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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 3, 1998
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E*TRADE Group, Inc.
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(Exact name of registrant as specified in charter)
Delaware 1-11921 94-2844166
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File No. Identification No.)
Four Embarcadero Place, 2400 Geng Road, Palo Alto, California 94303
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (650) 842-2500
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Not Applicable
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(Former name or former address, if changed since last report.)
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Item 5 OTHER EVENTS
On June 3, 1998, E*TRADE Group, Inc. ("E*TRADE") entered into an agreement
with SOFTBANK CORP. to form a joint venture company in Japan, E*TRADE Japan K.K.
A copy of the joint venture agreement is attached hereto as Exhibit 10.1 and
incorporated herein by reference. A copy of the press release announcing the
agreement to form the joint venture company is attached hereto as Exhibit 99.1
and incorporated herein by reference.
In connection with the formation of E*TRADE Japan K.K., E*TRADE borrowed
567,000,000 Japanese yen from SOFTBANK CORP. pursuant to a promissory note due
January 10, 2003. A copy of the promissory note is attached hereto as Exhibit
10.2 and incorporated herein by reference.
On June 5, 1998, E*TRADE entered into a stock purchase agreement to sell,
at its option, up to $50 million of E*TRADE common stock to SOFTBANK Holdings,
Inc. within 18 months of the date of signing (the "Stock Purchase Agreement"). A
copy of the Stock Purchase Agreement is attached hereto as Exhibit 10.3 and
incorporated herein by reference. A copy of the press release announcing the
Stock Purchase Agreement is attached hereto as Exhibit 99.2 and incorporated
herein by reference.
Item 7 FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits. The following documents are filed as exhibits to this report:
10.1 Joint Venture Agreement dated June 3, 1998 between E*TRADE
Group, Inc. and SOFTBANK CORP.
10.2 Promissory Note dated June 5, 1998 issued by E*TRADE
Group, Inc. to SOFTBANK CORP.
10.3 Stock Purchase Agreement dated June 5, 1998 between
E*TRADE Group, Inc. and SOFTBANK Holdings, Inc.
99.1 Press Release, dated June 3, 1998, issued by E*TRADE Group,
Inc. announcing the agreement to form a joint venture company
in Japan.
99.2 Press Release, dated June 3, 1998, issued by E*TRADE Group,
Inc. announcing the Stock Purchase Agreement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
E*TRADE Group, Inc.
(Registrant)
Date: June 12, 1998 By: /s/ Leonard C. Purkis
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Leonard C. Purkis
Title: Chief Financial Officer
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EXHIBIT INDEX
Exhibit Description
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10.1 Joint Venture Agreement dated June 3, 1998 between E*TRADE
Group, Inc. and SOFTBANK CORP.
10.2 Promissory Note dated June 5, 1998 issued by E*TRADE
Group, Inc. to SOFTBANK CORP.
10.3 Stock Purchase Agreement dated June 5, 1998 between
E*TRADE Group, Inc. and SOFTBANK Holdings, Inc.
99.1 Press Release, dated June 3, 1998, issued by E*TRADE Group,
Inc. announcing the agreement to form a joint venture company
in Japan.
99.2 Press Release, dated June 3, 1998, issued by E*TRADE Group,
Inc. announcing the Stock Purchase Agreement.
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Exhibit 10.1
JOINT VENTURE AGREEMENT
by and between
SOFTBANK CORP.
and
E*TRADE GROUP, INC.
June 3, 1998
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JOINT VENTURE AGREEMENT
This JOINT VENTURE AGREEMENT ("AGREEMENT") is made as of June 3, 1998, by
and between E*TRADE GROUP, INC., a Delaware corporation ("E*TRADE"), and
SOFTBANK CORP., a Japanese corporation ("SOFTBANK"). E*TRADE and SOFTBANK are
hereunder also referred to collectively as the "PARTIES" and individually as a
"PARTY."
RECITALS
A. SOFTBANK is a leading provider of information and distribution services
in Japan and worldwide as infrastructure for the digital information industry.
B. E*TRADE is a leading provider of Internet-based online securities
trading services.
C. The Parties desire to form a joint venture to provide online securities
trading services to residents of Japan on the terms and subject to the
conditions set forth herein.
NOW THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Parties hereby agree as follows:
AGREEMENT
1. DEFINITIONS
1.1 "AFFILIATE" means any Person: (a) that is controlled by, controls,
or is under common control with a Party (collectively, a "CONTROLLED PERSON");
or (b) that is controlled by, controls, or under common control with any such
Controlled Person, in each case for so long as such control continues; provided,
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however, (i) that Affiliates of either Party shall include Persons in which such
Party owns, directly or indirectly, shares representing at least thirty percent
(30%) of the voting power represented by such Affiliates' outstanding shares,
regardless of whether such control actually exists and (ii) Yahoo Inc. shall not
be deemed an Affiliate of SOFTBANK or any member of the SOFTBANK Group for
purposes of this Agreement. For purposes of this definition and Section 1.19,
"CONTROL" shall mean the possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
securities or other ownership interests, by contract or otherwise).
1.2 "ANNUAL PLAN" means a business operations plan detailing E*TRADE
Japan's goals and procedures for personnel, technical, financial, administrative
and marketing activities for E*TRADE Japan's next succeeding fiscal year, as
approved each year and revised from time to time by the Board.
1.3 "ARTICLES" means the articles of incorporation of E*TRADE Japan in
the form of attached Exhibit 1.3, as the same may be amended from time to time
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in accordance with this Agreement and the Commercial Code.
1.4 "BOARD" means the board of directors of E*TRADE Japan.
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1.5 "BUSINESS" means the development and distribution of online
electronic investing services permitting residents of Japan to place and
consummate orders for securities over the internet, and to initiate and
consummate such other transactions as the Parties may agree from time to time
after prior consultation and review of applicable regulatory issues.
1.6 "BUSINESS DAY" means a day on which commercial banks in the United
States and Japan are generally open to conduct their regular banking business.
1.7 "CLOSING DATE" is defined in Section 3.2(a).
1.8 "COMMERCIAL CODE" means the Commercial Code of Japan, as amended
and in effect from time to time.
1.9 "COMMON STOCK" means common stock of E*TRADE Japan as authorized by
the Articles.
1.10 "CONFIDENTIAL INFORMATION" means all nonpublic or proprietary
information disclosed by SOFTBANK, E*TRADE, E*TRADE Japan, or any of their
Affiliates to any Party (whether owned by the disclosing Party or a third party
to whom the disclosing Party owes a non-disclosure obligation) other than
information which the receiving Party can demonstrate: (i) was known to the
receiving Party at the time of the disclosure by the disclosing Party; (ii) has
become publicly known through no wrongful act of the receiving Party; (iii) has
rightfully been received by the receiving Party from a third party; or (iv) has
been independently developed by the receiving Party.
1.11 "CONSULTING SERVICES AGREEMENT' means the Consulting Services
Agreement to be entered into between SOFTBANK and E*TRADE Japan on the Closing
Date in the form of attached Exhibit 1.11, as amended from time to time.
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1.12 "DIRECTOR" means a member of the Board.
1.13 "DISCLOSING PARTY" is defined in Section 5.2.
1.14 "ETJ INTEREST" shall mean, for a Party, the percentage interest
represented by the Securities then held by such Party divided by the all
outstanding Securities (on an as-converted to Common Stock basis).
1.15 "E*TRADE AFFILIATES" is defined in Section 3.4(a).
1.16 "E*TRADE JAPAN" is defined in Section 3.1.
1.17 "E*TRADE SECURITIES" is defined in Section 6.2(a).
1.18 "EFFECTIVE DATE" means the date of this Agreement.
1.19 "FUND" means any investment fund controlled by SOFTBANK or any
SOFTBANK Affiliate.
1.20 "KEY OFFICERS" means those E*TRADE Japan employees who are in
management positions reporting directly to the President.
1.21 "LAUNCH DATE" is defined in Section 3.1.
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1.22 "LICENSE AGREEMENT" shall mean the License Agreement to be entered
into between E*TRADE and E*TRADE Japan on the Closing Date in the form attached
hereto as Exhibit 1.22 and as amended from time to time.
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1.23 "LOAN" is defined in Section 3.3.
1.24 "PARTNERS" means such Persons as SOFTBANK deems strategically
important to the success of E*TRADE Japan and proposes to include in the
SOFTBANK Group pursuant to Section 3.2(a).
1.25 "PARTY" and "PARTIES" are defined in the opening paragraph of this
Agreement.
1.26 "PERSON" means a natural individual, partnership, firm,
corporation, or other entity or form of business association.
1.27 "PROMISSORY NOTE" means a promissory note, dated the Closing Date,
made by E*TRADE in favor of SOFTBANK, and in the form of attached Exhibit 1.27.
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1.28 "PROPRIETARY INFORMATION" is as defined in the License Agreement.
1.29 "RECEIVING PARTY" is defined in Section 5.2.
1.30 "REGISTER" is defined in Section 3.3(c).
1.31 "SECURITIES" shall mean all outstanding shares of Common Stock and
any other equity securities of E*TRADE Japan or instruments exercisable or
exchangeable for or convertible into Common Stock or other equity securities of
E*TRADE Japan.
1.32 "SECURITIES BUSINESS LICENSE" means a securities business license
for the broker-dealer business under the Japan Securities and Exchange Law (Law
No. 25 of 1948, as amended).
1.33 "SOFTBANK GROUP" is defined in Section 3.2(a).
1.34 "SPECIAL EXCEPTIONS LAW" means the Law Pertaining to Special
Exceptions to the Commercial Code concerning Auditors of Companies (Kabushiki
Kaisha).
1.35 "STATUTORY AUDITOR" means a statutory auditor (Kansa-yaku) of
E*TRADE Japan with powers and duties as specified in the Commercial Code.
1.36 "TEMPORARY ACCOUNT" is defined in Section 3.2(a).
1.37 "TERM" is defined in Section 7.1.
1.38 "TRANSACTION DOCUMENTS" means this Agreement, the Articles, the
License Agreement, the Consulting Services Agreement, the Promissory Note and
each other agreement entered into between the Parties on or as of the Effective
Date or the Closing Date, as the case may be, in connection with the
transactions contemplated hereby.
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2. PURPOSE OF JOINT VENTURE
The Parties hereby associate themselves in a joint venture relationship
which shall have as its principal purpose the establishment and development of
the Business.
3. ESTABLISHMENT AND CAPITALIZATION OF E*TRADE JAPAN
3.1 Establishment. The Parties agree that the joint venture
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contemplated by this Agreement shall be carried out exclusively through a newly-
formed Japanese kabushiki kaisha established by the Parties pursuant to this
Section 3.2 ("E*TRADE JAPAN"). E*TRADE Japan's corporate name shall be "E.TRADE
Kabushiki Kaisha" in Japanese and "E*TRADE Japan K.K." in English. The Parties
shall use commercially reasonable efforts to cause E*TRADE Japan to commence
commercial operations by January 10, 1999 (the "LAUNCH DATE"). Promptly
following E*TRADE Japan's receipt of a broker-dealer business license pursuant
to the Securities and Exchange Law (Law No. 25 of 1948, as amended), the Parties
shall cooperate to cause the Articles to be amended to reflect (a) "E.TRADE
SHOKEN KABUSHIKI KAISHA" as E*TRADE Japan's name in Japanese, and (b) the
appropriate business purposes of E*TRADE Japan.
3.2 Capitalization.
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(a) Initial Capitalization. E*TRADE Japan shall, as of the second
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(2nd) Business Day immediately following the Effective Date (the "CLOSING
DATE"), have authorized capital stock consisting of one class of shares
designated as Common Stock with the rights set forth in the Articles.
Fifty-four thousand (54,000) shares of Common Stock, with a par value of
(Yen)50,000 per share, shall be issued on the Closing Date. Listed in
Exhibit 3.2 are the SOFTBANK Affiliates, Funds and Partners which shall be
included as the initial SOFTBANK shareholders of E*TRADE Japan (the
"SOFTBANK GROUP"). SOFTBANK shall notify E*TRADE in writing regarding any
SOFTBANK Affiliates, Funds and Partners which SOFTBANK proposes to include
as additional SOFTBANK shareholders of E*TRADE Japan following the Closing
Date, whether in connection with a subscription for newly-issued Securities
pursuant to Section 3.4 or by way of transfer of Securities from one or
more members of the then-current SOFTBANK Group. E*TRADE shall have the
right to approve such proposed additional SOFTBANK Group members, which
approval shall not be unreasonably withheld. E*TRADE shall deliver to
SOFTBANK written confirmation of its approval of or objection to additional
proposed SOFTBANK Group members within five (5) Business Days of E*TRADE's
receipt of SOFTBANK's notice, and any such entities so approved by E*TRADE
shall be deemed to be members of the SOFTBANK Group for purposes of this
Agreement. E*TRADE Japan's initial equity shall be funded as follows: On
the Effective Date, SOFTBANK and E*TRADE shall (i) instruct their
respective banks to wire (Yen)1,566,000,000 and (Yen)1,134,000,000,
respectively, to a temporary account ("Betsudan Yokin") established by
SOFTBANK at The Fuji Bank, Limited (Tokyo headquarters), account number
3948, for purposes of incorporating E*TRADE Japan (the "TEMPORARY
ACCOUNT"), and (ii) shall exchange with each other copies of such wire
instructions. Upon written confirmation of receipt of such wire transfers
in the Temporary Account on or prior to the Closing Date (a copy of which
confirmation SOFTBANK shall deliver promptly to E*TRADE), the Parties shall
be deemed to have made, effective as of the Closing Date, and SOFTBANK
shall cause to be reflected in the documentation for E*TRADE Japan's
registration of incorporation, the following initial subscriptions for
shares of Common Stock:
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(i) SOFTBANK Group Initial Subscription. The SOFTBANK Group
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shall, collectively, subscribe for thirty-one thousand three hundred twenty
(31,320) shares of Common Stock, representing a fifty-eight percent (58%)
ETJ Interest; and
(ii) E*TRADE Purchase. E*TRADE shall subscribe for twenty-two
thousand six hundred eighty (22,680) shares of Common Stock, representing a
42% ETJ Interest.
