exercisable for that number of whole shares
\nof Parent Common Stock equal to the product of the number of shares of Company
\nCommon Stock that were issuable upon exercise of such option immediately prior
\nto the Effective Time multiplied by the Exchange Ratio and rounded down to the
\nnearest whole number of shares of Parent Common Stock, and (ii) the per share
\nexercise price for the shares of Parent Common Stock issuable upon exercise of
\nsuch assumed option will be equal to the quotient determined by dividing the
\nexercise price per share of Company Common Stock at which such option was
\nexercisable immediately prior to the Effective Time by the Exchange Ratio,
\nrounded up to the nearest whole cent, subject to any adjustments necessary to
\nprotect the status of any option as an incentive stock option as defined in
\nSection 422 of the Code. It is the intention of the parties that the options so
\nassumed by Parent qualify, to the maximum extent permissible following the
\nEffective Time as incentive stock options as defined in Section 422 of the Code
\nto the extent such options qualified as incentive stock options prior to the
\nEffective Time. As soon as practicable (and in any event within thirty (30)
\nbusiness days after the Effective Time, Parent will issue to each person who,
\nimmediately prior to the Effective Time was a holder of an outstanding option
\nunder the Company Stock Option Plans or a Company Option a document, in form and
\nsubstance submitted to Company at least ten (10) days before the Closing Date
\nand reasonably satisfactory to Company, evidencing the foregoing assumption of
\nsuch option by Parent. All Company Options assumed by Parent hereunder will be
\nexercisable in accordance with their terms without regard to whether such
\ndocument has been delivered to the holder thereof.<\/p>\n
(b) All outstanding rights of Company which it may hold immediately
\nprior to the Effective Time to repurchase unvested shares of Company Common
\nStock (the “Repurchase Options”) shall be assigned to Parent in the Merger and
\nshall thereafter be exercisable by Parent upon the same terms and conditions in
\neffect immediately prior to the Effective Time, except that the shares
\npurchasable pursuant to the Repurchase Options and the purchase price per shall
\nbe adjusted to reflect the Exchange Ratio.<\/p>\n
5.14 Form S-8. Parent agrees to use its reasonable best efforts to
\n ——–
\nfile as soon as practicable after the Effective Time (and in any event no later
\nthan twenty (20) business days after the Effective Time), a registration
\nstatement on Form S-8 covering the shares of Parent Common Stock issuable
\npursuant to outstanding options under the Company Stock Option Plans assumed by
\nParent. Company shall cooperate with and assist Parent in the preparation of
\nsuch registration statement.<\/p>\n
5.15 Employees; Employee Benefit Matters.
\n ———————————– <\/p>\n
(a) Concurrently with the execution of this Agreement, each of
\nthe individuals set forth on Schedule 5.15(a) shall have delivered to Parent an
\n —————-
\nexecuted Management Continuity Agreement in the form of Exhibit D attached
\n ———
\nhereto.<\/p>\n
40<\/p>\n
(b) If required by Parent in writing delivered to Company not
\nless than five (5) business days before Closing, Company shall, on or before the
\nday immediately prior to the Closing Date, terminate the Company 401(k) Plan
\n(the “Plan”) and no further contributions shall be made to the Plan. Company
\nshall provide to Parent (i) certified copies of resolutions adopted by the Board
\nof Directors of Company authorizing the termination and (ii) an executed
\namendment to the Plan in form and substance reasonably satisfactory to Parent to
\nconform the plan document for the Plan with all applicable requirements of the
\nCode and regulations thereunder relating to the tax-qualified status of the
\nPlan.<\/p>\n
(c) To the extent permissible under the applicable provisions of
\nthe Code and ERISA and the terms of any employee benefit plans sponsored or
\nmaintained by Parent or its Subsidiaries, (i) for purposes of crediting periods
\nof service for eligibility to participate and vesting, employees of Company and
\nits Subsidiaries shall receive full credit for purposes of eligibility and
\nvesting, and periods of service with Company and any Subsidiary before the
\nEffective Time shall be treated as if such service had been with Parent and (ii)
\nindividuals who are employees of Company or any of its Subsidiaries at the
\nEffective Time and who become employees of Parent or any Subsidiary thereof
\nshall be eligible to participate in any employee benefit plan (within the
\nmeaning of ERISA Section 3(3)) (except for the Parent 401(k) Plan and Parent
\nStock Option Plans) maintained by Parent or any Subsidiary thereof on the same
\nterms and conditions as apply generally to other employees of Parent or any of
\nits Subsidiaries.<\/p>\n
(d) Parent will or will cause the Surviving Corporation or
\nTelebank to offer a position of at-will employment on Parent’s customary
\nemployment terms (except to the extent Management Continuity Agreements in the
\nform of Exhibit D are in effect) to each of Company’s and its Subsidiaries’
\npersonnel as of the Effective Time at their existing employment location as of
\nthe Effective Time.<\/p>\n
(e) Company agrees to use commercially reasonable efforts to
\ncause each of its employees and officers to enter into proprietary information
\nagreements, in substantially the form previously provided by Parent to Company,
