<PAGE>
As filed with the Securities and Exchange Commission on April 18, 2000
Registration No. 333-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
E*TRADE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2844166
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
4500 Bohannon Drive
Menlo Park, California 94025
(Address of principal executive offices) (Zip Code)
E*TRADE UK (HOLDINGS) LIMITED 1999 EXECUTIVE SHARE OPTION SCHEME
TELEBANC FINANCIAL CORPORATION STOCK OPTION PLAN
TELEBANC FINANCIAL CORPORATION 1997 STOCK OPTION PLAN
TELEBANC FINANCIAL CORPORATION 1998 STOCK INCENTIVE PLAN
OPTIONS GRANTED TO CERTAIN INDIVIDUALS(3)
(Full title of the Plans)
Christos M. Cotsakos
Chairman of the Board and
Chief Executive Officer
E*TRADE GROUP, INC.
4500 Bohannon Drive
Menlo Park, California 94025
(650) 331-6000
(Name, address including zip code, and telephone number, including area code, of
agent for service)
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered (1) per Share (2) Price (2) Fee
---------- ------------- ------------- --------------- ------------
<S> <C> <C> <C> <C>
E*TRADE UK (Holdings) Limited
1999 Executive Share Option Scheme
- ----------------------------------
Common Stock, $0.01 par value 1,013,357 shares $1.6645 $1,686,732.70 $445.30
Telebanc Financial Corporation
Stock Option Plan
- ------------------------------
Common Stock, $0.01 par value 1,105,482 shares $1.56 $1,724,551.92 $455.28
Telebanc Financial Corporation
1997 Stock Option Plan
- ------------------------------
Common Stock, $0.01 par value 1,700,330 shares $5.95 $10,116,963.50 $2,670.87
Telebanc Financial Corporation
1998 Stock Incentive Plan
- ------------------------------
Common Stock, $0.01 par value 2,144,945 shares $11.26 $24,152,080.70 $6,376.14
Options Granted to Certain
Individuals (3)
- ------------------------------
Common Stock, $0.01 par value 334,090 shares $2.86 $955,497.40 $252.25
Aggregate Registration Fee $10,199.84
---------
</TABLE>
(1) This Registration Statement shall also cover any additional shares of Common
Stock which become issuable under the E*TRADE UK (Holdings) Limited 1999
Executive Share Option Scheme, the Telebanc Financial Corporation Stock
Option Plan, the Telebanc Financial Corporation 1997 Stock Option Plan, the
Telebanc Financial Corporation 1998 Stock Incentive Plan and/or the options
granted to certain individuals by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without Registrant's
receipt of consideration which results in an increase in the number of the
outstanding shares of Registrant's Common Stock.
(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the weighted average
exercise price of the outstanding options.
(3) The following individuals have outstanding Non-Plan Options in the amounts
and at the exercise prices set forth below:
<TABLE>
<CAPTION>
Optionee's Name Exercise Price Shares
- --------------- -------------- ------
<S> <C> <C>
Aneiro, Michael 3.22 4,069
Bream, Douglas E. 3.22 10,172
Campbell, Kenneth A. 3.22 4,069
DeCamp, David R. 2.12 31,500
Gallahan, Catherine May 3.22 15,258
Gelbard, Arlen W. 2.12 23,100
Gelman, Jane 3.22 10,172
Greenberg, Laurence 3.22 101,732
Henderson, Ann T. 3.22 4,069
Lau, David P. 3.22 4,069
Opsahl, Michael R. 3.22 28,093
Pugh, Aileen Lopez 3.22 40,693
Rollinson, Mark 2.12 36,750
Yi, Sang-Hee C. 3.22 20,344
</TABLE>
<PAGE>
PART II
Information Required in the Registration Statement
Item 3. Incorporation of Documents by Reference
---------------------------------------
E*TRADE Group, Inc. (the "Registrant") hereby incorporates by reference
into this Registration Statement the following documents previously filed with
the Securities and Exchange Commission (the "SEC"):
(a) The Registrant's Annual Report on Form 10-K for the fiscal year
ended September 30, 1999, filed with the SEC on October 22, 1999,
as amended on Form 10-K/A, filed with the SEC on April 17, 2000;
(b) The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended December 31, 1999, filed with the SEC on
February 14, 2000, as amended on Form 10-Q/A, filed with the SEC
on April 17, 2000;
(c) The Registrant's Current Reports on Form 8-K for period dates
January 12, 2000 and April 12, 2000 filed with the SEC on
January 27, 2000 and April 17, 2000, respectively; and
(d) The Registrant's Registration Statement No. 001-11921 on Form 8-
A12B filed with the SEC on July 12, 1996 pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended (the "1934 Act"),
in which there is described the terms, rights and provisions
applicable to the Registrant's outstanding Common Stock.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of
this Registration Statement and prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained herein or in any subsequently filed
document which also is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.
Item 4. Description of Securities
-------------------------
Not Applicable.
Item 5. Interests of Named Experts and Counsel
--------------------------------------
Not Applicable.
Item 6. Indemnification of Directors and Officers
-----------------------------------------
Section 145 of the General Corporation Law of the State of Delaware
(the "Delaware Law") empowers a Delaware corporation to indemnify any persons
who are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceedings, whether civil, criminal,
administrative or investigative (other than action by or in the right of such
corporation), by reason of the fact that such person was an officer or director
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that such officer or
director acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests, and, for criminal proceedings,
had no reasonable cause to believe his conduct was illegal. A Delaware
corporation may indemnify officers and directors in an action by or in the right
of the corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable to the corporation in the performance of his duty. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses which
such officer or director actually and reasonably incurred.
II-1
<PAGE>
In accordance with the Delaware Law, the Restated Certificate of
Incorporation of the Registrant contains a provision to limit the personal
liability of the directors of the Registrant for violations of their fiduciary
duty. This provision eliminates each director's liability to the Registrant or
its stockholders for monetary damages except (i) for any breach of the
director's duty of loyalty to the Registrant or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware Law providing
for liability of directors for unlawful payment of dividends or unlawful stock
purchases or redemptions, or (iv) for any transaction from which a director
derived an improper personal benefit. The effect of this provision is to
eliminate the personal liability of directors for monetary damages for actions
involving a breach of their fiduciary duty of care, including any such actions
involving gross negligence.
Article 5 of the Restated Bylaws of the Registrant provide for
indemnification of the officers and directors of the Registrant to the fullest
extent permitted by applicable law.
In connection with the incorporation of the Registrant into the State
of Delaware, the Registrant entered into indemnification agreements with each
director and certain officers. The Indemnification Agreements provide
indemnification to such directors and officers under certain circumstances for
acts or omissions which may not be covered by directors' and officers' liability
insurance.
Item 7. Exemption from Registration Claimed
-----------------------------------
Not Applicable.
Item 8. Exhibits
--------
Number Exhibit
------ -------
4 Instruments Defining Rights of Stockholders. Reference is
made to Registrant's Registration Statement No. 001-11921
on Form 8-A12B, including the exhibits thereto, which is
incorporated herein by reference pursuant to Item 3(d).
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Deloitte & Touche LLP, Independent Auditors.
23.2 Consent of Arthur Andersen LLP, Independent Auditors.
23.3 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 E*TRADE UK (Holdings) Limited 1999 Executive Share Option
Scheme.
99.2 Form of Option Assumption Agreement-Vested Shares.
99.3 Form of Option Assumption Agreement-Unvested Shares.
99.4 Telebanc Financial Corporation Stock Option Plan.
99.5 Telebanc Financial Corporation 1997 Stock Option Plan.
99.6 Telebanc Financial Corporation 1998 Stock Incentive Plan.
99.7 Form of Stock Option Agreement-Non-Plan Options.
99.8 Form of Option Assumption Agreement.
99.9 Form of Option Assumption Agreement-Full Acceleration.
99.10 Form of Option Assumption Agreement-Involuntary
Termination.
Item 9. Undertakings
------------
A. The undersigned Registrant hereby undertakes: (1) to file, during any
period in which offers or sales are being made, a post-effective amendment to
this Registration Statement (i) to include any prospectus required by Section
10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in this
Registration Statement and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in this
Registration Statement; provided, however, that clauses (1)(i) and (1)(ii) shall
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act that are
incorporated by reference into this Registration Statement; (2) that for the
purpose of determining any liability under the 1933 Act each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof; and (3) to remove
from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the E*TRADE UK
(Holdings) Limited 1999 Executive Share Option Scheme, the Telebanc Financial
Corporation Stock Option Plan, the Telebanc Financial Corporation 1997 Stock
Option Plan, the Telebanc Financial Corporation 1998 Stock Incentive Plan
and/or the options granted to certain individuals.
II-2.
<PAGE>
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is
incorporated by reference into this Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers, or controlling persons of the
Registrant pursuant to the indemnification foregoing provisions summarized in
Item 6 or otherwise, the Registrant has been advised that, in the opinion of the
SEC, such indemnification is against public policy as expressed in the 1933 Act,
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
II-3.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8, and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Menlo Park, State of California on this 18/th/
day of April, 2000.
E*TRADE GROUP, INC.
By: /s/ Christos M. Cotsakos
------------------------------
Christos M. Cotsakos
Chairman of the Board and Chief
Executive Officer
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of E*TRADE Group, Inc., a
Delaware corporation, do hereby constitute and appoint Theodore J. Theophilos,
Brigitte Van Baelen, and Leonard C. Purkis, and each one of them, the lawful
attorneys-in-fact and agents with full power and authority to do any and all
acts and things and to execute any and all instruments which said attorneys
and agents, and any one of them, determine may be necessary or advisable or
required to enable said corporation to comply with the Securities Act of 1933,
as amended, and any rules or regulations or requirements of the Securities and
Exchange Commission in connection with this Registration Statement. Without
limiting the generality of the foregoing power and authority, the powers
granted include the power and authority to sign the names of the undersigned
officers and directors in the capacities indicated below to this Registration
Statement, to any and all amendments, both pre-effective and post-effective,
and supplements to this Registration Statement, and to any and all instruments
or documents filed as part of or in conjunction with this Registration
Statement or amendments or supplements thereof, and each of the undersigned
hereby ratifies and confirms all that said attorneys and agents, or any one of
them, shall do or cause to be done by virtue hereof. This Power of Attorney
may be signed in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Christos M. Cotsakos Chairman of the Board and Chief April 18, 2000
- ------------------------ Executive Officer (Principal Executive
Christos M. Cotsakos Officer)
/s/ Leonard C. Purkis Chief Financial
- ------------------------ Officer (Principal Financial and April 18, 2000
Leonard C. Purkis Accounting Officer)
</TABLE>
II-4.
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Richard S. Braddock
- --------------------------
Richard S. Braddock Director April 18, 2000
/s/ William E. Ford
- --------------------------
William E. Ford Director April 18, 2000
/s/ George Hayter
- --------------------------
George Hayter Director April 18, 2000
/s/ Lewis E. Randall
- --------------------------
Lewis E. Randall Director April 18, 2000
/s/ Masayoshi Son
- --------------------------
Masayoshi Son Director April 18, 2000
/s/ Lester C. Thurow
- --------------------------
Lester C. Thurow Director April 18, 2000
/s/ Peter Chernin
- --------------------------
Peter Chernin Director April 18, 2000
/s/ William A. Porter
- --------------------------
William A. Porter Director April 18, 2000
</TABLE>
II-5.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
E*TRADE GROUP, INC.
<PAGE>
EXHIBIT INDEX
-------------
Number Exhibit
------ -------
4 Instruments Defining Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 001-11921 on Form 8-A12B,
including the exhibits thereto, which is incorporated herein by
reference pursuant to Item 3(d).
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Deloitte & Touche LLP, Independent Auditors.
23.2 Consent of Arthur Andersen LLP, Independent Auditors.
23.3 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 E*TRADE UK (Holdings) Limited 1999 Executive Share Option Scheme.
99.2 Form of Option Assumption Agreement-Vested Shares.
99.3 Form of Option Assumption Agreement-Unvested Shares.
99.4 Telebanc Financial Corporation Stock Option Plan.
99.5 Telebanc Financial Corporation 1997 Stock Option Plan.
99.6 Telebanc Financial Corporation 1998 Stock Incentive Plan.
99.7 Form of Stock Option Agreement-Non-Plan Options.
99.8 Form of Option Assumption Agreement.
99.9 Form of Option Assumption Agreement-Full Acceleration.
99.10 Form of Option Assumption Agreement-Involuntary Termination.
<PAGE>
EXHIBIT 5
Opinion and consent of Brobeck, Phleger & Harrison LLP
April 18, 2000
E*TRADE Group, Inc.
4500 Bohannan Drive
Menlo Park, California 94025
Re: E*TRADE Group, Inc. - Registration Statement for Offering of
6,298,204 Shares of Common Stock
------------------------------------------------------------
Dear Ladies and Gentlemen:
We have acted as counsel to E*TRADE Group, Inc., a Delaware corporation
(the "Company"), in connection with the registration on Form S-8 (the
"Registration Statement") under the Securities Act of 1933, as amended, of an
aggregate of 6,298,204 shares of common stock (the "Shares") and related stock
options under (i) the E*Trade UK (Holdings) Limited 1999 Executive Share Option
Scheme (the "Scheme"), (ii) the Telebanc Financial Corporation Stock Option Plan
(the "Option Plan"), (iii) the Telebanc Financial Corporation 1997 Stock
Option Plan (the "1997 Plan"), (iv) the Telebanc Financial Corporation 1998
Stock Incentive Plan (the "Incentive Plan") (collectively, the "Plans") and
(v) the options granted to certain individuals (the "Option Grants").
This opinion is being furnished in accordance with the requirements of Item
8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the assumption of the
Plans and the Option Grants. Based on such review, we are of the opinion that
if, as and when the Shares are issued and sold (and the consideration therefor
received) pursuant to the provisions of the option agreements duly authorized
under the Plans or the Option Grants, and in accordance with the Registration
Statement, such Shares will be duly authorized, legally issued, fully paid and
nonassessable.
We consent to the filing of this opinion letter as Exhibit 5 to the
Registration Statement.
This opinion letter is rendered as of the date first written above and we
disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company, the
Plans, or the Shares.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
EXHIBIT 23.1
Consent of Deloitte & Touche LLP, Independent Auditors
We consent to the incorporation by reference in this Registration Statement of
E*TRADE Group, Inc. on Form S-8 of our report dated October 13, 1999 (March 15,
2000 as to the second paragraph of note 1), appearing in the Annual Report on
Form 10-K/A of E*TRADE Group, Inc. for the year ended September 30, 1999.
/s/ Deloitte & Touche LLP
San Jose, California
April 18, 2000
<PAGE>
EXHIBIT 23.2
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated march 15, 2000
included in E*TRADE Group, Inc.'s Form 10-K/A for the year ended September 30,
1999 and to all references to our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
Vienna, Virginia
April 18, 2000
<PAGE>
EXHIBIT 99.1
E*TRADE UK (HOLDINGS) LIMITED
1999 EXECUTIVE SHARE OPTION SCHEME
<PAGE>
ADOPTED BY RESOLUTION OF THE DIRECTORS DATED 30 MARCH 1999
==============================================
THE RULES OF
1999 EXECUTIVE SHARE OPTION SCHEME OF
E*TRADE UK (HOLDINGS) LIMITED
==============================================
O
90 Long Acre
London WC2E 9TT
Tel: 0171-208 8888
Fax: 0171-208 8800
email: [email protected]
Ref: MAC/5797-7
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
Clause Page
<S> <C>
1. DEFINITIONS .......................................................... 1
2. COMMENCEMENT ......................................................... 5
3. GRANT OF OPTIONS ..................................................... 5
4. LIMITATIONS OF SCHEME ................................................ 6
5. EXERCISE, LAPSE AND RENUNCIATION OF OPTIONS .......................... 6
6. THE MANNER OF EXERCISE OF OPTIONS .................................... 9
7. ADJUSTMENT OF OPTIONS ................................................ 10
8. AMENDMENT ............................................................ 10
9. TERMINATION .......................................................... 11
10. NOTICES............................................................... 11
11. ADMINISTRATION........................................................ 11
12. AVAILABILITY OF SHARES................................................ 12
13. NOT PART OF EMPLOYMENT TERMS.......................................... 12
14. INDEMNITY BY OPTION HOLDERS........................................... 12
</TABLE>
<PAGE>
E*TRADE UK (HOLDINGS) LIMITED
1999 EXECUTIVE SHARE OPTION SCHEME
(As adopted by a resolution of the Directors on [ ] 1999)
(and approved by Shareholders by ordinary resolution passed on [ ])
1. DEFINITIONS
1.1 In this Scheme, except where the context otherwise requires, the words and
expressions set out below shall bear the following respective meanings,
namely:
"Acquiring Company" shall have the meaning ascribed to it in
paragraph 5.6;
"Auditors" the auditors of the Company for the time
being;
"Company" E*Trade UK (Holdings) Limited, unless
otherwise stated in paragraph 5;
"Date of Commencement" the date on which this Scheme is approved by
the shareholders of the Company in general
meeting or by written resolution;
"Date of Grant" the date on which an Option is granted as
specified in paragraph 3.2;
"Directors" the board of directors of the Company for the
time being and from time to time or a duly
authorised committee thereof;
"Eligible Participant" any director or employee of the Company or of
any other member of the Group selected by the
Directors in accordance with their prevailing
policy from time to time to participate in
this Scheme;
"Group" any company which is (i) a holding company of
the Company; or (ii) a subsidiary of the
Company or any of its or their subsidiaries
or holding companies or, where the context
permits, any one or more of them and
references to "member of Group" shall be
construed accordingly;
"holding company" the meanings set out in sections 736 and 736A
or "subsidiary" of the Companies Act 1985;
"Listing" the date of admission of any part of the
share capital of the Company to the Official
List of the
1
<PAGE>
London Stock Exchange Limited or the grant of
permission to deal in the same in the
Alternative Investment Market or on any
recognised investment exchange or overseas
exchange, as such terms are defined in the
Financial Services Act 1986;
"Market Value" the value determined in accordance with
paragraph (i) of the definition of "Option
Price";
"Notice of Exercise" the notice in writing to be given pursuant to
paragraph 5.1 informing the Company of the
Eligible Participant's exercise of an Option,
to be in such form as the Directors
determine, from time to time;
"Notice Period" (i) the period of notice of termination of
employment given to an Optionholder in
accordance with such Optionholder's
employment contract with the Company or any
Group company; or
(ii) if on termination of such employment
with the Company or any Group company, a
shorter period of notice is given to that
specified in his employment contract, or no
period of notice is given, then the period of
notice of termination that should have been
given by the Company or any Group company to
such employee in accordance with his
employment contract, less that period of
notice actually given to him;
"Notice of Grant" the notice to be given pursuant to paragraph
3.2, to be in such form as the Directors
determine, from time to time, informing an
Eligible Participant of the grant of an
Option to him and his right to renounce such
Option in whole or in part;
"Notice of Retention" the form to be completed by an Eligible
Participant following receipt of a Notice of
Grant as specified in paragraph 3.3, to be in
such form as the Directors determine from
time to time;
2
<PAGE>
"Option" a non-transferable right to subscribe for or
purchase Ordinary Shares granted to an
Eligible Participant in accordance with this
Scheme;
"Optionholder" a person granted an Option and in whom rights
under this Scheme are still vested or, where
the context requires or permits, his legal
personal representatives;
"Option Certificate" a certificate of grant of an Option to be
issued to an Optionholder in accordance with
the provisions of paragraph 3.3;
"Option Period" a period of ten years commencing on the Date
of Grant of an Option;
"Option Price" a price per Ordinary Share equal to whichever
shall be the price set by the Directors at
the Date of Grant:
plus, if the Option is granted after 1 April
1999, 10 percent of the difference between
the market value of an Ordinary Share on the
date of exercise of the Option and the market
value of the Option on the Date of Grant (as
aforesaid) if the former is higher than the
latter
or (when applicable) such price as from time
to time adjusted pursuant to this Scheme
subject, where the Option shares are to be
allotted rather than transferred to fulfil
the exercise of an Option, to the Option
Price only being reduced below the nominal
value to the extent that reserves in the
Company have been capitalised, so as to
enable the shares to be issued as fully paid,
failing which it shall rest at the nominal
value of such Ordinary Share, following
adjustment;
"Ordinary Shares" fully paid ordinary shares in the capital of
the Company and "Ordinary Shareholder" shall
be construed accordingly;
"Qualifying Quarters" shall have the meaning given in paragraph
5.1;
"Quarterly Entitlement" shall have the meaning given in paragraph
5.1;
3
<PAGE>
"Relevant Event" any variation in the share capital of the
Company arising from any reduction of capital
or sub-division or consolidation of capital
or issue of shares by way of capitalisation
of profits or reserves;
"Restricted Business" any financial services Internet business or
online share dealing business in any country
in which the Company or any member of its
Group operates, that competes with the
business carried on by the Company or any
member of its Group at the date a Subsisting
Option is exercised by an Optionholder
pursuant to paragraphs 5.2.3 and 5.2.4;
"Rules" the rules for the administration of this
Scheme contained herein or which are laid
down by the Directors and which may be
amended by them in accordance with paragraph
8 hereof;
"Sale" the sale of the whole or a substantial part
of the business and assets of the Company
from time to time;
"this Scheme" this scheme in its present form and as from
time to time amended in accordance with the
provisions hereof;
"Subsisting Option" an Option that has not lapsed, been renounced
or exercised;
"Takeover Offer" any offer (or action that would be an offer
if Part XIIIA of the Companies Act 1985
applied) made by a single company, business
or individual, or a concert party thereof
(within the meaning of the City Code on
Takeovers and Mergers in the UK) to acquire
more than fifty percent of (a) the issued
shares of the Company from time to time or
(b) the shareholder voting rights in the
Company from time to time;
"Taxes Act 1988" the Income and Corporation Taxes Act 1988;
and
"Vesting Date" the date determined by the Directors.