(b) Certain Deliveries. On the Closing Date:
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(i) SOFTBANK shall (A) execute and deliver to E*TRADE the
Transaction Documents (other than this Agreement) to which SOFTBANK is a
party, (B) cause E*TRADE Japan to execute and deliver to E*TRADE the
License Agreement and the Consulting Services Agreement and (C) subject to
Section 3.3, cause to be wired to E*TRADE the Loan proceeds; and
(ii) E*TRADE shall execute and deliver to SOFTBANK and to E*TRADE
Japan the License Agreement, and execute and deliver to SOFTBANK the other
Transaction Documents (other than this Agreement) to which E*TRADE is a
party.
(c) Acknowledgment of Agreement; Delivery of Share Certificates.
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Promptly after the Closing Date, SOFTBANK shall cause E*TRADE Japan (i) to
deliver to each Party its written acknowledgment of, and agreement to abide
by, the terms of this Agreement, and (ii) at the request of either SOFTBANK
or E*TRADE, to promptly issue and deliver to the SOFTBANK Group and to
E*TRADE share certificates representing the shares of Common Stock
subscribed for and purchased pursuant to this Section 3.2.
3.3 Loan.
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(a) In General. In order to assist E*TRADE in funding its purchase of
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Common Stock pursuant to Section 3.2, SOFTBANK hereby agrees to loan to
E*TRADE on the Closing Date, by wire transfer to such bank account as
E*TRADE shall specify in writing to SOFTBANK on or before the Effective
Date, and E*TRADE hereby agrees, to borrow from and repay to SOFTBANK,
(Yen)567,000,000 (the "LOAN"). The Loan shall be subject to E*TRADE's prior
execution and delivery to SOFTBANK of the Promissory Note and the terms of
E*TRADE's repayment of the Loan shall be governed thereby.
(b) The Register. E*TRADE shall maintain at its address referred to in
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Section 10.2 hereof a register (the "REGISTER") for the recordation of (i)
the name and address of each Noteholder (as defined in the Promissory Note)
and (ii) the principal amount of the Loan owing to, and any Promissory Note
evidencing such Loan owned by, each Noteholder from time to time.
Notwithstanding anything to the contrary in this Agreement, E*TRADE and
each Noteholder shall treat each Person whose name is recorded in the
Register as the owner of the Loan for all purposes of this Agreement. The
Register shall be available for inspection by any Noteholder at any
reasonable time and from time to time upon reasonable prior notice.
(c) Forms. The Noteholder:
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(i) shall furnish to E*TRADE on or before the date of any
payment to such Noteholder by E*TRADE pursuant to the terms of the
Promissory Note an
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accurate and complete original signed copy of Internal Revenue Service Form
W-8, or successor applicable form, certifying to such information as may be
requested to establish such Noteholder's legal entitlement at the date of
such certificate to an exemption from U.S. withholding tax under the
provisions of Section 881(c) of the Code with respect to payments of
interest to be made on the Loan (and deliver to E*TRADE a further copy of
such form on or before the date it expires or becomes obsolete and after
the occurrence of any event requiring a change in the most recently
provided form); and
(ii) agrees to the extent legally entitled to do so, upon
E*TRADE's reasonable request, to provide to E*TRADE (for the benefit of
E*TRADE) (A) such other forms as may be reasonably required in order to
establish the legal entitlement of such Noteholder to an exemption from
U.S. withholding tax with respect to payment of interest made on the Loan
and (B) such other supplemental forms as may at any time be required as a
result of changes to applicable law or regulations in order to confirm or
maintain in effect its entitlement to exemption from U.S. withholding tax
on any payments of interest made on the Loan; provided, however, that
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E*TRADE shall promptly reimburse all of such Noteholder's reasonable
out-of-pocket costs and expenses (including attorneys' fees) incurred in
connection with the performance of its obligations pursuant to this Section
3.3(c).
3.4 Additional Capital; Preemptive Right.
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(a) Subject to Section 4, the Board may, by written notice to the
Parties pursuant to the terms hereof, setting forth the terms, conditions
and reasons for the financing, call for the Parties to subscribe for such
additional Securities as the Board may deem appropriate based on E*TRADE
Japan's capital requirements from time to time. Except as set forth in
Section 3.4(b), the SOFTBANK Group, E*TRADE and E*TRADE Securities (and
E*TRADE's other Affiliates, to the extent approved by SOFTBANK pursuant to
this Section 3.4(a), the "E*TRADE AFFILIATES") shall have the right to
purchase their respective pro rata share (which shall be equal to their
then-current respective ETJ Interests) of any new issuance of Securities
(i) proposed to be issued to the Parties pursuant to the immediately
preceding sentence, and (ii) in the event of a proposed new issuance of
Securities to any other Person, on the same terms and conditions as such
Securities are offered to any other Person. SOFTBANK and E*TRADE shall each
notify the other Party and E*TRADE Japan in writing of its decision to
participate in any such proposed new issuance of Securities within ten (10)
Business Days after receipt of the notice described in the first sentence
of this Section 3.4(a). SOFTBANK shall have the right to approve in advance
(which approval shall not be unreasonably withheld) any Affiliates of
E*TRADE which E*TRADE proposes to include as shareholders of E*TRADE Japan.
To the extent the SOFTBANK Group or E*TRADE (including E*TRADE Affiliates)
elects not to subscribe for its full pro rata share of such Securities,
SOFTBANK Group (if E*TRADE does not so subscribe) and E*TRADE (if the
SOFTBANK Group does not so subscribe) shall be entitled to purchase any of
the unsubscribed Securities. The Party electing to subscribe for any of the
unsubscribed Securities shall, together with E*TRADE Japan, effect the
closing of such subscription within thirty (30) days of its receipt of the
nonsubscribing Party's election not to subscribe for such Securities, on
the terms contained in the notice first mentioned above in this Section
3.4(a). Any subsequent proposed subscription of such Securities shall again
be subject to the Parties' preemptive rights, and shall require compliance
with the procedures, described in this Section 3.4(a).
(b) Notwithstanding Section 3.4(a), the SOFTBANK Group and E*TRADE
shall not have the right to purchase their pro rata share of new issuances
of
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Securities issued pursuant to an E*TRADE Japan employee stock option plan
adopted by the Board in accordance with this Agreement.
3.5 Employee Stock Option Plan. The Parties agree that an employee
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stock option plan would be beneficial to E*TRADE Japan, and accordingly shall
cooperate in good faith with a view towards establishing such a plan within
twelve (12) months after the Effective Date on terms mutually agreed by the
Parties. The Securities allocated to an employee stock option plan shall not,
initially, represent more than a two percent (2%) ETJ Interest. Any Securities
allocated to an employee stock option plan shall be newly-issued and accordingly
shall dilute the Parties' respective ETJ Interests on a pro rata basis.
3.6 ETJ Interest. The Parties agree to implement E*TRADE Japan's
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capital structure and the terms of this Agreement so that at all times during
the term hereof, including following E*TRADE Japan's initial public offering,
(a) the SOFTBANK Group's ETJ Interest (on a fully-diluted basis taking into
account any shares reserved for issuance pursuant to any employee stock option
plan) shall not be less than fifty and one tenth percent (50.1%) and (b) E*TRADE
Group's ETJ Interest (on a fully-diluted basis taking into account any shares
reserved for issuance pursuant to any employee stock option plan) shall not be
less than thirty-four and nine-tenths percent (34.9%).
4. OPERATION AND MANAGEMENT OF E*TRADE JAPAN
4.1 Operation of E*TRADE Japan. The Parties agree to take all actions
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necessary to ensure that E*TRADE Japan shall be operated in accordance with the
terms of this Agreement and the other Transaction Documents.
4.2 Board of Directors. E*TRADE Japan will be managed by the Board in
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accordance with the terms of this Agreement and applicable law. The Board shall
initially consist of five (5) Directors, three (3) of whom shall be nominated by
SOFTBANK and two (2) of whom shall be nominated by E*TRADE. If E*TRADE's ETJ
Interest at any time decreases to less than thirty-five percent (35%), the
Parties shall cause the Board constituency to be adjusted within thirty (30)
Business Days of such decrease so that four (4) Directors are nominated by
SOFTBANK and one (1) Director is nominated by E*TRADE. If the SOFTBANK Group's
ETJ Interest at any time decreases to less than forty two percent (42%), the
Parties shall cause the Board constituency to be adjusted so that only two (2)
Directors are nominated by SOFTBANK, and if the SOFTBANK Group's ETJ Interest at
any time decreases to less than thirty-five percent (35%), the Parties shall
cause the Board constituency to be adjusted so that only one (1) Director is
nominated by SOFTBANK, in each case within thirty (30) Business Days of the
triggering decrease.
4.3 Removal; Reappointment of Directors. Any Director may be removed
-----------------------------------
for cause in accordance with applicable law. In addition, each Party having the
right to appoint a Director pursuant to this Section 4 shall also have the
right, in its sole discretion, to remove such Director at any time, effective
upon delivery of written notice to E*TRADE Japan, the Director to be removed and
to the other Party. In the case of a vacancy in the office of a Director for any
reason (including removal pursuant to the preceding sentence), the vacancy shall
be filled by the Party that nominated or has the right to nominate the Director
in question.
4.4 Board Meetings. The President shall have the authority to convene
Board meetings, including the authority to specify the time and place of such
meetings (with video
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conference or any other legally permitted means of meeting to be permitted at
the request of any Director); provided, however, that (i) the Board shall meet
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at least once during each calendar quarter and (ii) written notice of such
meetings shall be given not less than twenty (20) Business Days in advance
(which twenty (20)-Business Day period may be shortened by written waiver of
Directors or actual attendance by Directors, without objection, at a special
Board meeting). Board meetings shall be conducted in the Japanese language (with
English translation) and minutes of such meetings shall be prepared by E*TRADE
Japan in Japanese and English and distributed to each Director promptly
following a meeting. In the event of conflict or controversy, the Japanese
version of the minutes shall control. Proposals or reports brought before any
Board or shareholders' meeting for information or action (including without
limitation E*TRADE Japan's annual and semi-annual financial statements) shall be
prepared in English and Japanese. In the event of conflict or controversy, the
Japanese version thereof shall control. Any and all reasonable travel costs
(including without limitation business class air travel) and expenses incurred
for purposes of attendance by a Party's Directors at Board meetings held outside
the country where the Party's corporate headquarters is located shall be
reimbursed by E*TRADE Japan.
4.5 Board Quorum, Resolutions. A quorum shall be deemed to exist for
-------------------------
purposes of Board actions so long as at least three (3) Directors are present,
including one Director appointed by each of the Parties. If no Directors
nominated by a Party attend a duly noticed Board meeting, such meeting shall be
immediately adjourned and rescheduled, and written notice of such rescheduled
meeting shall be delivered to the Directors not less than five (5) Business Days
in advance of the rescheduled meeting. If the number of Directors who attend
such rescheduled meeting is not sufficient to constitute a quorum under the
first sentence of this Section 4.5, a quorum shall be deemed to exist for
purposes of the rescheduled meeting notwithstanding such non-attending
Directors' absence so long as there is a sufficient number of directors present
to constitute a valid quorum pursuant to the Commercial Code. Any action,
determination or resolution of the Board shall require the affirmative vote of a
majority of Directors present at a meeting at which a valid quorum pursuant to
this Section 4.5 is present.
4.6 E*TRADE Approval Rights. Notwithstanding any other provision of
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this Agreement, in addition to approval by the Board, E*TRADE's prior written
approval (either in the form of a written consent or in the form of E*TRADE's
Director voting in favor of such action at a duly held Board meeting) shall be
required for any of the actions described in attached Exhibit 4.6. E*TRADE's
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approval rights in respect of the President, Key Officers and Statutory Auditors
pursuant to Sections 4.7 and 4.8 shall be subject to the limitations set forth
in attached Exhibit 4.6.
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4.7 Representative Director; Key Officers. E*TRADE Japan shall have
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one (1) President, who shall be the Representative Director of E*TRADE Japan in
accordance with the Commercial Code. The President shall be elected by the Board
from among the Directors nominated by SOFTBANK pursuant to Section 4.2. E*TRADE
shall have the right to approve the President and the Key Officers (which
approval shall not be unreasonably withheld). SOFTBANK shall have the right,
exercisable in its sole discretion, to remove and, subject to E*TRADE's prior
approval of the proposed successor, replace the President or any Key Officer at
any time, effective upon the delivery of written notice to E*TRADE Japan, the
President or the Key Officer, and E*TRADE. SOFTBANK shall also have the right to
appoint a successor President or Key Officer, subject to E*TRADE's prior
approval of the proposed successor, in the event a vacancy arises for any
reason.
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4.8 Statutory Auditors. E*TRADE Japan shall have three (3) Statutory
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Auditors whom shall be nominated by SOFTBANK, subject to E*TRADE's prior
approval (which approval shall not be unreasonably withheld and provided that
affiliation with SOFTBANK or any member of the SOFTBANK Group shall not be
deemed a basis for E*TRADE's withholding its approval of a Statutory Auditor
hereunder). A Statutory Auditor may be removed for cause in accordance with the
applicable law. SOFTBANK shall also have the right, exercisable in its sole
discretion, to remove and, subject to E*TRADE's prior approval of the proposed
successor, replace a Statutory Auditor at any time, effective upon the delivery
of written notice to E*TRADE Japan, the Statutory Auditor to be removed and
E*TRADE. SOFTBANK shall also further have the right to appoint a successor
Statutory Auditor, subject to E*TRADE's prior approval of the proposed
successor, in the event a vacancy arises for any reason.
4.9 Shareholders' Meetings. Shareholders of E*TRADE Japan shall
----------------------
receive notice of each shareholders' meeting at least twenty (20) Business Days
before the scheduled date of such meeting. E*TRADE Japan shall have at least one
shareholders' meeting each calendar year. Such meeting will take place at such
time and place as is determined by the Board. Meetings shall be conducted in the
Japanese language (with English translation to the extent requested by E*TRADE),
and minutes of such meetings shall be prepared by E*TRADE Japan in Japanese and
English. In the event of conflict or controversy, the Japanese version of the
minutes shall control.
4.10 Voting. Each Party shall vote all Securities held by it (and
------
shall cause all Securities held by its permitted transferees under Section 8) to
effect the provisions of this Section 4.
4.11 Annual Plan. E*TRADE Japan's President shall prepare, and the
-----------
Board shall approve, an Annual Plan with respect to each fiscal year no later
than sixty (60) days prior to the commencement of the fiscal year. The Parties
shall cause E*TRADE Japan to conduct its operations in accordance with an Annual
Plan, which shall set forth certain financial performance goals, including
without limitation with respect to revenues, profits, return on net assets and
return on equity for the subject fiscal year.