\nas soon as practicable.<\/p>\n
5.16 Director and Officer Indemnification.
\n ———————————— <\/p>\n
(a) Parent agrees not to cause or allow the Surviving Corporation
\nto modify, and to cause the Surviving Corporation to honor, any rights to
\nindemnification or exculpation from liabilities for acts or omissions occurring
\nat or prior to the Effective Time now existing in favor of the officers and
\ndirectors of Company and its Subsidiaries as provided in their respective
\ncertificates of incorporation or by-laws (or comparable organizational
\ndocuments) and any indemnification agreements of Company.<\/p>\n
(b) For four years after the Effective Time, Parent will cause
\nthe Surviving Corporation to use commercially reasonable efforts to provide
\nofficers’ and directors’ liability insurance in respect of acts or omissions
\noccurring at or prior to the Effective Time covering each such person currently
\ncovered by Company’s officers’ and directors’ liability insurance policy on
\nterms reasonably comparable to those of such policy in effect on the date
\nhereof, provided that in satisfying its obligation under this paragraph, Parent
\nshall not be obligated to cause the Surviving Corporation to pay premiums in
\nexcess of 150% of the amount <\/p>\n
41<\/p>\n
per annum Company paid in its last full fiscal year, which amount has been
\ndisclosed in writing to Parent, and if the Surviving Corporation is unable to
\nobtain the insurance required by this paragraph, it shall obtain as much
\ncomparable insurance as possible for an annual premium equal to such maximum
\namount.<\/p>\n
(c) Parent will not permit the Surviving Corporation to merge or
\nconsolidate with any other person unless the Surviving Corporation will ensure
\nthat the surviving or resulting entity assumes the obligations imposed by this
\nSection 5.16.<\/p>\n
5.17 Comfort Letters.
\n ————— <\/p>\n
(a) Parent shall use its reasonable best efforts to cause to be
\ndelivered to Company a procedures letter of Parent’s independent auditors, dated
\na date within two (2) business days before the date on which the Registration
\nStatement shall become effective and addressed to Parent and Company, in form
\nreasonably satisfactory to Company and customary in scope and substance for
\nletters delivered by independent public accountants in accordance with Opinion
\n16 of the Accounting Principles Board and Statement of Accounting Standards No.
\n72 in connection with registration statements similar to the Registration
\nStatement.<\/p>\n
(b) Company shall use its reasonable best efforts to cause to be
\ndelivered to Parent a procedures letter of Company’s independent auditors, dated
\na date within two (2) business days before the date on which the Registration
\nStatement shall become effective and addressed to Parent and Company, in form
\nreasonably satisfactory to Parent and customary in scope and substance for
\nletters delivered by independent public accountants in accordance with Opinion
\n16 of the Accounting Principles Board and Statement of Accounting Standards No.
\n72 in connection with registration statements similar to the Registration
\nStatement.<\/p>\n
5.18 Stockholder Litigation. Unless and until Company has withdrawn
\n ———————-
\nits recommendation of the Merger in compliance with Section 4.4, Company shall
\ngive Parent the opportunity to participate in or, in the event Parent is named
\nin any such litigation, to lead, in each case at its own expense, the defense of
\nany stockholder litigation against Company and\/or its directors relating to the
\ntransactions contemplated by this Agreement and the Option Agreement. In the
\nevent Parent is leading any such stockholder litigation, Company shall be given
\nthe opportunity to participate at its own expense in the defense of such
\nstockholder litigation.<\/p>\n
5.19 Company Debt Securities. As required by all contracts and
\n ———————–
\nagreements relating to Company’s outstanding 11-1\/2% Subordinated Notes due
\n2004, 11.00% Junior Subordinated Deferrable Interest Debentures, 9.0% Junior
\nSubordinated Deferrable Interest Debentures (Series A), and 9.5% Senior
\nSubordinated Notes due March 31, 2004, Parent shall: (a) expressly assume, by
\nsupplemental indenture or as otherwise required by such contracts and
\nagreements, all obligations under such contracts and agreements and the
\nperformance of the covenants and conditions of Company to be performed and
\nobserved therein; (b) maintain compliance with all applicable capital
\nrequirements, financial tests and other financial ratios contained therein; and
\n(c) deliver all such certificates and opinions as required therein.<\/p>\n
42<\/p>\n
ARTICLE VI<\/p>\n
CONDITIONS TO THE MERGER
\n ————————<\/p>\n