1.2 References to paragraphs are to paragraphs of this Scheme.
4
<PAGE>
1.3 In this Scheme any reference to a statutory provision shall be deemed to
include that provision as the same may, from time to time, be amended or
re-enacted, any reference to a Company employee share option scheme
includes that scheme as the same may be varied from time to time in
accordance with its terms, and wherever the context so admits or requires,
the singular shall include the plural and vice versa and the masculine
shall include the feminine.
2. COMMENCEMENT
This Scheme shall commence on the Date of Commencement.
3. GRANT OF OPTIONS
3.1 The Directors may, from time to time, at their discretion grant Options to
Eligible Participants in such amounts as they determine for such Eligible
Participants to subscribe or purchase Ordinary Shares at the applicable
Option Price. No person shall be entitled as of right to participate in
this Scheme.
3.2 The Directors shall grant Options by their resolution to Eligible
Participants. As soon as practicable thereafter, the Directors shall issue
to the Eligible Participant, in respect of each Option granted, a Notice of
Grant, specifying the number of Ordinary Shares the subject of such Option,
the Option Price and the Date of Grant thereof and a Notice of Retention.
3.3 If an Eligible Participant wishes to retain the Option, he must, within 21
days of the date of the Notice of Grant (or such other date as is specified
in the Notice of Grant) return the Notice of Retention to the Company duly
completed in accordance with its terms. On the Eligible Participant
returning to the Company a duly completed Notice of Retention the Company
shall within 14 days thereof issue to the Eligible Participant an Option
Certificate.
3.4 If an Eligible Participant does not return a duly completed Notice of
Retention of the Option to the Company within the period of 21 days
referred to in paragraph 3.3 above then the Option shall be treated as
renounced from the date that it was granted.
3.5 An Eligible Participant may at any time renounce his right to the Option
granted to him, in whole or in part, by returning the Option Certificate to
the Company with details of the extent to which it is renounced completed,
in which case such Option shall be deemed for all purposes never to have
been granted, to the extent that it is so renounced.
3.6 The Option Certificate issued by the Directors shall be given under seal or
executed as a deed. The Eligible Participant shall be bound by this Scheme
from the Date of Grant.
3.7 No payment shall be required for the grant of an Option.
5
<PAGE>
4. LIMITATIONS OF SCHEME
No Option shall be granted after the date falling ten years after the Date
of Commencement.
5. EXERCISE, LAPSE AND RENUNCIATION OF OPTIONS
5.1 General Rule on Vesting and Exercise
Subject to the following provisions of paragraphs 5 and 6.4, a Subsisting
Option may not be exercised by an Optionholder, in whole or in part, until
after the Vesting Date. Immediately after the Vesting Date, the
Optionholder shall be entitled to exercise up to 25% of the Subsisting
Option ("the first 25%"), in whole or in part. Thereafter, the Optionholder
shall be entitled to exercise the balancing 75% of a Subsisting Option,
from time to time, over such number of Ordinary Shares as is equal to 6.25%
of the total number of Ordinary Shares (rounded down to the nearest whole
share) that equals 75% of the number of Ordinary Shares the subject of that
Option when granted ("Quarterly Entitlement"), in respect of each complete
calendar quarter of employment of the Optionholder since the Vesting Date
("Qualifying Quarters"). Hence, after 36 complete months of employment
following the Vesting Date the total Subsisting Option will be exercisable.
A Subsisting Option shall be exercised by notification by the Optionholder
to the Company of the exercise of such Subsisting Option in accordance with
a Notice of Exercise.
5.2 Certain Early Vesting Events and Subsequent Exercise
Notwithstanding the foregoing but subject to paragraphs 5.4 and 6.4, a
Subsisting Option may nevertheless vest and therefore be exercised, as
specified below if:
5.2.1 the Optionholder ceases to be in the employment of a member of the
Group by reason of his injury or disability then the Subsisting
Option shall be deemed to have vested in respect of the period from
the Vesting Date until the date of cessation of employment on the
Date of Grant and the Optionholder shall, during the period of three
months from the date of such cessation, have the right to exercise
the Subsisting Options; or
5.2.2 the Optionholder dies whilst in the full time employment of a member
of the Group then the Subsisting Option shall be deemed to have
vested in respect of the period from the Vesting Date until the date
of death on the Date of Grant and his legal personal representatives
shall, during the period of 12 months from the date of his death,
have the right to exercise Subsisting Options; or
5.2.3 a Takeover Offer is made and such offer becomes or is declared
unconditional, then the Subsisting Option shall, if not vested by
that date, vest in full on the date that such offer becomes or is
declared unconditional. [This acceleration is conditional on the
Optionholder, if required to do so by the Directors, entering into
an agreement with the Company prior to exercise
6
<PAGE>
of the Option, not to participate in any Restricted Business for a
period of 12 months from the date that the Takeover Offer becomes or
is declared unconditional]; or
5.2.4 a Sale is completed, then the Subsisting Option shall, if not vested
by that date, vest in full on the date that the Sale is completed.
[This acceleration is conditional on the Optionholder, if required
to do so by the Directors, entering into an agreement with the
Company prior to exercise of the Option not to participate in any
Restricted Business for a period of 12 months from the date that the
Sale is completed]; or
5.2.5 a Listing is obtained, then the Subsisting Option shall, if not
vested by that date, be deemed to have vested in full on the Date of
Grant and the Optionholder shall have the right to exercise the
Subsisting Options.
5.3 Dismissal of Optionholder - Exercise of Options
If an Optionholder's employment with any company in the Group is terminated
by such company (other than for summary dismissal in accordance with such
Optionholder's employment contract and other than as specified in paragraph
5.2) then the Option shall be deemed to have vested for the period from the
Vesting Date until the date of termination, and the Optionholder shall, for
a period of three months after the date of termination, have the right to
exercise the Subsisting Option.
5.4 Lapse
Notwithstanding the foregoing provisions of this paragraph 5, an Option
shall lapse automatically insofar as it is capable of exercise if it has
not been exercised by the earlier of:
5.4.1 the expiration of ten years from the Date of Grant thereof;
5.4.2 the expiration of three months from the date on which an
Optionholder ceases to be in the employment of a member of the Group
for the reasons described in paragraph 5.2.1;
5.4.3 the expiration of 12 months from the date of the death of the
Optionholder whilst in the full time employment of a member of the
Group;
5.4.4 the date on which an Optionholder leaves the employment of a member
of the Group for any reason other than for those reasons or in the
circumstances described in paragraphs 5.2.1, 5.2.2, and 5.3;
5.4.5 providing that a new Option is offered for a Subsisting Option or a
comparable offer is otherwise made in accordance with paragraph 5.6,
and such new Option offer or comparable offer is accepted, then the
date of grant of the new Option or fulfilment of such comparable
offer. If such new Option offer or comparable offer is made pursuant
to paragraph 5.6 and not accepted, then the Option shall
automatically lapse, one month after the date
7
<PAGE>
of any notice in writing given to the holders of Ordinary Shares
pursuant to Sections 428-430F of the Companies Act 1985;
5.4.6 the date of commencement of a winding up of the Company;
5.4.7 the date the Optionholder is adjudicated bankrupt;
5.4.8 upon lapse of the Option pursuant to paragraph 11.5 hereof; or
5.4.9 the expiration of the Notice Period if the Optionholder ceases to be
in the employment of a member of the Group in accordance with
paragraph 5.3.
5.5 Renunciation
An Optionholder may, at any time renounce his Option in accordance with
paragraph 3.5.
5.6 Takeover - Transfer of Option
If any company (in this paragraph 5.6 referred to as the "Acquiring
Company") obtains control of the Company as a result of a Takeover Offer,
the Directors shall seek the agreement of the Acquiring Company for
Optionholders to release Subsisting Options to the Acquiring Company in
consideration of the Acquiring Company granting new Options which relate to
shares in the Acquiring Company or any other company which controls the
Acquiring Company. If such agreement is obtained, every Optionholder shall
be entitled to release every Subsisting Option held by him in consideration
of the grant of a new Option which satisfies the following conditions and
providing that such release is within the appropriate period defined as set
out below:
5.6.1 is over shares in the Acquiring Company or a company controlling the
Acquiring Company (and the term "Ordinary Shares" in these
paragraphs shall thereafter be construed accordingly);
5.6.2 is a right to acquire such number of such Ordinary Shares as has on
acquisition of the new Option an aggregate Market Value equal to the
aggregate Market Value of the Ordinary Shares subject to the old
Option on its release;
5.6.3 has an Option Price per Ordinary Share such that the aggregate price
payable on complete exercise of the Option equals the aggregate
price that would have been payable on complete exercise of the old
Option as at that date; and
5.6.4 is otherwise exercisable in the same manner as the old Option.
The new Option shall, for all other purposes of these paragraphs, be
treated as having been acquired at the same time as the old Option for
which it is released.
8
<PAGE>
The "appropriate period" referred to in this paragraph 5.6 means the period
of four months beginning when the offeror has obtained control of the
Company and any conditions subject to which the offer is made are
satisfied.
Following the release of Subsisting Options and the grant of new Options
the term "Company" shall for the purposes only of paragraphs 5.5, 5.6, 6,
8, 9, 10, 11, 12, 13 and 14 mean, in relation to the new Options, the
company the share capital of which includes shares over which new Options
have been granted and for the purposes of paragraphs 5.10 and 11.3 shall
mean E*Trade UK (Holdings) Limited and the Acquiring Company and the term
"Directors" in paragraphs 5, 6, 7, 8, 9, 11 and 12 shall mean in relation
to the new Options the Directors of such company.
If the agreement of the Acquiring Company to release Subsisting Options as
aforesaid, is not obtained, then the Company shall seek the agreement of
the Acquiring Company to follow the spirit of the Rules of The City Code on
Takeovers and Mergers as regards treatment of Options.
5.7 Takeover - Option Exercise if Options remain over Company Shares
In the event of a Takeover Offer concluding where the result is that the
Optionholder retains his Option over shares in the Company (which is by
then a subsidiary of the company making the Takeover Offer) then the
Company shall procure, so far as it is able, that on exercise of a
Subsisting Option the Optionholder is allotted shares in the company having
concluded the Takeover Offer in consideration for such company receiving
the due payment for exercise, on the same basis that the Takeover Offer was
made to shareholders of the Company.
6. THE MANNER OF EXERCISE OF OPTIONS
6.1 Subject to paragraph 14 below, a Subsisting Option may be exercised in
whole or part by the Optionholder giving Notice of Exercise to the Company,
by notice to the Secretary of the Company, stating that the Option is
thereby exercised and stating the number of Ordinary Shares in respect of
which it is exercised. Subject to paragraphs 5.2 and 5.3 an Optionholder
may not give more than one Notice of Exercise in any twelve month period.
With such Notice of Exercise the Optionholder shall forward to the
Secretary of the Company the consideration for the Ordinary Shares in
respect of which the Subsisting Option is exercised calculated by reference
to the Option Price and the Option Certificate. If, at the date of exercise
of an Option, an Optionholder is unclear of the Option Price, he should
serve Notice of Exercise, with a request for confirmation of the Option
Price. The Company shall respond to such request within 10 business days of
receipt of such request and the Optionholder shall, with 5 business days of
such response, send to the Company any balancing funds to satisfy payment
of the Option Price in respect of the Option so exercised. A Subsisting
Option (or part thereof) shall be deemed to have been exercised when the
said valid notice together with the said consideration plus any income tax
liability (including PAYE) that arises as a consequence or in connection
with the exercise of the Option (in cleared funds) is received by the
Secretary of the Company and the Option exercise date shall be
9
<PAGE>
deemed to be the date that a valid notice is so received. As soon as
practicable and in any event within 30 days of receipt of the said notice
and consideration (in cleared funds), the Company will send or cause to be
sent to the Optionholder or his legal personal representatives (as the case
may be) a definitive share certificate for the Ordinary Shares in respect
of which the Option is exercised.
6.2 Any Ordinary Shares allotted on the exercise of a Subsisting Option shall
rank pari passu in all respects with the Ordinary Shares in issue at the
date of exercise of such Option and shall participate in all dividends or
other distributions which may be declared, made or paid by reference to a
record date after such date, but not before.
6.3 Any partial exercise of an Option (other than such partial exercise as
completes the exercise of the said Option) shall be in respect of 10
Ordinary Shares or an integral multiple thereof.
6.4 In the event of an Option being exercised in part only, the balance of the
Option not thereby exercised shall continue to be exercisable in accordance
with the provisions of this paragraph 6.4 until such time as it shall lapse
in accordance with paragraph 5.9, and the Company shall issue to the
Optionholder a balancing Option Certificate in respect of that part of the
Option which the Optionholder has elected not to exercise. Such balancing
Option Certificate shall state the remaining number of Ordinary Shares over
which the Option remains capable of exercise and shall be in such form as
the Directors shall from time to time determine.
6.5 The allotment or transfer of Ordinary Shares under this Scheme shall be
subject to obtaining an approval or consent mentioned in paragraph 12.3.
7. ADJUSTMENT OF OPTIONS
7.1 Upon the occurrence of any Relevant Event the number or nominal amount of
Ordinary Shares comprised in each Option and the Option Price thereunder
may be adjusted in such manner (including retrospective adjustment where a
Relevant Event occurs after the date of exercise of an Option but the
record date relating to such Relevant Event precedes such date of exercise)
as the Directors (with the written concurrence of the Auditors that in
their opinion the adjustments proposed are fair and reasonable) may deem
appropriate, provided always that no increase shall be made to the
aggregate Option Price relating to any Option, and to the minimum Option
Price of each Ordinary Share the subject of an Option will be no less than
the nominal value of such Ordinary Share. Notice of any such adjustments
shall be given to the Optionholders by the Directors, who may call in
Option Certificates for endorsement or replacement.
8. AMENDMENT
8.1 This Scheme may be amended by the Directors from time to time PROVIDED
THAT:
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<PAGE>
8.1.1 no amendment shall operate to affect adversely any rights already
acquired by an Optionholder under this Scheme;
8.1.2 no amendment may be made except by the Company in general meeting to
nullify or override any of the provision of paragraphs 1.1, 3, 4, 5,
6.2, 8, 9, 10 and 12.
9. TERMINATION
9.1 The Company in general meeting or the Directors may, at any time, resolve
to terminate this Scheme in which event no further Options shall be granted
but the provisions of this Scheme shall, in relation to Options then
subsisting, continue in full force and effect.
10. NOTICES
10.1 Optionholders shall be entitled, while they have subsisting rights under
this Scheme, to receive copies of notices of general meeting only sent by
the Company to its Ordinary Shareholders but no other document.
10.2 Any notice or other document which the Optionholder is required or may
desire to give to the Company pursuant to this Scheme shall be given by
sending the same by post or personal delivery to the registered office of
the Company.
10.3 Any notice or other document which the Company is required or may desire to
give to any Optionholder pursuant to this Scheme shall be sufficiently
given if delivered to him (if he is still an Eligible Participant) at his
place of work or sent through the post in a prepaid envelope addressed to
the Optionholder at his address last known to the Company and if so sent
shall be deemed to have been duly given on the date of posting. Any
document so sent to an Optionholder shall be deemed to have been duly
delivered notwithstanding that he be then deceased (and whether or not the
Company has notice of his death) except where his legal personal
representatives have established their title to the satisfaction of the
Company and supplied to the Company an address to which documents are to be
sent.
11. ADMINISTRATION
11.1 This Scheme shall in all respects be administered by the Directors and the
Directors shall have power, from time to time, to make or vary regulations
for the administration and operation of this Scheme PROVIDED THAT such
regulations are not inconsistent with the provisions of this Scheme.
11.2 The Company shall bear the costs of setting up and administering this
Scheme.
11.3 The Company shall maintain all necessary books of account and records
relating to this Scheme.
11
<PAGE>
11.4 The Directors shall be entitled to authorise any person to execute on
behalf of an Optionholder, at the request of the Optionholder, any document
relating to this Scheme insofar as such document is required to be executed
pursuant to this Scheme.
11.5 An Option shall be personal to the Optionholder and accordingly, save in
the specific situations described in the paragraphs where the Option may be
exercised by personal representatives, no Option or any interest in it may
be transferred, assigned or charged and any purported transfer, assignment
or charge shall cause the Option to lapse forthwith. Each Option
Certificate shall carry a statement to this effect.
11.6 The decision of the Directors in any dispute or question affecting any
Optionholder or as to any rights or obligations of any person hereunder or
in relation to the construction or effect hereof shall be final and
conclusive, subject to the concurrence of the Auditors whenever required
under the provisions of this Scheme.
12. AVAILABILITY OF SHARES
12.1 Subject to the provisions of this paragraph 12, the Company shall have
available at all times sufficient unissued Ordinary Shares necessary to
satisfy Subsisting Options.
12.2 On exercise of a Subsisting Option the Directors may satisfy the
requirement for Ordinary Shares by allotment of Ordinary Shares, by
purchasing Ordinary Shares or by such other means as they may determine.
12.3 If at any time prior to exercise of a Subsisting Option the Ordinary Share
capital of the Company shall be dealt in in the Alternative Investment
Market or listed on The London Stock Exchange Limited the Company shall,
within one month after the date of exercise of an Option, apply to the
Council of The Stock Exchange for permission for the Ordinary Shares the
subject of such exercise to be dealt in in the Alternative Investment
Market or admitted to the Official List, as the case may be if they are not
already so admitted.
13. NOT PART OF EMPLOYMENT TERMS
This Scheme shall not form part of any contract of employment between the
Company and any Eligible Participant or employee or officer of it or any
holding company or subsidiary of it. Any benefit to the Eligible
Participant or any employee or officer of the Company or any holding
company or subsidiary of it under this Scheme shall not form part of his
remuneration or count as remuneration for pension fund or other purposes.
It shall be a condition of this Scheme that in the event of the termination
of an Optionholder's employment with a member of the Group (for whatever
reason) he shall not be entitled to any compensation whatsoever by reason
of any alteration or termination, thereupon, of his rights or expectations
under this Scheme.
14. INDEMNITY BY OPTION HOLDERS
By completing and returning the Notice of Retention to the Company in
accordance with paragraph 3.3, each Optionholder unconditionally and
irrevocably undertakes to
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<PAGE>
indemnify the Company or such Group company as the Company may direct, on
demand in respect of all income tax (including PAYE) that arises as a
consequence of or in connection with the exercise of an Option by or on
behalf of the Optionholder ("Tax"). The Optionholder authorises the Company
to itself exercise any Option in respect of which a Notice of Exercise is
given to the Company, in respect of such number of Ordinary Shares as is
required after payment of Tax, to realise such proceeds to pay the Tax and
agrees to sign promptly, all documents required by the Company to effect
the terms of this provision.
13
<PAGE>
Date of this Notice: _____________________
To: _____________________
E*TRADE UK (HOLDINGS) LIMITED ("the Company")
---------------------------------------------
1999 EXECUTIVE SHARE OPTION SCHEME
----------------------------------
NOTICE OF GRANT OF OPTION ON __________________________ ("Date of Grant")
- -------------------------
Vesting Date: _____________________
The Directors of the Company have granted you an Option ("the Option") to
subscribe for or acquire up to Ordinary Shares of pence each in the Company
at a price of (Pounds) per share, on the terms and conditions set out in the
Rules of the E*TRADE UK (HOLDINGS) Limited 1999 Executive Share Option Scheme.