4.12 Financial Statements and Accounting Records. Financial statements
-------------------------------------------
for E*TRADE Japan, including without limitation a balance sheet, income
statement, statement of cash flows and statement of shareholders' equity, shall
be submitted by E*TRADE Japan to each of the Parties (i) within sixty (60) days
after the end of each fiscal quarter for such quarter, and (ii) within ninety
(90) days after the end of each fiscal year for such year. Each of the annual
financial statements shall be audited and certified by an internationally
recognized accounting firm (which will act as an independent auditor under the
Special Exceptions Law) retained by E*TRADE Japan and jointly selected by
SOFTBANK and E*TRADE. All financial statements shall be (i) prepared in
accordance with generally accepted accounting principles in Japan and (ii) in
reasonable detail and shall contain such financial data as SOFTBANK and E*TRADE
may deem necessary in order to keep each of them advised of E*TRADE Japan's
financial status (although quarterly statements need not include footnotes and
may be subject to year-end adjustments).
4.13 Right of Inspection. During office hours of E*TRADE Japan, and
-------------------
upon reasonable notice to E*TRADE Japan, each Party shall have full access to
all properties, books of account, and records of E*TRADE Japan, and each Party
shall have the right to make copies from such books and records at its own
expense. Any information obtained by
9
<PAGE>
the Parties through exercise of rights granted under this Section 4.13 shall, to
the extent constituting Confidential Information hereunder, be subject to the
confidentiality provisions set forth in Section 5.2.
5. ADDITIONAL COVENANTS
5.1 Cooperation. In accordance with and subject to the License
-----------
Agreement, E*TRADE shall provide E*TRADE Japan with an exclusive license, under
all of its intellectual property rights (including its trademarks), sufficient
to conduct the Business. In addition, upon the terms and subject to the License
Agreement, E*TRADE shall provide E*TRADE Japan with such technical support as it
may reasonably require to localize E*TRADE's online securities trading
technology for the Japanese environment and to interconnect with the Tokyo Stock
Exchange and other Japanese exchanges, such technical support to be provided
without charge (except for reimbursement of reasonable out-of-pocket expenses).
In accordance with the Consulting Services Agreement, SOFTBANK shall provide
consulting services to E*TRADE Japan regarding (i) necessary Japanese regulatory
approvals required for the Business and (ii) strategic business opportunities
relating to the Business. The Parties agree that E*TRADE Japan shall pay a
royalty to E*TRADE in accordance with the License Agreement and a consulting fee
to SOFTBANK in accordance with the Consulting Services Agreement; provided,
--------
however, that if E*TRADE Japan fails to complete its initial public offering
by the fourth (4th) anniversary of the Launch Date, the royalty payable to
E*TRADE under the License Agreement and the consulting fee payable to SOFTBANK
under the Consulting Services Agreement shall each be adjusted to equal a
percentage of E*TRADE Japan's gross revenues agreed upon by the Parties and
approved by the Board, and shall be payable quarterly from and after the
fourth (4th) anniversary of the Launch Date.
5.2 Confidentiality.
---------------
(a) The Parties recognize that, in connection with the performance of
this Agreement, each Party (in such capacity, the "DISCLOSING PARTY") may
disclose Confidential Information to the other Party (the "RECEIVING PARTY").
The Receiving Party agrees (i) not to use any such Confidential Information for
any purpose other than in the performance of its obligations under this
Agreement or any Transaction Document and (ii) not to disclose any such
Confidential Information, except to its employees and (in the case of SOFTBANK,
employees of other members of the SOFTBANK GROUP who agree, in a writing
satisfactory to E*TRADE, to be bound hereby) who are reasonably required to have
the Confidential Information in connection herewith. The Receiving Party agrees
to take all reasonable measures to protect the secrecy and confidentiality of,
and avoid disclosure or unauthorized use of, the Disclosing Party's Confidential
Information.
(b) Each Party agrees that its obligations under this Section 5.2 are
necessary and reasonable to protect the other Party and its business, that any
violation of these provisions could cause irreparable injury to the other Party
for which money damages would be inadequate, and that, in addition to any other
remedies that may be available in law, the other Party shall be entitled to
obtain injunctive relief against the threatened breach of the provisions of this
Section 5.2 without the necessity of proving actual damages. The Parties agree
that the remedies set forth in this Section 5.2 are in addition to and in no way
preclude any other remedies or actions that may be available under this
Agreement.
10
<PAGE>
5.3 Confidentiality of Agreement; Publicity. Each Party agrees that
---------------------------------------
the terms and conditions of this Agreement and the Transaction Documents shall
be treated as confidential information and that no reference thereto shall be
made thereto without the prior written consent of the other Party (which consent
shall not be unreasonably withheld or delayed) except (i) as required by
applicable disclosure laws, (ii) to its accountants, banks, financing sources,
lawyers and other professional advisors in connection with this Agreement,
provided that such parties undertake in writing (or are otherwise bound by rules
of professional conduct) to keep such information strictly confidential, (iii)
as necessary in connection with the enforcement of the Agreement between the
Parties, or (iv) pursuant to joint press releases of the Parties prepared in
good faith. The Parties will consult with each other, in advance, with regard to
the terms of all proposed press releases, public announcements and other public
statements with respect to the transactions contemplated hereby.
5.4 Noncompetition. During the term of this Agreement, neither Party
--------------
shall, directly or indirectly, offer online electronic investing services
permitting any Person residing in Japan to execute trades over the internet in
securities which are listed on a securities exchange or quoted on an interdealer
quotation system which is governed by the rules of a national securities
association pursuant to applicable law. In the event that this Agreement is
terminated due to a Party's breach (including, if SOFTBANK is the terminating
Party, a breach by E*TRADE under the License Agreement), the breaching Party's
obligations pursuant to this Section 5.4 shall remain in effect for a period of
twenty-four (24) months following such termination.
5.5 Regulatory Approvals. SOFTBANK shall be primarily responsible for
--------------------
assisting E*TRADE Japan to obtain such approvals, consents and similar actions
from Japanese governmental authorities, and E*TRADE shall be primarily
responsible for assisting E*TRADE Japan to obtain such approvals, comments and
similar actions from governmental authorities outside of Japan, as may be
necessary or appropriate in order to consummate the transactions contemplated
under the Transaction Documents. Each Party shall provide such assistance, at
the other Party's cost, as the other Party may reasonably request in connection
with such consents and approvals.
6. WARRANTIES AND REPRESENTATIONS OF THE PARTIES
6.1 Warranties of SOFTBANK. SOFTBANK hereby represents and warrants to
----------------------
E*TRADE that, as of the Effective Date, the following statements are and shall
be true and correct:
(a) Organization. SOFTBANK is a corporation duly organized and validly
------------
existing under the laws of Japan, and has the corporate power and authority
to enter into and perform this Agreement and the other Transaction
Documents to which it is a party.
(b) Permits; Approvals. SOFTBANK holds all licenses, permits,
------------------
certifications and other authorizations, the absence of which would have a
material adverse effect on its financial condition or business, and there has
been no default or violation under any such authorization and there is no
proceeding or investigation that is pending or, to SOFTBANK's knowledge,
threatened under which any such authorization may be revoked, terminated or
suspended.
(c) Authorization. All corporate action on the part of SOFTBANK
-------------
necessary for the authorization, execution and delivery of this Agreement and
the other
11
<PAGE>
Transaction Documents to which it is a party and for the performance
of all of its obligations hereunder and thereunder has been taken, and this
Agreement and the other Transaction Documents to which it is a party when fully
executed and delivered, shall each constitute a valid, legally binding and
enforceable obligation of SOFTBANK.
(d) Government and Other Consents. Other than any licenses, permits,
-----------------------------
certifications or other authorizations which may be required in connection with
the Business, as to which SOFTBANK makes no representation, no consent,
authorization, license, permit, registration or approval of, or exemption or
other action by, any governmental or public body or authority, or any other
Person, is required in connection with SOFTBANK's execution, delivery and
performance of this Agreement and the other Transaction Documents to which it is
a party, or if any such consent is required, SOFTBANK has satisfied the
applicable requirements.
(e) Effect of Agreement. SOFTBANK's execution, delivery and
-------------------
performance of this Agreement and the other Transaction Documents to which it is
a party will not (i) violate the Articles of Incorporation of SOFTBANK or any
provision of any law, statute, rule or regulation to which SOFTBANK is subject,
(ii) violate any judgment, order, writ, injunction or decree of any court
applicable to SOFTBANK, (iii) have any effect on the compliance of SOFTBANK with
any applicable licenses, permits or authorizations which would materially and
adversely affect SOFTBANK, (iv) result in the breach of, give rise to a right of
termination, cancellation or acceleration of any obligation with respect to
(presently or with the passage of time), or otherwise be in conflict with any
term of, or affect the validity or enforceability of, any agreement or other
commitment to which SOFTBANK is a party and which would materially and adversely
affect SOFTBANK or (v) result in the creation of any lien, pledge, mortgage,
claim, charge or encumbrance upon any assets of SOFTBANK; provided, however,
--------
that regulatory approvals may be required in connection with the conducting the
Business with respect to certain securities and SOFTBANK makes no representation
with respect to any such approvals pending the Parties' further review of
regulatory issues in connection with the Business.
(f) Litigation. There are no actions, suits or proceedings pending or,
----------
to SOFTBANK's knowledge, threatened, against SOFTBANK before any court or
governmental agency which question SOFTBANK's right to enter into or perform
this Agreement or the other Transaction Documents to which it is a party, or
which question the validity of this Agreement or any of the other Transaction
Documents.
(g) Disclosure. No representation or warranty by SOFTBANK contained in
----------
this Agreement or in any other Transaction Document to which it is a party, and
no exhibit, writing or other instrument required to be furnished by SOFTBANK
pursuant hereto contains any untrue statement of a material fact or omits any
material fact necessary in order to make the statements and information
contained therein not misleading.
6.2 Warranties of E*TRADE. E*TRADE hereby represents and warrants to
---------------------
SOFTBANK that, as of the Effective Date, the following statements are and shall
be true and correct:
(a) Organization. E*TRADE is a corporation duly organized and validly
------------
existing under the laws of Delaware, and E*TRADE Securities, Inc. ("E*TRADE
SECURITIES") is a corporation duly organized and validly existing under the laws
of California.
12
<PAGE>
E*TRADE has the corporate power and authority to enter into and perform this
Agreement and the other Transaction Documents to which it is a party.
(b) Permits; Approvals. Each of E*TRADE and E*TRADE Securities hold
------------------
all licenses, permits, certifications and other authorizations, including
without limitation any such authorizations required under U.S. federal
securities laws, the absence of which would have a material adverse effect on
the financial condition or business of E*TRADE or E*TRADE Securities, as the
case may be, and there has been no default or violation under any such
authorization and there is no proceeding or investigation that is pending or, to
E*TRADE's knowledge, threatened under which any such authorization may be
revoked, terminated or suspended.
(c) Authorization. All corporate action on the part of E*TRADE
-------------
necessary for the authorization, execution and delivery of this Agreement and,
the other Transaction Documents to which it is a party and for the performance
of all of its obligations hereunder and thereunder has been taken, and this
Agreement, the License Agreement and the other Transaction Documents to which it
is a party, when fully executed and delivered, shall each constitute a valid,
legally binding and enforceable obligation of E*TRADE.
(d) Government and Other Consents. Other than any licenses, permits,
-----------------------------
certifications or other authorizations which may be required from regulatory
authorities in Japan in connection with the Business, as to which E*TRADE makes
no representation, no consent, authorization, license, permit, registration or
approval of, or exemption or other action by, any governmental or public body or
authority, or any other Person, is required in connection with E*TRADE's
execution, delivery and performance of this Agreement or the other Transaction
Documents to which it is a party, or if any such consent is required, E*TRADE
has satisfied any applicable requirements.
(e) Effect of Agreement. E*TRADE's execution, delivery and performance
-------------------
of this Agreement and the other Transaction Documents to which it is a party
will not (i) violate the Articles of Incorporation of E*TRADE or any provision
of any law, statue, rule or regulation to which it is subject, (ii) violate any
judgment, order, writ, injunction or decree of any court applicable to E*TRADE,
(iii) have any effect on the compliance of E*TRADE with any applicable licenses,
permits or authorizations which would materially and adversely affect E*TRADE,
(iv) result in the breach of, give rise to a right of termination, cancellation
or acceleration of any obligation with respect to (presently or with the passage
of time), or otherwise be in conflict with, any term of, or affect the validity
or enforceability of any agreement or other commitment to which E*TRADE is a
party and which would materially and adversely affect E*TRADE, or (v) result in
the creation of any lien, pledge, mortgage, claim, charge or encumbrance upon
any assets of E*TRADE; provided, however, that Japanese regulatory approvals may
--------
be required in connection with the conducting the Business with respect to
certain securities and E*TRADE makes no representation with respect to any such
approvals pending the Parties' further review of regulatory issues in connection
with the Business.
(f) Litigation. There are no actions, suits or proceedings pending or,
----------
to E*TRADE's knowledge, threatened, against E*TRADE before any court or
governmental agency which question E*TRADE's right to enter into or perform this
Agreement or other Transaction Documents to which it is a party, or which
question the validity of this Agreement or any of the other Transaction
Documents.
13
<PAGE>
(g) Disclosure. No representation or warranty by E*TRADE contained in
----------
this Agreement or any other Transaction Document to which it is a party, and no
exhibit, writing or other instrument required to be furnished pursuant hereto
contains any untrue statement of a material fact or omits any material fact
necessary in order to make the statements and information contained therein not
misleading.
7. TERM AND TERMINATION
7.1 Term. This Agreement shall be effective as of the Effective Date
----
and shall continue in effect until and unless terminated pursuant to Section
7.2.
7.2 Termination. This Agreement may be terminated as follows:
-----------
(a) Upon the Parties' mutual written agreement.
(b) If SOFTBANK or E*TRADE fails to perform, in any material respect,
any of its material obligations hereunder or any of the other Transaction
Documents, and if such default continues for a period of thirty (30) days after
the date the defaulting Party first receives written notice of such default from
the other Party, then E*TRADE (if SOFTBANK is the defaulting Party) or SOFTBANK
(if E*TRADE is the defaulting Party) shall have the right to terminate this
Agreement effective immediately upon written notice to the defaulting Party at
any time after such thirty (30)-day period.