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
\n ————————————————————
\nrespective obligations of each party to this Agreement to consummate and effect
\nthe Merger shall be subject to the satisfaction at or prior to the Effective
\nTime of each of the following conditions, any of which may be waived, in
\nwriting, by agreement of all the parties hereto:<\/p>\n
(a) Stockholder Approvals. This Agreement and the Merger shall
\n ———————
\nhave been approved and adopted by the holders of two-thirds (2\/3) of the shares
\nof Company Common Stock outstanding as of the record date set for the Company
\nStockholders Meeting, and an increase in the number of authorized shares of
\nParent Common Stock sufficient to allow consummation of the Merger and the
\ntransactions contemplated hereby shall have been approved and adopted by the
\nholders of a majority of the shares of Parent Common Stock outstanding as of the
\nrecord date set for a meeting to be held for such purpose (the “Parent
\nStockholder Approval”).<\/p>\n
(b) Registration Statement Effective. The SEC shall have declared
\n ——————————–
\nthe Registration Statement effective. No stop order suspending the effectiveness
\nof the Registration Statement or any part thereof shall have been issued, and no
\nproceeding for that purpose, and no similar proceeding shall have been initiated
\nby the SEC in respect of the Proxy Statement; and all requests for additional
\ninformation on the part of the SEC shall have been complied with to the
\nreasonable satisfaction of the parties hereto.<\/p>\n
(c) No Injunctions or Restraints; Illegality. No temporary
\n —————————————–
\nrestraining order, preliminary or permanent injunction or other order issued by
\nany court of competent jurisdiction or other legal or regulatory restraint or
\nprohibition preventing the consummation of the Merger shall be in effect, nor
\nshall any proceeding brought by an administrative agency or commission or other
\ngovernmental authority or instrumentality, domestic or foreign, seeking any of
\nthe foregoing be pending; nor shall there be any action taken, or any statute,
\nrule, regulation or order enacted, entered, enforced or deemed applicable to the
\nMerger, which prevents or prohibits the consummation of the Merger. In the event
\nan injunction or other order shall have been issued, each party agrees to use
\nits commercially reasonable efforts to have such injunction or other order
\nlifted.<\/p>\n
(d) Listing of Additional Shares. The filing with the Nasdaq
\n —————————-
\nNational Market of a Notification Form for Listing of Additional Shares with
\nrespect to the shares of Parent Common Stock issuable upon conversion of the
\nCompany Common Stock in the Merger and upon exercise of the options under the
\nCompany Stock Option Plans assumed by Parent, shall have been made.<\/p>\n
(e) Pooling Letters. Parent shall have received letters, each
\n —————
\ndated the Closing Date, from Deloitte & Touche, L.L.P., Parent’s independent
\nauditors, and Arthur Andersen LLP, Company’s independent auditors, to the effect
\nthat the Merger qualifies for pooling of interests accounting treatment if
\nconsummated in accordance with this Agreement.<\/p>\n
43<\/p>\n
6.2 Additional Conditions to Obligations of Company. The obligations
\n ———————————————–
\nof Company to consummate and effect the Merger shall be subject to the
\nsatisfaction at or prior to the Effective Time of each of the following
\nconditions, any of which may be waived, in writing, by Company:<\/p>\n
(a) Representations, Warranties and Covenants. (i) The
\n —————————————–
\nrepresentations and warranties of Parent in this Agreement shall be true and
\ncorrect in all respects (ignoring for this purpose all materiality or Material
\nAdverse Effect qualifications in such representations and warranties) when made
\nand as of the Effective Time as though such representations and warranties were
\nmade on and as of such time (other than (A) representations and warranties
\nexpressly made as of an earlier date, which shall have been true and correct as
\nof such earlier date, and (B) failures to be true and correct that do not, in
\nthe aggregate, constitute a Material Adverse Effect on Parent) and (ii) Parent
\nand Merger Sub shall have performed and complied in all material respects with
\nall covenants, obligations and conditions of this Agreement required to be
\nperformed and complied with by them at or prior to the Effective Time.<\/p>\n
(b) Certificate of Parent. Company shall have been provided with
\n ———————
\na certificate executed on behalf of Parent by its President and its Chief
\nFinancial Officer certifying that the condition set forth in Section 6.2(a) has
\nbeen fulfilled.<\/p>\n
(c) Governmental Approval. Parent, Company and Merger Sub and