This Option is personal to you and may not be transferred, assigned or pledged
to any other person.
If you wish to retain this Option, you should, within 21 days from the date of
this Notice, complete and send the Notice of Retention below, to The Company
Secretary, E*TRADE UK (HOLDINGS) Limited at ____________________________ (or
such other address of which he gives you written notice), otherwise the Option
granted to you by this Notice will automatically lapse.
If you do not wish to retain this Option and wish to renounce it you should not
do anything and the Option will automatically lapse in 21 days from the date of
this Notice.
The detailed terms governing the Option are set out in the Rules of the Scheme,
a copy of which is enclosed. The Rules are legally binding and are deemed to be
incorporated in this Notice.
If you leave employment, or give notice to the Company or any member of its
Group of your intention to leave the employment of the Company or any member of
its Group within 21 days from the date of this Notice, the grant of Option
specified above will automatically lapse.
Executed and Delivered as a Deed by the Company on the above date.
EXECUTED as a DEED and DELIVERED ) ___________________________
by E*TRADE UK (HOLDINGS) LIMITED ) Director
by the signing by two Directors or a Director )
and the Company Secretary ) ___________________________
) Director/Secretary
- --------------------------------------------------------------------------------
Notice of Retention - this section should be completed by the Optionholder to
- -------------------
retain the Option and returned to the Company Secretary within 21 days from the
date of this Notice.
I ________________________ (note: complete name here) WISH TO ACCEPT
_________________ (note: complete the number of shares under Option that you
have been granted) OF THE SHARES GRANTED TO ME BY OPTION, AS EVIDENCED BY THIS
NOTICE OF GRANT. IN ACCEPTING THE GRANT OF OPTIONS MADE TO ME, I HERBY AGREE TO
BE BOUND BY, AND TO COMPLY WITH, THE RULES OF THE E*TRADE UK (HOLDINGS) LIMITED
1999 EXECUTIVE SHARE OPTION SCHEME AND, IN PARTICULAR, BUT WITHOUT LIMITATION, I
AGREE TO INDEMNIFY THE COMPANY IN RESPECT OF TAX AS PROVIDED FOR IN PARAGRAPH 14
OF THE SCHEME.
EXECUTED as a DEED and DELIVERED ) ______________
by _____________________________ ) Signature
in the presence of )
______________
Date
Witness signature __________________
Witness name _______________________
Witness address ____________________
____________________
Witness occupation _________________
(note: it is important for you to sign in the presence of a witness who
completes the above information about themselves)
14
<PAGE>
E*TRADE UK (HOLDINGS) LIMITED
-----------------------------
1999 EXECUTIVE SHARE OPTION SCHEME
----------------------------------
OPTION CERTIFICATE
------------------
THIS IS TO CERTIFY that on the Date of Grant specified in the Notice of Grant of
Option of was granted an Option to subscribe for or acquire ordinary shares of
pence each in the capital of this company at a price of per share, in accordance
with and subject to, the Rules of the E*TRADE UK (HOLDINGS) Limited 1999
Executive Share Option Scheme. No Option may be transferred, assigned or charged
and any purported transfer, assignment or charge shall cause the Option to lapse
forthwith.
Executed and Delivered as a Deed by the Company on.
EXECUTED as a DEED and DELIVERED by ) __________________
E*TRADE UK (HOLDINGS) LIMITED by ) Director
the signing by two Directors or a Director )
and the Company Secretary __________________
Director/Secretary
- -------------------------------------------------------------------------------
RENUNCIATION OF OPTIONS - this section should be completed by the Optionholder
- -----------------------
if he wants to renounce the Option and returned to the Company Secretary.
I ________________________________________ (note: complete name here) WISH TO
RENOUNCE _______________ (note: complete the number of shares under Option that
you wish to renounce) OF THE SHARES UNDER OPTION, AS EVIDENCED BY THIS
CERTIFICATE.
______________________ __________________________ _________________
Optionholder Signature Print name of Optionholder Date
- -------------------------------------------------------------------------------
EXERCISE OF OPTIONS - this section should be completed by the Optionholder if he
- -------------------
wants to exercise the Option and returned to the Company Secretary together with
payment in full.
I ________________________________________ (note: complete name here) WISH TO
EXERCISE _________________ (note: complete the number of shares under Option
that you wish to exercise) OF THE SHARES UNDER OPTION, AS
EVIDENCED BY THIS CERTIFICATE.
I ENCLOSE A CHEQUE FOR THE FULL SUBSCRIPTION OR PURCHASE PRICE PAYABLE BEING
(Pounds)_________________________
______________________ __________________________ _____________
Optionholder Signature Print name of Optionholder Date
Note: 1. This Notice of Exercise must be accompanied by payment in full.
2. If you are exercising this Option as a personal representative, an
office copy of the Probate or Letters of Administration should
accompany this Notice.
- -------------------------------------------------------------------------------
CERTIFICATE OF EXERCISE OF OPTION - this section should be completed by the
- ---------------------------------
Company on exercise of the Option.
THIS IS TO CERTIFY that the above Option was exercised by
________________________________________________________________ on
___________________________________________ in respect of __________________
ordinary shares of pence each in E*TRADE UK (HOLDINGS) Limited.
_________________ ______________________
Company Secretary Date
<PAGE>
EXHIBIT 99.2
E*TRADE GROUP, INC.
STOCK OPTION ASSUMPTION AGREEMENT
E*TRADE UK (HOLDINGS) LIMITED
1999 EXECUTIVE SHARE OPTION SCHEME
Optionee: ((First_Name)) ((Last_Name)),
STOCK OPTION ASSUMPTION AGREEMENT effective as of the 21st day of
December, 1999 by E*TRADE Group, Inc., a Delaware corporation ("E*TRADE US").
WHEREAS, the undersigned individual ("Optionee") holds one or more
outstanding options to purchase ordinary shares of E*TRADE UK (Holdings)
Limited, a United Kingdom company ("E*TRADE UK"), which were granted to Optionee
under the E*TRADE UK (Holdings) Limited 1999 Executive Share Option Scheme (the
"Scheme") and are each evidenced by an Option Certificate (the "Option
Certificate").
WHEREAS, E*TRADE UK has been acquired by E*TRADE US (the
"Acquisition") pursuant to the Offer Letter from E*TRADE US to the shareholders
of E*TRADE UK dated as of December 8, 1999 (the "Offer Letter").
WHEREAS, in connection with the Acquisition, E*TRADE US has agreed to
assume all obligations of E*TRADE UK under all outstanding options under the
Scheme at the consummation of the Acquisition. The terms of assumption of
vested option are as set forth in the Offer Letter; the terms of the unvested
options are set forth in a letter to the optionees dated December 8, 1999.
WHEREAS, pursuant to the provisions of the Offer Letter, the exchange
ratio (the "Exchange Ratio") in effect for vested option shares is 0.5339 shares
of E*TRADE US common stock ("E*TRADE US Stock") for each outstanding vested
ordinary share of E*TRADE UK ("E*TRADE UK Stock"). In addition, the exchange
rate of 1.6207 U.S. Dollar for UK(Pounds) is used to convert the adjusted
exercise price into U.S. Dollars.
WHEREAS, this Agreement is intended to set forth the terms of the
assumption of your vested options. Simultaneously herewith, you are receiving
an agreement reflecting the terms of the assumption of your unvested options.
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of vested shares of E*TRADE UK Stock subject to the
options held by Optionee under the Scheme immediately prior to the Effective
Time (the "E*TRADE UK Vested Options") and the exercise price payable per share
are set forth below. E*TRADE US hereby assumes, as of the Effective Time, all
the duties and obligations of E*TRADE UK under each of the E*TRADE UK Vested
Options. In connection with such assumption, the number of shares of E*TRADE US
Stock purchasable under each E*TRADE UK Vested Option hereby assumed and the
exercise price payable thereunder have been adjusted
1
<PAGE>
to reflect the Exchange Ratio. Accordingly, the number of vested shares of
E*TRADE US Stock subject to each E*TRADE UK Vested Option hereby assumed shall
be as specified for that option below, and the adjusted exercise price (in US
Dollars) payable per share of E*TRADE US Stock under the assumed E*TRADE UK
Vested Option shall also be as indicated for that option below.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
E*TRADE UK OPTIONS E*TRADE US ASSUMED OPTIONS
- ------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
# of E*TRADE UK Exercise Price # of E*TRADE US Adjusted Exercise Price
Vested Shares per Share Vested Shares per Share
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UK(Pounds) US$
- -------------------------------------------------------------------------------------------------------
</TABLE>
2. The following provisions shall govern each E*TRADE UK Option hereby
assumed by E*TRADE US:
(a) Unless the context otherwise requires, all references in
each Option Certificate and, in the Scheme (i) to the "Company" shall
mean E*TRADE US, (ii) to "Ordinary Shares" shall mean shares of E*TRADE
US Stock, and (iii) to the "Directors" shall mean the Board of Directors
of E*TRADE US.
(b) The grant date and the expiration date of each assumed
E*TRADE UK Option and all other provisions which govern either the
exercise or the termination of the assumed E*TRADE UK Option shall
remain the same as set forth in the Option Certificate applicable to
that option, and the provisions of the Option Certificate shall
accordingly govern and control Optionee's rights under this Agreement to
purchase E*TRADE US Stock.
(c) For purposes of applying any and all provisions of the
Option Certificate and/or the Scheme relating to Optionee's status as an
employee of E*TRADE UK, Optionee shall be deemed to continue in such
status as an employee for so long as Optionee renders services as an
employee to E*TRADE US or any present or future E*TRADE US subsidiary.
Accordingly, the provisions of the Option Certificate governing the
termination of the assumed E*TRADE UK Options upon Optionee's cessation
of service as an employee of E*TRADE UK shall hereafter be applied on
the basis of Optionee's cessation of employee status with E*TRADE US and
its subsidiaries, and each assumed E*TRADE UK Option shall accordingly
terminate within the designated time period in effect under the Option
Certificate for that option.
(d) The adjusted exercise price payable for the E*TRADE US Stock
subject to each assumed vested share of an E*TRADE UK Option shall be
payable in any of the forms authorized under the Option Certificate
applicable to that option.
(e) In order to exercise each assumed E*TRADE UK Option,
Optionee must deliver to E*TRADE US a written notice of exercise in
which the
2
<PAGE>
number of shares of E*TRADE US Stock to be purchased thereunder must be
indicated. The exercise notice must be accompanied by payment of the
adjusted exercise price payable for the purchased shares of E*TRADE US
Stock and should be delivered to E*TRADE US at the following address:
E*TRADE Group, Inc.
Stock Administration
4500 Bohannon Drive
Menlo Park, CA 94025
3. Except to the extent specifically modified by this Option Assumption
Agreement, all of the terms and conditions of each Option Certificate as in
effect immediately prior to the Merger shall continue in full force and effect
and shall not in any way be amended, revised or otherwise affected by this Stock
Option Assumption Agreement.
3
<PAGE>
IN WITNESS WHEREOF, E*TRADE Group, Inc. has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly-authorized officer
as of the 21st day of December, 1999.
E*TRADE GROUP, INC.
By:
------------------------------------
Name and Title of Officer
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock Option
Assumption Agreement and understands that all rights and liabilities with
respect to each of his or her E*TRADE UK Vested Options hereby assumed by
E*TRADE US are as set forth in the Option Certificate, the Scheme, as
applicable, and such Stock Option Assumption Agreement.
--------------------------------------------
((First_Name)) ((Last_Name)), OPTIONEE
DATED: __________________, 2000
4
<PAGE>
EXHIBIT 99.3
E*TRADE GROUP, INC.
STOCK OPTION ASSUMPTION AGREEMENT
E*TRADE UK (HOLDINGS) LIMITED
1999 EXECUTIVE SHARE OPTION SCHEME
Optionee: ((First_Name)) ((Last_Name)),
STOCK OPTION ASSUMPTION AGREEMENT effective as of the 21st day of
December, 1999 by E*TRADE Group, Inc., a Delaware corporation ("E*TRADE US").
WHEREAS, the undersigned individual ("Optionee") holds one or more
outstanding options to purchase ordinary shares of E*TRADE UK (Holdings)
Limited, a United Kingdom company ("E*TRADE UK"), which were granted to Optionee
under the E*TRADE UK (Holdings) Limited 1999 Executive Share Option Scheme (the
"Scheme") and are each evidenced by an Option Certificate (the "Option
Certificate").
WHEREAS, E*TRADE UK has been acquired by E*TRADE US (the
"Acquisition") pursuant to the Offer Letter from E*TRADE US to the shareholders
of E*TRADE UK dated as of December 8, 1999 (the "Offer Letter").
WHEREAS, in connection with the Acquisition, E*TRADE US has agreed to
assume all obligations of E*TRADE UK under all outstanding options under the
Scheme at the consummation of the Acquisition. The terms of assumption of the
vested options are as set forth in the Offer Letter; the terms of the unvested
options are as set forth in a letter to the optionees dated December 8, 1999.
WHEREAS, pursuant to the provisions of the Offer Letter, the exchange
ratio (the "Exchange Ratio") in effect for unvested option shares is 0.4019
shares of E*TRADE US common stock ("E*TRADE US Stock") for each outstanding
unvested ordinary share of E*TRADE UK ("E*TRADE UK Stock"). In addition the
exchange rate of 1.6207 U.S. Dollar for UK(Pounds) is used to convert the
adjusted exercise price into U.S. Dollars.
WHEREAS, this Agreement is intended to set forth the terms of the
assumption of unvested options. Simultaneously herewith, you are receiving an
agreement reflecting the terms of the assumption of your vested options.
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of unvested shares of E*TRADE UK Stock subject to the
options held by Optionee under the Scheme immediately prior to the Effective
Time (the "E*TRADE UK Unvested Options") and the exercise price payable per
share are set forth below. E*TRADE US hereby assumes, as of the Effective Time,
all the duties and obligations of E*TRADE UK under each of the E*TRADE UK
Unvested Options. In connection with such assumption, the number of shares of
E*TRADE US Stock purchasable under each E*TRADE UK Unvested Option hereby
assumed and the exercise price payable thereunder have been
<PAGE>
adjusted to reflect the Exchange Ratio. Accordingly, the number of unvested
shares of E*TRADE US Stock subject to each E*TRADE UK Unvested Option hereby
assumed shall be as specified for that option below, and the adjusted exercise
price (in US Dollars) payable per share of E*TRADE US Stock under the assumed
E*TRADE UK Unvested Option shall also be as indicated for that option below.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
E*TRADE UK OPTIONS E*TRADE US ASSUMED OPTIONS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
# of E*TRADE UK Exercise Price # of E*TRADE US Adjusted Exercise
Unvested Shares per Share Unvested Shares Price per Share
- -------------------------------------------------------------------------------------------------------------------
UK(Pounds) US$
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
2. The following provisions shall govern each E*TRADE UK Option
hereby assumed by E*TRADE US:
(a) Unless the context otherwise requires, all references in
each Option Certificate and, in the Scheme (i) to the "Company" shall
mean E*TRADE US, (ii) to "Ordinary Shares" shall mean shares of
E*TRADE US Stock, and (iii) to the "Directors" shall mean the Board of
Directors of E*TRADE US.
(b) The grant date and the expiration date of each assumed
E*TRADE UK Option and all other provisions which govern either the
exercise or the termination of the assumed E*TRADE UK Option shall
remain the same as set forth in the Option Certificate applicable to
that option, and the provisions of the Option Certificate shall
accordingly govern and control Optionee's rights under this Agreement
to purchase E*TRADE US Stock.
(c) Pursuant to the terms of the Merger none of your
unvested option shares assumed by E*TRADE US in connection with the
transaction will vest or become exercisable on an accelerated basis
upon the consummation of the Merger. Each E*TRADE UK Option shall be
assumed by E*TRADE US as of the Effective Time. Each such assumed
E*TRADE UK Option shall thereafter continue to vest for any remaining
unvested shares of E*TRADE US Stock subject to that option in
accordance with the same installment vesting schedule in effect under
the applicable Option Certificate immediately prior to the Effective
Time; provided, however, that the number of shares subject to each
such installment shall be adjusted to reflect the Exchange Ratio.
(d) For purposes of applying any and all provisions of the
Option Certificate and/or the Scheme relating to Optionee's status as
an employee of E*TRADE UK, Optionee shall be deemed to continue in
such status as an employee for so long as Optionee renders services as
an employee to E*TRADE US or any present or future E*TRADE US
subsidiary. Accordingly, the provisions of the Option Certificate
governing the termination of the assumed E*TRADE UK Options upon
Optionee's cessation of service as an employee of E*TRADE UK shall
hereafter be applied on the basis of Optionee's cessation of
2
<PAGE>
employee status with E*TRADE US and its subsidiaries, and each assumed
E*TRADE UK Option shall accordingly terminate within the designated
time period in effect under the Option Certificate for that option.
(e) The adjusted exercise price payable for the E*TRADE US
Stock subject to each assumed E*TRADE UK Option shall be payable in
any of the forms authorized under the Option Certificate applicable to
that option.
(f) In order to exercise each assumed E*TRADE UK Option,
Optionee must deliver to E*TRADE US a written notice of exercise in
which the number of shares of E*TRADE US Stock to be purchased
thereunder must be indicated. The exercise notice must be accompanied
by payment of the adjusted exercise price payable for the purchased
shares of E*TRADE US Stock and should be delivered to E*TRADE US at
the following address:
E*TRADE Group, Inc.
Stock Administration
4500 Bohannon Drive
Menlo Park, CA 94025
3. Except to the extent specifically modified by this Option
Assumption Agreement, all of the terms and conditions of each Option Certificate
as in effect immediately prior to the Merger shall continue in full force and
effect and shall not in any way be amended, revised or otherwise affected by
this Stock Option Assumption Agreement.
3
<PAGE>
IN WITNESS WHEREOF, E*TRADE Group, Inc. has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly-authorized officer
as of the 21st day of December, 1999.
E*TRADE GROUP, INC.
By:
-----------------------------
Name and Title of Officer
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock Option
Assumption Agreement and understands that all rights and liabilities with
respect to each of his or her E*TRADE UK Unvested Options hereby assumed by
E*TRADE US are as set forth in the Option Certificate, the Scheme, as
applicable, and such Stock Option Assumption Agreement.
------------------------------------------
((First_Name)) ((Last_Name)), OPTIONEE
DATED: __________________, 2000
4
<PAGE>
EXHIBIT 99.4
TELEBANC FINANCIAL CORPORATION
STOCK OPTION PLAN
TeleBanc Financial Corporation (the "Company") sets forth herein the
terms of this Stock Option Plan (the "Plan") as follows:
1. PURPOSE
The Plan is intended to advance the interests of the Company by
providing eligible individuals (as designated pursuant to Section 4 below) with
an opportunity to acquire or increase a Proprietary interest in the Company,
which thereby will create a stronger incentive to expend maximum effort for the
success of the Company and its subsidiaries, and will encourage such eligible
individuals to remain in the employ or service of the Company or of one or more
of its Subsidiaries. Each stock option granted under the Plan (an "Option") is
intended to be an "incentive stock option" ("Incentive Stock Option") within the
meaning of Section 422 of the Internal Revenue Code of 1986, or the
corresponding provision of any subsequently-enacted tax statute, as amended from
time to time (the "Code"), except (i) to the extent that any such Option would
exceed the Limitations set forth in Section 7 below; (ii) for Options
specifically designated at the time of grant as not being "incentive stock
options"; and (iii) for Options granted to members of the Board of Directors of
the Company who are not officers or other employees of the Company or any
"subsidiary corporation" (a "Subsidiary") thereof within the meaning of Section
424(f) of the Code. ("Non-Employee Directors") or to directors of any Subsidiary
who are not Non-Employee Directors and who are not officers or other employees
of the Company (a "Subsidiary Director").
2. ADMINISTRATION
(a) Board. The Plan shall be administered by the Board of Directors
-----
of the Company (the "Board"), which shall have the full power and authority to
take all actions, and to make all determinations required or provided for under
the Plan or any Option granted or Option Agreement (as defined in Section 8
below) entered into hereunder and all such other actions and determinations not
inconsistent with the specific terms and provisions of the Plan deemed by the
Board to be necessary or appropriate to the administration of the Plan or any
Option granted or Option Agreement entered into hereunder. All such actions and
determinations shall be by the affirmative vote of a majority of the members of
the Board present at a meeting at which any issue relating to the Plan is
properly raised for consideration or by unanimous consent of the Board executed
in writing in accordance with the Company's Amended and Restated Certificate of
Incorporation (the "Certificate") and Bylaws, as may be amended hereafter, and
with applicable law. The interpretation and construction by the Board of any
provision of the Plan or of any Option granted or Option Agreement entered into
hereunder shall be final and conclusive.
