AMENDED AND RESTATED
ACQUISITION AGREEMENT
by and among
TELEBANC FINANCIAL CORPORATION,
ARBOR CAPITAL PARTNERS, INC.,
MET HOLDINGS CORPORATION,
AND
WILLIAM M. DAUGHERTY
dated as of February 19, 1997
TABLE OF CONTENTS
Page
SECTION 1. ACQUISITION OF THE ARBOR ASSETS...........................................................2
1.1 Acquisition of the Assets and Issuance of the Shares......................................2
1.2 Effective Time; Closing...................................................................2
SECTION 2. RESTRICTED SECURITIES.....................................................................4
2.1 No Registration Under the Securities Act..................................................4
2.2 Acquisition for Investment................................................................4
2.3 Evaluation of Merits and Risks of Investment..............................................4
2.4 Investment Representations................................................................4
SECTION 3. REPRESENTATIONS AND WARRANTIES OF TELEBANC................................................5
3.1 Organization of TeleBanc..................................................................5
3.2 Capitalization............................................................................5
3.3 Authorization.............................................................................5
3.4 Validity of Shares; Issuance..............................................................6
3.5 Absence of Violation......................................................................6
3.6 Binding Obligation........................................................................6
SECTION 4. REPRESENTATIONS AND WARRANTIES OF ARBOR, MET HOLDINGS AND DAUGHERTY.......................6
4.1 Organization of Arbor.....................................................................6
4.2 Capitalization............................................................................7
4.3 Non-Contravention.........................................................................7
4.4 Properties and Assets.....................................................................7
4.5 Certificate of Incorporation and Bylaws...................................................8
4.6 Financial Statements......................................................................8
4.7 Absence of Changes........................................................................9
4.8 Legal Proceedings.........................................................................9
4.9 Certain Contracts.........................................................................9
4.10 Insurance................................................................................10
4.11 Employee Benefit Plans...................................................................10
4.12 Compliance with Applicable Laws..........................................................12
4.13 Regulatory Filings and Reports...........................................................12
4.14 Tax Matters..............................................................................12
4.15 Broker's Fees............................................................................14
4.16 No Misrepresentations....................................................................14
SECTION 5. REPRESENTATIONS AND WARRANTIES OF MET HOLDINGS...........................................14
5.1 Organization of MET Holdings.............................................................14
5.2 Authorization............................................................................14
5.3 Absence of Violation.....................................................................15
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SECTION 6. REPRESENTATIONS AND WARRANTIES OF DAUGHERTY..............................................15
6.1 Authority and Capacity...................................................................15
6.2 Absence of Violation.....................................................................15
6.3 Binding Obligation.......................................................................15
SECTION 7. COVENANTS................................................................................16
7.1 Regulatory Applications..................................................................16
7.2 Further Action; Stockholder Approval.....................................................16
7.3 Third Party Consents.....................................................................16
SECTION 8. CONDITIONS TO CLOSING....................................................................16
8.1 Conditions to Obligations of All Parties.................................................16
8.2 Conditions to the Obligations of Arbor...................................................17
8.3 Conditions to Obligations of TeleBanc....................................................18
SECTION 9. CLOSING..................................................................................18
9.1 Deliveries by TeleBanc...................................................................18
9.2 Deliveries by Arbor......................................................................19
9.3 Deliveries by Daugherty..................................................................19
SECTION 10. TERMINATION..............................................................................20
10.1 Mutual Consent...........................................................................20
10.2 Other Termination........................................................................20
10.3 Effect of Termination....................................................................20
SECTION 11. REGISTRATION RIGHTS......................................................................21
11.1 Piggyback Registration Rights............................................................21
11.2 Demand Registration Rights...............................................................21
11.3 Registration Procedures..................................................................22
11.4 Registration Expenses....................................................................23
11.5 Indemnity and Contribution...............................................................24
SECTION 12. MISCELLANEOUS............................................................................26
12.1 Additional Actions and Documents.........................................................26
12.2 Expenses.................................................................................26
12.3 Notices..................................................................................26
12.4 Waiver...................................................................................27
12.5 Binding Effect...........................................................................27
12.6 Entire Agreement; Amendment..............................................................28
12.7 Severability.............................................................................28
12.8 Headings.................................................................................28
12.9 Governing Law............................................................................28
12.10 Signature in Counterparts...............................................................28
12.11 No Third Party Beneficiaries.............................................................28
12.12 Assignability............................................................................29
12.13 Parties Not Partners.....................................................................29
12.14 Survival.................................................................................29
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AMENDED AND RESTATED ACQUISITION AGREEMENT
This Amended and Restated Acquisition Agreement (this
"Agreement"), dated as of the 19th day of February, 1997, is entered into by and
among TeleBanc Financial Corporation, a Delaware corporation ("TeleBanc"), Arbor
Capital Partners, Inc. ("Arbor"), MET Holdings Corporation, a Delaware
corporation ("MET Holdings"), and William M. Daugherty ("Daugherty").
WHEREAS, TeleBanc desires to acquire substantially all of the
assets of Arbor;
WHEREAS, MET Holdings and Daugherty own all of the issued and
outstanding capital stock of Arbor (the "Arbor Stock");
WHEREAS, Daugherty is the President of Arbor and a member of
its Board of Directors, and in such capacities Daugherty has been granted the
right (the "Daugherty Arbor Option") to purchase for $64,407.69 an additional 27
shares of common stock of Arbor in the event of a change of control in Arbor or
MET Holdings;
WHEREAS, as part of the transaction contemplated hereby,
immediately prior to the Acquisition (as defined below) contemplated hereby,
TeleBanc intends to sell in a private placement approximately 29,900 units
consisting of debt, warrants and convertible preferred stock (the "Units Sale");
WHEREAS, the independent members of the Board of Directors of
TeleBanc (the "Independent Directors") deem it advisable for TeleBanc to enter
into this Agreement, pursuant to which, at the Effective Time (as defined
below), TeleBanc will purchase substantially all of the assets of Arbor;
WHEREAS, the parties intend that the Acquisition contemplated
hereby shall constitute a reorganization within the meaning of Section
368(a)(1)(C) of the Internal Revenue Code of 1988, as amended (the "Code"); and
WHEREAS, MET Holdings and Daugherty each desires that Arbor
sell substantially all of the assets of Arbor on the terms and under the
conditions specified herein;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, the sufficiency of which is hereby acknowledged, the parties mutually
agree as follows:
SECTION 1. ACQUISITION OF THE ARBOR ASSETS.
1.1 Acquisition of the Assets and Issuance of the Shares.
(a) At the Effective Time (as defined in Section 1.2 hereof),
on the basis of the representations, warranties and agreements contained herein,
and subject to the terms and conditions of this Agreement, (i) Arbor agrees to
sell and assign to TeleBanc (or any subsidiary of TeleBanc as may be designated
by TeleBanc) those assets and liabilities of Arbor set forth at Schedule A
hereto (such assets and liabilities, which constitute substantially all of the
assets and liabilities of Arbor, and as may change from the date hereof until
the Effective Time only in the ordinary course of Arbor's business, are
hereinafter referred to as the "Arbor Assets"); and (ii) TeleBanc agrees to
issue 162,461 shares of common stock, par value $.01 per share ("TeleBanc Common
Stock") and $500,000.00 in cash to Arbor (such TeleBanc Common Stock and cash
are together hereinafter referred to as the "Acquisition Consideration"). The
acquisition by TeleBanc hereby of the Arbor Assets is referred to as the
"Acquisition."