(c) SOFTBANK shall have the right to terminate this Agreement,
effective immediately upon written notice to E*TRADE, in the event that E*TRADE
Japan has elected to terminate the License Agreement in accordance with its
terms. E*TRADE shall have the right to terminate this Agreement effective
immediately upon written notice to SOFTBANK in the event that E*TRADE has
elected to terminate the License Agreement in accordance with its terms.
(d) Either E*TRADE or SOFTBANK shall have the right to terminate this
Agreement, effective immediately upon written notice to the other Party and
E*TRADE, in the event that E*TRADE (where SOFTBANK is the Party giving notice)
or SOFTBANK (where E*TRADE is the Party giving notice) is dissolved, liquidated
or declared bankrupt or a voluntary or involuntary bankruptcy filing is made by
such Party.
7.3 Effect. Upon termination of this Agreement, the Parties shall
------
negotiate in good faith a possible purchase by one Party of all outstanding
Securities held by the other Party or the sale of E*TRADE Japan to a third
party. In the event that, notwithstanding their good faith negotiations, the
Parties are unable to agree upon one Party's purchase of the other Party's
Securities or the sale of E*TRADE Japan to a third party within thirty (30) days
of the notice of termination, the Parties shall cooperate to cause E*TRADE Japan
to be liquidated as promptly as practical in accordance with applicable law. The
rights and obligations of the Parties under Sections 5.2, 5.3, 5.4 (to the
extent provided therein), this Section 7.3, and Sections 7.4, 7.5, 9 and 10
shall survive any termination of this Agreement.
7.4 Return of Confidential Information. Upon the termination of this
----------------------------------
Agreement, each Party shall at its cost promptly return to the disclosing Party
any and all documents and materials constituting or containing Confidential
Information of the disclosing Party which are in the possession or control of
the receiving Party, or if requested by the disclosing Party, shall destroy such
documents and materials and certify such destruction in writing.
14
<PAGE>
7.5 Continuing Liability. Termination of this Agreement for any reason
--------------------
shall not release either Party from any liability or obligation which has
already accrued as of the effective date of such termination, and shall not
constitute a waiver or release of, or otherwise be deemed to prejudice or
adversely affect, any rights, remedies or claims, whether for damages or
otherwise, which a Party may have hereunder, at law, equity or otherwise or
which may arise out of or in connection with such termination.
8. TRANSFER RESTRICTIONS
8.1 General Restriction. Subject to Section 8.2, Each Party agrees to
--------
hold its Securities during the Term and, except as otherwise specifically
provided in this Agreement or agreed to in writing by the other Party, to not
sell, transfer, assign, hypothecate or in any way alienate any of such Party's
Securities or any right or interest therein except to an Affiliate controlled by
such Party, provided, however, that transfers to Affiliates in which the
--------
transferring Party holds, directly or indirectly, an equity interest of less
than seventy percent (70%) shall require the non-transferring Party's prior
written consent, which consent shall not be unreasonably withheld (and the non-
transferring Party in any case shall deliver its response regarding the proposed
transfer to the transferring Party within five (5) Business Days of receipt of
notice of the proposed transfer). In the case of any transfer permitted
hereunder (including Section 8.2), the transferring Party shall deliver to the
other Party (i) at least ten (10) Business Days prior to such transfer, a
written notice stating its intention to transfer the Securities to be
transferred, the name of the transferee Affiliate, the number of Securities to
be transferred, and the price and other terms and conditions of the transfer,
and (ii) on or prior to the effective date of the transfer and in a form
acceptable to the other Party and its counsel, the transferee's written
acknowledgement of and agreement to be bound by, and to vote and act in respect
of the transferred Securities at all times in accordance with, the terms of this
Agreement.
8.2 Transfers to Party Employees. Notwithstanding the provisions of
----------------------------
Section 8.1, each Party shall, upon written notice to E*TRADE Japan and the
other Party, have the right to transfer, to such Party's employees, such number
of its Securities as it may elect from time to time. Any such transfers shall
not affect the transferring Party's ETJ Interest for purposes of Section 3.6 or
Section 4.2.
9. INCIDENTAL AND CONSEQUENTIAL DAMAGES
NEITHER PARTY NOR ITS AFFILIATES WILL BE LIABLE TO THE OTHER PARTY UNDER
ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY FOR ANY INDIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING WITHOUT LIMITATION LOST PROFITS)
WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT.
10. GENERAL PROVISIONS
10.1 Governing Law; Dispute Resolution. The validity, construction and
---------------------------------
enforceability of this Agreement shall be governed and construed in accordance
with the laws of Japan. All disputes between the Parties arising out of this
Agreement (and not including any dispute under any other Transaction Document,
which shall be resolved pursuant to the terms thereof) shall be settled by the
Parties amicably through good faith discussions upon the written request of
either Party. In the event that any such dispute cannot be resolved thereby
within a period of sixty (60) days after such notice has been given, such
dispute shall
15
<PAGE>
be finally settled by arbitration in Tokyo, Japan, using the English language,
and in accordance with the rules then in effect of the Japan Commercial
Arbitration Association. The arbitrator(s) shall have the authority to grant
specific performance, and to allocate between the Parties the costs of
arbitration in such equitable manner as the arbitrator(s) may determine. The
prevailing party in the arbitration shall be entitled to receive reimbursement
of its reasonable expenses incurred in connection therewith, including (if
E*TRADE is the prevailing party) costs of travel to, and meals and hotel
accommodations in, Japan. Judgement upon the award so rendered may be entered in
any court having jurisdiction or application may be made to such court for
judicial acceptance of any award and an order of enforcement, as the case may
be.
10.2 Notices and Other Communications. Any and all notices, requests,
--------------------------------
demands and other communications required or otherwise contemplated to be made
under this Agreement shall be in writing and in English and shall be provided by
one or more of the following means and shall be deemed to have been duly given
(a) if delivered personally, when received, (b) if transmitted by facsimile, on
the first (1st) Business Day following receipt of a transmittal confirmation, or
(c) if by international courier service, on the fourth (4th) Business Day
following the date of deposit with such courier service, or such earlier
delivery date as may be confirmed to the sender by such courier service. All
such notices, requests, demands and other communications shall be addressed as
follows:
If to SOFTBANK:
SOFTBANK CORP.
24-1 Nihonbashi-Hakozakicho
Chuo-ku, Tokyo 103-8501
Attention: Mr. Yoshitaka Kitao
Mr. Minoru Machida
Hitoshi Hasegawa, Esq.
Telephone: 81-3-5642-8369
Facsimile: 81-3-5642-3402
with a copy to:
Morrison & Foerster LLP
AIG Building, 7th Floor
1-1-3 Marunouchi,
Chiyoda-ku, Tokyo 100-0005, Japan
Attention: Ken A. Siegel, Esq.
Charles C. Comey, Esq.
Telephone: 81-3-3214-6522
Facsimile: 81-3-3214-6512
16
<PAGE>
If to E*TRADE:
E*TRADE Group, Inc.
Four Embarcadero Place
2400 Geng Road
Palo Alto, CA 94303
U.S.A.
Attention: Mr. Stephen Richards
Mr. Michael P. Rolnick
Telephone: 1-650-842-2500
Facsimile: 1-650-842-8622
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
U.S.A.
Attention: Thomas A. Bevilacqua, Esq.
Curtis L. Mo, Esq.
Telephone: 1-650-424-0160
Facsimile: 1-650-496-2885
or in each case to such other address or facsimile number as a Party may have
furnished to the other Party in writing.
10.3 Language. This Agreement is in the English language
--------
only, which language shall be controlling in all respects, and all versions
hereof in any other language shall be for accommodation only and shall not be
binding upon the Parties hereto. All communications and notices to be made or
given pursuant to this Agreement shall be in the English language.
10.4 Severability. If any provision in this Agreement shall
------------
be found or be held to be invalid or unenforceable (including without limitation
objections by the Japanese Fair Trade Commission) then the meaning of said
provision shall be construed, to the extent feasible, so as to render the
provision enforceable, and if no feasible interpretation would save such
provision, it shall be severed from the remainder of this Agreement which shall
remain in full force and effect unless the severed provision is essential and
material to the rights or benefits received by any Party. In such event, the
Parties shall use best efforts to negotiate, in good faith, a substitute, valid
and enforceable provision or agreement which most nearly affects the Parties'
intent in entering into this Agreement.
10.5 References; Subject Headings. Unless otherwise
----------------------------
indicated, references to Sections and Exhibits herein are to Sections of, and
Exhibits to, this Agreement. The subject headings of the Sections of this
Agreement are included for the purpose of convenience of reference only, and
shall not affect the construction or interpretation of any of its provisions.
10.6 Further Assurances. The Parties shall each perform
------------------
such acts, execute and deliver such instruments and documents, and do all such
other things as may be reasonably necessary to accomplish the transactions
contemplated in this Agreement.
17
<PAGE>
10.7 Expenses. Each of the Parties will bear its own costs
--------
and expenses, including without limitation fees and expenses of legal counsel,
accountants, brokers, consultants and other representatives used or hired in
connection with the negotiation and preparation of this Agreement and
consummation of the transactions contemplated hereby. All such expenses
incurred by E*TRADE Japan shall be borne by E*TRADE Japan to the maximum extent
permitted by applicable law including, without limitation, expenses relating to
the formation of E*TRADE Japan, any transfer taxes for transfer of E*TRADE Japan
stock to the Parties, registration charges, taxes, fees and expenses relating to
required governmental or regulatory approvals, notary fees and legal fees and
expenses.
10.8 No Waiver. No waiver of any term or condition of this
---------
Agreement be valid or binding on a Party unless the same shall have been
mutually assented to in writing by all Parties. The failure of a Party to
enforce at any time any of the provisions of this Agreement, or the failure to
require at any time performance by one or both of the other Parties of any of
the provisions of this Agreement, shall in no way be construed to be a present
or future waiver of such provisions, nor in any way affect the ability of a
Party to enforce each and every such provision thereafter.
10.9 Entire Agreement; Amendments. The terms and conditions
----------------------------
contained in this Agreement (including the Exhibits hereto) and the Transaction
Documents constitute the entire agreement between the Parties and supersede all
previous agreements and understandings, whether oral or written, between the
Parties with respect to the subject matter hereof. No agreement or
understanding amending this Agreement shall be binding upon any Party unless set
forth in a written document which expressly refers to this Agreement and which
is signed and delivered by duly authorized representatives of each Party.
10.10 Assignment. Neither Party shall assign this Agreement
----------
(i) without the other Party's prior written consent, and (ii) only in such case
if the assignee agrees in writing to be bound irrevocably and unconditionally by
the terms hereof, provided, however, that the assigning Party shall remain
--------
liable for the assignee's performance of its obligations hereunder. This
Agreement shall inure to the benefit of, and shall be binding upon, the Parties
and their respective permitted successors and assigns.
10.11 No Agency. The Parties are independent contractors.
---------
Nothing contained herein or done in pursuance of this Agreement shall constitute
any Party the agent of any other Party for any purpose or in any sense
whatsoever.
10.12 No Beneficiaries. Nothing herein express or implied,
----------------
is intended to or shall be construed to confer upon or give to any person, firm,
corporation or legal entity, other than the Parties and their Affiliates who
hold Securities (and, in the case of SOFTBANK, any other member of the SOFTBANK
Group), any interests, rights, remedies or other benefits with respect to or in
connection with any agreement or provision contained herein or contemplated
hereby.
10.13 Counterparts. This Agreement may be executed in any
------------
number of counterparts, and each counterpart shall constitute an original
instrument, but all such separate counterparts shall constitute only one and the
same instrument.
18
<PAGE>
IN WITNESS WHEREOF, the Parties have caused their respective duly
authorized representatives to execute this Agreement as of the Effective Date.
SOFTBANK CORP. E*TRADE GROUP, INC.
- ------------------------------------------- -----------------------------------
Christos M. Cotsakos
Masayoshi Son President & CEO
President & CEO
19
<PAGE>
EXHIBIT 1.3
E*TRADE Japan Articles of Incorporation
<PAGE>
EXHIBIT 1.11
Consulting Services Agreement
<PAGE>
EXHIBIT 1.22
License Agreement
<PAGE>
EXHIBIT 1.27
Promissory Note
<PAGE>
EXHIBIT 3.2
SOFTBANK Group
<PAGE>
EXHIBIT 4.6
Actions Requiring E*TRADE Consent
<PAGE>
EXHIBIT 10.2
PROMISSORY NOTE
$567,000,000 June 5, 1998
FOR VALUE RECEIVED, the undersigned, E*TRADE GROUP, INC., a Delaware
corporation (the "Maker"), unconditionally promises to pay to SOFTBANK
CORP., a Japanese corporation, and its registered assigns (SOFTBANK CORP.
or any registered assign, the "Noteholder"), in the manner and at the
place hereinafter provided, the principal amount of five hundred
sixty-seven million Japanese yen ($567,000,000), and to pay interest on
such principal amount as calculated in accordance herewith. Each payment
under this Promissory Note shall first be credited against accrued and
unpaid interest, with the remainder credited against principal.
1. Maturity Date. The principal amount under this Promissory Note
together with all accrued and unpaid interest thereon shall be due and
payable on January 10, 2003 (the "Maturity Date"). If the Maturity Date
shall fall on a date that is not a day on which commercial banks in Japan
are generally open to conduct their regular banking business (a "Business
Day"), then payment shall be made on the next succeeding Business Day and
such extension of time shall be included in the computation of interest
hereunder.
2. Interest.
(a) The principal sum outstanding under this Promissory Note shall
bear interest from the date hereof until paid in full at a fluctuating per
annum rate equal to the greater of (i) the interest rate announced from
time to time by The Dai-ichi Kangyo Bank at its Tokyo headquarters as its
short term ("tan-ki") prime rate (the "Prime Rate"), and (ii) the average
interest rate applicable to the Noteholder's loans, with maturities of one
(1) year or less, from financial institutions (the "Short-Term Funding
Rate"). Each change in the Prime Rate shall be effective on the date such
rate changes, as announced by The Dai-ichi Kangyo Bank at its Tokyo
headquarters, without notice to the Maker. Each change in the Short-Term
Funding Rate shall be effective on the date the Noteholder sends written
notice of such change to the Maker.
(b) Notwithstanding the foregoing, upon the occurrence and during the
continuation of any Event of Default (as defined in Section 5 below), the
outstanding principal amount of this Promissory Note and, to the extent
permitted by law, any interest not paid when due, shall bear interest,
payable upon demand, at a rate which is two percent (2%) per annum in
excess of the rate of interest otherwise applicable under this Promissory
Note; provided, however, that in no event shall the interest rate payable
under this Promissory Note exceed the maximum rate of interest permitted
to be charged under applicable law.