(b) Committee. The Board may from time to time appoint a Stock
---------
Option Committee (the "Committee") consisting of not less than two members of
the Board, none of whom shall be an officer or other salaried employee of the
Company or any of its Subsidiaries, and each of whom shall qualify in all
respects as a "disinterested person" as defined in Rule 16b-3 of the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as
<PAGE>
amended (the "Exchange Act"). The Board, in its sole discretion, may provide
that the role of the Committee shall be limited to making recommendations to the
Board concerning any determinations to be made and actions to be taken by the
Board pursuant to or with respect to the Plan, or the Board may delegate to the
Committee such powers and authorities related to the administration of the Plan,
as set forth in Section 2(a) above, as the Board shall determine, consistent
with the Certificate and Bylaws of the Company and applicable law. The Board may
remove members, add members, and fill vacancies on the Committee from time to
time, all in accordance with the Company's Certificate and Bylaws, and with
applicable law. The majority vote of the Committee, or acts reduced to or
approved in writing by a majority of the members of the Committee, shall be the
valid acts of the Committee.
(c) No Liability. No member of the Board or of the Committee shall
------------
be liable for any action or determination made in good faith with respect to the
Plan any Option granted or Option Agreement entered into hereunder.
(d) Delegation to the Committee. In the event that the Plan or any
---------------------------
Option granted or Option Agreement entered into hereunder provides for any
action to be taken by or determination to be made by the Board, such action may
be taken by or such determination may be made by the Committee if the power and
authority to do so has been delegated to the Committee by the Board as provided
for in Section 2(b) above. Unless otherwise expressly determined by the Board,
any such action or determination by the Committee shall be final and conclusive.
(e) Action by the Board. The Board may act under the Plan with
-------------------
respect to any Option granted to or Option Agreement entered into with an
officer, director or shareholder of the Company who is subject to Section 16 of
the Exchange Act other than by, or in accordance with the recommendations of,
the Committee, constituted as set forth in Section 2(b) above, only if all of
the members of the Board are "disinterested persons" as defined in Rule 16b-3 of
the Securities and Exchange Commission under the Exchange Act.
3. STOCK
The stock that may be issued pursuant to Options granted under the
Plan shall be shares of common stock, par value $.01 per share, of the Company
(the "Stock"), which shares may be treasury shares or authorized but unissued
shares. The number of shares of Stock that may be issued pursuant to Options
granted under the Plan shall be 324,875, which number of shares is subject to
adjustment as hereinafter provided in Section 17 below. If any Option expires,
terminates, or is terminated or canceled for any reason prior to exercise in
full, the shares of Stock that were subject to the unexercised portion of such
Option shall be available for future Options granted under the Plan.
4. ELIGIBILITY
(a) Employees and Subsidiary Directors. Options may be granted
----------------------------------
under the Plan to any employee of the Company or any Subsidiary (including any
such employee who is an officer or director of the Company or any Subsidiary) or
to any Subsidiary Director as the Board shall determine and designate from time
to time prior to expiration or termination of the Plan.
2
<PAGE>
(b) Non-Employee Directors. An Option to purchase up to 5,000 shares
----------------------
of Stock at the price and upon the other terms and conditions specified in the
Plan, shall be granted under the Plan to each Non-Employee Director on the
Effective date of the Plan pursuant to Section 5(a) below. Each Option granted
to a Non-Employee Director shall be granted at an Option Price equal to the
greater of par value or 100 percent of the fair market value of a share of Stock
on the date of grant (determined under Section 9 below) and upon the other terms
and conditions specified in the Plan. Except as provided in this Section 4(b),
no Non-Employee Directors shall be eligible to be granted Options under the
Plan.
5. EFFECTIVE DATE AND TERM OF THE PLAN
(a) Effective Date. The Plan shall be effective on the date of
--------------
adoption by the Board, subject to approval of the Plan within one year of such
effective date by a majority of the notes present and entitled to vote at a duly
held meeting of the shareholders of the Company at which a quorum representing a
majority of all outstanding voting stock is present, either in person or by
proxy; provided, however, that upon approval of the Plan by the shareholders of
the Company as set forth above, all Options granted under the Plan on or after
the effective date shall be fully effective as if the shareholders of the
Company had approved the Plan on the effective date. If the shareholders fail to
approve the Plan within one year of such effective date, any options granted
hereunder shall be null and void and of no effect.
(b) Term. The Plan shall terminate on the date ten years from the
effective date.
6. GRANT OF OPTIONS
Subject to the terms and conditions of the Plan, the Board may, at any
time and from time to time, prior to the date of termination of the Plan, grant
to such eligible individuals as the Board may determine ("Optionees"), Options
to purchase such number of shares of the Stock on such terms and conditions as
the Board may determine, including any terms or conditions which may be
necessary to qualify such Options as "incentive stock options" under Section 422
of the Code. The date on which the Board approves the grant of an Option (or
such later date as is specified by the Board) shall be considered the date on
which such Option is granted.
7. LIMITATION ON INCENTIVE STOCK OPTIONS
An Option (other than an Option described in exception (ii) or (iii)
of Section 1) shall constitute an Incentive Stock Option to the extent that the
aggregate fair market value (determined at the time the option is granted) of
the stock with respect to which Incentive Stock Options are exercisable for the
first time by any Optionee during any calendar year (under the Plan and all
other plans of the Optionee's employer corporation and its parent and subsidiary
corporations within the meaning of Section 422(d) of the Code) does not exceed
$100,000. This limitation shall be applied by taking Options into account in
the order in which they were granted.
3
<PAGE>
8. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by written
agreements ("Option Agreements"), to be executed by the Company and by the
Optionee, in such form or forms as the Board shall from time to time determine.
Option Agreements covering Options granted. other than to Non-Employee
Directors. from time to time or at the same time need not contain similar
provisions; provided, however, that all such Option Agreements shall comply with
-------- -------
all terms of the Plan.
9. OPTION PRICE
The purchase price of each share of the Stock subject to an Option
(the "Option Price") shall be Fixed by the Board and stated in each Option
Agreement, and shall be not less than the greater of par value or 100% of the
fair market value of a share of the Stock on the date the Option is granted (as
determined in good faith by the Board); provided, however, that in the event the
Optionee would otherwise be ineligible to receive an Incentive Stock Option by
reason of the provisions of Sections 422(b)(6) and 424(d) of the Code (relating
to stock ownership of more than 10%), the Option Price of an Option that is
intended to be an Incentive Stock Option shall be not less thin the greater of
par value or 110% of the fair market value of a share of Stock at the time such
Option is granted. In the case of Options granted an the Effective date of the
Plan, "fair market value" for purposes of determining the Option Price shall be
the price per share at which the stock is sold in connection with the Company's
initial public offering to be registered on Form S-1 under the Securities Act of
1933, as amended.
10. TERM AND EXERCISE OF OPTIONS
(a) Term. Unless earlier terminated pursuant to Section 17(c), each
----
Option granted under the Plan shall terminate and all rights to purchase shares
thereunder shall cease upon the expiration of ten years from the date such
Option is granted, or with respect to Options granted to persons other than Non-
Employee Directors, on such date prior thereto `as may be fixed by the Board and
stated in the Option Agreement relating to such Option; provided, however that
in the event the Optionee would otherwise be ineligible to receive an Incentive
Stock Option by reason of the provisions of Sections 422(b)(6) and 424(d) of the
Code (relating to stock ownership of more than 10%), an Option granted to such
Optionee that is intended to be an Incentive Stock Option shall in no event be
exercisable after the expiration of five years from the date it is granted.
(b) Option Period and Limitations on Exercise. Each Option granted
-----------------------------------------
under the Plan shall be exercisable, in whole or in part, at any time and from
time to time, over a period Commencing on or after the date of grant and ending
upon the expiration or termination of the Option, as the Board shall determine
and set forth in the Option Agreement relating to such Option. Without limiting
the foregoing, the Board, subject to the terms and conditions of the Plan, may
in its sole discretion provide that an Option may not be exercised in whole or
in part for any period or periods of time during which such Option is
outstanding; provided, however, that any such limitation on the exercise of an
Option contained in any Option Agreement may be rescinded, modified or waived by
the Board, in its sole discretion, at any time and from time to time after the
date of grant of such Option, so as to accelerate the time at which the Option
may
4
<PAGE>
be exercised. Notwithstanding any other provision of the Plan, no Option granted
to an Optionee under the Plan shall be exercisable in whole or in part prior to
the date the Plan is approved by the shareholders of the Company as provided in
Section 5 above.
(c) Method of Exercise. An Option that is exercisable hereunder may
------------------
be exercised by delivery to the Company on any business day, at its principal
office, addressed to the attention of the Board, of written notice of exercise,
which notice shall specify the number of shares with respect to which the Option
is being exercised. The minimum number of shares of Stock with respect to which
an Option may be exercised, in whole or in part, at any time shall be the lesser
of 100 shares or the maximum number of shares available for purchase under the
Option at the time of exercise. Except as provided in the next following
sentence, payment in full of the Option Price of the shares for which the Option
is being exercised shall accompany the written notice of exercise of the Option
and shall be made, (i) in cash or in cash equivalents; (ii) through the tender
to the Company of shares of Stock, which shares shall be valued, for purposes of
determining the extent to which the Option Price has been paid thereby, at their
fair market value determined in the manner described in Section 9 above) on the
date of exercise; or (iii) by a combination of the methods described in (i) and
(ii); provided, however, that the Board may in its discretion impose and set
forth in the Option Agreement pertaining to an Option granted to persons other
than Non-Employee Directors such limitations or prohibitions on the use of share
of Stock to exercise Options as it deems appropriate. Unless the Board provides
otherwise in an Option Agreement, payment in full of the Option Price need not
accompany the written notice of exercise provided the notice of exercise directs
that the Stock certificate or certificates for the shares for which the Option
is exercised be delivered to a licensed broker acceptable to the Company as the
agent for the individual exercising the Option and, at the time such Stock
certificate or certificates are delivered, the broker tenders to the Company
cash (or cash equivalents acceptable to the Company) equal to the Option Price
for the shares of Stock purchased pursuant to the exercise of the Option plus
the amount (if any) of federal and/or other taxes which the Company may, in its
judgment, be required to withhold with respect to the exercise of the Option. An
attempt to exercise any Option granted hereunder other than as set forth above
shall be invalid and of no force and effect. Promptly after the exercise of an
Option and the payment in full of the Option Price of the shares of Stock
covered thereby, the individual exercising the Option shall be entitled to the
issuance of a Stock certificate or certificates evidencing his or her ownership
of such shares. A separate Stock certificate or certificates shall be issued for
any shares purchased pursuant to the exercise of an Option which is an Incentive
Stock Option, written certificate or certificates shall not include any shares
which were purchased pursuant to the exercise of an Option which is not an
Incentive Stock Option. An individual holding or exercising any Option shall
have none of the rights of a shareholder until the shares of Stock covered
thereby are fully paid and issued to him and, except as provided in Section 17
below, no adjustment shall be in made for dividends or other rights for which
the record date is prior to the date of such issuance.
(d) Restrictions on Transfer of Stock. If an Option is exercised
---------------------------------
prior to the date that is six months from the later of (i) the date of grant of
the Option or (ii) the date of shareholder approval of the Plan and the
individual exercising the Option is a reporting person under Section 16(a) of
the Exchange Act, then such certificate or certificates shall bear a legend
restricting the transfer of the Stock covered thereby until the expiration of
six months from the later of the date specified in clause (i) above or the date
specified in clause (ii) above.
5
<PAGE>
11. TRANSFERABILITY OF OPTIONS
During the lifetime of an Optionee to whom an Option is granted, only
such Optionee in the event of legal incapacity or incompetence, the Optionee's
guardian or legal representative) may exercise the Option. No Option shall be
assignable or transferable by the Optionee to whom it is granted, other than by
will or the laws of descent and distribution.
12. TERMINATION OF SERVICE OR EMPLOYMENT
(a) Employees. Upon the termination of the employment or service of
---------
an Optionee (other than a Non-Employee Director), other than by reason of the
death or "permanent and total disability" (within the meaning of Section
22(e)(3) of the Code) of such Optionee, any Corporation granted to an Optionee
pursuant to the Plan shall terminate three months after the date of such
termination of employment, unless earlier terminated pursuant to Section 10(a)
above, and such Optionee shall have no further right to purchase shares of Stock
pursuant to such Option; however, that the Board may provide, by inclusion of
appropriate language in any Option Agreement, that the Optionee may (subject to
the general limitations on exercise set forth in Section 10(b) above), in the
event of termination of service or employment Company or a Subsidiary, exercise
an Option, in whole or in part, at any time subsequent to such termination of
service or employment and prior to termination of the Option pursuant to Section
10(a) above, either subject to or without regard to any installment limitation
on exercise imposed pursuant to Section 10(b) above. Whether a leave of absence
or leave on military or government service shall constitute a termination of
service or employment for purposes of the Plan shall be determined by the Board,
which determination shall be final and conclusive. For purposes of the Plan, a
termination of employment with the Company or a Subsidiary shall not be deemed
to occur if the Optionee is immediately thereafter employed with or in the
service of the Company or Deny Subsidiary.
(b) Non-Employee Directors. Any Option granted to a Non-Employee
----------------------
Director shall not terminate until the expiration of the option under Section
10(a) above.
13. RIGHTS IN THE EVENT OF DEATH OR DISABILITY
(a) Death of an Employee or Subsidiary Director. If an Optionee
-------------------------------------------
(other than a Non-Employee) dies while in the employ or service of the Company
or a subsidiary or within the period following the termination of employment or
service during which the Option is exercisable under Section 12 above or Section
13(b) below, the executors or administrators or legatees or distributees of such
Optionee's estate shall have the right (subject to the general limitations on
exercise set forth in Section 10(b) above), at any time within one year after
the date of such Optionee's death and prior to termination of the Option
pursuant to Section 10(a) above, to exercise any Option held by such Optionee at
the date of such Optionee's death, whether or not such Option was exercisable
immediately prior to such Optionee's death; provided however, that the Board may
-------- -------
provide by inclusion of appropriate language in any Option Agreement that, in
the event of the death of the Optionee, the executors or administrators or
legatees or distributees of such Optionee's estate may exercise an Option
(subject to the general limitations on exercise set forth in Section 10(b)
above), in whole or in part, at any time subsequent to such Optionee's death and
prior to termination of the Option pursuant to Section
6
<PAGE>
10(a) above, either subject to or without regard to any installment limitation
on exercise imposed pursuant to Section 10(b) above.
(b) Disability of an Employee or Subsidiary Director. If an Optionee
------------------------------------------------
(other than a Non-Employee Director) terminates service or employment with the
Company or a Subsidiary by reason of the "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code) of such Optionee, then such
Optionee shall have the right (subject to the general limitations on exercise
set forth in Section 10(b) above), at any time within one year after such
termination of service or employment and prior to termination of the Option
pursuant to Section 10(a) above, to exercise, in whole or in part, any Option
held by such Optionee at the date of such termination of service or employment,
whether or not such Option was exercisable immediately prior to such termination
of service or employment; provided, however, that the Board may provide, by
inclusion of appropriate language in any Option Agreement, that the Optionee may
(subject to the general limitations on exercise set forth in Section 10(b)
above), in the event of the termination of service or employment of the Optionee
with the Company or a Subsidiary by reason of the "permanent and total
disability" (within the meaning of Section 22(e)(3) of the Code) of such
Optionee, exercise an Option, in whole or in part, at any time subsequent to
such termination of service or employment and prior to termination of the Option
pursuant to Section 10(a) above, either subject to or without regard to any
installment limitation on exercise imposed pursuant to Section 10(b) above.
Whether a termination of service or employment is to be considered by reason of
`permanent and total disability for purposes of this Plan shall be determined by
the Board, which determination shall be final and conclusive.
(c) Death or Disability of a Non-Employee Director. Any Option
----------------------------------------------
granted to a Non-Employee Director shall not terminate until the expiration of
the Option under Section 10(a)
14. USE OF PROCEEDS
The proceeds received by the Company from the sale of Stock pursuant
to Options granted under the Plan shall constitute general funds of the Company.
15. REQUIREMENTS OF LAW
(a) Violations of Law. The Company shall not be required to sell or
-----------------
issue any shares of Stock under any Option if the sale or issuance of such
shares would constitute a violation by the individual exercising the Option or
the Company of any provisions of any law or regulation of any governmental
authority, including without limitation any federal or state securities laws or
regulations and laws and regulations applicable to ownership of securities of
financial institutions. The Company shall not be obligated to taken any
affirmative action in order to cause the exercise of an Option or the issuance
of shares pursuant thereto to comply with any law or regulation of any
governmental authority. As to any jurisdiction that expressly imposes the
requirements that an Option shall not be exercisable unless and until the shares
of Stock covered by such Option are registered or are subject to an available
exemption from registration, the exercise of such Option (under circumstances in
which the laws of such jurisdiction apply) shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.
7
<PAGE>
(b) Compliance with Rule 16b-3. The intent of this Plan is to
--------------------------
qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the
extent any provision of the Plan does not comply with the requirements of Rule
16b-3, it shall be deemed inoperative to the extent permitted by law and deemed
advisable by the Board and shall not affect the validity of the Plan. In the
event Rule 16b-3 is revised or replaced, the Board, or the Committee acting on
behalf of the Board, may exercise discretion to modify this Plan in any respect
necessary to satisfy the requirements of the revised exemption or its
replacement.
16. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend or
terminate the Plan as to any shares of Stock as to which Options have not been
granted; provided, however, that no amendment by the Board shall, without
approval by a majority of the votes present and entitled to vote at a duly held
meeting of the shareholders of the Company at which a quorum representing a
majority of all outstanding voting stock is, either in person or by proxy,
present and voting on the amendment, or by written consent in accordance with
applicable state law and the Certificate of Incorporation and Bylaws of the
Company, (a) change the requirements as to eligibility to receive Options; (b)
increase the maximum number of shares of Stock in the aggregate that may be sold
pursuant to Options granted under the Plan (except as permitted under Section 17
hereof); or (c) materially increase the benefits accruing to eligible
individuals under the Plan. Except as permitted under Section 17 hereof, no
amendment, suspension or termination of the Plan shall, without the consent of
the holder of the Option, alter or impair rights or obligations under any Option
theretofore granted under the Plan.
17. EFFECT OF CHANGES IN CAPITALIZATION
(a) Changes in Stock. If the outstanding shares of Stock are
----------------
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities (if the Company by reason of any
recapitalization, reclassification, stock split-up, combination of shares,
exchange of shares, stock dividend or other distribution payable in capital
stock, or other increase or decrease in such shares effected without receipt of
consideration by the Company, occurring after the effective date of the Plan,
the number and kinds of shares for the purchase of which Options may be granted
under the Plan shall be adjusted proportionately and accordingly by the Company.
In addition, the number and kind of shares for which Options are outstanding
shall be adjusted proportionately and accordingly so that the proportionate
interest of the holder of the Option immediately following such event shall, to
the extent practicable, be the same as immediately prior to such event. Any such
adjustment in outstanding Options shall not change the aggregate Option Price
payable with respect to shares subject to the unexercised portion of the Option
outstanding but shall include a corresponding proportionate adjustment in the
Option Price
(b) Reorganization in Which the Company Is the Surviving Company.
------------------------------------------------------------
Subject to Subsection (c) hereof, if the Company shall be the surviving Company
in any reorganization. merger, or consolidation of the Company with one or more
other Companies, any Option theretofore granted pursuant to the Plan shall
pertain to and apply to the securities to which a holder of the number of shares
of Stock subject to such Option would have been entitled immediately following
such reorganization, merger, or consolidation, with a corresponding
8
<PAGE>
proportionate adjustment of the Option Price per share so that the aggregate
Option Price thereafter shall be the same as the aggregate Option Price of the
shares remaining subject to the Option immediately prior to such reorganization,
merger, or consolidation.