(b) Because of the Acquisition contemplated hereby, the
parties agree that the Daugherty Arbor Option would be of no value following the
Acquisition. Furthermore, inasmuch as Daugherty will become an employee of
TeleBanc (or a wholly owned subsidiary thereof) with primary responsibility,
among other things, to be the officer in charge of the former Arbor assets, upon
the Acquisition, TeleBanc also will issue to Daugherty an option for 24,201
shares of TeleBanc Common Stock (the "Daugherty TeleBanc Option"). The Daugherty
TeleBanc Option shall have an exercise price of $64,407.69 and shall be
exercisable for a period of 10 years from Effective Time.
(c) Notwithstanding the foregoing provision of Section
1.1(a)(ii), the parties hereto agree that the TeleBanc Common Stock and amount
of cash to be paid to Arbor can be adjusted by TeleBanc in order that at the
Effective Time, the TeleBanc Common Stock issued in the Acquisition does not
have "an aggregate Market Value of five percent or more of the total Market
Value of the outstanding shares" of TeleBanc (within the meaning of Section
11.1(c) of TeleBanc's Amended and Restated Certificate of Incorporation).
1.2 Effective Time; Closing.
The effective time (the "Effective Time") of the Acquisition
shall be as soon as possible following the Units Sale, but in no event later
than one business day following the Units Sale.
The closing (the "Closing") of the Acquisition shall occur at
the principal executive office of TeleBanc at 1111 North Highland Street,
Arlington,
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Virginia 22201, or at such other place as the parties shall
mutually agree, on the day on which the Acquisition takes place (the "Closing
Date").
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SECTION 2. RESTRICTED SECURITIES.
Each of Arbor, MET Holdings and Daugherty hereby represents,
warrants and covenants as follows:
2.1 No Registration Under the Securities Act.
Arbor and Daugherty understand that the TeleBanc Common Stock
to be received by them under this Agreement and under the Daugherty TeleBanc
Option, respectively, has not been registered under the Securities Act of 1933,
as amended (the "Securities Act") in reliance upon exemptions contained in the
Securities Act or interpretations thereof, and cannot be offered for sale, sold
or otherwise transferred unless such TeleBanc Common Stock being so acquired
subsequently is so registered or qualifies for exemption from registration under
the Securities Act.
2.2 Acquisition for Investment.
The TeleBanc Common Stock is being acquired under this
Agreement by Arbor and by Daugherty under the Daugherty TeleBanc Option,
respectively, in good faith solely for its and his own account, for investment
and not with a view toward resale or other distribution within the meaning of
the Securities Act. Such TeleBanc Common Stock will not be offered for sale,
sold or otherwise transferred by Arbor or Daugherty without either registration
or exemption from registration under the Securities Act.
2.3 Evaluation of Merits and Risks of Investment.
Arbor and Daugherty have such knowledge and experience in
financial and business matters that they are capable of evaluating the merits
and risks of an investment in such TeleBanc Common Stock being acquired
hereunder or under the Daugherty TeleBanc Option. Arbor and Daugherty understand
and are able to bear any economic risks associated with such investment
(including, without limitation, the necessity of holding such TeleBanc Common
Stock for an indefinite period of time, inasmuch as such TeleBanc Common Stock
has not been registered under the Securities Act).
2.4 Investment Representations.
Arbor and Daugherty have had an opportunity to evaluate, and
are capable of evaluating, TeleBanc's business, properties and financial
affairs. Arbor and Daugherty are capable of evaluating the merits and risks of
the transactions contemplated and have had the opportunity to do so, and have
the capacity to
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protect their own interests and have had the opportunity to do so. In entering
into this Agreement, and except for matters specifically set forth in this
Agreement, each of Arbor, MET Holdings and Daugherty is not relying on any
documents, information, representations, warranties or other statements provided
or made to it by or on behalf of TeleBanc.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF TELEBANC.
TeleBanc hereby represents and warrants to Arbor, MET Holdings
and Daugherty as follows:
3.1 Organization of TeleBanc.
TeleBanc is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
3.2 Capitalization.
As of the date of this Agreement and before giving effect to
the Units Sale, the entire authorized capital stock of TeleBanc consists of
4,000,000 shares, (a) 3,500,000 shares of TeleBanc Common Stock, of which
2,049,500 shares have been issued and are outstanding and (b) 500,000 shares of
preferred stock, par value $0.01 per share ("TeleBanc Preferred Stock"), of
which no shares have been issued and are outstanding. There also are issued and
outstanding 345,000 warrants to purchase one share each of TeleBanc Common
Stock. All the issued and outstanding shares of TeleBanc Common Stock and the
capital stock of each of TeleBanc's subsidiaries have been duly authorized and
validly issued.
3.3 Authorization.
TeleBanc has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated by this Agreement in accordance with the terms hereof. The
execution, delivery and performance of this Agreement have been duly authorized
by the Independent Directors of TeleBanc and no other corporate proceedings on
the part of TeleBanc or any TeleBanc subsidiary are necessary to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by TeleBanc and constitutes a valid and legally binding obligation
of TeleBanc enforceable against TeleBanc in accordance with its terms.
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3.4 Validity of Shares; Issuance.
The TeleBanc Common Stock to be issued as part of the
Acquisition Consideration and pursuant to the Daugherty TeleBanc Option, when
issued in compliance with the provisions of this Agreement and said Option, as
applicable, will be validly issued, fully paid and non-assessable, and free of
any escrow or encumbrances, and will be issued in compliance with all applicable
federal laws.
3.5 Absence of Violation.
The execution, delivery and performance by TeleBanc of this
Agreement and all other documents contemplated hereby, the fulfillment of and
the compliance with the respective terms and provisions hereof and thereof, and
the consummation of the transactions contemplated hereby and thereby, do not and
will not (a) conflict with, or violate any provision of, any law having
applicability to TeleBanc; or (b) conflict with, or result in any breach of, or
constitute a default under, any agreement to which TeleBanc is a party.
3.6 Binding Obligation.
This Agreement constitutes a valid and binding obligation of
TeleBanc, enforceable in accordance with its terms. Each document to be executed
by TeleBanc pursuant hereto, when executed and delivered in accordance with the
provisions hereof, will be a valid and binding obligation of TeleBanc,
enforceable in accordance with its terms.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF ARBOR, MET HOLDINGS AND DAUGHERTY.
Arbor, MET Holdings and Daugherty hereby jointly and severally
represent and warrant to TeleBanc as follows:
4.1 Organization of Arbor.
Arbor is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York. Arbor has full corporate
power and authority to own or lease its properties and assets and to carry on
its business as now being conducted. Arbor is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the nature of the
business conducted by it or the character or location of the employees or of the
properties or assets owned or leased by it makes such licensing or qualification
necessary.
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4.2 Capitalization.
The authorized capital stock of Arbor consists of 200 shares
of common stock, without par value, and 10,000 shares of 6% non-cumulative
preferred stock, par value $100.00 per share. The Arbor Stock owned by MET and
Daugherty constitute the only shares of capital stock of Arbor that are issued
and outstanding and no other shares of Arbor capital stock are subject to or
reserved for issuance under any circumstances except for the shares subject to
the Daugherty Arbor Option. All of the issued and outstanding shares of Arbor
Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. Except with respect to the Daugherty Arbor
Option, Arbor does not have and is not bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character calling for
the purchase or issuance of any shares of Arbor Stock or any other equity
security of Arbor or any securities representing the right to purchase or
otherwise receive any shares of Arbor Stock or any other equity security of
Arbor.