\n ———————
\ntheir respective Subsidiaries shall have timely obtained from each Governmental
\nEntity all approvals, waivers and consents, if any, necessary for consummation
\nof or in connection with the Merger and the other transactions contemplated
\nhereby, including such approvals, waivers and consents as may be required under
\nthe Home Owners Loan Act, the Securities Act, the Exchange Act, any SRO
\nconstitution or rules or any state Blue Sky laws.<\/p>\n
(d) Tax Opinion. Company shall have received a written opinion of
\n ———–
\nHogan & Hartson L.L.P. (or if such firm is unable to, or fails to timely
\ndeliver, such opinion, Brobeck, Phleger & Harrison LLP) dated as of the Closing
\nDate to the effect that the Merger will constitute a reorganization within the
\nmeaning of Section 368(a) of the Code, and such opinion shall not have been
\nwithdrawn. In rendering such opinion, counsel shall be entitled to rely upon,
\namong other things, reasonable assumptions as well as representations of Parent,
\nMerger Sub and Company.<\/p>\n
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
\n —————————————————————–
\nThe obligations of Parent and Merger Sub to consummate and effect the Merger
\nshall be subject to the satisfaction at or prior to the Effective Time of each
\nof the following conditions, any of which may be waived, in writing, by Parent:<\/p>\n
(a) Representations, Warranties and Covenants. (i) The
\n —————————————–
\nrepresentations and warranties of Company in this Agreement shall be true and
\ncorrect in all respects (ignoring for this purpose all materiality or Material
\nAdverse Effect qualifications in such representations and warranties) when made
\nand as of the Effective Time as though such representations and warranties were
\nmade on and as of such time (other than (A) representations and warranties
\nexpressly made as of an earlier date and (B) failures to be true and correct
\nthat do <\/p>\n
44<\/p>\n
not, in the aggregate, constitute a Material Adverse Effect on Company) and (ii)
\nCompany shall have performed and complied in all material respects with all
\ncovenants, obligations and conditions of this Agreement required to be performed
\nand complied with by it at or prior to the Effective Time.<\/p>\n
(b) Certificate of Company. Parent shall have been provided with
\n ———————-
\na certificate executed on behalf of Company by its President and Chief Financial
\nOfficer certifying that the condition set forth in Section 6.3(a) has been
\nfulfilled.<\/p>\n
(c) Governmental Approval. Parent, Company and Merger Sub and
\n ———————
\ntheir respective Subsidiaries shall have timely obtained from each Governmental
\nEntity all approvals, waivers and consents, if any, necessary for consummation
\nof or in connection with the Merger and the other transactions contemplated
\nhereby, including such approvals, waivers and consents as may be required under
\nthe Home Owners Loan Act, the Securities Act, the Exchange Act, any SRO
\nconstitution or rules, or any state Blue Sky laws; provided, however, that none
\n ——– ——-
\nof the preceding shall be deemed obtained or made if it shall impose a non-
\ncustomary condition or restriction that Parent reasonably determines in good
\nfaith could reasonably be expected to result in a Material Adverse Effect on
\nParent or the Surviving Corporation.<\/p>\n
(d) Third Party Consents. Parent shall have been furnished with
\n ——————–
\nevidence satisfactory to it of the consent or approval of those persons whose
\nconsent or approval shall be required in connection with the Merger under any
\nMaterial Contract of Company or any of its Subsidiaries or otherwise, the
\nfailure of which to obtain could reasonably be expected to have a Material
\nAdverse Effect on Parent or the Surviving Corporation.<\/p>\n
(e) Injunctions or Restraints on Conduct of Business. No
\n ————————————————
\ntemporary restraining order, preliminary or permanent injunction or other order
\nissued by any court of competent jurisdiction or other legal or regulatory
\nrestraint provision limiting or restricting Parent’s conduct or operation of the
\nbusiness of Company and its Subsidiaries, following the Merger shall be in
\neffect, nor shall any proceeding brought by an administrative agency or
\ncommission, SRO or other Governmental Entity, domestic or foreign, seeking the
\nforegoing be pending.<\/p>\n
(f) No Material Adverse Effect. There shall not have occurred
\n ————————–
\nsince the date hereof any Material Adverse Effect on Company.<\/p>\n
(g) Tax Opinion. Parent shall have received a written opinion of
\n ———–
\nBrobeck, Phleger & Harrison LLP (or if such firm is unable to, or fails to
\ntimely deliver, such opinion, Hogan & Hartson L.L.P.) dated as of the Closing