(c) Reorganization in Which the Company Is Not the Surviving Company
----------------------------------------------------------------
or Sale of Assets or Stock. Upon the dissolution or Liquidation of the Company,
- --------------------------
or upon a merger, or consolidation or reorganization of the Company with one or
more other Companies in which the Company is not the surviving Company, or upon
a sale of all or substantially all of the assets of the ("Company to another
Company, or upon any transaction (including, without Limitation, a merger or
reorganization in which the Company is the surviving Company) approved by the
Board which results in any person or entity owning 80% or more of the combined
voting power of all classes of stock of the Company, the Plan and all Options
outstanding hereunder shall terminate except to the extent provision is made in
writing in connection with such transaction for the continuation of the Plan
and/or the assumption of the Options theretofore granted, or for the
substitution for such Options of new options or stock appreciation rights
covering the stock of a successor Company, or a parent or subsidiary thereof,
with appropriate adjustments as to the number and kinds of shares and exercise
prices, in which event the Plan and Options theretofore granted shall continue
in the manner and under the terms so provided. In the event of any such
termination of the Plan, each individual holding an Option shall have the right
(subject to the general limitations on exercise set forth in Section 10(b) above
and except as otherwise specifically provided in the Option Agreement relating
to such Option), immediately prior to the occurrence of such termination and
during such period occurring prior to such termination as the Board in its sole
discretion shall determine and designate, to exercise such Option in whole or in
part, whether or not such Option was otherwise exercisable at the time such
termination occurs and without regard to any installment limitation on exercise
imposed pursuant to Section 10(b) above. The Board shall send written notice of
an event that will result in such a termination to all individuals who hold
Options not later than the time at which the Company gives notice thereof to its
shareholders.
(d) Adjustments. Adjustments under this Section 17 related to stock
-----------
or securities of the Company shall be made by the Board, whose determination in
that respect shall be final, binding, and conclusive. No fractional shares of
Stock or units of other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole share or unit.
(e) No Limitations on Company. The grant of an Option pursuant to
-------------------------
the Plan shall not affect or limit in any way the right or power of the Company
to make adjustments, reclassifications, reorganizations or changes of its
capital or business structure or to merge, Consolidate, dissolve or liquidate,
or to sell or transfer all or any part of its business or assets.
18. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or Option Agreement
entered into pursuant to the Plan shall be construed to confer upon any
individual the right to remain in the employ or service of the Company or any
Subsidiary, or to interfere in any way with the right and authority of the
Company or any Subsidiary either to increase or decrease the compensation
9
<PAGE>
of any individual at any time, or to terminate any employment or other
relationship between any individual and the Company or any Subsidiary.
19. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
shareholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which applicable either generally to a
class or classes of individuals or specifically to arrangements may be
applicable in its discretion determines desirable, including, a particular
individual or individuals) as the Board in its discretion determines desirable,
including, without limitation, the granting of stock options or stock
appreciation rights otherwise than under the Plan.
This Plan was duly adopted and approved by the Board of Directors of
the Company by resolution at a meeting held on the _____ day of _______________,
1994. The exercise price for the initial Options granted under the Plan was
based on the fair market value of the Stock on the ________ day of 1994, the
effective date of the Plan.
______________________________________________
Secretary of the Company
This Plan was duly approved by the shareholders of the Company at a
meeting of the shareholders held on the ______ day of _______, 1994.
______________________________________________
Secretary of the Company
10
<PAGE>
EXHIBIT 99.5
TELEBANC FINANCIAL CORPORATION
1997 STOCK OPTION PLAN
TELEBANC FINANCIAL CORPORATION ("TeleBanc") hereby adopts "this
TeleBanc Financial Corporation 1997 Stock Option Plan (the "Plan") the terms of
which shall be as follows:
1. PURPOSE
The Plan is intended to advance the interests of TeleBanc by providing
eligible individuals (as designated pursuant to Section 4 below) with an
opportunity to acquire or increase a proprietary interest in TeleBanc, which
thereby will create a stronger incentive to expend maximum effort for the growth
and success of TeleBanc and its subsidiaries, and will encourage such eligible
individuals to remain in the employ of TeleBanc or one or more of its
subsidiaries. Each stock option granted under the Plan (an "Option") is
intended to be an "incentive stock option" ("Incentive Stock Option") within the
meaning of Section 422 of the Internal Revenue Code of 1986, or the
corresponding provision of any subsequently-enacted tax statute, as amended from
time to time (the "Code"), except to the extent that any such Option (i) would
exceed the limitations set forth in Section 7 below; (ii) is specifically
designated at the time of grant as not being an Incentive Stock Options; or
(iii) is granted to someone who is not an employee of TeleBanc or any subsidiary
or affiliate of TeleBanc.
2. ADMINISTRATION
(a) Board. The Plan shall be administered by the Board of
-----
Directors of TeleBanc (the "Board"), which shall have the full power and
authority to take all actions, and to make all determinations required or
provided for under the Plan or any Option granted or Option Agreement (as
defined in Section 8 below) entered into under the Plan and all such other
actions and determinations not inconsistent with the specific terms and
provisions of the Plan deemed by the Board to be necessary or appropriate to the
administration of the Plan or any Option g-ranted or Option Agreement entered
into hereunder. All such actions and determinations shall be by the affirmative
vote of a majority of the members of the Board present at a meeting at which any
issue relating to the Plan is properly raised for consideration or without a
meeting by written consent of the Board executed in accordance with TeleBanc's
Articles of Incorporation and By-Laws, and with applicable law. The
interpretation and construction by the Board of any provision of the Plan or of
any Option granted or Option Agreement entered into hereunder shall be final and
conclusive.
(b) Committee. The Board may from time to time appoint a
---------
Stock Option Committee (the "Committee") consisting of not less than two members
of the Board, none of whom shall be an officer or other salaried employee of
TeleBanc or any of its subsidiaries, and each of whom shall qualify in all
respects as a "non-employee director" as defined in Rule 16b-3 of the Securities
and Exchange Commission under the Securities Exchange Act of 1934 (the "Exchange
Act") and an "outside director" for purposes of Section 162(m) of the Code. The
Board, in its sole discretion, may provide that the role of the Committee shall
be Limited to making recommendations to the Board concerning any
<PAGE>
determinations to be made and actions to be taken by the Board pursuant to or
with respect to the Plan, or the Board may delegate to the Committee such powers
and authorities related to the administration of the Plan, as set forth in
Section 2(a) above, as the Board shall determine, consistent with the Articles
of Incorporation and By-Laws of TeleBanc and applicable law. The Board may
remove members, add members, and fill vacancies on the Committee from time to
time, all in accordance with TeleBanc's Articles of Incorporation and By-Laws,
and with applicable law. The majority vote of the Committee, or acts reduced to
or approved in writing by a majority of the members of the Committee, shall be
the valid acts of the Committee.
(c) No Liability. No member of the Board or of the Committee
------------
shall be liable for any action or determination made in good faith with respect
to the Plan or any Option granted or Option Agreement entered into hereunder.
(d) Delegation to the Committee. In the event that the Plan or
---------------------------
any Option granted or Option Agreement entered into hereunder provides for any
action to be taken by or determination to be made by the Board, such action may
be taken by or such determination may be made by the Committee if the power and
authority to do so has been delegated to the Committee by the Board as provided
for in Section 2(b) above. Unless otherwise expressly determined by the Board,
any such action or determination by the Committee shall be final and conclusive.
3. STOCK
The stock that may be issued pursuant to Options granted under the
Plan shall be shares of common stock, $.01 par value, of TeleBanc (the "Stock"),
which shares may be treasury shares or authorized but unissued shares. The
number of shares of Stock that may be issued pursuant to Options granted under
the Plan shall not exceed in the aggregate 440,000 shares, subject to adjustment
as provided in Section 17 below. If any Option expires, terminates, or is
terminated or canceled for any reason prior to exercise in full, the shares of
Stock that were subject to the unexercised portion of such Option shall be
available for future Options granted under the Plan.
4. ELIGIBILITY
(a) Employees. Options may be granted under the Plan to any
---------
employee of TeleBanc or any "subsidiary corporation" (a "Subsidiary") thereof
within the meaning of Section 424(f) of the Code (including any such employee
who is an officer or director of TeleBanc or any Subsidiary) as the Board shall
determine and designate from time to time prior to expiration or termination of
the Plan. The maximum number of shares of Stock subject to Options that may be
granted under the Plan during any calendar year to any executive officer or
other employee of TeleBanc or any Subsidiary whose compensation is or may be
subject to Code (S) 162(m) is 200,000 shares (subject to adjustment as provided
in Section 17 hereof).
(b) Directors and Independent Contractors. Options not
-------------------------------------
intended to constitute Incentive Stock Options may be granted to members of the
Board who are not employees of TeleBanc or any Subsidiary and to independent
contractors performing services for
2
<PAGE>
TeleBanc or a Subsidiary as determined by the Board from time to time on the
basis of their importance to the business of TeleBanc or such Subsidiary.
(c) Multiple Grants. An individual may hold more than one
---------------
option, subject to such restrictions as are provided herein.
5. EFFECTIVE DATE AND TERM OF THE PLAN
(a) Effective Date. The Plan shall be effective as of the date
--------------
of adoption by the Board, which date is set forth below, subject to approval of
the Plan, within one year of such effective date, by the shareholders of
TeleBanc by a majority of the votes present and entitled to vote at a duly held
meeting of the shareholders at which a quorum representing a majority of all
outstanding voting stock is present, either in person or by proxy or by written
consent in accordance with TeleBanc's Articles of Incorporation and By-Laws;
provided however, that upon approval of the Plan by the shareholders of TeleBanc
as set forth above, all Options granted under the Plan on or after the effective
date shall be fully effective as if the shareholders of TeleBanc had approved
the Plan on the effective date. If the shareholders fail to approve the Plan
within one year of such effective date, any options granted hereunder shall be
null and void and of no effect.
(b) Term. The Plan shall terminate on the date 10 years from
----
the effective date.
6. GRANT OF OPTIONS
Subject to the terms and conditions of the Plan, the Board may, at any
time and from time to time, prior to the date of termination of the Plan, grant
to such eligible individuals as the Board may determine ("Optionees"), Options
to purchase such number of shares of the Stock on such terms and conditions as
the Board may determine, including any terms or conditions which may be
necessary to qualify such Options as Incentive Stock Options. The date on which
the Board approves the grant of an Option (or such later date as is specified by
the Board) shall be considered the date on which such Option is granted.
7. LIMITATION ON INCENTIVE STOCK OPTIONS
An Option (other than an Option described in exception (ii) of Section
1) shall constitute an Incentive Stock Option to the extent that the aggregate
fair market value (determined at the time the Option is granted) of the stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionee during any calendar year (under the Plan and all other plans of
the Optionee's employer corporation and its parent and subsidiary corporations
within the meaning of Section 422(d) of the Code) does not exceed $100,000.
This limitation shall be applied by taking Options into account in the order in
which they were granted.
8. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by written
agreements ("Option Agreements"), to be executed by TeleBanc and by the
Optionee, in such form or forms
3
<PAGE>
as the Board shall from time to time determine. Option Agreements covering
Options granted from time to time or at the same time need not contain similar
provisions; provided, however, that all such Option Agreements shall comply with
-------- -------
all terms of the Plan.
9. OPTION PRICE
The purchase price of each share of the Stock subject to an Option
(the "Option Price") shall be fixed by the Board and stated in each Option
Agreement, except that the Option Price of a share of Stock subject to an Option
that is intended to constitute an Incentive Stock Option shall be not less than
100 percent of the fair market value of a share of the Stock on the date the
Option is granted (as determined in good faith by the Board); provided, however,
-------- -------
that in the event the Optionee would otherwise be ineligible to receive an
Incentive Stock Option by reason of the provisions of Sections 422(b)(6) and
424(d) of the Code (relating to stock ownership of more than 10 percent), the
Option Price of an Option that is intended to be an Incentive Stock Option shall
be not less than 110 percent of the fair market value of a share of Stock at the
time such Option is granted. In the event that the Stock is listed on an
established national or regional stock exchange, is admitted to quotation on the
National Association of Securities Dealers Automated Quotation System, or is
publicly traded on an established securities market, in determining the fair
market value of the Stock, the Board shall use the dosing price of the Stock on
such exchange or System or in such market (the highest such closing price if
there is more that one such exchange or market) on the trading date immediately
before the Option is granted (or, if there is no such dosing price, then the
Board shall use the mean between the high and low prices on such date), or, if
no sale of the Stock had been made on such day, on the next preceding day on
which any such sale shall have been made.
10. TERM AND EXERCISE OF OPTIONS
(a) Term. Each Option granted under the Plan shall terminate
----
and all rights to purchase shares thereunder shall cease upon the expiration of
ten years from the date such Option is granted, or on such date prior thereto as
may be fixed by the Board and stated in the Option Agreement relating to such
Option; provided, however, that in the event the Optionee would receive an
-------- -------
Incentive Stock Option by reason of the provisions of Sections 422(b)(6) and
424(d) of the Code (relating to stock ownership of more than 10 percent), an
Option granted to such Optionee that is intended to be an Incentive Stock Option
shall in no event be exercisable after the expiration of five years from the
date it is granted.
(b) Option Period and Limitations on Exercise. Each Option
-----------------------------------------
shall be exercisable, in whole or in part, at any time and from time to time,
over a period commencing on or after the date of grant and ending upon the
expiration or termination of the Option, as the Board shall determine and set
forth in the Option Agreement relating to such Option. Without limiting the
foregoing, the Board, subject to the terms and conditions of the Plan, may in
its sole discretion provide that an Option may not be exercised in whole or in
part for any period or periods of time during which such Option is outstanding;
provided, however, that any such limitation on the exercise of an Option
- -------- -------
contained in any Option Agreement may be rescinded, modified or waived by the
Board, in its sole discretion, at any time and from time to time after the date
of grant of such Option, so as to accelerate the time at which the Option may be
exercised. Each Option shall be exercisable, in whole or in part, at any time
and from time to
4
<PAGE>
time, over a period commencing on the date of grant and ending upon the
expiration of the Option. Notwithstanding any other provision of the Plan, no
Option granted to an Optionee under the Plan shall be exercisable in whole or in
part prior to the date the Plan is approved by the shareholders of TeleBanc as
provided in Section 5 above.
(c) Method of Exercise. An Option that is exercisable hereunder may
------------------
shall be exercised by delivery to TeleBanc on any business day, at its principal
office, addressed to the attention of the Committee, of written notice of
exercise, which notice shall specify the number of shares with respect to which
the Option is being exercised, and shall be accompanied by payment in full of
the Option Price of the shares for which the Option is being exercised, except
as provided below. The minimum number of shares of Stock with respect to which
an Option may be exercised, in whole or in part, at any time shall be the lesser
of 100 shares or the maximum number of shares available for purchase under the
Option at the time of exercise. Payment of the Option Price for the shares of
Stock purchased pursuant to the exercise of an Option shall be made (i) in cash
or in cash equivalents, (ii) through the tender to TeleBanc of shares of Stock,
which shares shall be valued, for purposes of determining the extent to which
the Option Price has been paid thereby, at their fair market value (determined
in the manner described in Section 9 above) on the date of exercise; (iii) by
delivering a written direction to TeleBanc that the Option be exercised pursuant
to a "cashless" exercise/sale procedure (pursuant to which funds to pay for
exercise of the a "cashless" exercise of the Option are delivered to TeleBanc by
a broker upon receipt of stock certificates from TeleBanc) or a cashless
exercise/loan procedure (pursuant to which the optionees would obtain a margin
loan from a broker to fund the exercise) through a licensed Broker acceptable to
TeleBanc whereby the stock certificate or certificates for the shares of Stock
for which the Option is exercised will be delivered to such broker as the agent
for the individual exercising the Option and the broker will deliver to TeleBanc
cash (or cash equivalents acceptable to TeleBanc) equal to the Option Price for
the shares of Stock purchased pursuant to the exercise of the Option plus the
amount (if any) of federal and other taxes that TeleBanc, may, in its judgment,
be required to withhold with respect to the exercise of the Option; (iv) to the
extent permitted by applicable law and under the terms of the Option Agreement
with respect to such Option, by the delivery of a promissory note of the
Optionee to TeleBanc on such terms as shall be set out in such Option Agreement;
(v) by a Combination of the methods described in (i), (ii), (iii) and (iv).
Payment in full of the Option Price need not accompany the written notice of
exercise if the Option is exercised pursuant to the cashless exercise/sale
procedure described above. An attempt to exercise any Option granted hereunder
other than as set forth above shall be invalid and of no force and effect.
Promptly after the exercise of an Option, the individual exercising the Option
shall be entitled to the issuance of a Stock certificate or certificates
evidencing his ownership of such shares. A separate Stock certificate or
certificates shall be issued for any shares purchased pursuant to the exercise
of an Option that is intended to be an Incentive Stock Option, which certificate
or certificates shall not include any shares that were purchased pursuant to the
exercise of an Option that is not an Incentive Stock Option. An individual
holding or exercising an Option shall have none of the rights of a shareholder
until the shares of Stock covered thereby are full paid and issued to him and,
except as provided in Section 18 below, no adjustment shall be made for
dividends or other rights for which the record date is prior to the date of such
issuance.
(d) Restrictions on Transfer of Stock. If an Option is exercised
---------------------------------
before the date that is six months from the later of (i) the date of grant of
the Option or (ii) the date of
5
<PAGE>
shareholder approval of the Plan and the sale of stock acquired pursuant to such
exercise would subject the individual exercising the Option to Liability under
Section 16 of the Exchange Act, then such certificate or certificates shall bear
a legend restricting the transfer of the Stock covered thereby until the
expiration of six months from the later of the date specified in clause (i)
above or the date specified in clause (ii) above.
(e) Change in Control. In the event of a Change in Control (as
-----------------
defined below), subject to the limitations set out in Section 17(f) hereof and
except as the Board shall otherwise provide in an Option Agreement with respect
to an Option granted under the Plan, all outstanding Options shall become
immediately exercisable in full, without regard to any limitation on exercise
imposed pursuant to Section 10(b) above. For purposes of the Plan, a "Change in
Control" shall be deemed to occur if any person shall (a) acquire direct or
indirect beneficial ownership of more than 50% of the total combined voting
power with respect to the election of directors of the issued and outstanding
stock of TeleBanc (except that no Change in Control shall be deemed to have
occurred if the persons who were stockholders of TeleBanc immediately before
such acquisition own all or substantially all of the voting stock or other
interests of such person immediately after such transaction), or (b) have the
power (whether as a result of stock ownership, revocable or irrevocable proxies,
contract or otherwise) or ability to elect or cause the election of directors
consisting at the time of such election of a majority of the Board. A "person"
for this purpose shall mean any person, corporation, partnership, joint venture
or other entity or any group (as such term is defined for purposes of Section
13(d) of the Exchange Act), other than those persons who beneficially own, or
have outstanding options or warrants to acquire, more than five percent of the
voting stock of TeleBanc as of February 25, 1997. For purposes of this Section
10(e), "fair market value" shall be determined in accordance with Section hereof
and a person shall be deemed to be a beneficial owner as that term is used in
Rule 13d-3 under the Exchange Act.
11. TRANSFERABILITY OF OPTIONS
During the lifetime of an Optionee to whom an Incentive Stock Option
is granted, only such Optionee (or, in the event of legal incapacity or
incompetence, the Optionee's guardian or legal representative) may exercise the
Incentive Stock Option. No Option shall be assignable or transferable by the
Optionee to whom it is granted, other than by will or the laws of descent and
distribution, except that the Optionee may transfer an Option that is not
intended to constitute an Incentive Stock Option (a) pursuant to a qualified
domestic relations order as defined for purposes of the Employee Retirement
Income Security Act of 1974, as amended, or (b) by gift: to a member of. the
"Family' (as defined below) of the Optionee, to or for the benefit of one or
more organizations qualifying under Code (S)(S) 501(c)(3) and 170(c)(2) (a
"Charitable Organization") or to a trust for the exclusive benefit of the
Optionee, one or more members of the Optionee's Family, one or more Charitable
Organizations, or any combination of the foregoing, provided that any such
transferee shall enter into a written agreement to be bound by the terms of this
Agreement. For this purpose, "Family" shall mean the spouse, siblings, and
lineal ancestors and descendants of the Optionee.
6
<PAGE>
12. TERMINATION OF EMPLOYMENT OR SERVICE
Upon the termination of the employment or other service of an Optionee
with TeleBanc or a Subsidiary, other than by reason of the death or to
"permanent and total disability" (within the meaning of Section 22(e)(3) of the
Code) of such Optionee, any Option granted to an Optionee pursuant to the Plan
shall terminate three months after the date of such termination of employment or
service and thereafter such Optionee shall have no further right to purchase
shares of Stock pursuant to such Option; provided, however, that the Board may
-------- -------
provide, by inclusion of appropriate language in any Option Agreement, that the
Optionee may (subject to the general limitations on exercise set forth in
Section 10(b) above), in the event of termination of employment or service of
the Optionee with TeleBanc or a Subsidiary, exercise an Option, in whole or in
part, at any time subsequent to such termination of employment or service and
prior to termination of the Option pursuant to Section 10(a) above, either
subject to or without regard to any installment or other Limitation on exercise
imposed pursuant to Section 10(b) above. Whether a leave of absence or leave on
military or government service shall constitute a termination of employment or
service for purposes of the Plan shall be determined by the Board, which
determination shall be final and conclusive. For purposes of the Plan, a
termination of employment or service with TeleBanc or a Subsidiary shall not be
deemed to occur if the Optionee is immediately thereafter employed by or
otherwise providing services to TeleBanc or any Subsidiary.