4.3 Non-Contravention.
The execution and delivery of this Agreement by MET Holdings
and Daugherty does not, and the performance of this Agreement in accordance with
the terms hereof, will not (a) violate any provision of the charter or articles
of incorporation or bylaws of Arbor, (b) conflict with or result in a breach of,
or default under, or result in the creation of any lien, claim, charge or other
encumbrance upon any of the assets or properties of Arbor pursuant to the
provisions of any agreement, mortgage, indenture or other document or instrument
to which Arbor is a party or by which Arbor or any of its properties or assets
is bound, (c) violate any existing laws applicable to Arbor or any of its
properties or assets, or Arbor's ability to obtain any regulatory consent,
approval, expiration of a waiting period or similar action or inaction by any
governmental authority that is required in connection with the consummation of
the transactions contemplated by this Agreement ("Regulatory Approvals"), or (d)
require any consent, notice, approval or other filing with any third party in
connection with any lease, agreement or other arrangement, the benefits of which
cannot be retained upon consummation of the transactions contemplated hereby
without such consent, notice, approval or filing, except as set forth at
Schedule B hereto (such consents, notices, approvals or other filings
collectively referred to as the "Required Consents").
4.4 Properties and Assets.
The Arbor Assets are all of the assets and known or contingent
liabilities of Arbor as of the date hereof. Arbor does not own any real property
nor is it a party to any contract for the purchase, sale, or development of real
estate.
7
Arbor has provided to TeleBanc a true, correct and complete copy of each real
property lease, sublease, or similar agreement to which Arbor is a party. Except
for (a) items reflected in the audited financial statements of Arbor as of
December 31, 1995, (b) exceptions to title that do not interfere materially with
Arbor's use and enjoyment of leased real property (other than real property
acquired through foreclosure or a transaction in lieu of foreclosure), (c) liens
for current real estate taxes not yet delinquent, or being contested in good
faith, properly reserved against (and reflected on the financial statements
referred to in Section 4.6 below) and (d) properties and assets sold or
transferred in the ordinary course of business consistent with past practice
since December 31, 1995, Arbor has good title to all its properties and assets,
including the properties and assets reflected in the Schedule A of Arbor Assets,
whether real, personal, tangible or intangible, free and clear of all liens,
claims, charges and other encumbrances. Arbor, as lessee, has the right under
valid and subsisting leases to occupy, use and possess all property leased by
it, and there has not occurred under any such lease any breach, violation or
default except with respect to deductibles under insurance policies that comply
with the requirements of Section 4.10, and Arbor has not experienced any
uninsured damage or destruction with respect to such properties since December
31, 1995. Arbor enjoys peaceful and undisturbed possession under all leases for
the use of real or tangible personal property under which it is the lessee, and
all leases to which Arbor is a party are valid and enforceable in all material
respects in accordance with the terms thereof except as may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting creditors'
rights and except as may be limited by the exercise of judicial discretion in
applying principles of equity. Arbor is not in default with respect to any such
lease.
4.5 Certificate of Incorporation and Bylaws.
True and complete copies of the certificate of incorporation
and bylaws of Arbor, as in effect on the date hereof, have been delivered to
TeleBanc.
4.6 Financial Statements.
(a) Arbor has previously delivered or made available to
TeleBanc accurate and complete copies of the statements of financial condition
of Arbor as of December 31, 1993, 1994 and 1995, and the related statements of
income, shareholders' equity and cash flows for the years ended December 31,
1993, 1994 and 1995, in each case accompanied by the audit report of the
independent public accountants with respect to Arbor. The statements of
financial condition of Arbor referred to herein (including the related notes,
where applicable), fairly present the financial condition of Arbor as of the
respective dates set forth therein, and the related statements of income,
shareholders' equity and cash flows (including the related notes, where
applicable) fairly present the results of operations,
8
shareholders' equity and cash flows of Arbor for the respective periods or as of
the respective dates set forth therein.
(b) Each of the financial statements referred to in Section
4.6(a) has been prepared in accordance with generally accepted accounting
principles consistently applied during the periods involved. The audits of Arbor
have been conducted in accordance with generally accepted auditing standards.
The books and records of Arbor are being maintained in material compliance with
applicable legal and accounting requirements.
(c) Except and to the extent (i) reflected, disclosed or
provided for in the financial statements as of December 31, 1995 referred to
above and (ii) of liabilities incurred since December 31, 1995 in the ordinary
course of business and consistent with past practice, Arbor does not have any
liabilities, whether absolute, accrued, contingent or otherwise.
4.7 Absence of Changes.
Since December 31, 1995, the business of Arbor has been
conducted only in the ordinary course consistent with past practice and there
has not been any material adverse change in the business, financial condition,
operating results or prospects of Arbor, nor has there been any material change
in any policy or practice followed by Arbor in the ordinary course of business.
4.8 Legal Proceedings.
There are no legal, administrative or other claims, actions,
suits or other proceedings pending, or to the knowledge of any of Arbor's
officers and directors, threatened, of which Arbor is a party before any court
or arbitration tribunal or before or by any governmental authority. Arbor is not
a party to any pending or, to the knowledge of any of Arbor's officers and
directors, threatened legal, administrative or other claim, action, suit,
investigation, arbitration or proceeding challenging the validity or propriety
of any of the transactions contemplated by this Agreement. Arbor is not subject
to any judgment, order, writ, injunction, decree or arbitration award.
4.9 Certain Contracts.
Except as contemplated by this Agreement, Arbor is not a party
to nor is it bound or affected by, nor does it receive benefits under (a) any
material agreement, arrangement or understanding not made in the ordinary course
of business; (b) any agreement, indenture or other instrument relating to the
borrowing of money by Arbor or the guarantee by Arbor of any obligation; (c) any
agreement, arrangement or understanding relating to the employment, election,
9
retention in office or severance of any present or former director, officer or
employee of Arbor; (d) any agreement, arrangement or understanding pursuant to
which any payment (whether of severance pay or otherwise) became or may become
due to any director, officer or employee of Arbor upon execution of this
Agreement or upon or following consummation of the transactions contemplated by
this Agreement (either alone or in connection with the occurrence of any
additional acts or events); (e) any assistance agreement, supervisory agreement,
memorandum of understanding, consent order, cease and desist order or condition
of any regulatory order or decree with or by the Securities and Exchange
Commission (the "SEC"), the National Association of Securities Dealers, Inc. or
any other regulatory agency; or (f) any other agreement, arrangement or
understanding, which requires aggregate payments to or from Arbor of $25,000 or
more per year.
4.10 Insurance.
All insurance policies and bonds maintained by Arbor have,
from time to time, in respect of the nature of the risks insured against and
amount of coverage provided, been substantially similar in kind and amount to
that customarily carried by parties similarly situated who engage in businesses
substantially similar to that of Arbor), and are in full force and effect and
have been in full force and effect at all times during which Arbor had any
insurable interest in the subject of such insurance policies and bonds. As of
the date hereof, Arbor has not received any notice of cancellation or amendment
of any such policy or bond or is in default under any such policy or bond, no
coverage thereunder is being disputed and all material claims thereunder have
been filed in a timely fashion. The existing insurance carried by Arbor is and
will continue to be, in respect of the nature of the risks insured against and
the amount of coverage provided, substantially similar in kind and amount to
that customarily carried by parties similarly situated who engage in businesses
substantially similar to that of Arbor, and is sufficient for compliance by
Arbor with all material requirements of any laws, regulations and agreements to
which Arbor is subject or is a party. True and complete copies of all such
policies and bonds as in effect on the date hereof, have been delivered to
TeleBanc.