(c) All computations of interest under this Promissory Note shall be
made by the Noteholder for the actual number of days elapsed, on the basis
of a 365-day year.
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3. Payments. All payments of principal and interest under this
Promissory Note shall be made in lawful money of Japan in immediately
available funds to the Noteholder's savings account numbered 6337476 at
the head-quarters of The Fuji Bank, Limited (bank code 0003-110), or such
other account as may be designated from time to time by the Noteholder in
a written notice to the Maker. All payments under this Promissory Note to
the Noteholder (but not any registered assignee unless the assignment has
been effected in compliance with Section 9) shall be made free and clear
of, and without deduction, set-off or withholding for or on account of,
present or future income or other taxes, levies, imposts, duties or
charges of any nature imposed in the United States (all such taxes,
levies, imposts, duties or charges, "Taxes"); and if any Taxes are
required to be withheld from any principal, interest, fees or other
amounts payable to the Noteholder hereunder, the amounts so payable shall
be increased to the extent necessary to yield to the Noteholder (after
payment of all Taxes) the amount of such principal, interest, fees or
other amounts intended to be paid hereunder at the rates or in the amounts
specified herein. Promptly after the Noteholder's receipt thereof, the
Noteholder shall deliver to the Maker all documentation issued by Japanese
tax authorities in respect of any payment hereunder.
4. Prepayments. The Maker shall have the right at any time and from
time to time to prepay the principal of this Promissory Note, in whole or
in part, without premium or penalty, upon at least five (5) Business Days'
prior written notice; provided that any such prepayment shall be in a
minimum principal amount of $100,000,000. Each prepayment of principal
hereunder shall be accompanied by interest, through the date of the
prepayment, on the principal amount being prepaid.
5. Events of Default. The occurrence of any of the following events
shall be deemed an event of default ("Event of Default") under this
Promissory Note:
(a) The Maker shall fail to pay any amount due under this
Promissory Note on the due date;
(b) The Maker shall fail to observe or perform in any material respect
any of the other terms or conditions of this Promissory Note or any other
Transaction Document (as defined in the Joint Venture Agreement dated as
of June 3, 1998 between the Maker and the Noteholder (the "JV Agreement"))
and such failure is not cured within thirty (30) days of the Maker's
receipt of notice thereof from the Holder or the company established
pursuant to the JV Agreement (the "Company");
(c) Any representation or warranty made by the Maker in the JV Agreement
or any of the Transaction Documents shall be inaccurate or incomplete, in
any material respect, when made;
(d) The JV Agreement shall have been terminated in accordance with its
terms;
(e) (i) The Maker or the Company shall (A) commence any case,
proceeding or other action under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation,
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dissolution, composition or other relief with respect to it or its debts, or (B)
commence any case, proceeding or other action seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or (C) make a general assignment for the benefit
of its creditors; or (ii) there shall be commenced against the Maker or the
Company any case, proceeding or other action of a nature referred to in clause
(i) above which (A) results in the entry of an order for relief or any such
adjudication or appointment, or (B) remains undismissed, undischarged or
unbonded for a period of sixty (60) days; or (iii) there shall be commenced
against the Maker or the Company any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets which results in the entry of
an order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within sixty (60) days from the entry thereof;
or (iv) the Maker or the Company shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in clauses (i), (ii) or (iii) above; or (v) the Maker or the Company shall
generally not, or shall be unable to, or shall admit in writing its inability
to, pay its debts as they become due; or
(f) The Company shall be dissolved as the result of a proceeding as
described in clause (e) of this Section 5 or otherwise.
Automatically upon the occurrence of an Event of Default described in
clause (d), (e) or (f) of this Section 5 and, in all other cases, at the
option of the Noteholder, in each case without notice to or demand upon
the Maker, the entire principal balance hereof together with all accrued
and unpaid interest thereon shall become immediately due and payable.
6. Costs and Expenses. If the Maker fails to make any payment here
under when due, the Maker promises to pay all costs and expenses,
including reasonable attorneys' fees, incurred by the Noteholder in
collecting or attempting to collect the indebtedness under this Promissory
Note, whether or not any action or proceeding is commenced.
7. Acceptance of Past Due Payments and Indulgences Not Waivers. None
of the provisions hereof and none of the Noteholder's rights or remedies
hereunder on account of any past or future defaults shall be deemed to
have been waived by the Noteholder's acceptance of any past due payments
or by any indulgence granted by the Noteholder to the Maker. No failure
or delay on the part of the Noteholder to exercise any right, power or
privilege under this Promissory Note and no course of dealing between the
Maker and the Noteholder shall impair such right, power or privilege or
operate as a waiver of any default or an acquiescence therein, nor shall
any single or partial exercise of any such right, power or privilege
preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.
8. Waivers by the Maker; No Setoffs or Counterclaims. The Maker hereby
waives presentment, demand, protest and notice thereof or of dishonor, and
agrees that it shall remain liable for all amounts due hereunder
notwithstanding any extension of time or change in the terms of payment of
this Promissory Note granted by the Noteholder, any change, alteration or
release of any property now or hereafter securing the payment hereof or
any delay or failure by the Noteholder to exercise any rights under this
Promissory Note. All payments required by this Note shall be made by
without setoff or counterclaim. The Maker
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hereby waives the right to plead any statutes of limitation as a defense to a
demand hereunder to the full extent permitted by law.
9. Assignment.
(a) SOFTBANK agrees that E*Trade may assign this Promissory Note,
and its obligations to repay the Loan hereunder, to a wholly-owned
subsidiary of E*Trade; provided, however, that E*Trade, as a condition to
the effectiveness of any such assignment, shall provide SOFTBANK with an
unconditional guarantee of the full performance of this Promissory Note in
form and substance reasonably satisfactory to SOFTBANK.
(b) E*Trade agrees that SOFTBANK may assign its rights under this
Promissory Note; provided, however, that:
(A) such assignment will not be effective unless
and until such assignment is recorded by E*Trade on the Register (as
defined in the JV Agreement); and
(B) such assignment is effected in accordance
with the requirements contained in Section 9(c).
(c) This Promissory Note may be assigned or otherwise transferred
only upon surrender of this Promissory Note for registration of transfer
on the Register in accordance with Section 3.3(b) of the JV Agreement,
duly endorsed, or accompanied by a duly executed written instrument of
transfer in form satisfactory to the Company. Thereupon, a new Promissory
Note for like principal amount and interest will be issued to, and
registered in the name of, the transferee. Interest and principal are
payable only to the registered holder of the Note.
10. Governing Law. This Promissory Note shall be governed by and
construed under the laws of the State of California (as permitted by
Section 1646.5 of the California Civil Code (or any successor provision
thereto)) without giving effect to any choice of law rule that would cause
the application of the laws of any jurisdiction other than the internal
laws of the State of California to the rights and duties of the Maker and
the Noteholder hereunder.
11. WAIVER OF JURY TRIAL. EACH OF THE MAKER AND, BY ITS ACCEPTANCE OF
THIS PROMISSORY NOTE, THE NOTEHOLDER, (A) IRREVOCABLY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF OR RELATED TO THIS PROMISSORY NOTE OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS PROMISSORY NOTE AND
THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY EITHER THE MAKER OR
THE NOTEHOLDER AGAINST THE OTHER, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE; (B) AGREE THAT ANY SUCH CLAIM OR CAUSE OF
ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY; AND (C) WITHOUT
LIMITING THE FOREGOING, AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS
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WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER
PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS PROMISSORY NOTE OR ANY PROVISION HEREOF.
12. Uniform Foreign-Money Claims Act. The Maker acknowledges and agrees
that the loan evidenced by this Promissory Note has been advanced in, and
all sums payable under this Promissory Note shall be payable in, Japanese
yen. Any judgment or award based on or arising out of this Promissory
Note shall be entered in Japanese yen and shall otherwise be entered,
enforced and paid in accordance with Title 8.5 (Uniform Foreign-Money
Claims Act) of the California Code of Civil Procedure, as in effect on the
date hereof.
13. Notices. Any and all notices, requests, demands and other
communications required or otherwise contemplated to be made under this
Promissory Note, shall be in writing and in English and shall be deemed to
have been duly given (i) if delivered personally, when received, (ii) if
transmitted by facsimile, upon the first (1st) Business Day following
receipt of a confirmation of receipt, or (iii) if by international courier
service, on the fourth (4th) Business Day following the date of deposit
with such courier service. All such notices, requests, demands and other
communications shall be addressed as follows:
If to the Maker:
E*TRADE GROUP, INC.
Four Embarcadero Place
2400 Geng Road
Palo Alto, CA 94303
Attention: Mr. Stephen Richards
Mr. Michael Rolnick
Telephone: 1-650-842-2500
Facsimile: 1-650-842-8622
with a copy to (which shall not constitute notice):
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
U.S.A.
Attention: Thomas A. Bevilacqua, Esq.
Curtis L. Mo, Esq.
Telephone: 1-650-424-0160
Facsimile: 1-650-496-2885
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If to the Noteholder:
SOFTBANK CORP.
24-1, Nihonbashi-Hakozakicho
Chuo-ku, Tokyo 103, Japan
Attention: Mr. Yoshitaka Kitao
Hitoshi Hasegawa, Esq.
Telephone: 81-3-5642-8369
Facsimile: 81-3-5641-3402
with a copy to (which shall not constitute notice):
Morrison & Foerster LLP
AIG Building, 7th Floor
1-3, Marunouchi 1-Chome
Chiyoda-ku, Tokyo 100-0005, Japan
Attention: Ken A. Siegel, Esq.
Charles C. Comey, Esq.
Telephone: 81-3-3214-6522
Facsimile: 81-3-3214-6512
14. Severability. If any provision in this Promissory Note shall be
found or be held to be invalid or unenforceable then the meaning of said
provision shall be construed, to the extent feasible, so as to render the
provision enforceable, and if no feasible interpretation would save such
provision, it shall be severed from the remainder of this Promissory Note
which shall remain in full force and effect unless the severed provision
is essential and material to the rights or benefits received by the Maker
or the Noteholder. In such event, the Maker and the Noteholder shall use
best efforts to negotiate, in good faith, a substitute, valid and
enforceable provision or agreement which most nearly affects such
entities' intent in delivering and receiving this Promissory Note.
IN WITNESS WHEREOF, the Maker has caused this Promissory Note to be
duly executed the day and year first above written.
E*TRADE GROUP, INC.
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Christos M. Costakos
President & CEO
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EXHIBIT 10.3
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT ("Agreement") is made as of
_______ ___, 1998 (the "Effective Date"), by and between E*TRADE GROUP,
INC., a Delaware corporation "E*TRADE"), and SOFTBANK Holdings, Inc., a
Delaware corporation "SOFTBANK"). E*TRADE and SOFTBANK are hereunder
also referred to collectively as the "Parties" and individually as a
"Party."
RECITALS
A. E*TRADE and SOFTBANK have entered into a Joint Venture
Agreement, dated the Effective Date (the "JV Agreement"), for the purpose
of developing an online securities trading service in Japan.
B. Pursuant to the JV Agreement, E*TRADE and SOFTBANK have agreed
that it is in their mutual interest for SOFTBANK to acquire a significant
equity interest in E*TRADE.
C. SOFTBANK is willing to commit to acquire such an interest, at
E*TRADE's election, on the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the Parties hereby agree as follows:
AGREEMENT
1. Purchase and Sale of Stock
1.1 Option. Subject to the terms and conditions of this Agreement,
SOFTBANK hereby grants to E*TRADE an option, exercisable as set forth this
Section 1 (the "Option"), to cause SOFTBANK to purchase from E*TRADE up to
an aggregate of Fifty Million Dollars ($50,000,000) of E*TRADE common
stock (the "Common Stock").
1.2 Exercise of Option. E*TRADE may exercise the Option only by
forwarding an irrevocable written notice of its election, in the form of
attached Exhibit 1.2 (an "Exercise Notice") to SOFTBANK and to SOFTBANK
CORP., at the addresses specified in Exhibit 1.2, received at any time or
from time to time within eighteen (18) months after the date hereof (the
"Option Term"). The Exercise Notice shall specify the purchase price to be
paid (the "Purchase Price"), which in the case of the first Exercise
Notice shall be a minimum of Twenty Five Million Dollars ($25,000,000) or
any multiple of Five Million Dollars ($5,000,000) in excess thereof. In
the event that E*TRADE elects in an initial Exercise Notice to cause
SOFTBANK to acquire less than Fifty Million Dollars ($50,000,000) of
Common Stock, E*TRADE shall retain the right to forward additional
Exercise Notices, during the Option Term and otherwise in accordance with
the terms of this Agreement, specifying a minimum Purchase Price of Five
Million Dollars ($5,000,000) or any multiple of Five Million Dollars
($5,000,000) in excess thereof; provided, however, that in no event shall
SOFTBANK be required to acquire more than Fifty Million Dollars
($50,000,000) in Common Stock hereunder. SOFTBANK shall have no
obligation with
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respect to any Exercise Notice received by SOFTBANK after the expiration of the
Option Term.
1.3 Shares to Be Purchased. Upon E*TRADE's delivery of an Exercise
Notice in accordance with Section 1.2, SOFTBANK shall purchase from
E*TRADE, and E*TRADE shall issue and sell to SOFTBANK, the number of
shares of Common Stock (the "Shares") determined by dividing (i) the
Purchase Price by (ii) the product of the following (with any fractional
Shares rounded up to the nearest whole Share): (A) the average closing
price of one share of Common Stock as quoted on the NASDAQ National Market
during the period commencing on (and including) the later of (x) the
eighth (8th) Business Day immediately prior to the next Filing Date (as
defined in Section 1.4) and (y) the date (which shall be no later than the
Filing Date) on which E*TRADE issues a press release regarding earnings
for the fiscal quarter (or fiscal year, if a Form 10-K is filed on such
Filing Date) covered in the periodic report filed with the U.S. Securities
and Exchange Commission (the "SEC") on such Filing Date, and ending on
(and including) the twelfth (12th) Business Day immediately following the
Filing Date (as defined in Section 1.4) (the "Trading Price"); and (B) if
the Trading Price is (x) below $27.50, ninety-seven percent (97%),
(y) equal to or greater than $27.50 but below $35.00, ninety-five percent
(95%); and (z) equal to or greater than $35.00, ninety-three percent (93%).