13. RIGHTS IN THE EVENT OF DEATH OR DISABILITY
(a) Death. If an Optionee dies while in the employ or service
-----
of TeleBanc or a Subsidiary or within the period following the termination of
employment or service during which the Option is exercisable under Section 12
above or Section 13(b) below, the executors or administrators or legatees or
distributees of such Optionee's estate shall have the right (subject to the
general limitations on exercise set forth in Section 10(b) above), at any time
within one year after the date of such Optionee's death and prior to termination
of the Option pursuant to Section 10(a) above, to exercise any Option held by
such Optionee at the date of such Optionee's death, whether or not such Option
was exercisable immediately prior to such Optionee's death; provided, however,
-------- -------
that the Board may provide by inclusion of appropriate language in any Option
Agreement that, in the event of the death of the Optionee, the executors or
administrators or legatees or distributees of such Optionee's estate may
exercise an Option (subject to the general limitations on exercise set forth in
Section 10(b) above), in whole or in part, at any time subsequent to such
Optionee's death and prior to termination of the Option pursuant to Section
10(a) above, either subject to or without regard to any installment or other
limitation on exercise imposed pursuant to Section 10(b) above.
(b) Disability. If an Optionee terminates employment or
----------
service with TeleBanc or a Subsidiary by reason of the "permanent and total
disability" (within the meaning of Section 22(e)(3) of the Code) of such
Optionee, then such Optionee shall have the right (subject to the general
limitations on exercise set forth in Section 10(b) above), at any time within
one year after such termination of employment or service and prior to
termination of the Option pursuant to Section 10(a) above, to exercise, in whole
or in part, any Option held by such Optionee at the date of such termination of
employment or service, whether or not such Option was exercisable immediately
prior to such termination of employment or service; provided,
--------
7
<PAGE>
however, that the Board may provide, by inclusion of appropriate language in any
- -------
Option Agreement, that the Optionee may (subject to the general limitations on
exercise set forth in Section 10(b) above), in the event of the termination of
employment or service of the Optionee with TeleBanc or a Subsidiary by reason of
the "permanent and total disability" (within the meaning of Section 22(e)(3) of
the Code) of such Optionee, exercise an Option in whole or in part, at any time
subsequent to such termination of employment or service and prior to termination
of the Option pursuant to Section 10(a) above, either subject to or without
regard to any installment limitation on exercise imposed pursuant to Section
10(b) above. Whether a termination of employment or service is to be considered
by reason of "permanent and total disability" for purposes of this Plan shall be
determined by the Board, which determination shall be final and conclusive.
14. USE OF PROCEEDS
The proceeds received by TeleBanc from the sale of Stock pursuant to
Options granted under the Plan shall constitute general funds of TeleBanc.
15. REQUIREMENTS OF LAW
(a) Violations of Law. TeleBanc shall not be required to sell
-----------------
or issue any shares of Stock under any Option if the sale or issuance of such
shares would constitute a violation by the individual exercising the Option or
TeleBanc of any provisions of any law or regulation of any governmental
authority, including without limitation any federal or state securities laws or
regulations. Any determination in this connection by the Board shall be final,
binding, and conclusive. TeleBanc shall not be obligated to take any affirmative
action in order to cause the exercise of an Option or the issuance of shares
pursuant thereto to comply with any law or regulation of any governmental
authority. As to any jurisdiction that expressly imposes the requirement that an
Option shall not be exercisable unless and until the shares of Stock covered by
such Option are registered or are subject to an available exemption from
registration, the exercise of such Option (under circumstances in which the laws
of such jurisdiction apply) shall be deemed conditioned upon the effectiveness
of such registration or the availability of such an exemption.
(b) Compliance with Rule 16b-3. The intent of this Plan is to
--------------------------
qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the
extent any provision of the Plan does not comply with the requirements of Rule
16b-3, it shall be deemed inoperative to the extent permitted by law and deemed
advisable by the Board and shall not affect the validity of the Plan. In the
event Rule 16b-3 is revised or replaced, the Board, or the Committee acting on
behalf of the Board, may exercise discretion to modify this Plan in any respect
necessary to satisfy the requirements of the revised exemption or its
replacement.
16. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend or
terminate the Plan as to any shares of Stock as to which Options have not been
granted; provided, however, that no amendment by the Board shall, without
-------- -------
approval by a majority of the votes present and entitled to vote at a duly held
meeting of the shareholders of TeleBanc at which a quorum
8
<PAGE>
representing a majority of all outstanding voting stock is, either in person or
by proxy, present and voting on the amendment, or by written consent in
accordance with applicable state law and the Articles of Incorporation and By-
Laws of TeleBanc, change the requirements as to eligibility to receive Incentive
Stock Options, increase the maximum number of shares of Stock in the aggregate
that may be sold pursuant to Incentive Stock Options granted under the Plan
(except as permitted under Section 17 hereof) or modify the Plan so that Options
granted under the Plan could not satisfy the applicable requirements of Code (S)
162(m). Except as permitted under Section 17 hereof, no amendment, suspension or
termination of the Plan shall, without the consent of the holder of the Option,
alter or impair rights or obligations under any Option theretofore granted under
the Plan.
17. EFFECT OF CHANGES IN CAPITALIZATION
(a) Changes in Stock. If the outstanding shares of Stock are
----------------
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of TeleBanc by reason of any
recapitalization, reclassification, stock split, reverse split, combination of
shares, exchange of shares, stock dividend or other distribution payable in
capital stock, or other increase or decrease in such shares effected without
receipt of consideration by TeleBanc, occurring after the effective date of the
Plan, the number and kinds of shares for the purchase of which Options may be
granted under the Plan shall be adjusted proportionately and accordingly by
TeleBanc. In addition, the number and kind of shares for which Options are
outstanding shall be adjusted proportionately and accordingly so that the
proportionate interest of the holder of the Option immediately following such
event shall, to the extent practicable, be the same as immediately prior to such
event. Any such adjustment in outstanding Options shall not change the aggregate
Option Price payable with respect to shares subject to the unexercised portion
of the Option outstanding but shall include a corresponding proportionate
adjustment in the Option Price per share. If there is a distribution payable in
the capital stock of a subsidiary corporation of TeleBanc ("Spin-off Shares"),
to the extent consistent with Treasury Regulation Section 1.425-1(a)(6) or the
corresponding provision of any subsequent regulation, each outstanding Option
shall thereafter additionally pertain to the number of Spin-off Shares that
would have been received in such distribution by a shareholder of TeleBanc who
owned a number of shares of Common Stock equal to the number of shares that are
subject to the Option at the time of such distribution, and the aggregate Option
Price of the Option shall be allocated between the Spin-off Shares and the
Common Stock in proportion to the relative fair market values of a Spin-off
Share and a share of Common Stock immediately after the distribution of Spin-off
Shares.
(b) Reorganization in Which TeleBanc Is the Surviving
-------------------------------------------------
Corporation. Subject to Subsection (c) hereof, if TeleBanc shall be the
- -----------
surviving corporation with any reorganization, merger, or consolidation of
TeleBanc with one or more other corporations, any Option theretofore granted
pursuant to the Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to such Option would have been
entitled immediately following such reorganization, merger, or consolidation,
with a corresponding proportionate adjustment of the Option Price per share so
that the aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the shares remaining subject to the Option immediately prior to
such reorganization, merger, or consolidation.
9
<PAGE>
(c) Reorganization in Which TeleBanc Is Not the Surviving
-----------------------------------------------------
Corporation or Sale of Assets or Stock. Upon the dissolution or liquidation of
- --------------------------------------
TeleBanc, or upon a merger, consolidation, reorganization or other business
combination of TeleBanc with one or more other entities in which TeleBanc is not
the surviving entity, or upon a sale of all or substantially all of the assets
of TeleBanc to another entity, or upon any transaction (including, without
limitation, a merger or reorganization in which TeleBanc is the surviving
corporation) approved by the Board which results in any person or entity (or
persons or entities acting as a group or otherwise in concert) owning 80 percent
or more of the combined voting power of all classes of stock of TeleBanc, the
Plan and all Options outstanding hereunder shall terminate, except to the extent
provision is, made in writing in connection with such transaction for the
continuation of the Plan and/or the assumption of the Options theretofore
granted, or for the substitution for such Options of new options covering the
stock of a successor entity, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kinds of shares and exercise prices, in which
event the Plan and Options theretofore granted shall continue in the manner and
under the terms so provided. In the event of any such termination of the Plan,
each individual holding an Option shall have the right (subject to Section 17(f)
below and to the general limitations on exercise set forth in Section 10(b)
above, and except as otherwise specifically provided in the Option Agreement
relating to such Option), immediately prior to the Occurrence of such
termination and during such period occurring prior to such termination as the
Board in its sole discretion shall determine and designate, to exercise such
Option in whole or in part, whether or not such Option was otherwise exercisable
at the time such termination occurs and without regard to any installment
limitation on exercise imposed pursuant to Section 10(b) above. The Board shall
send written notice of an event that will result in such a termination to all
individuals who hold Options not later than the time at which TeleBanc gives
notice thereof to its shareholders.
(d) Adjustments. Adjustments under this Section 17 related to
-----------
stock or securities of TeleBanc shall be made by the Board, whose determination
in that respect shall be final, binding, and conclusive. No fractional shares of
Stock or units of other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole share or unit.
(e) No Limitation on Corporation. The grant of an Option
----------------------------
pursuant to the Plan shall not affect or Limit in any way the right or power of
TeleBanc to make adjustments, reclassifications, reorganizations or changes of
its Hospital or business structure or to merge, consolidate, dissolve or
liquidate, or to sell or transfer all or any part of its business or assets.
(f) Parachute Limitation. If the acceleration of the
--------------------
exercisability or vesting of any Option or any other benefit to an Optionee
under this Plan would be considered a "parachute payment" within the meaning of
Section 280G(b)(2) of the Code and if, after reduction for any applicable
federal excise tax imposed by Section 4999 of the Code (the "Excise Tax") and
federal income tax imposed by the Code, the Optionee's net proceeds from the
exercise of such Options and from other amounts that would be so considered
would be less than the amount of the Optionee's net proceeds resulting from the
payment of the Reduced Amount described below, after reduction for federal
income taxes, then the exercisability and vesting of Options and other benefits
provided under the Plan shall be limited to the Reduced Amount. The "Reduced
Amount" shall be the largest amount that could be received by the Optionee under
the
10
<PAGE>
Plan and each Option Agreement such that no payment or other benefit received by
the Optionee under the Plan and Option Agreements and any other agreement,
contract, or understanding heretofore or hereafter entered into between the
Optionee and TeleBanc or any Subsidiary (the "Other Agreements") and any formal
or informal plan or other arrangement (other than the Plan) heretofore or
hereafter adopted by TeleBanc or any Subsidiary for the direct or indirect
provision of compensation to the Optionee (including groups or classes of
participants or beneficiaries of which the Optionee is a member), whether or not
such compensation is deferred, is in cash, or is in the form of a benefit to or
for the Optionee (a "Benefit Plan") would be subject to the Excise Tax. In the
event that the Optionee shall be limited to the Reduced Amount under the
preceding sentence, then the Optionee shall have the right, in the Optionee's
sole discretion, to designate those payments or benefits under the Plan and
Option Agreements, any Other Agreements, and any Benefit Plans, that should be
reduced or eliminated so as to avoid having the benefits to the Optionee under
the Plan and Option Agreements be subject to the Excise Tax. In the event that
the Optionee would otherwise be deemed to have received an amount that would
constitute a parachute payment, the amount received by him that exceeds the
maximum amount permissible under this Section 17(f) shall be treated as a loan
to him and shall be repaid, with interest, to the extent necessary to reduce the
amount paid to the maximum permissible amount. The interest rate of any such
loan shall be at the minimum rate necessary to avoid characterization of the
loan as an excess parachute payment and the other terms of any such loan shall
conform to customary and reasonable terms that would be applicable to loans of a
similar unsecured type made by a bank or other financial institution to an
unrelated third party. Any such loan shall be repaid in full not later than six
months after the date on which TeleBanc notifies the Optionee that a loan
relationship exists, and may be repaid by the Optionee without prepayment
penalty at any time during such six month period.
18. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or Option Agreement
entered into pursuant to the Plan shall be construed to confer upon any
individual the right to remain in the employ of TeleBanc or any Subsidiary, or
to interfere in any way with the night and authority of TeleBanc or any
Subsidiary either to increase or decrease the compensation of any individual at
any time, or to terminate any Employment or other relationship between any
individual and TeleBanc or any Subsidiary.
19. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
,shareholders of TeleBanc for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation Arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or individuals) as the Board in its discretion determines desirable.
including, without limitation, the granting of stock options or stock
appreciation rights otherwise than under the Plan.
11
<PAGE>
This Plan was duly adopted and approved by the Board of Directors of
TeleBanc by resolution at a meeting held on the 25th day of February, 1997.
______________________________________
Assistant Secretary of TeleBanc
This Plan was duly approved by the shareholders of TeleBanc at a
meeting held the ____ day of May, 1997.
______________________________________
Assistant Secretary of TeleBanc
12
<PAGE>
EXHIBIT 99.6
TELEBANC FINANCIAL CORPORATION
1998 STOCK INCENTIVE PLAN
ARTICLE I
Purposes
The Plan is intended to assist TeleBanc Financial Corporation and its
Affiliates in recruiting and retaining individuals with ability and initiative
by enabling such persons to participate in the future success of the Company and
its Affiliates and to associate their interests with those of the Company and
its stockholders. The Plan is intended to permit the grant of both Options
qualifying under Section 422 of the Code ("incentive stock options") and Options
not so qualifying, and the grant of SARs and Stock Awards. No Option that is
intended to be an Incentive Stock Option shall be invalid for failure to qualify
as an Incentive Stock Option. The proceeds received by the Company from the
sale of Common Stock pursuant to this Plan shall be used for general corporate
purposes.
ARTICLE II
Definitions
2.1 Affiliate means (i) any entity that directly or indirectly, is
controlled by, or controls or is under common control with the Company, and (ii)
any entity in which the Company has a significant equity interest, in either
case as determined by the Committee.
2.2 Agreement means a written agreement (including any amendment or
supplement thereto) between the Company and a Participant specifying the terms
and conditions of a Stock Award, Option or SAR granted to such Participant.
2.3 Board means the Board of Directors of the Company.
2.4 Change of Control means:
(a) a "person" or "group" (which terms shall have the meaning they
have when used in Section 13(d) of the Exchange Act) (other than the
Company, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, any corporation owned directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of voting securities of the Company) becomes
(other than solely by reason of a repurchase of voting securities by the
Company), the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of fifty percent (50%) or more of
the combined voting power of the Company's then total outstanding voting
securities;
(b) the Company consolidates with or merges with or into another
corporation or partnership or conveys, transfers or leases, in any
transaction or series of transactions, all or substantially all of its
assets to any corporation or
<PAGE>
partnership, or any corporation or partnership consolidates with or merges
with or into the Company, in any event pursuant to a transaction in which
the outstanding voting stock of the Company is reclassified or changed into
or exchanged for cash, securities or other property, other than any such
transaction where (i) the outstanding voting securities of the Company are
changed into or exchanged for voting securities of the surviving
corporation and (ii) the persons who were the beneficial owners of the
Company's voting securities immediately prior to such transaction
beneficially own immediately after such transaction 50% or more of the
total outstanding voting power of the surviving corporation, or the Company
is liquidated or dissolved or adopts a plan of liquidation or dissolution.
2.5 Code means the Internal Revenue Code of 1986, and any amendments
thereto.
2.6 Committee means either (i) the Board or (ii) a committee of the Board
designated by the Board to administer the Plan and composed of not less than two
directors, each of whom is expected, but not required, to be a "Non-Employee
Director" (within the meaning of Rule 16b-3 of the Exchange Act) and an "outside
director" (within the meaning of Code section 162(m)) to the extent Rule 16b-3
of the Exchange Act and Code section 162(m), respectively, are at such time
applicable to the Company and the Plan. If at any time such a committee has not
been so designated, the Board shall constitute the Committee.
2.7 Common Stock means the common stock, $0.01 par value, of the Company.
2.8 Company means TeleBanc Financial Corporation, a Delaware corporation.
2.9 Consultant means any person performing consulting or advisory services
for the Company or any Affiliate, with or without compensation, to whom the
Committee chooses to grant a Stock Award, Option, or SAR in accordance with the
Plan.
2.10 Corresponding SAR means an SAR that is granted in relation to a
particular Option and that can be exercised only upon the surrender to the
Company, unexercised, of that portion of the Option to which the SAR relates.
2.11 Director means a member of the Company's Board of Directors.
2.12 Disability shall have the meaning provided for in Section 22 (e) (3)
of the Code or any successor statute thereto.
2.13 Exchange Act means the Securities Exchange Act of 1934, as amended.
2.14 Fair Market Value means, on any given date. the current fair market
value of the shares of Common Stock as determined pursuant to subsection (a) or
(b) below.
(a) While the Company is a Public Company, Fair Market Value shall be
determined as follows: (i) if the Common Stock is traded on the Nasdaq
SmallCap or National Market or listed on a national securities exchange,
the closing price of the Common Stock on the determination date on the
exchange on which the Common Stock is principally traded, or, if there are
no sales on such date, then on the next preceding date on which there were
sales of Common Stock, (ii) if the Common Stock is not traded on
2
<PAGE>
the Nasdaq SmallCap or National Market or listed on a national securities
exchange, the closing price last reported by the National Association of
Securities Dealers, Inc. for the over-the-counter market on the
determination date, or, if no sales are reported on such date, then on the
next preceding date on which there where such quotations.
(b) Notwithstanding subsections (a) and (b) of this Section, in all
cases, Fair Market Value shall not be less than the par value of the Common
Stock.
(c) For purposes of this Section, the term "Public Company" means the
Company, subsequent to the effective date of the Plan, has sold securities
pursuant to an effective registration statement filed pursuant to the
Securities Act and is subject to the reporting and information requirements
under the Exchange Act, and the term "Non-Public Company" means the Company
has not sold securities pursuant to an effective registration statement
filed pursuant to the Securities Act and is not subject to the reporting
and information requirements under the Exchange Act.
2.15 Initial Value means, with respect to an SAR, the Fair Market Value of
one share of Common Stock on the date of grant.
2.16 Incentive Stock Option means an Option qualifying for special tax
treatment under Section 422 of the Code.
2.17 Nonqualified Stock Option means an option which is not an Incentive
Stock Option.
2.18 Option means a stock option that is either a Nonqualified Stock Option
or Incentive Stock Option that entitles the holder to purchase from the Company
a stated number of shares of Common Stock at the price set forth in an
------
Agreement.
2.19 Optionee means the employee, Director or Consultant to whom an Option
is granted.
2.20 Parent Corporation means a corporation which is with respect to the
Company a parent corporation as defined in Section 424 of the Code.
2.21 Participant means an employee of the Company or an Affiliate, a
Director or a Consultant who satisfies the requirements of Article IV and is
selected by the Committee to receive a Stock Award, Option, SAR or a combination
thereof.
2.22 Plan means this 1998 Stock Incentive Plan.
2.23 SAR means a stock appreciation right that in accordance with the terms
of an Agreement entities the holder to receive, with respect to each share of
Common Stock encompassed by the exercise of such SAR, the amount determined by
the Committee and specified in an Agreement. In the absence of such a
determination, the holder shall be entitled to receive, with respect to such
share of Common Stock encompassed by the exercise of such SAR, the excess of its
Fair Market Value on the date of exercise over the Initial Value. References to
3
<PAGE>
"SARs" include both Corresponding SARs and SARs granted independently of
Options, unless the context requires otherwise.
2.24 Securities Act means the Securities Act of 1933, as amended.
2.24 Stock Award means Common Stock awarded to a Participant under Article
VIII.
2.25 Stockholder means the holder of Common Stock issued under the Plan as
a result of exercise of an Option or SAR or grant of a Stock Award.
2.26 Subsidiary Corporation means a corporation which is with respect to
the Company a subsidiary corporation as defined in Section 424 of the Code.