\nDate to the effect that the Merger will constitute a reorganization within the
\nmeaning of Section 368(a) of the Code, and such opinion shall not have been
\nwithdrawn. In rendering such opinion, counsel shall be entitled to rely upon,
\namong other things, reasonable assumptions as well as representations of Parent,
\nMerger Sub and Company.<\/p>\n
45<\/p>\n
ARTICLE VII<\/p>\n
TERMINATION, AMENDMENT AND WAIVER
\n ———————————<\/p>\n
7.1 Termination. At any time prior to the Effective Time, whether
\n ———–
\nbefore or after approval of the matters presented in connection with the Merger
\nby the stockholders of Company, this Agreement may be terminated:<\/p>\n
(a) by mutual consent of Parent and Company;<\/p>\n
(b) by either Parent or Company, if, the Closing shall not have
\noccurred on or before December 31, 1999 (provided that the right to terminate
\nthis Agreement under this Section 7.1(b) shall not be available to any party
\nwhose action or failure to act has been the cause of or resulted in the failure
\nof the Merger to occur on or before such date and such action or failure to act
\nconstitutes a breach of this Agreement);<\/p>\n
(c) by Parent, if (i) Company shall breach any of its
\nrepresentations, warranties or obligations hereunder to an extent that would
\ncause the condition set forth in Section 6.3(a) not to be satisfied and such
\nbreach shall not have been cured within ten (10) business days of receipt by
\nCompany of written notice of such breach (provided that the right to terminate
\nthis Agreement by Parent shall not be available to Parent if Parent is at that
\ntime in material breach of this Agreement), (ii) the Board of Directors of
\nCompany shall have withdrawn or modified its recommendation of this Agreement or
\nthe Merger or any transaction contemplated hereby in a manner adverse to Parent
\nor shall have resolved to do any of the foregoing, (iii) Company shall have
\nfailed to comply with the Option Agreement or with Section 4.4 or Section 5.2 of
\nthis Agreement, or (iv) the Board of Directors of Company shall have
\nrecommended, endorsed, accepted or agreed to a Takeover Proposal or shall have
\nresolved to do so;<\/p>\n
(d) by Company, if Parent shall breach any of its
\nrepresentations, warranties or obligations hereunder to an extent that would
\ncause the condition set forth in Section 6.2(a) not to be satisfied and such
\nbreach shall not have been cured within ten (10) business days following receipt
\nby Parent of written notice of such breach (provided that the right to terminate
\nthis Agreement by Company shall not be available to Company where Company is at
\nthat time in material breach of this Agreement);<\/p>\n
(e) by Parent if a Trigger Event (as defined in Section 7.3(e))
\n or Takeover Proposal shall have occurred and the Board of Directors of
\n Company, in connection therewith, does not within five (5) business days of
\n such occurrence (i) reconfirm its approval and recommendation of this
\n Agreement and the transactions contemplated hereby and (ii) reject such
\n Takeover Proposal or Trigger Event; or<\/p>\n
(f) by either Parent or Company if (i) any permanent injunction
\nor other order of a court or other competent authority preventing the
\nconsummation of the Merger shall have become final and nonappealable, (ii) if
\nany required approval of the stockholders of Company shall not have been
\nobtained by reason of the failure to obtain the required vote upon a vote held
\nat a duly held meeting of stockholders of Company or at any adjournment thereof
\nor (iii) if the Parent Stockholder Approval shall not have been obtained at the
\nJune 25 Meeting and <\/p>\n
46<\/p>\n
the Parent Stockholder Approval is not obtained at a meeting of Parent’s
\nstockholders, or any postponement or adjournment thereof, to be held on or about
\nthe day of the Company Stockholders Meeting (the “Parent Stockholders Meeting”).<\/p>\n
7.2 Effect of Termination. In the event of termination of this
\n ———————
\nAgreement as provided in Section 7.1, this Agreement shall forthwith become void
\nand there shall be no liability or obligation on the part of Parent, Merger Sub
\nor Company or their respective officers, directors, stockholders or affiliates,
\nexcept to the extent that such termination results from the breach by a party
\nhereto of any of its representations, warranties or covenants set forth in this
\nAgreement; provided that (a) the provisions of Section 5.4 (Confidentiality),
\nSection 7.3 (Expenses and Termination Fees), Section 8.8 (Governing Law) and
\nthis Section 7.2 shall remain in full force and effect and survive any
\ntermination of this Agreement and (b) nothing herein shall relieve any party
\nfrom liability for fraud or willful breach in connection with this Agreement or