4.11 Employee Benefit Plans.
(a) True, correct and complete copies of each employee benefit
plan (as that term is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), which plan is subject to any
provisions of ERISA and covers any one or more of the directors and employees of
Arbor, whether active or retired (an "Employee Plan")) of Arbor, including
amendments and trust agreements relating thereto, have been delivered to
TeleBanc, together with (i) a complete and correct copy of the five most recent
annual reports (Form 5500 including, if applicable, Schedule B thereto) prepared
in connection with any such
10
Employee Plan, (ii) a true, correct and complete copy of the five most recent
actuarial valuation reports, if any, prepared in connection with any such
Employee Plan, and (iii) a true, correct and complete copy of the most recent
summary plan description (including any summaries of material modifications) of
each such Employee Plan. None of such Employee Plans is a "multiemployer plan,"
as defined in Section 3(37) of ERISA, and Arbor has not been obligated to make a
contribution to any such multiemployer plan within the past five years. Since
its inception, each Employee Plan which is intended to be qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "IRC") has
been operated and administered in all material respects in accordance with the
requirements for a qualified plan under Section 401(a) of the IRC and each trust
maintained in connection with each such Employee Plan has been operated and
administered in all material respects in accordance with the requirements for a
tax exempt trust under Section 501 of the IRC and applicable state laws. Arbor
has received from the Internal Revenue Service a determination letter with
respect to the qualification of each such Employee Plan and has delivered to
TeleBanc a true and complete copy of the most recent determination letter for
each such Employee Plan, as well as all correspondence relating to the
application therefor. The representations made as a part of the application for
each such determination letter were true and complete when made and continue to
be true and complete. Nothing has occurred since the date of the most recent
applicable determination letter that would adversely affect the qualified status
of any such Employee Plan.
(b) True and complete copies of any current or deferred
compensation, bonus, stock option, stock appreciation right, severance pay,
salary continuation, retirement or incentive plan or arrangement, or any group
or individual health, disability or life insurance plan, or welfare or similar
plan or arrangement for the benefit of any one or more of the directors,
officers and employees of Arbor, whether active or retired, other than Employee
Plans and plans and agreements providing for base salary and base wages
("Benefit Arrangements") that Arbor maintains have been delivered to TeleBanc.
(c) Each of the Employee Plans and Benefit Arrangements of
Arbor is in compliance with the requirements prescribed by any and all
applicable laws and regulations, including, but not limited to, ERISA and the
IRC. No Employee Plan is subject to Title IV of ERISA. Neither Arbor nor any
Employee Plan has engaged in a "prohibited transaction," as defined in Section
406 of ERISA and Section 4975 of the IRC, which could subject Arbor to material
liability under Section 409 or 502(i) of ERISA or Section 4975 of the IRC. No
Employee Plan is subject to Part III of Subtitle B of Title I of ERISA or
Section 412 of the IRC, or both. Arbor has not failed to make any contribution
or pay any amount due and owing as required by the terms of any Employee Plan or
Benefit Arrangement. Each funded Employee Plan is fully funded such that the
fair market value of the net assets of the Employee Plan equals or exceeds the
present value of all accrued
11
benefits and other liabilities under such Employee Plan. No events have occurred
or are expected to occur with respect to any Employee Plan that would cause a
material change in the value of the assets or the amount or present value of
accrued benefits and other liabilities of such Employee Plan.
(d) No Employee Plan or Benefit Arrangement, individually or
collectively, provides for any payment by Arbor to any employee or independent
contractor, in connection with or as a result of the transactions contemplated
by this Agreement, that is not deductible under either Section 162(a)(1),
162(m), 280G or 404 of the IRC.
4.12 Compliance with Applicable Laws.
Arbor has complied with all laws applicable to it or to the
operation of its business and has not received any notice of any alleged claim
or threatened claim, violation of or liability or potential responsibility under
such laws that has not heretofore been cured and for which there is no remaining
liability.
4.13 Regulatory Filings and Reports.
Since December 31, 1991, Arbor has filed all documents
required to be filed by it under federal securities laws and laws applicable to
broker-dealers and investment advisors, and applicable regulations thereunder,
and all such documents, as finally amended, were complete and accurate, complied
in all material respects as to form and substance with all applicable
requirements of law and regulation and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
4.14 Tax Matters.
(a) Arbor has timely filed on behalf of itself, with the
appropriate governmental authorities, all federal, state and local tax returns
and declarations of estimated tax with respect to income and all other
applicable taxes, and all other tax returns and reports, the filing of which is
required by applicable laws (including returns and reports with respect to taxes
withheld from or imposed in respect of employees' wages and with respect to
deposit accounts (the "Tax Returns"). All of the Tax Returns are accurate and
complete in all material respects.
(b) Arbor has collected and withheld all taxes which it is or
has been required to collect or withhold and has timely submitted all such
collected and withheld amounts to the appropriate authorities. Arbor is in
compliance with the
12
back-up withholding and information reporting requirements under the IRC, and
the rules and regulations of the Internal Revenue Service thereunder.
(c) All federal, state and local taxes, due and payable by
Arbor pursuant to the Tax Returns, or pursuant to any assessment with respect to
taxes, penalties or interest in any of such jurisdictions, have been accrued or
paid.
(d) The reserves for taxes contained in the financial
statements (including the notes thereto) described in Section 4.6 of this
Agreement are adequate to cover the tax liabilities, including penalties and
interest, of Arbor for all periods up to and including December 31, 1995.
(e) Arbor has not received any notice of deficiency or
assessment or proposed deficiency or assessment by the Internal Revenue Service
or any other taxing authority in connection with the Tax Returns that has not
been brought to the attention of TeleBanc management. There is no action, suit,
proceeding, audit, examination, investigation, or claim pending, or to the
knowledge of any of Arbor's officers and directors, threatened, in respect of
any taxes for which Arbor is or may become liable if such action, suit,
proceeding, audit, examination, investigation, or claim were to be resolved, in
whole or in part, adversely to Arbor that has not been brought to the attention
of TeleBanc management. To the knowledge of any of Arbor' officers and
directors, no fact exists which constitutes grounds for the assessment of
material additional taxes with respect to Arbor that has not been brought to the
attention of TeleBanc management. Arbor has provided to TeleBanc a true, correct
and complete copy of any agreement for the allocation or sharing of taxes.
(f) Arbor has not waived any law fixing, or consented to the
extension of, any period of time for assessment of any tax.
(g) Arbor has not made an election under Section 341(f) of the
IRC.
(h) Arbor has provided to TeleBanc complete and correct copies
of the Tax Returns and all material correspondence and documents, if any,
relating directly or indirectly to taxes for each taxable year of Arbor as to
which the applicable statute of limitations has not run on the date hereof. For
this purpose, "correspondence and documents" include, without limitation,
amended tax returns, claims for refunds, notices from taxing authorities of
proposed changes or adjustments to taxes or tax returns, consents to assessment
or collection of taxes, acceptances of proposed adjustments, closing agreements,
rulings and determination letters and requests therefor, and all other written
communications to or from taxing authorities relating to any material tax
liability of Arbor.