2.27 Termination of Employment means unless provided otherwise by the
Committee, an employee has ceased to be employed by the Company or an Affiliate,
a director has ceased to be a member of the Board of Directors of the Company or
an Affiliate, or a Consultant has ceased to have a consulting relationship with
the Company or an Affiliate.
2.28 Ten Percent Shareholder means any individual owning more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, a Parent Corporation or a Subsidiary Corporation. An individual shall
be considered to own any voting stock owned (directly or indirectly) by or for
his brothers, sisters, spouse, ancestors or lineal descendants and shall be
considered to own proportionately any voting stock owned (directly or
indirectly) by or for a company, partnership, estate or trust of which such
individual is a shareholder, partner or beneficiary, all as required by Section
424(d) of the Code.
ARTICLE III
Administration
The Committee shall have authority to grant Stock Awards, Options and
SARs upon such terms (not inconsistent with the provisions of this Plan) as the
Committee may consider appropriate. Such terms may include conditions (in
addition to those contained in this Plan) on the exercisability of all or any
part of an Option or SAR or on the transferability or forfeitability of a Stock
Award. Notwithstanding any such conditions, the Committee may, in its
discretion, accelerate the time at which any Option or SAR may be exercised, or
the time at which a Stock Award may become transferable or noforfeitable or the
time at which it may be settled. The Committee shall have complete authority to
interpret all provisions of this Plan; to prescribe the form of Agreements; to
adopt, amend, and rescind rules and regulations pertaining to the administration
of the Plan; and to make all other determinations necessary or advisable for the
administration of this Plan. The express grant in the Plan of any specific
power to the Committee shall not be construed as limiting any power or authority
of the Committee; provided that the Committee may not exercise any right or
power reserved to the Board. Any decision made, or action taken, by the Board
or the Committee or in connection with the administration of this Plan shall be
final and conclusive on all persons having an interest in the Plan. No member
of the Board or the Committee shall be liable for any act done in good faith
with respect to this Plan or any Agreement, Option, SAR or Stock Award. All
expenses of administering this Plan
4
<PAGE>
shall be borne by the Company. If no Committee is appointed by the Board, the
Board shall constitute the Committee.
The Committee, in its discretion, may delegate to one or more officers
of the Company, all or part of the Committee's authority and duties with respect
to grants and awards to individuals who are not subject to the reporting and
other provisions of Section 16 of the Exchange Act. The Committee may revoke or
amend the terms of a delegation at any time but such action shall not invalidate
any prior actions of the Committee's delegates that were consistent with the
terms of the Plan. Furthermore, the mere fact that a Committee member shall
fail to qualify as a "non-employee Director" or "outside director" within the
meaning of Rule 16b-3 under the Exchange Act and Section 162(m) of the Code,
respectively, shall not invalidate any award made by the Committee which award
is otherwise validly made under the Plan.
ARTICLE IV
Eligibility
Any employee of the Company or an Affiliate (including a company that
becomes an Affiliate after the adoption of this Plan), a Director or a
Consultant to the Company or an Affiliate (including a company that becomes an
Affiliate after the adoption of this Plan) is eligible to participate in this
Plan if the Committee, in its sole discretion, determines that such person has
contributed significantly or can be expected to contribute significantly to the
profits or growth of the Company or an Affiliate. Only employees of the
Company, a Subsidiary Corporation or a Parent Corporation are eligible to
receive Incentive Stock Options.
ARTICLE V
Stock Subject to Plan
5.1 Maximum Shares for Delivery. The maximum number of shares of Common
Stock that may be delivered to Participants under the Plan pursuant to Stock
Awards and exercise of options or SARs shall be 500,000 shares; and (ii) any
Common Stock that are represented by awards granted under the Plan of the
Company, which are forfeited, expired or are canceled without the delivery of
Common Stock or which result in the forfeiture of Common Stock back to the
Company.
5.2 The shares of Common Stock issued may be shares of authorized but
unissued Common Stock or shares of previously issued Common Stock that have been
reacquired by the Company. The maximum aggregate number of shares that may be
issued under this Plan shall be subject to adjustment as provided in Article X.
5.3 Individual Limit. The maximum number of shares of Common Stock with
respect to which Options, SARS, and Stock Awards may be granted to any one
Participant during any one calendar year shall be 100,000.
5.4 Reallocation of Shares. If an Option is terminated, in whole or in
part, for any reason other than its exercise or the exercise of a Corresponding
SAR that is settled with Common Stock, the number of shares of Common Stock
allocated to the Option or portion
5
<PAGE>
thereof may be reallocated to other Options, SARs and Stock Awards to be granted
under this Plan. If an SAR is terminated, in whole or in part, for any reason
other than its exercise or the exercise of a related Option, the number of
shares of Common Stock allocated to the SAR or portion thereof may be
reallocated to other Options, SARs and Stock Awards to be granted under this
Plan.
ARTICLE VI
Options
6.1 Award. In accordance with the provisions of Article IV, the Committee
will designate each individual to whom an Option is to be granted and will
specify the number of shares of Common Stock covered by such awards. The Option
Agreement shall specify whether the Option is an Incentive Stock Option or
Nonqualified Stock Option, the vesting schedule applicable to such Option and
any other terms of such Option. An individual must be an employee of the
Company, a Subsidiary Corporation or a Parent Corporation to be eligible to be
granted an Incentive Stock Option.
6.2 Option Price. The exercise price per share for Common Stock subject
to an Option shall be determined by the Board on the date of grant; provided,
however, that the exercise price per share shall not be less than one hundred
percent 100% of the Fair Market Value of a share of Common Stock on the date the
Option is granted and the exercise price per share of Common Stock for an Option
that is an Incentive Stock Option shall not be less than one hundred percent
(100%) of the Fair Market Value on the date the Option is granted.
Notwithstanding the preceding sentence, the exercise price per share of Common
Stock subject to an Option that is an Incentive Stock Option granted to an
individual who is or is deemed to be a Ten Percent Shareholder on the date such
option is granted, shall not be less than one hundred ten percent (110%) of the
Fair Market Value on the date the Option is granted.
6.3 Maximum Option Period. Unless provided otherwise in this Agreement,
the maximum period in which an Option may be exercised shall be ten years,
except that no Option that is an Incentive Stock Option shall be exercisable
after the expiration of ten years from the date such Option was granted. In the
case of an Incentive Stock Option that is granted to a Participant who is or is
deemed to be a Ten Percent Shareholder on the date of grant, such Option shall
not be exercisable after the expiration of five years from the date of grant.
The terms of any Option that is an Incentive Stock Option may provide that it is
exercisable for a period less than such maximum period.
6.4 Maximum Value of Options which are Incentive Stock Options. To the
extent that the aggregate Fair Market Value of the Common Stock with respect to
which Incentive Stock Options granted to any person are exercisable for the
first time during any calendar year (under all stock option plans of the
Company, a subsidiary Corporation or Parent Corporation) exceeds $100,000 the
Options are not Incentive Stock Options. For purposes of this section, the Fair
Market Value of the Common Stock will be determined as of the time the Incentive
Stock Option with respect to the Common Stock is granted. This paragraph will be
applied by taking Incentive Stock Options into account in the order in which
they are granted.
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<PAGE>
6.5 Nontransferabilily. Except as provided in Section 6.6, each Option
granted under this Plan shall be nontransferable except by will or by the laws
of descent and distribution. In the event of any such transfer, the Option and
any Corresponding SAR that relates to such Option must be transferred to the
same person or persons or entity or entities. Except to the extent an Option is
transferred in accordance with Section 6.6, during the lifetime of the
Participant to whom the Option is granted, the Option may be exercised only by
the Participant. No right or interest of a Participant in any Option shall be
liable for, or subject to, any lien, obligation, or liability of such
Participant.
6.6 Transferable Options. Section 6.5 to the contrary notwithstanding, if
the Agreement so provides, an Option-that is not an Incentive Stock Option may
be transferred by a Participant to the Participant's children, grandchildren,
spouse, one or more trusts for the benefit of such family members or a
partnership in which such family members are the only partners; provided,
however, that Participant may not receive any consideration for the transfer.
The holder of an Option transferred pursuant to this section shall be bound by
the same terms and conditions that governed the Option during the period that it
was held by the Participant. In the event of any such transfer, the Option and
any Corresponding SAR that relates to such Option must be transferred to the
same person or persons or entity or entities.
6.7 Vesting and Termination of Employment. Except as provided in an
Option Agreement, the following rules shall apply
(a) Options will vest as provided in the Option Agreement. An Option
will be fully vested upon the occurrence of a Change of Control prior to
the Participant's Termination of Employment. An Option will be exercisable
only to the extent that it is vested on the date of exercise. Vesting of an
Option will cease on the date of the Optionee's Termination of Employment
and the Option will be exercisable only to the extent the Option is vested
on the date of Termination of Employment.
(b) If the Optionee's Termination of Employment is for reason of
death or Disability, the right to exercise the Option (to the extent
vested) will expire on the earlier of (i) one (1) year after the date of
the Optionee's Termination of Employment, or (ii) the expiration date under
the terms of the Agreement. Until the expiration date, the Optionee's
heirs, legatees or legal representative may exercise the Option, except to
the extent the Option was previously transferred pursuant to Section 6.6.
(c) If the Optionee's Termination of Employment is by reason of the
Optionee's retirement from service of the Company and its Affiliates on or
after the attainment of age sixty-two (62), the right to exercise the
Option (to the extent that it is vested) will expire on the earlier of (i)
three (3) years after the date of the Optionee's Termination of Employment,
or (ii) the expiration date under the terms of the Agreement.
(d) If the Optionee's Termination of Employment is for any reason
other than death, Disability or retirement, the right to exercise the
Option (to the extent that it is vested) will expire on the earlier of (i)
three (3) months after the date of the Optionee's Termination of
Employment, or (ii) the expiration date under the terms of the Agreement.
However, if the Option would then expire during the Pooling Period and the
Common
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<PAGE>
Stock received upon the exercise of the Option would be subject to the
Pooling Period transfer restrictions, then the right to exercise the Option
will expire ten (10) calendar days after the end of the Pooling Period.
"Pooling Period" means the period in which property is subject to
restrictions on transfer in compliance with the "Pooling of Interests
Accounting" rules set forth in the Securities and Exchange Commission
Accounting Series Releases 130 and 135. If Termination of Employment is for
a reason other than the Optionee's death, disability or retirement and the
Option holder dies after his or her Termination of Employment but before
the right to exercise the Option has expired, the right to exercise the
Option shall expire on the earlier of (i) one (1) year after the date of
the Optionee's Termination of Employment, or (ii) the date the Option
expires under the terms of the Agreement, and, until expiration, the
Optionee's heirs, legatees or legal representative may exercise the Option,
except to the extent the Option was previously transferred pursuant to
Section 6.6.
6.7 Forfeiture for Cause. Notwithstanding any provision of the Plan to
the contrary, unless provided otherwise in an Option Agreement, all unexercised
Options granted to an Optionee whose Termination of Employment is for "cause"
shall terminate and be forfeited by the Optionee. A termination of Employment
shall be for cause if it is by reason of (i) conduct related to the Optionee's
service to the Company or an Affiliate for which either criminal or civil
penalties against the Optionee may be sought, (ii) material violation of Company
policies, or (iii) disclosing or misusing any confidential information or
material concerning the Company or Affiliate. An Optionee may be released from
the forfeiture provisions of this section if the Committee (or its duly
appointed agent) determines in its sole discretion that such action is in the
best interests of the Company.
6.8 Exercise. The Option holder must provide written notice to the
Secretary of the Company of the exercise of Options and the number of Options
exercised. Subject to the provisions of this Plan and the applicable Agreement,
an Option may be exercised to the extent vested in whole at any time or in part
from time to time at such times and in compliance with such requirements as the
Committee shall determine. An Option granted under this Plan may be exercised
with respect to any number of whole shares less than the full number for which
the Option could be exercised. An Option may not be exercised with respect to
fractional shares of Common Stock. A partial exercise of an Option shall not
affect the right to exercise the Option from time to time in accordance with
this Plan and the applicable Agreement with respect to the remaining shares
subject to the Option. The exercise of an Option shall result in the
termination of any Corresponding SAR to the extent of the number of shares with
respect to which the Option is exercised.
6.9 Payment. Unless otherwise provided by the Agreement, payment of the
Option price shall be made in cash or a cash equivalent acceptable to the
Committee. Unless otherwise provided by the Agreement, payment of all or part
of the Option price may also be made by surrendering shares of Common Stock to
the Company that have been held for at least six (6) months prior to the date of
exercise. If Common Stock is used to pay all or part of the Option price, the
sum of the cash or cash equivalent and the Fair Market Value (determined as of
the day preceding the date of exercise) of the shares surrendered must not be
less than the Option price of the shares for which the option is being
exercised. In accordance-with such procedures as the Committee may determine,
the Committee may approve payment of the exercise price by a
8
<PAGE>
broker-dealer or by the Option holder with cash advanced by the broker-dealer if
the exercise notice is accompanied by the Option holder's written irrevocable
instructions to deliver the Common Stock acquired upon exercise of the Option to
the broker-dealer.
Wherever in this Plan or any Agreement a Participant is permitted to pay the
exercise price of an Option or SAR or taxes relating to the exercise of an
Option or SAR by delivering Common Stock, the Participant may, subject to
procedures satisfactory to the Committee, satisfy such delivery requirement by
presenting proof of beneficial ownership of such Common Stock, in which case the
Company shall treat the Option or SAR as exercised without further payment and
shall withhold such number of Common Stock from the Common Stock acquired by the
exercise of the Option or SAR.
6.10 Stockholder Rights. No Participant shall have any rights as a
stockholder with respect to shares subject to his or her Option until the date
of exercise of such Option.
6.11 Stock Certificate Legends. The Company may require that certificates
evidencing shares of Common Stock purchased upon the exercise of Incentive Stock
Option issued under the Plan be endorsed with a legend in substantially the
following form:
The shares evidenced by this Certificate may not be sold or
transferred prior to 19__, in the absence of a written statement from
the Company to the effect that the Company is aware of the facts of
such sale or transfer.
The blank contained in this legend shall be filled in with the date that is the
later of (i) one year and one day after the date of the exercise of such
Incentive Stock Option or (ii) two years and one day after the grant of such
Incentive Stock Option. Upon delivery to the Company, at its principal
executive office, of a written statement to the effect that such shares have
been sold or transferred prior to such date, the Company does hereby agree to
promptly deliver to the transfer agent for such shares a written statement to
the effect that the Company is aware of the fact of such sale or transfer.
6.12 Disposition of Stock. A Participant shall notify the Company of any
sale or other disposition of Common Stock acquired pursuant to an Incentive
Stock Option if such sale or disposition occurs (i) within two years of the
grant of an Option or (ii) within one year of the issuance of the Common Stock
to the Participant. Such notice shall be in writing and directed to the
Secretary of the Company.
ARTICLE VII
SAR
7.1 Award. In accordance with the provisions of Article IV, the Board
will designate each individual to whom SARs are to be granted and will specify
the number of shares covered by such awards. In addition no Participant may be
granted Corresponding SARs (under all Incentive Stock Option plans of the
Company and its Affiliates) that are related to Incentive Stock Options which
are first exercisable in any calendar year for stock having an aggregate Fair
Market Value (determined as of the date the related Option is granted) that
exceeds $100,000.
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7.2 Maximum SAR Period. The maximum period in which an SAR may be
exercised shall be determined by the Board on the date of grant, except that no
Corresponding SAR that is related to an Incentive Stock Option shall be
exercisable after the expiration of ten years from the date such related Option
was granted. In the case of a Corresponding SAR that is related to an Incentive
Stock Option granted to a Participant who is or is deemed to be a Ten Percent
Shareholder, such Corresponding SAR shall not be exercisable after the
expiration of five years from the date such related Option was granted. The
terms of any Corresponding SAR that is related to an Incentive Stock Option may
provide that it is exercisable for a period less than such maximum period.
7.3 Nontransferability. Except as provided in Section 7.4, each SAR
granted under this Plan shall be nontransferable except by will or by the laws
of descent and distribution. In the event of any such transfer, a Corresponding
SAR and the related Option must be transferred to the same person or persons or
entity or entities. During the lifetime of the Participant to whom the SAR is
granted, the SAR may be exercised only by the Participant. No right or interest
of a Participant in any SAR shall be liable for, or subject to, any lien,
obligation, or liability of such Participant.
7.4 Transferable SARS. Section 7.3 to the contrary notwithstanding, if
the Agreement so provides, a SAR may be transferred by a Participant to the
children, grandchildren, spouse, one or more trusts for the benefit of such
family members or a partnership in which such family members are the only
partners; provided, however, that a Participant may not receive any
consideration for the transfer. In the event of any such transfer, a
Corresponding SAR and the related Option must be transferred to the same person
or persons or entity or entities. The holder of an SAR transferred pursuant to
this section shall be bound by the same terms and conditions that governed the
SAR during the period that it was held by the Participant.
7.5 Exercise. Subject to the provisions of this Plan and the applicable
Agreement, an SAR may be exercised in whole at any time or in part from time to
time at such times and in compliance with such requirements as the Committee
shall determine; provided, however, that a Corresponding SAR that is related to
an Incentive Stock Option may be exercised only to the extent that the related
Option is exercisable and only when the Fair Market Value exceeds the option
price of the related Option. An SAR granted under this Plan may be exercised
with respect to any number of whole shares less than the full number for which
the SAR could be exercised. A partial exercise of an SAR shall not affect the
right to exercise the SAR from time to time in accordance with this Plan and the
applicable Agreement with respect to the remaining shares subject to the SAR.
The exercise of a Corresponding SAR shall result in the termination of the
related Option to the extent of the number of shares with respect to which the
SAR is exercised.
7.6 Employee Status. If the terms of any SAR provide that it may be
exercised only during employment or within a specified period of time after
Termination of Employment, the Committee may decide to what extent leaves of
absence for governmental or military service, illness, temporary disability or
other reasons shall not be deemed interruptions of continuous employment.
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<PAGE>
7.7 Settlement. At the Committee's discretion, the amount payable as a
result of the exercise of an SAR may be settled in cash, Common Stock, or a
combination of cash and Common Stock. No fractional shares will be deliverable
upon the exercise of an SAR but a cash payment will be made in lieu thereof.
7.8 Shareholder Rights. No Participant shall, as a result of receiving an
SAR award, have any rights as a stockholder of the Company or any Affiliate
until the date that the SAR is exercised and then only to the extent that the
SAR is settled by the issuance of Common Stock.
ARTICLE VIII
Stock Awards
8.1 Award. In accordance with the provisions of Article IV, the Board
will designate each individual to whom a Stock Award is to be made and will
specify the number of shares of Common Stock covered by such awards.
8.2 Vesting. The Board, on the date of the award, may prescribe that a
Participant's rights in the Stock Award shall be forfeitable or otherwise
restricted for a period of time or subject to such conditions as may be set
forth in the Agreement.
8.3 Performance Objectives. In accordance with Section 8.2, the Board may
prescribe that Stock Awards will become vested or transferable or both based on
objectives such as, but not limited to, the Company's, an Affiliate's or an
operating unit's return on equity, earnings per share, total earnings, earnings
growth, return on capital, return on assets, or Fair Market Value. If the
Board, on the date of award, prescribes that a Stock Award shall become
nonforfeitable and transferable only upon the attainment of performance
Objectives, the shares subject to such Stock Award shall become nonforfeitable
and transferable only to the extent that the Committee certifies that such
objectives have been achieved.
8.4 Stock Legends and Related Matters.
(a) The Committee, on behalf of the Company, may endorse such legend
or legends upon the certificates representing the shares of Common Stock,
and may issue such "stop transfer" instructions as it determines to be
necessary or appropriate to (i) prevent a violation of, or to perfect an
exemption from, the registration requirements of the Securities Act, or
(ii) implement the provisions of any agreement between the Company or an
Affiliate and the Participant with respect to such shares.
(b) The Committee may require that a Participant, as a condition to
receipt of a particular award, execute and deliver to the Company a written
statement, in form satisfactory to the Committee, in which the Participant
represents and warrants that the shares are being acquired for such
person's own account, for investment only and not with a view to the resale
or distribution thereof. The Participant shall, at the request of the
Committee, be required to represent and warrant in writing that, to the
extent permitted by the terms of the award, any subsequent resale or
distribution of Shares by the Participant shall be made only pursuant to
either (i) a Registration Statement on an appropriate form under the
Securities Act, which Registration Statement has become
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<PAGE>
effective and is current with regard to the shares being sold, or (ii) a
specific exemption from the registration requirements of the Securities
Act, but in claiming such exemption the Participant shall, prior to any
offer of sale or sale of such shares, obtain a prior favorable written
opinion of counsel, in form and substance satisfactory to counsel for the
Company, as to the application of such exemption thereto.