\nthe transactions contemplated hereby.<\/p>\n
7.3 Expenses and Termination Fees.
\n —————————– <\/p>\n
(a) Subject to subsections (b), (c), (d), (e) and (f) of this
\nSection 7.3, whether or not the Merger is consummated, all costs and expenses
\nincurred in connection with this Agreement and the transactions contemplated
\nhereby (including, without limitation, the fees and expenses of its advisers,
\nbrokers, finders, agents, accountants and legal counsel) shall be paid by the
\nparty incurring such expense, it being understood and agreed that expenses
\nincurred in connection with printing the Proxy Materials and the Registration
\nStatement, and registration and filing fees incurred in connection with the
\nRegistration Statement, the Proxy Materials and the listing of additional shares
\npursuant to Section 6.1(d) and filing fees associated with compliance with
\napplicable OTS requirements in connection with the Merger shall be deemed to be
\nincurred equally by Company and Parent.<\/p>\n
(b) In the event that (i) Parent shall terminate this Agreement
\npursuant to Section 7.1(e), (ii) Parent shall terminate this Agreement pursuant
\nto Section 7.1(c)(ii), (iii) or (iv), (iii) either Parent or Company shall
\nterminate this Agreement pursuant to Section 7.1(f)(ii) following a failure of
\nthe stockholders of Company to approve this Agreement and, prior to the time of
\nthe Company Stockholders Meeting, there shall have been a Trigger Event or a
\nTakeover Proposal with respect to Company, then in the case of each of (i)
\nthrough (iii) Company shall reimburse Parent for all of the out-of-pocket costs
\nand expenses incurred by Parent in connection with this Agreement and the
\ntransactions contemplated hereby (including, without limitation, the reasonable
\nfees and expenses of its advisors, accountants and legal counsel), and, in
\naddition to any other remedies Parent may have, Company shall promptly pay to
\nParent cash in an amount equal to fifty-four million dollars ($54,000,000) (the
\n“Termination Fee”).<\/p>\n
(c) In the event that (i) Parent or Company shall terminate this
\nAgreement pursuant to Section 7.1(b) and, prior to the time of such termination,
\nthere shall have been a Trigger Event or a Takeover Proposal with respect to
\nCompany or (ii) Parent shall terminate this Agreement pursuant to Section
\n7.1(c)(i), Company shall promptly reimburse Parent for all of the reasonable
\nout-of-pocket costs and expenses incurred by Parent in connection with this
\nAgreement and the transactions contemplated hereby (including, without<\/p>\n
47<\/p>\n
limitation, the fees and expenses of its advisors, accountants and legal
\ncounsel), and, in the event a definite agreement or letter of intent is entered
\nby Company with respect to a Takeover Proposal, a Takeover Proposal is
\nconsummated or a Trigger Event results in a Person or group of Persons within
\nthe meaning of Section 13(d) of the Exchange Act and the regulations thereunder
\nbeneficially owning forty percent (40%), or results in a Person together with
\nany other Persons acting in concert within the meaning of Part 574 of the OTS
\nrules and regulations beneficially owning forty percent (40%), or more of the
\nvoting power of Company within nine (9) months of the later of (x) such
\ntermination of this Agreement and (y) the payment of the above-described
\nexpenses, Company shall also promptly pay to Parent the Termination Fee.<\/p>\n
(d) In the event that Parent or Company shall terminate this
\nAgreement pursuant to Section 7.1(f)(iii), then Parent shall promptly reimburse
\nCompany for all of the reasonable out-of-pocket costs and expenses incurred by
\nCompany in connection with this Agreement and the transactions contemplated
\nhereby (including, without limitation, the fees and expenses of its advisors,
\naccountants and legal counsel).<\/p>\n
(e) As used herein, a “Trigger Event” shall occur if any Person
\n(as that term is defined in Section 13(d) of the Exchange Act and the
\nregulations promulgated thereunder) acquires securities representing twenty
\npercent (20%) or more, or commences a tender or exchange offer, open market
\npurchase program or other publicly announced initiative following the successful
\nconsummation of which the offeror and its affiliate would beneficially own
\nsecurities representing twenty percent (20%) or more, of the voting power of
\nCompany.<\/p>\n
(f) For purposes of this Agreement, “Takeover Proposal” means any
\noffer or proposal for, or any indication of interest in, a merger or other
\nbusiness combination involving Company or any of its Subsidiaries or the
\nacquisition of twenty percent (20%) or more of the outstanding shares of capital
\nstock, or a significant portion of the assets of, Company or any of its
\nSubsidiaries, other than the transactions contemplated by this Agreement.<\/p>\n
7.4 Amendment. The boards of directors of the parties hereto may
\n ———
\ncause this Agreement to be amended at any time by execution of an instrument in
\nwriting signed on behalf of each of the parties hereto; provided that an
\n ——–
\namendment made subsequent to adoption of the Agreement by the stockholders of
\nCompany or Merger Sub shall not (i) alter or change the amount or kind of
\nconsideration to be received on conversion of the Company Common Stock, or (ii)
\nalter or change any of the terms and conditions of the Agreement if such
\nalteration or change would materially adversely affect the holders of Company
\nCommon Stock or Merger Sub Common Stock.<\/p>\n
7.5 Extension; Waiver. At any time prior to the Effective Time any
\n —————–
\nparty hereto may, to the extent legally allowed, (i) extend the time for the
\nperformance of any of the obligations or other acts of the other parties hereto,
\n(ii) waive any inaccuracies in the representations and warranties made to such
\nparty contained herein or in any document delivered pursuant hereto and (iii)
\nwaive compliance with any of the agreements or conditions for the benefit of
\nsuch party contained herein. Any agreement on the part of a party hereto to any
\nsuch extension or waiver shall be valid only if set forth in an instrument in
\nwriting signed on behalf of such party.<\/p>\n
48<\/p>\n
ARTICLE VIII<\/p>\n
GENERAL PROVISIONS
\n ——————<\/p>\n
8.1 Non-Survival at Effective Time. The representations, warranties
\n ——————————
\nand agreements set forth in this Agreement shall terminate at the Effective
\nTime, except that the agreements set forth in Article I, Section 5.4
\n(Confidentiality), 5.14 (Form S-8), 5.16 (Director and Officer Indemnification),
\n5.7 (Reasonable Best Efforts and Further Assurances), 7.3 (Expenses and
\nTermination Fees) and this Article VIII shall survive the Effective Time.<\/p>\n
8.2 Notices. All notices and other communications hereunder shall be
\n ——-
\nin writing and shall be deemed given if delivered personally or by commercial
\ndelivery service, or mailed by registered or certified mail (return receipt
\nrequested) or sent via facsimile (with confirmation of receipt) to the parties
\nat the following address (or at such other address for a party as shall be
\nspecified by like notice):<\/p>\n
(a) if to Parent or Merger Sub, to:<\/p>\n
E*TRADE Group, Inc.