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4.15 Broker's Fees.
No agent, finder, broker, investment banker, person or firm
acting on behalf or under authority of Arbor is or will be entitled to any fee
as compensation for services as broker or finder or any other commission or
similar fee directly or indirectly in connection with this Agreement or any of
the transactions contemplated hereby.
4.16 No Misrepresentations.
None of the representations and warranties of Arbor set forth
in this Agreement nor any matter disclosed in any of the schedules, lists,
certificates, exhibits or other documents delivered to TeleBanc hereunder or in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein, in light of the circumstances in
which they were made, not misleading.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF MET HOLDINGS.
MET Holdings hereby represents and warrants to TeleBanc as
follows:
5.1 Organization of MET Holdings.
MET Holdings is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
5.2 Authorization.
MET Holdings has all requisite corporate power and authority
to execute and deliver this Agreement and, subject to the approval of the
requisite number of stockholders of MET Holdings entitled to vote on this
Agreement and to the receipt of any Regulatory Approvals, to consummate the
transactions contemplated by this Agreement in accordance with the terms hereof.
The execution, delivery and performance of this Agreement have been duly
authorized by the Board of Directors of MET Holdings, and, except for the
approval of the requisite number of stockholders of MET Holdings as to this
Agreement, no other corporate proceedings on the part of MET Holdings or any MET
Holdings subsidiary are necessary to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
MET Holdings and
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constitutes a valid and legally binding obligation of MET Holdings enforceable
against MET Holdings in accordance with its terms.
5.3 Absence of Violation.
The execution, delivery and performance by MET Holdings of
this Agreement and all other documents contemplated hereby, the fulfillment of
and the compliance with the respective terms and provisions hereof and thereof,
and the consummation of the transactions contemplated hereby and thereby, do not
and will not (a) conflict with, or violate any provision of, any law having
applicability to MET Holdings; or (b) conflict with, or result in any breach of,
or constitute a default under, any agreement to which MET Holdings is a party.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF DAUGHERTY
Daugherty hereby represents and warrants to TeleBanc as
follows:
6.1 Authority and Capacity.
Daugherty has full legal right, capacity, power and authority
to execute this Agreement and to consummate the transactions contemplated
hereby.
6.2 Absence of Violation.
The execution, delivery and performance by Daugherty of this
Agreement and all other documents contemplated hereby, the fulfillment of and
the compliance with the respective terms and provisions hereof and thereof, and
the consummation of the transactions contemplated hereby and thereby, do not and
will not (a) conflict with, or violate any provision of, any law having
applicability to Daugherty; or (b) conflict with, or result in any breach of, or
constitute a default under, any agreement to which Daugherty is a party.
6.3 Binding Obligation.
This Agreement constitutes a valid and binding obligation of
Daugherty, enforceable in accordance with its terms. Each document to be
executed by Daugherty pursuant hereto, when executed and delivered in accordance
with the provisions hereof, will be a valid and binding obligation of Daugherty,
enforceable in accordance with its terms.
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SECTION 7. COVENANTS.
7.1 Regulatory Applications.
TeleBanc, MET Holdings and Daugherty shall cause to be
prepared and filed, as soon as is reasonably practical, all required
applications and notices and any other filings with governmental authorities
which are necessary or contemplated for consummation of the Acquisition. Such
applications and filings shall be in such forms as may be prescribed by the
respective governmental authorities or self regulatory agencies and shall
contain such information as they may require.
7.2 Further Action; Stockholder Approval.
TeleBanc, Arbor, MET Holdings and Daugherty agree to take all
such action required to consummate the transactions contemplated hereby. By
signing this Agreement, MET Holdings and Daugherty agree and acknowledge that as
the sole shareholders of Arbor, they hereby approve this Agreement and the
Acquisition contemplated hereby. Unless this Agreement is terminated in
accordance with its terms, MET Holdings agrees to submit this Agreement for the
approval of its stockholders.
7.3 Third Party Consents.
TeleBanc, MET Holdings and Daugherty agree to cooperate and
use their best efforts to obtain all written consents or approvals of other
persons in connection with any lease, agreement or other arrangement, the
benefits of which cannot be retained upon consummation of the transactions
contemplated hereby without such consent or approval.
SECTION 8. CONDITIONS TO CLOSING.
8.1 Conditions to Obligations of All Parties.
The obligations of each party to consummate the Acquisition
contemplated by this Agreement are subject to the satisfaction, on or before the
Closing Date, of each of the following conditions precedent:
(a) Termination. This Agreement shall not have been terminated
in accordance with its terms.
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(b) Approvals and Offering. This Agreement shall have been
approved by the requisite vote of the stockholders of MET Holdings and the Unit
Sale shall have been consummated.
(c) No Governmental Action. No action or proceeding by or
before any governmental authority shall have been instituted or threatened (and
not subsequently dismissed, settled or otherwise terminated) which is reasonably
expected to restrain, prohibit or invalidate the transactions contemplated by
this Agreement or to affect adversely the financial condition and business
prospects of TeleBanc or Arbor.
(d) Regulatory Approvals. All Regulatory Approvals required to
consummate the transactions contemplated hereby shall have been obtained. No
Regulatory Approval shall contain any condition that would require any material
modification or nonperformance of the terms of this Agreement. All Regulatory
Approvals shall remain in full force and effect and all conditions and
requirements set forth in any Regulatory Approval that are required to be
satisfied on or before the Closing Date, including the expiration of any waiting
periods, shall have been satisfied or properly waived.
(e) Consents. Except for such consents, approvals, permits and
other authorizations that, if not obtained, would not, individually or in the
aggregate, have a material effect on the transactions contemplated hereby, the
parties shall have obtained (i) the Required Consents, and (ii) all permits or
other authorizations other than Regulatory Approvals required to consummate the
transactions contemplated hereby.
(f) Arbor Assets. The Arbor Assets shall be as set forth at
Schedule A hereto, except for such changes as may occur from the date hereof in
the ordinary course of business.
8.2 Conditions to the Obligations of Arbor.
The obligations of Arbor to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, on or before the
Closing Date, of each of the following conditions precedent, any one or more of
which may be waived by Arbor, in its sole and absolute discretion:
(a) Representations and Warranties. The representations and
warranties of TeleBanc contained in this Agreement shall be true, correct and
complete in all material respects when made and shall be true and correct on the
Closing Date with the same force and effect as if made on the Closing Date.
(b) Compliance. TeleBanc shall have in all material respects
performed all obligations and agreements and complied with all covenants
17
contained in this Agreement to be performed and complied with by TeleBanc on or
prior to the Closing Date.
8.3 Conditions to Obligations of TeleBanc.
The obligations of TeleBanc to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, on or before the
Closing Date, of each of the following conditions precedent, any one or more of
which may be waived by TeleBanc, in its sole and absolute discretion:
(a) Representations and Warranties. The representations and
warranties of each of Arbor, MET Holdings and Daugherty contained in this
Agreement shall be true, correct and complete in all material respects when made
and shall be true and correct on the Closing Date with the same force and effect
as if made on the Closing Date.
(b) Compliance. Arbor shall have in all material respects
performed all obligations and agreements and complied with all covenants
contained in this Agreement to be performed and complied with by it on or prior
to the Closing Date.
(c) TeleBanc shall have received from Corporate Finance of
Washington, Inc., or such other financial advisor as TeleBanc may select, an
opinion in form reasonably satisfactory to TeleBanc dated the date of or
immediately before the date of this Agreement, as to the value of Arbor.