1.4 Closing. The closing of the purchase and sale of Shares pursuant to
any Exercise Notice (the "Closing") shall occur on the fifteenth (15th)
Business Day after E*TRADE's first filing of a Form 10-Q or Form 10-K with
the SEC (the date of such filing, the oFiling Date") after the date of the
Exercise Notice. On the twelfth (12th) Business Day following the Filing
Date, E*TRADE shall deliver to SOFTBANK and SOFTBANK CORP. a statement, in
reasonable detail, setting forth the calculation of the Trading Price.
Such statement shall be subject to verification by SOFTBANK, but shall be
binding upon the Parties absent manifest error. For purposes of this
Agreement, a "Business Dayo shall mean a day on which commercial banks in
the United States and Japan are generally open to conduct their regular
banking business.
1.5 Issuance of Certificate, etc. On the date of each Closing "Closing
Date"), E*TRADE shall deliver to SOFTBANK (i) a certificate in the name of
SOFTBANK representing the number of Shares determined pursuant to
Section 1.3 and (ii) an opinion from E*TRADE's counsel in the form of
attached Exhibit 1.5. Delivery of such certificate and legal opinion to
SOFTBANK shall be made against transfer of the Purchase Price by SOFTBANK
to the bank account specified by E*TRADE in the applicable Exercise
Notice, by wire transfer.
1.6 Certain Conditions. Notwithstanding anything in this Section 1 to
the contrary, SOFTBANK shall not be required to purchase any Shares
hereunder (i) if there shall have occurred and be continuing, as of the
Effective Date, the date of any Exercise Notice, or any Closing Date, any
material breach by E*TRADE of this Agreement, the JV Agreement, or any
other Transaction Document (as defined in the JV Agreement) or (ii) if,
prior to the date on which Closing would otherwise occur, (a) the JV
Agreement has been terminated or the joint venture established pursuant to
the JV Agreement has been dissolved or (b) the closing price of the Common
Stock after the Effective Date (as adjusted for any splits or
recapitalizations occurring after the Effective Date) has been $8.00 or
less. In addition,
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(x) any obligation of SOFTBANK to purchase Shares hereunder shall be
conditioned upon E*TRADE first (A) obtaining all United States federal and
state regulatory approvals required in connection with the transactions
contemplated hereby, including without limitation any approvals required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (including
any successor statute or rule thereto") (the "HSR Act"), but excluding any
United States federal and state securities filings which may be made (and
which E*TRADE shall timely file) following the Closing, and (B) delivering
to SOFTBANK a certificate signed by an officer of E*TRADE confirming that
all such approvals have been obtained and attaching reasonable evidence
thereof; and
(y) any obligation of E*TRADE to sell Shares hereunder shall be
conditioned upon (i) E*TRADE first (A) obtaining all Japanese and United
States federal and state regulatory approvals required to be obtained by
E*TRADE in connection with the transactions contemplated hereby, including
without limitation any approvals required under the HSR Act, but excluding
any United States federal and state securities filings which may be made
(and which E*TRADE shall timely file) following the Closing, and
(ii) SOFTBANK (A) first obtaining all Japanese and United States federal
and state regulatory approvals required to be obtained by SOFTBANK in
connection with the transactions contemplated hereby, including without
limitation any approvals required under the HSR Act, but excluding any
approvals which may be obtained (and which SOFTBANK shall timely file)
following the Closing, and (B) delivering to E*TRADE a certificate signed
by an officer of SOFTBANK confirming that all such approvals have been
obtained and attaching reasonable evidence thereof.
1.7 Right to Designate Alternate Purchaser. SOFTBANK shall have the
right, upon written notice to E*TRADE within fifteen (15) Business Days
after its receipt of any Exercise Notice, to designate SOFTBANK Holdings,
Inc., a Delaware corporation "SH"), to purchase all or a portion of the
Shares that SOFTBANK would otherwise be obligated to purchase hereunder,
subject to the execution by E*TRADE and SH of a stock purchase agreement
in the form hereof (and containing investor representations and
registration rights identical to those set forth herein). In any such
notice, SOFTBANK will specify the portion of the applicable Purchase Price
to be paid by SH, and the terms of this Section 1 shall apply to SH
mutatis mutandis (with respect to the portion of the Purchase Price
specified in such notice and the Shares issuable with respect thereto).
1.8 Transfer Restrictions. SOFTBANK agrees that it shall not, directly
or indirectly, sell, transfer, assign or pledge or otherwise dispose of
any interest in any or all of the Shares acquired hereunder for a period
of two (2) years following the acquisition of such Shares (the "Holding
Period"), provided that such agreement shall not be deemed to limit
SOFTBANK's right to consummate a merger or other corporate transaction
involving a change of control of SOFTBANK as a result of which Shares may
be deemed to be transferred by operation of law to a successor in interest
of SOFTBANK.
2. Representations and Warranties of E*TRADE
E*TRADE represents and warrants to SOFTBANK that, as of the
Effective Date, the date of each Exercise Notice and each Closing Date:
2.1 Organization, Good Standing and Qualification. Each of E*TRADE and
E*TRADE Securities, Inc. "E*TRADE Securities") is duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
organization. Each of E*TRADE and E*TRADE Securities is duly qualified to
transact business and is in good standing in
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each jurisdiction in which the failure to so qualify would have a material
adverse effect on the financial condition or business of E*TRADE or E*TRADE
Securities, as the case may be (a "Material Adverse Effect").
2.2 Permits; Approvals. Each of E*TRADE and E*TRADE Securities hold all
licenses, permits, certifications and other authorizations, including
without limitation any such authorizations required under U.S. federal
securities laws, the absence of which would have a Material Adverse
Effect, there has been no default or violation under any such
authorization and there is no proceeding or investigation that is pending
or, to E*TRADE's knowledge, threatened under which any such authorization
may be revoked, terminated or suspended.
2.3 Authorization. E*TRADE has the corporate power and authority to
execute, deliver and perform this Agreement and to issue and sell the
Shares. This Agreement constitutes E*TRADE's valid and legally binding
obligation, enforceable against E*TRADE in accordance with its terms. The
execution, delivery and performance of this Agreement by E*TRADE and the
issuance and delivery of the Shares have been duly authorized by all
necessary corporate action.
2.4 Valid Issuance of Shares. The Shares, when and if issued, sold and
delivered in accordance with the terms hereof, against full payment of the
Purchase Price therefor, will be duly and validly issued, fully paid and
nonassessable.
2.5 No Consent or Approval Required. Other than (i) the approval
required under the HSR Act, (ii) filings required under U.S. federal
securities laws by virtue of E*TRADE Securities' status a
broker-dealer, (iii) filings required under U.S. federal and state
securities laws in connection with SOFTBANK's purchase of the Shares
and (iv) any consent, approval, authorization or filing under Japanese law,
no consent, approval or authorization of, or filing with, any third party,
including any governmental or regulatory authority, is required for the
valid authorization, execution and delivery by E*TRADE of this Agreement
or for the valid authorization, issuance, sale and delivery of the Shares.
2.6 Disclosure. E*TRADE has previously furnished to SOFTBANK the
documents listed on attached Exhibit 2.6 (collectively, the "Commission
Filings"). As of their respective dates, the Commission Filings
(including all documents incorporated by reference therein) 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, except for statements or omissions which has been
corrected in a subsequent Commission Filing.
3. Representations and Warranties of SOFTBANK
SOFTBANK hereby represents and warrants to E*TRADE that:
3.1 Organization. SOFTBANK is a corporation duly organized and validly
existing under the laws of Japan.
3.2 Authorization. SOFTBANK has the corporate power and authority to
execute, deliver and perform this Agreement and to purchase the Shares.
This Agreement constitutes SOFTBANK's valid and legally binding
obligation, enforceable against SOFTBANK in
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accordance with its terms. The execution, delivery and performance of this
Agreement by SOFTBANK have been duly authorized by all necessary corporate
action.
3.3 No Consent or Approval Required. Other than the filing of a foreign
exchange notification under the Foreign Exchange and Foreign Trade Control
Law with the Ministry of Finance of Japan through the Bank of Japan, and
acceptance of such notification by the Ministry of Finance, no consent,
approval or authorization of, or filing with, any third party, including
any governmental or regulatory authority, is required for the valid
authorization, execution and delivery by SOFTBANK of this Agreement or for
the valid authorization, issuance, sale and delivery of the Shares.
3.4 Purchase Entirely for Own Account. The Shares will be acquired for
SOFTBANK's own account and not with a view to the resale or distribution
of any portion thereof. SOFTBANK has no present intention of
transferring, selling or otherwise distributing the Shares and is not a
party to any agreement or arrangement to sell or transfer any of the
Shares to any person.
3.5 Disclosure of Information. SOFTBANK believes it has received all
the information it considers necessary or appropriate for deciding whether
to purchase the Shares. SOFTBANK further represents that it has had an
opportunity to ask questions and receive answers from E*TRADE regarding
the Shares and the business of E*TRADE.
3.6 Investment Experience. SOFTBANK acknowledges that it can bear the
economic risk of its investment and has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits
and risks of purchasing the Shares.
3.7 Restricted Securities. SOFTBANK understands that unless the Shares
are registered under Section 4, the Shares will be "restricted securitieso
under the federal securities laws and that under such laws and applicable
regulations such Shares may be resold without registration under the
Securities Act of 1933, as amended (the "1933 Act"), only in certain
limited circumstances, including pursuant to Rule 144 under the 1933 Act,
or any successor rule thereto "Rule 144"). Unless a transfer of Shares
is made in accordance with an effective registration statement under the
1933 Act pursuant to Section 4, SOFTBANK shall not transfer any Shares
unless it shall furnish E*TRADE with an opinion of counsel, reasonably
satisfactory to E*TRADE, that such disposition will not require
registration of such shares under the 1933 Act.
3.8 Legends. It is understood that each certificate evidencing Shares
will bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, HAVE BEEN
ACQUIRED FOR THE HOLDER'S OWN ACCOUNT AND HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. NO OFFER, SALE OR
DISPOSITION OF THESE SECURITIES MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION
OF COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933.
5
<PAGE>
However, SOFTBANK (or any other Holder (pursuant to Section 4.6)) shall
have the right, upon written request to E*TRADE on or after termination of
applicable limitations on transfer with respect to any Shares, to receive
from E*TRADE, without expense, a new certificate omitting any legend with
respect to the terminated limitations.
4. Registration Rights
4.1 "Piggy-Back" Registration.
(a) If, following expiration of the Holding Period pursuant to
Section 1.8 hereof, E*TRADE contemplates filing with the Commission a
registration statement under the 1933 Act in connection with the public
offering of E*TRADE's securities (including any registration effected by
E*TRADE for shareholders other than Holders) other than a registration
relating solely to the sale of securities to participants in an employee
stock option, bonus or other compensation plan or in connection with an
acquisition, merger or other business combination, E*TRADE shall so notify
the Holders in writing of its intention to do so at least thirty (30) days
prior to the filing of such registration statement. Any Holder who gives
written notice to E*TRADE, within fifteen (15) days after the Holder's
receipt of such notice from E*TRADE, that such Holder desires to have any
of its Registrable Securities (as defined in Section 4.8) included in such
registration statement, may, subject to the provisions of this
Section 4.1, have such Registrable Securities so included. Irrespective of
whether a Holder decides to include any of its Registrable Securities in
any registration statement thereafter filed by E*TRADE, such Holder shall
nevertheless have the right to include any remaining Registrable
Securities in any subsequent registration statement as may be filed by
E*TRADE with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
(b) If the registration of which E*TRADE gives notice is for a
registered public offering involving an underwriting, E*TRADE shall so
advise the Holders as part of the written notice given pursuant to
Section 4.1(a). In such event, the right of any Holder to registration
pursuant to this Section 4.1 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein.
All Holders proposing to distribute Registrable Securities through such
underwriting shall (together with E*TRADE and the other holders of E*TRADE
securities participating therein) enter into an underwriting agreement in
customary form (including the provision of Section 4.5) with the
representative of the underwriter or underwriters selected by E*TRADE.
(c) Notwithstanding any other provision of this Section 4.1, if the
representative of the underwriters advises E*TRADE in writing that the
number of Registrable Securities proposed to be sold in any such offering
or sale is greater than the number of shares which the representative
believes feasible to sell at that time at the price and upon the terms
approved by E*TRADE, the representative may (subject to the limitations
set forth below) exclude all Registrable Securities from, or limit the
number of Registrable Securities to be included in, the registration and
underwriting. E*TRADE shall advise all holders of securities requesting
registration of any such marketing limitation, and the number of
securities that are entitled to be included in the registration and
underwriting shall be allocated first to E*TRADE, for securities being
sold for its own account, and thereafter among the Holders and other
holders of E*TRADE's securities with equivalent registration rights on a
pro-rata basis based upon the number of Registrable Securities and
securities held by such other holders.
6
<PAGE>
4.2 Obligations of E*TRADE. When effecting the registration of any
Registrable Securities under this Section 4, E*TRADE shall:
(a) Prepare and file with the Commission a registration statement with
respect to Registrable Shares and use its best efforts to cause the
applicable registration statement to become effective, and to keep such
registration statement effective for up to one hundred twenty (120) days,
unless E*TRADE elects to file a registration statement pursuant to
Rule 415 under the 1933 Act (or any successor rule theret"), which E*TRADE
shall keep effective until the disposition of all Registrable Securities.
However, if E*TRADE shall furnish to each Holder a certificate signed by
the President of E*TRADE stating that, in the good faith judgment of the
Board of Directors of E*TRADE, it would be seriously detrimental to
E*TRADE and its stockholders for such registration statement to be filed
in the near future and it is therefore essential to defer the filing of
such registration statement, E*TRADE shall have the right to defer such
filing for a period of not more than one hundred twenty (120) days after
receipt of the request for registration.
(b) Prepare and file with the Commission such amendments and supplements
to the registration statement and the prospectus used in connection with
such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all
Registrable Securities covered by the registration statement.
(c) Furnish to each Holder (or to any broker or other person at its
request) the numbers of copies of the then current prospectus, including a
preliminary prospectus, and any amendment of or supplement to the
prospectus, in conformity with the requirements of the 1933 Act, and such
other documents as the Holder may reasonably request in order to
facilitate the disposition of Registrable Securities.