\n Four Embarcadero Place
\n 2400 Geng Road
\n Palo Alto, CA 94303
\n Attention: Thomas A. Bevilacqua, Esq.
\n Facsimile No.: (650) 842-8781
\n Telephone No.: (650) 842-2475<\/p>\n
with a copy to:<\/p>\n
Brobeck, Phleger & Harrison LLP
\n Two Embarcadero Place
\n 2200 Geng Road
\n Palo Alto, CA 94303
\n Attention: Curtis L. Mo, Esq.
\n Facsimile No.: (650) 496-2885
\n Telephone No.: (650) 424-0160<\/p>\n
and<\/p>\n
Brobeck, Phleger & Harrison LLP
\n Spear Street Tower
\n One Market
\n San Francisco, CA 94105
\n Attention: J. Michael Shepherd, Esq.
\n Steve L. Camahort, Esq.
\n Facsimile No.: (415) 442-1010
\n Telephone No.: (415) 442-0900<\/p>\n
49<\/p>\n
(b) if to Company, to:<\/p>\n
Telebanc Financial Corporation
\n 1111 North Highland Street
\n Arlington, VA 22201-2807
\n Attention: President
\n Facsimile No.: (703) 524-0556
\n Telephone No.: (703) 247-3700<\/p>\n
with a copy to:<\/p>\n
Hogan & Hartson L.L.P.
\n Columbia Square
\n 555 Thirteenth Street, N.W.
\n Washington, D.C. 20004
\n Attention: Stuart G. Stein, Esq.
\n Steven Museles, Esq.
\n Facsimile No.: (202) 637-5910
\n Telephone No.: (202) 637-5600<\/p>\n
8.3 Interpretation. When a reference is made in this Agreement to
\n ————–
\nExhibits or Schedules, such reference shall be to an Exhibit or Schedule to this
\nAgreement unless otherwise indicated. The words “include,” “includes” and
\n“including” when used herein shall be deemed in each case to be followed by the
\nwords “without limitation.” The phrase “made available” in this Agreement shall
\nmean that the information referred to has been made available if requested by
\nthe party to whom such information is to be made available. The phrases “the
\ndate of this Agreement”, “the date hereof”, and terms of similar import, unless
\nthe context otherwise requires, shall be deemed to refer to the date set forth
\nin the first paragraph of this Agreement. The table of contents and headings
\ncontained in this Agreement are for reference purposes only and shall not affect
\nin any way the meaning or interpretation of this Agreement.<\/p>\n
8.4 Counterparts. This Agreement may be executed in two or more
\n ————
\ncounterparts, all of which shall be considered one and the same agreement and
\nshall become effective when one or more counterparts have been signed by each of
\nthe parties and delivered to the other parties, it being understood that all
\nparties need not sign the same counterpart.<\/p>\n
8.5 Entire Agreement; Nonassignability; Parties in Interest. This
\n ——————————————————-
\nAgreement and the documents and instruments and other agreements specifically
\nreferred to herein or delivered pursuant hereto, including the Exhibits, the
\nSchedules, including the Company Disclosure Schedule and the Parent Disclosure
\nSchedule, (a) constitute the entire agreement among the parties with respect to
\nthe subject matter hereof and supersede all prior agreements and understandings,
\nboth written and oral, among the parties with respect to the subject matter
\nhereof, except for the Confidentiality Agreement, which shall continue in full
\nforce and effect, and shall survive any termination of this Agreement or the
\nClosing, in accordance with its terms; (b) are not intended to confer upon any
\nother person any rights or remedies hereunder, except as set forth in Sections
\n1.6(a)-(c)-(d)-(f)-(g) (Effect on Capital Stock), 1.7 (Surrender of<\/p>\n
50<\/p>\n
Certificates) and 5.16 (Director and Officer Indemnification); and (c) shall not
\nbe assigned by operation of law or otherwise except as otherwise specifically
\nprovided.<\/p>\n
8.6 Severability. In the event that any provision of this Agreement,
\n ————
\nor the application thereof, becomes or is declared by a court of competent
\njurisdiction to be illegal, void, invalid or unenforceable, the remainder of
\nthis Agreement will continue in full force and effect and the application of
\nsuch provision to other persons or circumstances will be interpreted so as
\nreasonably to effect the intent of the parties hereto. The parties further agree
\nto replace such illegal, void, invalid or unenforceable provision of this
\nAgreement with a legal, valid and enforceable provision that will achieve, to
\nthe extent possible, the economic, business and other purposes of such illegal,
\nvoid, invalid or unenforceable provision.<\/p>\n
8.7 Remedies Cumulative. Except as otherwise provided herein, any and
\n ——————-
\nall remedies herein expressly conferred upon a party will be deemed cumulative
\nwith and not exclusive of any other remedy conferred hereby, or by law or equity