SECTION 9. CLOSING.
9.1 Deliveries by TeleBanc.
At the Closing, TeleBanc shall deliver to Daugherty or Arbor,
as applicable, the following:
(a) To Daugherty, an agreement as to the Daugherty TeleBanc
Option.
(b) To Arbor, (i) the certificate of TeleBanc Common Stock
representing the TeleBanc Common Stock portion of the Acquisition Consideration
registered in the name of Arbor; and (ii) the cash portion of the Acquisition
Consideration required hereby.
(c) To Arbor, a copy of the resolutions of the Directors of
TeleBanc certified by the Secretary of TeleBanc, as being true, correct and
complete and then in full force and effect, authorizing the execution, delivery
and performance of this
18
Agreement by TeleBanc, the authorization, sale, issuance and delivery of the
TeleBanc Common Stock and the Daugherty TeleBanc Option issued hereunder, and
the performance of TeleBanc's obligations hereunder.
(d) To Arbor, a certificate of TeleBanc signed by an executive
officer of TeleBanc not affiliated with MET Holdings certifying that the
representations and warranties of TeleBanc made herein are true, complete and
correct as of the date of this Agreement and are true and correct as of the
Closing Date, and TeleBanc has performed and complied with all covenants and
agreements required to be performed or complied with by TeleBanc on or prior to
the Closing.
9.2 Deliveries by Arbor.
At the Closing, Arbor shall deliver to TeleBanc, or obtain
from MET Holdings to deliver to TeleBanc, the following:
(a) The Arbor Assets, together with the required consents and
such other assignments, bills of sale or other documentation as may be required
to effect the transfer of assets contemplated hereby.
(b) A copy of (i) the resolutions of the Board of Directors of
Arbor authorizing the execution, delivery and performance of this Agreement by
Arbor, and (ii) the resolutions of the requisite number of stockholders of Arbor
approving this Agreement and the transactions contemplated hereby, certified by
the Secretary of Arbor, as being true, correct and complete and then in full
force and effect.
(c) A certificate of MET Holdings signed by the President of
MET Holdings certifying that the representations and warranties of MET Holdings
made herein are true, complete and correct as of the date of this Agreement and
are true and correct as of the Closing Date, and MET Holdings has performed and
complied with all covenants and agreements required to be performed or complied
with by MET Holdings on or prior to the Closing.
9.3 Deliveries by Daugherty.
At the Closing, Daugherty shall deliver to TeleBanc the
following:
(a) A certificate of Daugherty certifying that the
representations and warranties of Daugherty made herein are true, complete and
correct as of the date of this Agreement and are true and correct as of the
Closing Date, and that Daugherty has performed and complied with all covenants
and agreements required to be performed or complied with by Daugherty on or
prior to the Closing.
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(b) Evidence of cancellation of all rights under the Daugherty
Arbor Option in form and substance reasonably satisfactory to TeleBanc.
SECTION 10. TERMINATION.
10.1 Mutual Consent.
The parties may terminate this Agreement at any time by mutual
written agreement.
10.2 Other Termination.
Either of TeleBanc, on the one hand, or Arbor, MET Holdings or
Daugherty, on the other, may terminate this Agreement by giving notice (a
"Termination Notice") to the other at the time designated in this Section or, in
the absence of such designation, at any time up to and including the Closing
Date, if any one or more of the following shall have occurred and be continuing:
(a) Termination By Any Party. Any party may terminate this
Agreement under any one or more of the following circumstances:
(i) at any time after March 31, 1997, if the
Closing shall not have occurred for any reason other than a default or
non-performance of its obligations hereunder by the party giving such notice;
(ii) if this Agreement is not approved by the
requisite vote of the stockholders of MET Holdings.
(iii) a court or other governmental authority of
competent jurisdiction shall have issued an order, writ, injunction or decree or
shall have taken any other action permanently restraining or otherwise
prohibiting the Acquisition and the related transactions and such order, writ,
injunction, decree or other action shall have become final and nonappealable.
(b) Termination by Arbor. Arbor may terminate this Agreement
on the Closing Date, if any condition precedent forth in Sections 8.1 or 8.2
shall not have been satisfied.
(c) Termination by TeleBanc. TeleBanc may terminate this
Agreement on the Closing Date, if any condition precedent set forth in Sections
8.1 or 8.3 shall not have been satisfied.
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10.3 Effect of Termination.
Termination of this Agreement pursuant to this Section shall
not relieve any party of any liability for a default or other breach, or
nonperformance under this Agreement. Notwithstanding the foregoing, no party
hereto shall be liable for consequential or punitive damages in connection with
such termination.
SECTION 11. REGISTRATION RIGHTS.
11.1 Piggyback Registration Rights.
(a) Except as provided at Section 11.1(b) below, if at any
time or times beginning one year after the Closing Date, TeleBanc proposes to
make a public offering of TeleBanc Common Stock which requires registration
under applicable rules and regulations of the SEC, other than an offering not
suitable for inclusion of shares of selling stockholders for offer to the
public, such as shares being offered in connection with an employment benefit
plan or in connection with a merger, TeleBanc shall give written notice of the
proposed registration to MET Holdings and Daugherty (each a "Holder") not less
than 14 business days prior to the proposed filing date of the registration form
with the SEC, and at the written request of a Holder delivered to TeleBanc
within 10 days after the receipt of such notice, TeleBanc shall include in such
registration and offering, and in any underwriting of such offering, all shares
of TeleBanc Common Stock acquired by the Holder pursuant to this Agreement
(collectively with respect to the Holders, the "Shares") that have been
designated for registration in the Holder's request. TeleBanc may withdraw any
proposed registration statement or offering of securities under this Section 11
at any time without any liability to a Holder hereunder.
(b) If a registration in which the Holders have the right to
participate pursuant to this Section 11 is an underwritten public offering and
the managing underwriter advises TeleBanc in writing that in its opinion the
number of securities requested to be included in such registration exceeds the
number that can be sold in such offering consistent with the pricing
expectations of TeleBanc, then TeleBanc first shall include in such offering the
TeleBanc Common Stock proposed to be sold by TeleBanc if consistent with the
aforementioned opinion of the managing underwriter, second shall include the
shares requested to be included in such registration by any holder of
registration rights in connection with the Unit Sale, and thereafter, Shares
requested to be included by the Holder(s) and shares requested to be included by
other selling stockholders who hold registration rights pursuant to pre-existing
written agreements with TeleBanc, if any, pro rata based upon the number of
shares of TeleBanc Common Stock requested by each such
21
selling stockholder to be included in such registration, or in such other
amounts upon which TeleBanc, the Holder(s) and the other selling stockholders
may agree.
11.2 Demand Registration Rights.
(a) At any time after one year from the date of the
Acquisition, each Holder may request registration for sale under the Securities
Act of any Shares owned by such Holder (a "Demand Registration"), provided,
however, that (i) TeleBanc shall only be obligated to effect one Demand
Registration for each Holder, (ii) TeleBanc shall not be obligated to effect a
Demand Registration unless the Holder requests registration for the sale of
shares that represent at least 50% of the aggregate amount of the Shares then
owned by the Holder, and (iii) TeleBanc shall not be required to conduct an
underwritten offering. A Demand Registration shall specify the approximate
number of Shares requested to be registered and the anticipated per share price
range for such offering.