(d) Furnish, on the day that such Registrable Securities are delivered
to the underwriters for sale, if securities are being sold through the
underwriters, or, if such securities are not being sold through
underwriters, on the day that the registration statement with respect to
the securities become effective, (i) an opinion, dated as of the closing
date of the offering, of the counsel representing E*TRADE for purposes of
such registration, in form and substance as its customarily given to
underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders requesting registration of
Registrable Shares and (ii) letters dated as of (x) the effective date of
the registration statement covering such Registrable Shares and (y) the
Closing Date of the offering, from the independent certified public
accountants of E*TRADE, in form and substance as its customarily given by
independent certified public accountants to underwriters in an
underwritten public offering and reasonably satisfactory to be Holders,
addressed to the underwriters, if any, and if permitted by applicable
accounting standards, to the Holders requesting registration of
Registrable Shares.
(e) Use its best efforts to register and qualify, at its expense, the
Registrable Securities covered by such registration statement under such
other securities or Blue Sky laws of such jurisdictions as shall be
reasonably requested by any Holder to effectuate their disposition and
shall continue such qualification in effect so long as may be necessary to
comply with all applicable laws regulating sales of securities, provided
that E*TRADE shall not be required to qualify to do business or to file a
general consent to service of process in any jurisdiction.
7
<PAGE>
(f) In connection with any registration statement referred to in
Section 4 hereof, promptly advise each Holder whose Registrable Securities
are included therein, and confirm such advice in writing (i) when the
registration statement has become effective, (ii) upon the filing of any
amendment or supplement to the registration statement, (iii) when any
post-effective amendment to the registration statement becomes effective,
and (iv) of any request by the Commission for any amendment or supplement
to the registration statement or prospectus or for additional information.
(g) If at any time the Commission should institute or threaten to
institute any proceeding for the purpose of issuing, or should issue, a
stop order suspending the effectiveness of the registration statement,
promptly notify the Holders whose Registrable Securities are included in
such registration statement, and use its best efforts to prevent the
issuance of any such stop order or to obtain the withdrawal thereof as
soon as possible.
(h) Advise the Holders promptly of any order or communication of any
public board or body addressed to E*TRADE suspending or threatening to
suspend the qualification of any shares of Common Stock for sale in any
jurisdiction.
(i) Notify each Holder at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act or the happening of any event
as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances then existing and, at the request of any Holder,
promptly prepare and furnish to such Holder a reasonable number of copies
of the amended or supplemented prospectus.
4.3 Furnish Information. To facilitate a registration requested under
this Section 4, each Holder shall furnish to E*TRADE such information
regarding itself, the Registrable Securities held by it, and the intended
method of disposition of such securities as E*TRADE may reasonably request
in writing and as shall be required to effect the registration of its
Registrable Securities.
4.4 Expenses of Registration. In connection with any registration of
Registrable Securities hereunder, the Holders shall be solely responsible
for any (i) underwriting discounts and commissions applicable to the
Registrable Securities subject to such registration, (ii) income or
withholding taxes payable by any Holder on the proceeds received by such
Holder on the sale of such Registrable Securities, (iii) any applicable
stamp duties or transfer charges incurred in connection with the sale of
such Registrable Securities and (iv) the fees and disbursements of the
Holders' legal counsel, if any. E*TRADE shall be responsible for all
other expenses, including, without limitation, all registration, filing,
qualification, printers and accounting fees and the fees and disbursements
of counsel for E*TRADE.
4.5 Indemnification. With respect to any registration rights under this
Section 4:
(a) To the extent permitted by law, E*TRADE will indemnify, hold
harmless and defend each Holder (and any of such Holder's directors,
officers, employees, and legal counsel) and each person, if any, who
controls, is controlled by or under common control of any Holder within
the meaning of the 1933 Act or the Securities Exchange Act of 1934, as
amended (the "1934 Act"), against any and all losses, claims, damages,
liabilities (joint or several) or expenses (including reasonable legal and
other expenses incurred in
8
<PAGE>
investigating and defending against the same) to which the Holders, or any of
them, may become subject under the 1933 Act, the 1934 Act or other statute or
common law, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) arise out of or are based upon a claim by a third
party alleging any violation (a "Violation") by E*TRADE of the 1933 Act, the
1934 Act, or any state securities law or any rule or regulation promulgated
under any of the foregoing; provided, however, that E*TRADE shall not be liable
for any such loss, claim, damage, liability, expense or action to the extent
that it arises out of or is based upon a Violation which occurs in reliance upon
and in conformity with written information furnished expressly for use in
connection with such registration by such Holder.
(b) To the extent permitted by law, each Holder whose Registrable
Securities are included in a registration statement, will severally and
not jointly, indemnify, hold harmless and defend E*TRADE, each of its
directors, each of its officers who has signed the registration statement,
each person, if any, who controls, is controlled by or under common
control of E*TRADE within the meaning of the 1933 Act, any other Holder
selling securities under such registration statement and any person who
controls, is controlled by or under common control of any such Holder,
against any losses, claims, damages, liabilities or expenses (joint or
several) to which any of the foregoing persons may become subject, insofar
as such losses, claims, damages, liabilities or expenses (or actions in
respect theret") arise out of or are based upon any Violation, in each
case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; provided,
however, that in no event shall any indemnity by a Holder hereunder exceed
the proceeds from the offering received by such Holder.
(c) An indemnified Party will promptly notify the indemnifying Party of
the commencement of any action or proceeding for which it believes such
indemnity is provided. The indemnifying Party shall have the right to
participate in and to assume the defense thereof with counsel mutually
satisfactory to the parties. The failure to deliver written notice to the
indemnifying Party within a reasonable time for the commencement of any
such action, if prejudicial to its ability to defend such action, shall
relieve the indemnifying Party of any liability to the indemnified Party
under this Section 4.5.
(d) An indemnifying Party shall have no indemnification obligation under
this Section 4.5 if the indemnified Party settles an action, claim or
proceeding without the prior written consent of the indemnifying Party,
which consent shall not be unreasonably withheld.
(e) If the indemnification provided for in this Section 4.5 is held by a
court of competent jurisdiction to be unavailable to an indemnified Party
with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying Party, in lieu of indemnifying such indemnified
Party thereunder, shall, to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified Party as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative fault of the indemnifying Party on the
one hand and of the indemnified Party on the other in connection with the
Violation(s) that resulted in such loss, claim, damage or liability, as
well as any other relevant equivalent considerations. The relative fault
of the indemnifying Party and of the indemnified Party shall be determined
by a court of law by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying Party or
by the
9
<PAGE>
indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided, however, that in no event shall any contribution by a Holder hereunder
exceed the proceeds from the offering received by such Holder.
(f) The obligations of E*TRADE and the Holders under this Section 4.5
shall survive the completion of any offering of Registrable Securities in
a registration under this Section 4 and any termination of this Agreement.
4.6 Assignment of Registration Rights. The rights to cause E*TRADE to
register Registrable Securities pursuant to this Section 4 may be assigned
by any Holder together with any transfer of Registrable Securities
provided that (i) the transfer of the Registrable Securities complies with
the applicable terms of this Agreement, including, without limitation,
Section 3.7 and (ii) immediately after such transfer, the transferee holds
at least five percent (5%) of the then-outstanding Registrable Securities.
4.7 Market Holdback. If E*TRADE provides a notice pursuant to
Section 4.1(a) of its intention to file a registration statement in
connection with a public offering of E*TRADE's securities and any Holder
fails to exercise its right to have its Registrable Securities included in
such registration statement, such Holder shall not sell, transfer or
otherwise dispose of any of its Registrable Securities during any
specified holdback period (not to exceed one hundred eighty (180) days
following the effective date of the registration statement) if such
holdback is requested by the managing underwriter of the offering and the
same restriction is agreed to by the officers and directors of E*TRADE and
all other persons with registration rights with respect to Common Stock
(whether or not pursuant to this Agreement).
4.8 Definitions.
(a) The term "Holder" means SOFTBANK and any transferee of Registrable
Securities to which the registration rights conferred by this Agreement
have been transferred in accordance with Section 4.6.
(b) The term "Registrable Securities" means Shares (and securities
issued by E*TRADE in connection with any stock dividends on, or stock
splits with respect to, the Common Stock) that have not been sold to the
public in accordance with an effective registration statement under the
1933 Act or in accordance with Rule 144.
5. Rule 144 Reporting
With a view to making available the benefits of Rule 144 to Holders,
E*TRADE shall:
5.1 Make and keep available public information, as those terms are
understood and defined in Rule 144, at all times during which E*TRADE is
subject to the reporting requirements of the 1933 Act or the 1934 Act;
5.2 File with the Commission in a timely manner all reports and other
documents required by the Commission to be filed by E*TRADE as a condition
to the availability of an exemption under Rule 144 for the sale of Shares;
and
10
<PAGE>
5.3 Provide each Holder, promptly upon request, with (i) a written
statement by E*TRADE as to its compliance with the reporting requirements
of Rule 144 and (ii) such information as such Holder may reasonably
request to avail itself of any rule or regulation of the Commission
allowing a Holder to sell any Shares without registration.
6. INCIDENTAL AND CONSEQUENTIAL DAMAGES
SOFTBANK WILL NOT BE LIABLE UNDER ANY CONTRACT, NEGLIGENCE, STRICT
LIABILITY OR OTHER THEORY FOR ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES (INCLUDING WITHOUT LIMITATION LOST PROFITS) WITH RESPECT TO ANY
SUBJECT MATTER OF THIS AGREEMENT.
7. Miscellaneous
7.1 Successors and Assigns. The terms and conditions of this Agreement
shall not be assignable except to an affiliate of SOFTBANK which acquires
Registrable Securities pursuant to Section 4.6. Subject to the foregoing,
the provisions of this Agreement shall inure to the benefit of, and be
binding upon, the successors and assigns of the Parties and shall inure to
the benefit of, and be enforceable by, each person who shall be a Holder
from time to time. Nothing in this Agreement, express or implied, is
intended to confer upon any Party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.
7.2 Governing Law and Dispute Resolution. This Agreement shall be
governed by and construed under the laws of the State of California (as
permitted by Section 1646.5 of the California Civil Code (or any successor
provision thereto)) without giving effect to any choice of law rule that
would cause the application of the laws of any jurisdiction other than the
internal laws of the State of California to the rights and duties of the
Parties hereunder. Any disputes arising among the Parties in connection
with this Agreement shall be settled by the Parties amicably through good
faith discussions upon the written request of any Party. In the event
that any such dispute cannot be resolved through such discussions within a
period of sixty (60) days after delivery of such notice, the dispute shall
be finally settled by arbitration in San Francisco, California, U.S.A.,
using the English language and in accordance with the rules then in effect
of the American Arbitration Association. The arbitrator(s) shall have the
authority to grant specific performance, and to allocate between the
Parties the costs of arbitration in such equitable manner as the
arbitrator(s) may determine. The prevailing party in the arbitration
shall be entitled to receive reimbursement of its reasonable expenses
incurred in connection therewith, including (if SOFTBANK is the prevailing
party) costs of travel to, and meals and hotel accommodations in, the
United States. Judgment upon the award so rendered may be entered in any
court having jurisdiction or application may be made to such court for
judicial acceptance of any award and an order of enforcement, as the case
may be.
7.3 Notices. Any and all notices, requests, demands and other
communications required or otherwise contemplated to be made under this
Agreement, including any Exercise Notices provided by E*TRADE, shall be in
writing and in English and shall be deemed to have been duly given (i) if
delivered personally, when received, (ii) if transmitted by facsimile, on
the first (1st) Business Day following receipt of a confirmation of
receipt, or (iii) if by international courier service, on the fourth (4th)
Business Day following the date of
11
<PAGE>
deposit with such courier service. All such notices, requests, demands and other
communications shall be addressed as follows:
If to E*TRADE:
E*TRADE, Inc.
Four Embarcadero Place
2400 Geng Road
Palo Alto, CA 94303
Attention: Mr. Stephen Richards
Mr. Michael Rolnick
Telephone: 1-650-842-2500
Facsimile: 1-650-842-8622
with a copy to (which shall not constitute notice):
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
Attention: Thomas A. Bevilacqua, Esq.
Curtis L. Mo, Esq.
Telephone: 1-650-424-0160
Facsimile: 1-650-496-2885
If to SOFTBANK:
SOFTBANK Holdings, Inc.
10 Langley Road, Suite 43
Newton Center, Massachusetts
Attention: Ronald D. Fisher,
Vice Chairman
Telephone: 1-617-928-9300
Facsimile: 1-617-928-9301
with a copy to (which shall not constitute notice):
SOFTBANK CORP.
24-1, Nihonbashi-Hakozakicho
Chuo-ku, Tokyo 103, Japan
Attention: Mr. Yoshitaka Kitao
Hitoshi Hasegawa, Esq.
Telephone: 81-3-5642-8376
Facsimile: 81-3-5641-3402
12
<PAGE>
and a copy to (which shall not constitute notice):
Morrison & Foerster
AIG Building, 7th Floor
1-3, Marunouchi 1-Chome
Chiyoda-ku, Tokyo 100-0005, Japan
Attention: Ken A. Siegel, Esq.
Charles C. Comey, Esq.
Telephone: 81-3-3214-6522
Facsimile: 81-3-3214-6512
7.4 Expenses. Each Party shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and
performance of this Agreement. Each Party shall be responsible for all
costs, expenses and filing fees incurred in connection with obtaining the
regulatory approvals it is required to obtain pursuant to Section 1.6 as a
condition to any acquisition of Shares by SOFTBANK; provided, however,
that if approval is required under the HSR Act with respect to the
purchase by SOFTBANK of Common Stock hereunder, the Parties shall share
equally the cost of any related filing fees under the HSR Act. Each Party
agrees to cooperate with the other Party (at the other Party's expense) in
obtaining such regulatory approvals.
7.5 Amendments and Waivers. Any term of this Agreement may be amended
only with the written consent of the Parties. No waiver of any term or
condition of this Agreement be valid or binding on a Party unless the same
shall have been mutually assented to in writing by each Party. The
failure of a Party to enforce at any time any of the provisions of this
Agreement, or the failure to require at any time performance by one or
both of the other Parties of any of the provisions of this Agreement,
shall in no way be construed to be a present or future waiver of such
provisions, nor in any way affect the ability of a Party to enforce each
and every such provision thereafter.