\nupon such party, and the exercise by a party of any one remedy will not preclude
\nthe exercise of any other remedy.<\/p>\n
8.8 Governing Law. This Agreement shall be governed by and construed
\n ————-
\nin accordance with the laws of the State of Delaware without reference to such
\nstate’s principles of conflicts of law. Each of the parties hereto irrevocably
\nconsents to the exclusive jurisdiction of any court located within the State of
\nDelaware in connection with any matter based upon or arising out of this
\nAgreement or the matters contemplated herein, agrees that process may be served
\nupon them in any manner authorized by the laws of the State of Delaware for such
\npersons and waives and covenants not to assert or plead any objection which they
\nmight otherwise have to such jurisdiction and such process.<\/p>\n
8.9 Rules of Construction. The parties hereto agree that they have
\n ———————
\nbeen represented by counsel during the negotiation, preparation and execution of
\nthis Agreement and, therefore, waive the application of any law, regulation,
\nholding or rule of construction providing that ambiguities in an agreement or
\nother document will be construed against the party drafting such agreement or
\ndocument.<\/p>\n
8.10 Definitions; Etc.
\n —————- <\/p>\n
(a) For purposes of this Agreement, (i) “Material Adverse Effect”
\nmeans, with respect to any person or entity, any event, change, condition or
\neffect that is, or could be reasonably expected to be, materially adverse to the
\ncondition (financial or otherwise), properties, assets (including, without
\nlimitation, intangible assets), liabilities, business, operations or results of
\noperations of such person or entity and its Subsidiaries, taken as a whole;
\nprovided, however, that in no event shall a decrease in such person’s or
\nentity’s stock price in and of itself be considered a “Material Adverse Effect”,
\n(ii) “Subsidiary” means, with respect to any party, any corporation, partnership
\nor other organization or entity, whether incorporated or unincorporated, in
\nwhich such party has, directly or indirectly, a fifty percent (50%) or greater
\ninterest, and (iii) any reference to a party’s “knowledge” means the actual
\nknowledge of such party’s executive officers and directors.<\/p>\n
51<\/p>\n
(b) The parties acknowledge that, insofar as Company’s Board of
\nDirectors has declared and approved a 2-for-1 split of Company Common Stock
\npayable to its stockholders of record as of the close of business on May 28,
\n1999 (the “Stock Split”), the Exchange Ratio and all share numbers herein
\nrepresenting numbers of shares of Company Common Stock do not give effect to the
\nStock Split and shall be deemed to be proportionally adjusted for the Stock
\nSplit upon the effectiveness thereof. Notwithstanding anything herein to the
\ncontrary, consummation of the Stock Split shall not be deemed a breach of this
\nAgreement.<\/p>\n
52<\/p>\n
IN WITNESS WHEREOF, Company, Parent and Merger Sub have caused this
\nAgreement to be executed and delivered by their respective officers thereunto
\nduly authorized, all as of the date first written above.<\/p>\n
TELEBANC FINANCIAL CORPORATION<\/p>\n
By: \/s\/ Mitchell H. Caplan
\n _______________________________
\n Name: Mitchell H. Caplan
\n _____________________________
\n Title: President and Chief
\n Executive Officer
\n ____________________________<\/p>\n
E*TRADE GROUP, INC.<\/p>\n
By: \/s\/ Christos M. Cotsakos
\n _______________________________
\n Name: Christos M. Cotsakos
\n _____________________________
\n Title: Chief Executive Officer
\n ____________________________<\/p>\n
TURBO ACQUISITION CORP.<\/p>\n
By: \/s\/ Christos M. Cotsakos
\n _______________________________
\n Name: Christos M. Cotsakos
\n _____________________________
\n Title: President
\n ____________________________<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[9022],"corporate_contracts_industries":[9415],"corporate_contracts_types":[9622,9626],"class_list":["post-43018","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-telebanc-financial-corp","corporate_contracts_industries-financial__banks","corporate_contracts_types-planning","corporate_contracts_types-planning__merger"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/43018","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=43018"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43018"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43018"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43018"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}