(b) A Demand Registration shall be deemed to occur when such
registration becomes effective under the Securities Act, except that if, after
it becomes effective, such Demand Registration is interfered with by any stop
order, injunction or other order or requirement of the SEC or any other
governmental authority, such registration shall not be deemed to have been
effected unless such stop order, injunction or other order shall have been
subsequently vacated or removed.
11.3 Registration Procedures.
(a) TeleBanc shall have no obligation to include Shares owned
by a Holder in a registration statement pursuant to Section 11.1 or Section 11.2
hereof unless and until the Holder has furnished TeleBanc with all information
and statements about or pertaining to the Holder in such reasonable detail and
on such timely basis as is reasonably deemed by TeleBanc to be necessary or
appropriate for the preparation of the registration statement.
(b) Whenever a Holder have requested that Shares be registered
pursuant to Section 11.1 or Section 11.2 hereof, TeleBanc shall, subject to its
rights under Section 11.1(a) to withdraw the registration statement and the
other provisions of Section 11.1 and Section 11.2:
(1) prepare and file with the SEC a registration
statement with respect to such shares and use its reasonable efforts to cause
such registration statement to become effective as soon as practicable after the
filing thereof (provided that before filing a registration statement or any
amendments or supplements thereto, TeleBanc shall furnish counsel for the Holder
with copies of all such documents proposed to be filed);
22
(2) prepare and file with the SEC such
amendments and supplements to such registration statement as may be necessary to
keep such registration statement effective for a period of not less than (i)
three months, (i) until the Holder has completed the distribution described in
such registration statement, or (iii) until TeleBanc receives a Demand
Registration as defined in and pursuant to the Unit Purchase Agreement pursuant
to which the Units Sale is being consummated, whichever occurs first;
(3) furnish to the Holder the number of copies
of such registration statement, each amendment and supplement thereto, and such
other documents as the Holder may reasonably request;
(4) use reasonable efforts to register or
qualify such shares under the state blue sky or securities or banking laws
("Blue Sky Laws") of such jurisdictions as the Holder reasonably requests (and
to keep such registrations and qualifications effective for a period of three
months, or until the Holder has completed the distribution of such shares,
whichever occurs first), and to do any and all other acts and things that may be
reasonably necessary or advisable to enable the Holder to consummate the
disposition of such shares in such jurisdictions; provided, however, that
TeleBanc will not be required to do any of the following: (i) qualify generally
to do business in any jurisdiction where it would not be required but for this
Section 11.3(b), (ii) subject itself to taxation in any such jurisdiction, or
(iii) file any general consent to service of process in any such jurisdiction;
(5) promptly notify the Holder during the period
that TeleBanc is required to keep the registration statement effective, of the
occurrence of any event as a result of which the registration statement contains
an untrue statement of a material fact or omits any fact necessary to make the
statements therein in the light of the circumstances under which they were made,
not misleading, and prepare a supplement or amendment to the registration
statement so that, as thereafter delivered to the purchasers of such shares, the
registration statement will not contain an untrue statement of a material fact
or omit to state any fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading;
(6) provide a transfer agent and registrar (if
TeleBanc does not already have such an agent) for all such shares not later than
the effective date of such registration statement.
11.4 Registration Expenses.
(a) If, pursuant to Section 11.1 or Section 11.2 hereof,
Shares owned by a Holder are included in a registration statement, then the
Holder shall
23
pay all transfer taxes, if any, relating to the sale of its Shares, all
registration and filing fees, fees and expenses of compliance, with Blue Sky
Laws, the fees and expenses of its own counsel, printing expenses, and its pro
rata portion of any underwriting discounts or commissions or the equivalent
thereof.
(b) Except for the fees and expenses specified in Section
11.4(a) hereof and except as provided below in this Section 11.4(b), TeleBanc
shall pay all expenses incident to the registration and to TeleBanc's
performance of or compliance with this Agreement, including, without limitation,
underwriting discounts, fees, and expenses (other than the Holder's pro rata
portions of any underwriting discounts or commissions or the equivalent
thereof), messenger and delivery expenses, and fees and expenses of counsel for
TeleBanc and all independent certified public accountants and other persons
retained by TeleBanc. With respect to any registration pursuant to Section 11.4
hereof, TeleBanc shall pay its internal expenses (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties) and, if applicable, the expenses and fees for listing the
securities to be registered on an exchange or on the Nasdaq Stock Market.
11.5 Indemnity and Contribution.
(a) In the event that any Shares owned by a Holder are sold by
means of a registration statement pursuant to Section 11.1 or Section 11.2
hereof, the Holder (for the purposes of this Section 11.5(a), the "Indemnifying
Person") agrees to indemnify and hold harmless TeleBanc, each of TeleBanc's
officers and directors, and each person, if any, who controls or may control
TeleBanc within the meaning of the Securities Act (for the purposes of this
Section 11.5(a), TeleBanc, its officers and directors, and any such other
persons being hereinafter referred to individually as an "Indemnified Person"
and collectively as "Indemnified Persons") from and against all demands, claims,
actions or causes of action, assessments, losses, damages, liabilities, costs,
and expenses, including, without limitation, interest, penalties, and reasonable
attorneys' fees and disbursements, asserted against, resulting to, imposed upon,
or incurred by such Indemnified Person, directly or indirectly (collectively,
hereinafter referred to in the singular as a "Claim" and in the plural as
"Claims"), based upon, arising out of, or resulting from any untrue statement of
a material fact contained in the registration statement or any omission to state
therein a material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading, to
the extent that such Claim is based upon, arises out of or results from
information furnished to TeleBanc by the Holder in a written document provided
by the Holder for use in connection with the registration statement.
24
(b) TeleBanc (for the purposes of this Section 11.5(b), the
"Indemnifying Person") agrees to indemnify and hold harmless the Holder, Arbor's
officers and directors (if Shares owned by Arbor are being sold), each person,
if any, who controls or may control the Holder within the meaning of the
Securities Act and any underwriters participating in the distribution of the
Shares pursuant to a registration statement (for the purposes of this Section
11.5(b), the Holder, Arbor's officers and directors (if Shares owned by Arbor
are being sold), and any such other persons also being hereinafter referred to
individually as an "Indemnified Person" and collectively as "Indemnified
Persons") from and against all Claims based upon, arising out of, or resulting
from any untrue statement of a material fact contained in the registration
statement or any omission to state therein a material fact necessary in order to
make the statement made therein, in the light of the circumstances under which
they were made, not misleading, to the extent that such Claim is based upon,
arises out of or results from information furnished to the Holder by TeleBanc in
a written document provided by TeleBanc for use in connection with the
registration statement.