7.6 Severability. If any provision in this Agreement shall be found or
be held to be invalid or unenforceable then the meaning of said provision
shall be construed, to the extent feasible, so as to render the provision
enforceable, and if no feasible interpretation would save such provision,
it shall be severed from the remainder of this Agreement which shall
remain in full force and effect unless the severed provision is essential
and material to the rights or benefits received by any Party. In such
event, the Parties shall use best efforts to negotiate, in good faith, a
substitute, valid and enforceable provision or agreement which most nearly
affects the Parties' intent in entering into this Agreement.
7.7 Further Assurances. The Parties shall each perform such acts,
execute and deliver such instruments and documents, and do all such other
things as may be reasonably necessary to accomplish the transactions
contemplated in this Agreement.
7.8 References; Subject Headings. Unless otherwise indicated,
references to Sections and Exhibits herein are to Sections of, and
Exhibits to, this Agreement. The subject headings of the Sections of this
Agreement are included for the purpose of convenience of reference only,
and shall not affect the construction or interpretation of any of its
provisions.
7.9 Counterparts. This Agreement may be executed in any number of more
counterparts, but all of which together shall constitute one and the same
instrument.
13
<PAGE>
IN WITNESS WHEREOF, the Parties have caused their respective duly
authorized representatives to execute this Agreement as of the Effective
Date.
E*TRADE GROUP, INC. SOFTBANK HOLDINGS, INC.
- -------------------------------- -------------------------------
Christos M. Cotsakos Yoshitaka Kitao
President & CEO Director
14
<PAGE>
EXHIBIT 1.2
NOTICE OF EXERCISE
___________, 199__
SOFTBANK Holdings, Inc.
- --------------------------
- --------------------------
- --------------------------
Attention: Mr.
-----------
SOFTBANK CORP.
24-1, Nihonbashi-Hakozakicho
Chuo-ku, Tokyo 103, Japan
Attention: Mr. Yoshitaka Kitao
Hitoshi Hasegawa, Esq.
Ladies and Gentlemen:
Reference is made to that certain Stock Purchase Agreement dated as
of June 5, 1998 (as amended from time to time, the "Agreement") between
SOFTBANK Holdings, Inc. and E*TRADE Group, Inc. Capitalized terms used in
this Exercise Notice without definition have the meanings set forth in the
Agreement.
Pursuant to Section 1.2 of the Agreement, E*TRADE hereby irrevocably
exercises the Option to cause SOFTBANK to acquire Common Stock of
E*TRADE.
The amount of the Purchase Price is [$_______________].
On Closing, please transfer the Purchase Price to the following bank
account:
Name of Bank: ___________________
Bank's Address: ___________________
Account No.: ___________________
ABA No.: ___________________
Contact at Bank: ___________________
Contact's Phone No.: ___________________
Contact's Fax No.: ___________________
In connection with this exercise of the Option, E*TRADE hereby
certifies that:
(1) Representations and Warranties. Each of the representations
and warranties made by E*TRADE in Section 2 of the Agreement is true and
correct as of the date hereof and shall be true and correct on the Closing
Date.
1
<PAGE>
(2) No Breach. As of the date hereof, there has been no breach by
E*TRADE of the Agreement, the JV Agreement or any other Transaction
Document (as defined in the JV Agreement), and no such breach shall exist
on the Closing Date.
(3) Conditions Fulfilled. E*TRADE hereby acknowledges that
SOFTBANK's obligation to purchase Common Stock is contingent upon the
following additional conditions: (a) the joint venture established
pursuant to the JV Agreement shall not have been dissolved prior to the
Closing Date and (b) the closing price of the Common Stock after the
Effective Date of the Agreement (as adjusted for any splits or
recapitalizations occurring after the Effective Date) shall not have been
$8.00 or less.
E*TRADE GROUP, INC.
By:
-------------------------
Its:
-------------------------
Accepted and Acknowledged:
SOFTBANK HOLDINGS, INC.
By:
------------------------
Its:
------------------------
Date: ----------------------
2
<PAGE>
EXHIBIT 1.5
Form of legal opinion
<PAGE>
EXHIBIT 2.6
Commission Filings*
1. Annual Report on Form 10-K for the fiscal year ended
September 30, 1997 (filed 12/23/97).
2. Quarterly Report on Form 10-Q for the quarter ended
December 31, 1997 (filed 2/17/98).
3. Definitive Proxy Statement dated and filed as of January 16,
1998.
- --------
* To be updated as necessary to include all periodic reports filed
by E*TRADE since the Effective Date with the U.S. SEC pursuant to
E*TRADE's reporting obligations under the Securities Exchange Act of 1934,
as amended.
<PAGE>
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
- ---------------------
E*TRADE MEDIA CONTACT: SOFTBANK MEDIA CONTACT:
- ---------------------- -----------------------
Kim Shepherd or Tim Ryan Shawn Sehy
The Dilenschneider Group, Inc. SOFTBANK Corp.
312/553-0700 +81-3-5642-8000
[email protected]
[email protected]
E*TRADE AND SOFTBANK ANNOUNCE JOINT VENTURE
TO FORM E*TRADE JAPAN K.K.
LEVERAGES EXPERTISE AND BRAND POSITIONING OF INDUSTRY LEADERS
PALO ALTO, CA, June 3, 1998 -- Moving aggressively to capitalize on the
financial reform program underway in Japan and the burgeoning use of the
Internet there, E*TRADE Group, Inc. (Nasdaq: EGRP), a leading branded, popular
destination Web site for online investing services, and SOFTBANK CORP. (TSE:
9984), the largest software distributor in Japan, today announced the formation
of a joint venture company, E*TRADE Japan K. K., which is intended to provide
the rapidly growing Japanese market with access to a premier destination site
for online securities investing products and services.
Because this joint venture links two established, respected leaders in
their industries, E*TRADE Japan should have a compelling competitive advantage
intimate knowledge of the marketplace combined with a next generation system
architecture and a comprehensive, innovative mix of investing products and
services tailored exclusively for the Japanese investor.
- more -
<PAGE>
E*TRADE-SOFTBANK JOINT VENTURE/Page 2
"SOFTBANK's successful track record of targeting and investing capital in
emerging technology companies around the world, combined with the respect they
engender in the marketplace, makes them an excellent partner for E*TRADE as we
enter the emerging Japanese Internet market for online investing," said Christos
M. Cotsakos, President and Chief Executive Officer of E*TRADE Group, Inc.
"Because SOFTBANK was one of the first global companies to invest venture
capital in E*TRADE, we have a long-term, close relationship and a deep
understanding and respect of each other's business. It is fitting that they are
our first joint venture partner."
"The overhaul of the Japanese financial system, coined `Big Bang' reform,
which began April 1, has opened the door for an innovative, customer-driven
company like E*TRADE Japan to capture its segment of business as the Japanese
look to invest some 1,200 trillion yen ($9.2 trillion) in private financial
assets," said Masayoshi Son, President and Chief Executive Officer of SOFTBANK
CORP. "We are pleased to be working with E*TRADE to secure our share of
forward-thinking Japanese investors who view the Internet as an excellent means
to oversee their investment decisions," he added.
"E*TRADE has proven itself time after time as the cutting edge leader in a
category it helped to create. We are excited to be a part of their aggressive
global expansion and are confident that this joint venture will repeat the
extraordinary successes E*TRADE has had in building its brand around the world,"
Son said. "E*TRADE's rapid growth and continued profitability are measures
which we highly respect and value."
According to the United States Federal Reserve Board, approximately 38
percent of all financial assets held by households in the U.S. are invested in
securities. In contrast, the Economic Planning Agency of Japan reports that
just 11 percent of the financial assets of Japanese households are held in
stocks and mutual funds, providing substantial room for growth.
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<PAGE>
E*TRADE-SOFTBANK JOINT VENTURE/Page 3
"With approximately 10 million Japanese using the Internet, further
liberalization of the sale of securities and mutual funds and the abolition of
the securities transaction tax set for 2001, we view Japan as an ideal location
for E*TRADE to expand and thrive," Cotsakos stated. "We strongly believe that
the opportunities in Japan are extraordinary and full of growth potential for a
company formed by two organizations like ours that embody the entrepreneurial
spirit. This joint venture with a company of the caliber of SOFTBANK is yet
another cornerstone in our ongoing strategy to build the first global online
investing network through the Web," Cotsakos added.
E*TRADE will own 42 percent of the joint venture and SOFTBANK 58 percent.
E*TRADE Japan will be initially capitalized at approximately $20 million. In
addition to its investment, E*TRADE will provide all the necessary elements to
replicate its successful U.S. electronic model including its cutting edge
technology and consumer-friendly products and services.
ABOUT SOFTBANK
SOFTBANK CORP. is a leading provider of information and distribution
services for the digital information industry. In Japan, SOFTBANK is the
largest distributor of computer technology publications. In the U.S., SOFTBANK
owns approximately 72 percent of Ziff-Davis Inc. (NYSE: ZD), 29 percent of
Yahoo! Inc. (Nasdaq: YHOO) and 80 percent of Kingston Technology Company.
ABOUT E*TRADE
A leading branded, popular destination Web site for online investing
services, E*TRADE has established a popular destination Web site for self-
directed investors. The company offers independent investors the convenience
and control of automated stock, options, and mutual funds order placement at low
commission rates, along with a suite of value-added products and services that
can be personalized, including portfolio tracking, Java-based charting and quote
applications, real-time market commentary and analysis, news, and other
information services.
- more -
<PAGE>
E*TRADE-SOFTBANK JOINT VENTURE/Page 4
Customers can access E*TRADE at http://www.etrade.com on the Internet as
---------------------
well as through WebTV; via Prodigy; via AT&T Worldnet; via Microsoft Investor;
by GO ETRADE on CompuServe; with the keyword ETRADE on America Online; via
personal digital assistant; and via the TELE*MASTER interactive telephone
system. E*TRADE Securities and its parent company, E*TRADE Group, Inc., are
headquartered in Palo Alto, California.
E*TRADE is a registered trademark of the Company. TELE*MASTER is a
trademark of E*TRADE Securities, Inc. All other trademarks are properties of
their respective owners. The statements contained in this news release that are
forward-looking are based on current expectations that are subject to a number
of uncertainties and risks, and actual results may differ materially.
The uncertainties and risks include, but are not limited to, changes in
market activity, the development of new products and services, the enhancement
of existing products and services, competitive pressures, system failures,
economic or political conditions, and the introduction of competing products
having technological and/or other advantages. Further information about these
matters can be found in the information included in the annual report filed by
the Company with the SEC on Form 10-K and quarterly reports on Form 10-Q.
# # #
<PAGE>
EXHIBIT 99.2
FOR IMMEDIATE RELEASE
- ---------------------
E*TRADE Media Contact: SOFTBANK Media Contact:
- ---------------------- -----------------------
Kim Shepherd or Tim Ryan Shawn Sehy
The Dilenschneider Group, Inc. SOFTBANK Corp.
312/553-0700 +81-3-5642-8000
[email protected]
[email protected]
E*TRADE AND SOFTBANK ANNOUNCE
STRATEGIC INVESTMENT AGREEMENT
PALO ALTO, CA, June 3, 1998 -- Further cementing their ongoing relationship,
E*TRADE Group Inc. (Nasdaq: EGRP), a leading, branded popular destination Web
site for online investing services, and SOFTBANK CORP. (TSE: 9984), the
largest software distributor in Japan, today announced that they have entered
into an agreement whereby SOFTBANK may, at E*TRADE's option, make an
investment of up to $50 million through the purchase of E*TRADE common stock.
"Since SOFTBANK first invested venture capital funds in E*TRADE two
years ago, we have developed a strong bond between our two companies. We are
naturally quite pleased with this agreement as it signals the commitment of a
very successful global corporation to our company and our ability to continue
to grow our online investing business profitably worldwide," said Christos M.
Cotsakos, President and Chief Executive Officer of E*TRADE Group, Inc.
"E*TRADE has earned our financial support by anticipating the needs of
its demanding, self-directed customer base and acting quickly and decisively
to take the steps to ensure that it maintains its position as an innovative
industry leader," said Masayoshi Son, President and Chief Executive Officer
of SOFTBANK CORP. "We are happy to make this financial commitment to a
company we consider an excellent business partner with an outstanding future."
According to Son and Cotsakos, the agreement calls for SOFTBANK to
exercise its options, at E*TRADE's discretion, over the next 18 months.
Under the terms of the agreement, any stock purchased by SOFTBANK will be
held for a minimum of two years. The purchase of the shares is subject to
all applicable regulatory approvals.
- more -
<PAGE>
E*TRADE-SOFTBANK INVESTMENT ANNOUNCEMENT/Page 2
About SOFTBANK
SOFTBANK CORP. is a leading provider of information and distribution
services for the digital information industry. In Japan, SOFTBANK is the
largest distributor of computer technology publications. In the U.S.,
SOFTBANK owns approximately 72 percent of Ziff-Davis Inc. (NYSE: ZD), 29
percent of Yahoo! Inc. (Nasdaq: YHOO) and 80 percent of Kingston Technology
Company.
About E*TRADE
A leading branded, popular destination Web site for online investing
services, E*TRADE has established a popular destination Web site for
self-directed investors. The company offers independent investors the
convenience and control of automated stock, options, and mutual funds order
placement at low commission rates, along with a suite of value-added products
and services that can be personalized, including portfolio tracking,
Java-based charting and quote applications, real-time market commentary and
analysis, news, and other information services.
Customers can access E*TRADE at http://www.etrade.com on the Internet
---------------------
as well as through WebTV; via Prodigy; via AT&T Worldnet; via Microsoft
Investor; by GO ETRADE on CompuServe; with the keyword ETRADE on America
Online; via personal digital assistant; and via the TELE*MASTER interactive
telephone system. E*TRADE Securities and its parent company, E*TRADE Group,
Inc., are headquartered in Palo Alto, California.
E*TRADE is a registered trademark of the Company. TELE*MASTER is a
trademark of E*TRADE Securities, Inc. All other trademarks are properties of
their respective owners. The statements contained in this news release that
are forward-looking are based on current expectations that are subject to a
number of uncertainties and risks, and actual results may differ materially.
The uncertainties and risks include, but are not limited to, changes in
market activity, the development of new products and services, the
enhancement of existing products and services, competitive pressures, system
failures, economic or political conditions, and the introduction of competing
products having technological and/or other advantages. Further information
about these matters can be found in the information included in the annual
report filed by the Company with the SEC on Form 10-K and quarterly reports
on Form 10-Q.
# # #