(c) The indemnification set forth herein shall be in addition
to any liability TeleBanc or the Holder may otherwise have in connection with
any registration of the Shares. Within a reasonable time after receiving
definitive notice of any Claim in respect of which an Indemnified Person may
seek indemnification under this Section 11.5, such Indemnified Person shall
submit written notice thereof to Indemnifying Person. The failure of the
Indemnified Person so to notify the Indemnifying Person of any such Claim shall
not relieve the Indemnifying Person from any liability it may have hereunder
except to the extent that (a) such liability was caused or increased by such
omission, or (b) the ability of the Indemnifying Person to reduce such liability
was materially adversely affected by such omission. In addition, the omission of
the Indemnified Person so to notify the Indemnifying Person of any such Claim
shall not relieve the Indemnifying Person from any liability it may have
otherwise than hereunder. The Indemnifying Person shall have the right to
undertake, by counsel or representatives of its own choosing, the defense,
compromise, or settlement (without admitting liability of the Indemnifying
Person) of any such Claim asserted, such defense, compromise, or settlement to
be undertaken at the expense and risk of the Indemnifying Person, and the
Indemnified Person shall have the right to engage separate counsel, at its own
expense, whom counsel for the Indemnifying Person shall keep informed and
consult with in a reasonable manner. In the event the Indemnifying Person shall
fail to undertake such defense by its own representatives, the Indemnifying
Person shall give prompt written notice of such election to the Indemnified
Person, and the Indemnified Person shall undertake the defense, compromise, or
settlement (without admitting liability of the Indemnified Person) thereof on
behalf of and for the account and risk of the Indemnifying Person by counsel or
other representatives designated by the Indemnified Person. In the event that
any Claim shall arise out of a transaction or cover any period or periods
wherein TeleBanc and the Holder
25
shall each be liable hereunder for part of the liability or obligation arising
therefrom, then the parties shall, each choosing its own counsel and bearing its
own expenses, defend such Claim, and no settlement or compromise of such Claim
may be made without the joint consent or approval of TeleBanc and the Holder.
Notwithstanding the foregoing, no Indemnifying Person shall be obligated
hereunder with respect to amounts paid in settlement of any Claim if such
settlement is effected without the consent of such Indemnifying Person (which
consent shall not be unreasonably withheld).
SECTION 12. MISCELLANEOUS.
12. Additional Actions and Documents.
Each of the parties hereto agrees that it will, at any time,
prior to, at or after the Closing, take or cause to be taken such further
actions, and execute, deliver and file or cause to be executed, delivered and
filed such further documents and instruments as may be necessary or reasonably
requested in connection with the consummation of the Acquisition contemplated by
this Agreement or in order to fully effectuate the purposes, terms and
conditions of this Agreement, including the intent of the parties that the
Acquisition constitute a reorganization under Section 368(a)(1)(C) of the Code.
12.2 Expenses.
Each party hereto shall pay its own expenses incurred in
connection with this Agreement and in the preparation for and consummation of
the transactions contemplated hereby.
12.3 Notices.
All notices, demands, requests, or other communications which
may be or are required to be given or made by any party to any other party
pursuant to this Agreement shall be in writing and shall be hand delivered,
mailed by first-class registered or certified mail, return receipt requested,
postage prepaid, or delivered by overnight air courier, addressed as follows:
If to TeleBanc:
TeleBanc Financial Corporation
1111 North Highland Street
Arlington, Virginia 22201
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Attn.: Aileen Lopez Pugh
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Attn.: Stuart G. Stein, Esq.
If to Arbor:
Arbor Capital Partners, Inc.
405 Park Avenue, Suite 1104
New York, New York 10022
Attn.: Emidio Morizio
If to MET Holdings:
MET Holdings Corporation
405 Park Avenue, Suite 1104
New York, New York 10022
Attn.: Emidio Morizio
If to Daugherty:
William M. Daugherty
561 Hudson Street, #31
New York, NY 10014
or such other address as the addressee may indicate by written notice to the
other parties. Each notice, demand, request, or communication which shall be
given or made in the manner described above shall be deemed sufficiently given
or made for all purposes at such time as it is delivered to the addressee (with
the return receipt, the delivery receipt, or the affidavit of messenger being
deemed conclusive but not exclusive evidence of such delivery) or at such time
as delivery is refused by the addressee upon presentation.
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12.4 Waiver.
No waiver by any party of any failure or refusal of any other
party to comply with its obligations under this Agreement shall be deemed a
waiver of any other or subsequent failure or refusal to so comply by such other
party. No waiver shall be valid unless in writing signed by the party to be
charged and only to the extent therein set forth.
12.5 Binding Effect.
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
12.6 Entire Agreement; Amendment.
This Agreement, including the other instruments and documents
referred to herein or delivered pursuant hereto, contains the entire agreement
among the parties with respect to the subject matter hereof and supersedes all
prior oral or written agreements, commitments or understandings with respect to
such matters. No amendment, modification or discharge of this Agreement shall be
valid or binding unless set forth in writing and duly executed by the party
against whom enforcement of the amendment, modification or discharge is sought.
12.7 Severability.
If any part of any provision of this Agreement shall be
invalid or unenforceable under applicable law, such part shall be ineffective to
the extent of such invalidity or unenforceability only, without in any way
affecting the remaining parts of such provisions or the remaining provisions of
said Agreement.
12.8 Headings.
The headings of the sections and subsections contained in this
Agreement are inserted for convenience only and do not form a part or affect the
meaning, construction or scope thereof.
12.9 Governing Law.
This Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be governed by and
construed under and in accordance with the laws of the State of Delaware,
excluding the choice of law rules thereof.
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12.10 Signature in Counterparts.
This Agreement may be executed in separate counterparts, none
of which need contain the signatures of all parties, each of which shall be
deemed to be an original, and all of which taken together constitute one and the
same instrument. It shall not be necessary in making proof of this Agreement to
produce or account for more than the number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
12.11 No Third Party Beneficiaries.
Except as expressly provided herein, this Agreement is made
and entered into for the sole protection and benefit of the parties hereto, and
no other person or entity shall have any right of action hereon, right to claim
any right or benefit from the terms contained herein or be deemed a third party
beneficiary hereunder.
12.12 Assignability.
All terms and provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto, and their respective
transferees, successors and assigns; provided, however, that neither this
Agreement nor any rights, privileges, duties and obligations of the parties
hereto may be assigned or delegated by any party hereto without the prior
written consent of all the parties to this Agreement and any such purported or
attempted assignment shall be null and void ab initio and of no force or effect.
12.13 Parties Not Partners.
Nothing contained in this Agreement shall constitute any party
as a partner with, agent for or principal of any one or more of the other
parties or their successors and assigns.
12.14 Survival.
Except as specifically provided otherwise herein, the
representations, warranties, covenants or agreements of Arbor, MET Holdings and
Daugherty contained in this Agreement or in any certificate or instrument
delivered pursuant to this Agreement shall survive the Closing for a period of
one year from the Closing Date; provided, however, that this one year period
shall be extended with respect to claims in respect of taxes or employee
benefits to 30 days after the expiration of the applicable statutory period for
such assessments. The representations, warranties, covenants or agreements of
TeleBanc contained in this
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Agreement or in any certificate or instrument delivered
pursuant to this Agreement shall not survive the Closing.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date first above written.
TELEBANC FINANCIAL CORPORATION
By: /s/ Aileen Lopez Pugh
--------------------------
Name: Aileen Lopez Pugh
Title: EVP-CFO/Treasurer
Attest:
/s/ Sang-Hee Yi
- ------------------------
MET HOLDINGS CORPORATION
By: /s/ Mitchell H. Caplan
-------------------------
Name: Mitchell H. Caplan
Title: President
Attest:
/s/ Sang-Hee Yi
- -----------------------
ARBOR CAPITAL PARTNERS, INC.
By: /s/ Mitchell H. Caplan
-------------------------
Name: Mitchell H. Caplan
Title: Vice President & Managing Partner
Attest:
/s/ Sang-Hee Yi
- -----------------------
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WILLIAM M. DAUGHERTY
/s/ William M Daugherty
-------------------------------
Subscribed and sworn to before me this 24th day of February, 1997.
X
---------------------------------------------
Notary Public
My Commission Expires: 5/98
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