The Committee may delay any award, issuance or delivery of shares of Common
Stock if it determines that listing, registration or qualification of the shares
or the consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the sale or purchase of
shares under the Plan, until such listing, registration, qualification, consent
or approval shall have been effected or obtained, or otherwise provided for,
free of any conditions not acceptable to the Committee.
8.5 Employee Status. In the event that the terms of any Stock Award
provide that shares may become transferable and nonforfeitable thereunder only
after completion of a specified period of employment, the Committee may decide
in each case to what extent leaves of absence for governmental or military
service, illness, temporary disability, or other reasons shall not be deemed
interruptions of continuous employment.
8.6 Nontransferability. Except as provided in Section 8.7, Stock Awards
granted under this Plan shall be nontransferable except by will or by the laws
of descent and distribution. No right or interest of a Participant in a Stock
Award shall be liable for, or subject to, any lien, obligation, or liability of
such Participant.
8.7 Transferable Stock Awards. Section 8.6 to the contrary
notwithstanding if the Award so provides, a Stock Award may be transferred by a
Participant to the children, grandchildren, spouse, one or more trusts for the
benefit of such family members or a partnership in which such family members -
arc the only partners; provided, however, that Participant may not receive any
consideration for the transfer. The holder of a Stock Award transferred pursuant
to this section shall be bound by the same terms and conditions that governed
the Incentive Award during the period that it was held by the Participant.
8.8 Stockholder Rights. Prior to their forfeiture (in accordance with the
applicable Agreement) and while the shares of Common Stock granted pursuant to
the Stock Award may be forfeited or are nontransferable, a Participant will have
all rights of a stockholder with respect to a Stock Award, including the right
to receive dividends and vote the shares; provided, however, that during such
period (i) a Participant may not sell, transfer, pledge, exchange, hypothecate,
or otherwise dispose of shares of Common Stock granted pursuant to a Stock
Award, (ii) the Company shall retain custody of the certificates evidencing
shares of Common Stock granted pursuant to a Stock Award, and (iii) the
Participant will deliver to the Company a stock power, endorsed in blank, with
respect to each Stock Award. The limitations set forth in the preceding
sentence shall not apply after the shares of Common Stock granted under the
Stock Award are transferable and are no longer forfeitable.
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ARTICLE IX
Change in Capital Structure
The existence of outstanding Options shall not affect in any way the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issuance of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceedings
whether of a similar character or otherwise.
If the Company shall effect a subdivision or consolidation of shares
or other capital readjustment, the payment of a stock dividend, or other
increase or reduction of the number of shares of the Common Stock outstanding,
without receiving compensation therefore in money, services or property, then
(i) the number, class, and per share price of shares of Common Stock subject to
outstanding Options, SARs and Stock Awards hereunder shall be appropriately
adjusted in such a manner as to entitle an Optionee to receive upon exercise of
an Option or an SAR or the receipt of a Stock Award, for the same aggregate cash
consideration, the same total number and class of shares as he would have
received had the Optionee exercised his or her Option or SAR or received his or
her Stock Award in full immediately prior to the event requiring the adjustment;
and (ii) the number and class of shares then reserved for issuance under the
Plan shall be adjusted by substituting for the total number and class of shares
of Common Stock then reserved that number and class of shares of Common Stock
that would have been received by the owner of an equal number of outstanding
shares of each class of Common Stock as the result of the event requiring the
adjustment.
After a merger of one or more corporations into the Company or after a
consolidation of the Company and one or more corporations in which the Company
shall be the surviving company, each holder of in Option or an SAR shall at no
additional cost, be entitled upon exercise of such Option or SAR to receive
(subject to any required action by stockholders) in lieu of the number and class
of shares as to which such Option or SAR shall then be so exercisable, the
number and class of shares of stock or other securities to which such Option
holder would have been entitled pursuant to the terms of the agreement of merger
or consolidation if, immediately prior to such merger or consolidation, such
Option holder had been the holder of record of the number and class of shares of
Common Stock equal to the number and class of shares as to which such Option or
SAR shall be so exercised.
If the Company is merged into or consolidated with another company
under circumstances where the Company is not the surviving company, or if the
Company is liquidated, or sells or otherwise disposes of substantially all of
its assets to another company while unexercised Options or SARs or unvested
Stock Awards remain outstanding under the Plan, unless provisions are made in
connection with such transaction for the continuance of the Plan and/or the
assumption or substitution of such Options or SARs with new options, stock
appreciation rights covering the stock of the successor company, or parent or
subsidiary thereof, with appropriate adjustments as to the number and kind of
shares and prices, then all outstanding
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Options, SARs and Stock Awards shall be vested as of the effective date of any
such merger. consolidation, liquidation, or sale (the "corporate event").
Except as previously expressly provided, neither the issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, for cash or property, or for labor or services either
upon direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, nor the increase or decrease of the number
of authorized shares of stock, nor the addition or deletion of classes of stock,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number, class or price of shares of Common Stock then subject to outstanding
Options.
Adjustment under the preceding provisions of this section will be made
by the Committee, whose determination as to what adjustments will be made and
the extent thereof will be final, binding, and conclusive. No fractional
interests will be issued under the Plan on account of any such adjustment. No
adjustment will be made in a manner that causes an Incentive Stock Option to
fail to continue to qualify as an incentive Stock Option under the Code.
The Board may make Stock Awards and may grant Options and SARs in
substitution for performance shares, phantom shares, stock awards, stock
options, stock appreciation rights, or similar awards held by an individual who
becomes an employee of the Company or an Affiliate in connection with a
transaction described in this Article IX. Notwithstanding any provision of the
Plan (other than the limitation of Section 5. 1), the terms of such substituted
Stock Awards or Option or SAR grants shall be as the Board, in its discretion,
determines is appropriate.
ARTICLE X
Compliance with Law and Approval of Regulatory Bodies
No Option or SAR shall be exercisable, no Common Stock shall be
issued, no certificates for shares of Common Stock shall be delivered, and no
payment shall be made under this Plan except in compliance with all applicable
federal and state laws and regulations (including, without limitation,
withholding tax requirements, any listing agreement to which the Company is a
party, and the rules of all domestic stock exchanges on which the Company's
Common Stock may then be listed. The Company shall have the right to rely on an
opinion of its counsel as to such compliance. Any share certificate issued to
evidence Common Stock when a Stock Award is granted or for which an Option or
SAR is exercised may bear such legends and statements as the Committee may deem
advisable to assure compliance with federal and state laws and regulations. No
Option or SAR shall be exercisable, no Stock Award shall be granted, no Common
Stock shall be issued, no certificate for shares shall be delivered, and no
payment shall be made under this Plan until the Company has obtained such
consent or approval as the Committee may deem advisable from regulatory bodies
having jurisdiction over such matters.
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ARTICLE XI
General Provisions
11.1 Tax Withholding. Whenever the Company proposes or is required to
distribute Common Stock under the Plan, the Company may require the recipient to
remit to the Company an amount sufficient to satisfy any federal, state and
local tax withholding requirements prior to the delivery of any certificate for
such shares or, in the discretion of the Committee, the Company may withhold
from the Common Stock to be delivered shares sufficient to satisfy all or a
portion of such tax withholding requirements. Whenever under the Plan payments
are to be made in cash, such payments may be net of an amount sufficient to
satisfy any Federal state and local tax withholding requirements.
11.2 Employee Status. For purposes of determining the applicability of
Section 422 of the Code (relating to incentive stock options), or in the event
that the terms of any Option, SAR or Stock Award provide that an option or SAR
may be exercised only during employment or within a specified period of time
after Termination of Employment or that a Stock Award shall become transferable
and nonforfeitable only after completion of a specified period of employment,
the Committee may decide to what extent leaves of absence for governmental or
military service, illness, temporary disability, or other reasons shall not be
deemed interruptions of continuous employment.
11.3 Effect on Employment and Service. Neither the adoption of this Plan,
its operation, nor any documents describing or referring to this Plan (or any
part thereof) shall confer upon any individual any right to continue in the
employ or service of the Company or an Affiliate or in any way affect any right
and power of the Company or an Affiliate or in any way affect any right and
power of the Company or an Affiliate to terminate the employment or service of
any individual at any time with or without assigning a reason therefor.
11.4 Holding Period Notwithstanding anything to the contrary in the Plan,
Common Stock acquired through the exercise of an Option, SAR or Stock Award
granted to a Committee member may not be disposed of by such member during the
six-month period beginning on the date the Option, SAR or Stock Award is granted
to such Committee member.
11.5 Unfunded Plan. The Plan, insofar as it provides for grants, shall be
unfunded, and the Company shall not be required to segregate any assets that may
at any time be represented by grants under this Plan. Any liability of the
Company to any person with respect to any grant under this Plan shall be based
solely upon any contractual obligations that may be created pursuant to this
Plan. No such obligation of the Company shall be deemed to be secured by any
pledge of, or other encumbrance on, any property of the Company.
11.6 Rules of Construction. Headings are given to the articles and
sections of this Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation, or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
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11.7 Choice of Law. The Plan and all Agreements entered into under the
Plan shall be interpreted under the laws of the State of Delaware, without
regard to its conflict of laws provisions.
ARTICLE XII
Amendment
The Board may amend or terminate this Plan from time to time;
provided, however, that no amendment may become effective until shareholder
approval is obtained if the amendment increases the aggregate number of shares
of Common Stock that may be issued under the Plan. No amendment shall, without
a Participant's consent, adversely affect any rights of such Participant under
any outstanding Stock Award, Option or SAR outstanding at the time such
amendment is made.
ARTICLE XIII
Effective Date of Plan, Duration of Plan
13.1 The Plan became effective as of May 27, 1998 upon adoption by the
Board, subject to approval within one (1) year by the holders of a majority of
the shares of Common Stock.
13.2 Unless previously terminated, the Plan will terminate ten (10) years
after the earlier of (i) the date the Plan is adopted by the Board, or (ii) the
date the Plan is approved by the shareholders, except that Options, SARs and
Stock Awards that are granted under the Plan prior to its termination will
continue to be administered under the terms of the Plan until the Options
terminate or are exercised.
Date: May 27, 1998 TELEBANC FINANCIAL CORPORATION
By: /s/Mitchell H. Caplan
--------------------------------------
Name: Mitchell H. Caplan
--------------------------------------
Title: Vice Chairman, Chief Executive Officer
--------------------------------------
and President
--------------------------------------
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EXHIBIT 99.7
TELEBANC FINANCIAL CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
(Four-Year Vesting)
THIS STOCK OPTION AGREEMENT (the "Option Agreement") is made as of the
_____ day of ________, _____ by and between TELEBANC FINANCIAL CORPORATION, a
Delaware corporation (the "Company"), and ___________, an employee of the
Company or of a subsidiary of the Company (the "Optionee").
WHEREAS, the Board of Directors of the Company (the "Board") has determined
that it is desirable and in its best interests to grant to the Optionee an
option to purchase a certain number of shares of the Company's Common Stock,
$_________ par value (the "Stock") in order to provide the Optionee with an
incentive to advance the interests of the Company, all according to the terms
and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto do hereby agree as follows:
1. Grant of Option. The Company hereby grants to the Optionee the right and
---------------
option (the "Option") to purchase from the Company, on the terms and subject to
the conditions hereinafter set forth, _________ shares of Stock. The Option
shall not constitute an "incentive stock option" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"). The date of
grant of this Option is _________, _____ (the "Grant Date").
2. Price. The purchase price (the "Option Price") for the shares of Stock
-----
subject to the Option granted by this Option Agreement is $__________ per share.
3. Exercise of Option. Except as otherwise provided herein, the Option granted
------------------
pursuant to this Option Agreement shall be subject to exercise as follows:
A. Time of Exercise of Option. The Optionee may exercise the Option (subject
--------------------------
to the limitations on exercise set forth in Subsection G below), in whole or in
part, at any time and from time to time, to the extent that the Option has
become exercisable in accordance with this Section 3.A; provided, that no single
exercise of the Option shall be for less than 100 shares, unless the number of
shares purchased is the total number at the time available for purchase under
this Option. The Option shall be exercisable to the extent of 20% of the shares
specified in Section 1 above from and after the Grant Date, shall become
exercisable with respect to an additional 20% of the total number of shares
subject to the Option on the date that is 12 months after the Grant Date (the
"Vesting Date") and with respect to an additional 20% of the number of such
shares on each of the next two succeeding anniversaries of the Vesting Date, and
shall be exercisable in full on the third anniversary of the Vesting Date, in
each case so long as the Optionee continues to be employed by the Company or any
"subsidiary corporation" thereof within the meaning of Section 424(f) of the
Code (a "Subsidiary") on the Vesting Date and each such anniversary thereof.
<PAGE>
B. Exercise by Optionee. During the lifetime of the Optionee, only the
--------------------
Optionee (or, in the event of the Optionee's legal incapacity or incompetence,
the Optionee's guardian or legal representative) or a permitted transferee of
the Optionee may exercise the Option.
C. Termination of Employment.
-------------------------
(i) In General. The Optionee may exercise the Option only while the Optionee
----------
is employed by the Company or a Subsidiary, or for three months thereafter,
after which the Option shall terminate, except as provided in Subsections
C(ii), D, and E of this Section. Upon the Optionee's termination of
employment, the Optionee may (subject to the limitations on exercise set
forth in Subsection G below) exercise all or any part of the Option, to the
extent that the Option had become exercisable under Section 3.A. hereof
immediately before such termination at any time within three months after
termination of employment and prior to the termination of the Option as set
forth in Subsection F of this Section.
(ii) Termination Following Change in Control. If the Optionee's employment is
---------------------------------------
terminated involuntarily and other than for cause, as defined below, or
voluntarily for "good reason," as defined below, within two years following
a Change in Control, as defined below, the Optionee may (subject to the
limitations on exercise set forth in Subsection G below) exercise the
Option at any time after termination of employment and before the earlier
of three years after such termination of employment or the termination of
the Option, as set forth in Subsection F of this Section, whether or not
the Option had become exercisable under Section 3.A. hereof at the time of
the termination of employment. For purposes of this Subsection C(ii): (A)
termination for "cause" shall mean termination because of the Optionee's
personal dishonesty, incompetence, willful misconduct, breach of fiduciary
duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or final cease-and-desist order, or
material breach of any provision of any employment agreement between the
Optionee and the Company or a Subsidiary; (B) "good reason" shall mean a
material reduction in the position, authority, duties, or responsibilities
of the Optionee from those that existed prior to the change in control or
reduction in the Optionee's job stature as reflected in his title and (C) a
"Change in Control" shall be deemed to occur if any person shall (a)
acquire direct or indirect beneficial ownership of more than 50% of the
total combined voting power with respect to the election of directors of
the issued and outstanding stock of TeleBanc (except that no Change in
Control shall be deemed to have occurred if the persons who were
stockholders of TeleBanc immediately before such acquisition own all or
substantially all of the voting stock or other interests of such person
immediately after such transaction), or (b) have the power (whether as a
result of stock ownership, revocable or irrevocable proxies, contract or
otherwise) or ability to elect or cause the election of directors
consisting at the time of such election of a majority of the Board. A
"person" for this purpose shall mean any person, corporation partnership,
joint venture or other entity or any group (as such term is defined for
purposes of Section 13(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") other than those persons who beneficially own, or have
outstanding options or warrants to acquire, more than five percent of the
voting stock of TeleBanc as of the Grant Date. A person shall be deemed to
be a beneficial owner as that term is used in Rule 13d-3 under the Exchange
Act.
2
<PAGE>
D. Death. In the event of the Optionee's death while employed by the Company
-----
or a Subsidiary, the Option shall be exercisable whether or not it had become
exercisable immediately before the Optionee's death under Section 3.A. hereof
and, in such event or in the event of the Optionee's death during the period
following the termination of employment with the Company or a Subsidiary in
which the Option was exercisable pursuant to Subsection C or E of this Section,
the personal representative or legatees or distributees of the Optionee's
estate, as the case may be, shall have the right (subject to the limitations on
exercise set forth in Subsection G below) to exercise all or part of the Option
at any time within one year after the Optionee's death and before the
termination of the Option as set forth in Subsection F of this Section.
E. Disability. If the Optionee's termination of employment is by reason of
----------
"permanent and total disability" (within the meaning of Section 22(e)(3) of the
Code) the Optionee or the guardian or legal representative shall have the right
(subject to the limitations on exercise set forth in Subsection G below) to
exercise all or any part of the Option, whether or not the Option had become
exercisable under Section 3.A. hereof at the time of the termination of
employment, at any time within one year after such termination of employment and
before the termination of the Option as set forth in Subsection F of this
Section.
F. Termination of Option. The Option shall terminate upon the earliest of (i)
---------------------
the expiration of a period of ten years from the Grant Date; or (ii) three
months after the Optionee's termination of employment with the Company or a
Subsidiary, unless such termination falls within the scope of Subsection C(ii),
D, or E of this Section; or (iii) in the event the Optionee's termination of
employment with the Company or a Subsidiary falls within the scope of Subsection
C(ii), D, or E of this Section, upon the expiration of the period after the
Optionee's termination of employment within which the Option is exercisable as
specified in Subsection C(ii), D, or E of this Section, whichever is applicable.
G. Limitations on Exercise of Option. Notwithstanding the foregoing
---------------------------------
Subsections of this Section, in no event may the Option be exercised, in whole
or in part, after ten years following the Grant Date, or after the occurrence of
an event referred to in Section 7 below that results in termination of the
Option. In no event may the Option be exercised for a fractional share. If (i)
the vesting or exercise of the Option or any other benefit under this Agreement,
together with all other payments or benefits to or for the Optionee under any
other agreement, contract, or understanding heretofore or hereafter entered into
by the Optionee and the Company or any Subsidiary (the "Other Agreements") and
any formal or informal plan or other arrangement for the direct or indirect
provision of compensation to the Optionee (including groups or classes of
employees of which the Optionee is a member), whether or not such compensation
is deferred, is in cash, or is in the form of a benefit to or for the Optionee
(a "Benefit Plan"), would be considered an "excess parachute payment" within the
meaning of Code Section 280G (a "Parachute Payment"), and (ii) the net proceeds
to the Optionee or other person exercising the Option, after reduction for any
applicable federal excise tax imposed by (S) 4999 of the Code and federal income
tax imposed by the Code, would be less than the amount of such net proceeds,
after reduction for federal income taxes, resulting from the application of the
limitation specified in the next sentence, then the extent to which Options
shall become vested and exercisable as a result of a Change in Control shall be
limited to the extent necessary so that no excise tax would imposed by (S) 4999
of the Code. In determining whether any such reduction
3
<PAGE>
is to apply, the Company shall consult with legal and tax counsel, as
appropriate. In the event of a disagreement as to the application of (S)(S)
280G or 4999 of the Code to such payments and benefits, at the request of the
Optionee or other person exercising the Option, the Company will request a
ruling from the Internal Revenue Service or will obtain an opinion of counsel
with respect to such matters, or will take such other action as is reasonably
appropriate to resolve the matter.
4. Method of Exercise of Option. Subject to the terms and conditions of this
----------------------------
Option Agreement, the Option may be exercised by delivering written notice of
exercise to the Company, at its principal office, addressed to the attention of
the Committee, which notice shall specify the number of shares for which the
Option is being exercised, and, except as provided herein, shall be accompanied
by payment in full of the Option Price of the shares for which the Option is
being exercised. Payment of the Option Price for the shares of Stock purchased
pursuant to the exercise of an Option shall be made (i) in cash or in cash
equivalents; (ii) through the tender to the Company of shares of Stock, which
shares shall be valued, for purposes of determining the extent to which the
Option Price has been paid thereby, at their fair market value on the date of
exercise; (iii) by delivering a written direction to the Company that the Option
be exercised pursuant to a "cashless" exercise/sale procedure (pursuant to which
funds to pay for exercise of the option are delivered to the Company by a broker
upon receipt of stock certificates from the Company) or a cashless exercise/loan
procedure (pursuant to which the optionee would obtain a margin loan from a
broker to fund the exercise) through a licensed broker acceptable to the Company
whereby the stock certificate or certificates for the shares of Stock for which
the Option is exercised will be delivered to such broker as the agent for the
individual exercising the Option and the broker will deliver to the Company cash
(or cash equivalents acceptable to the Company) equal to the Option Price for
the shares of Stock purchased pursuant to the exercise of the Option plus the
amount (if any) of federal and other taxes that the Company, may, in its
judgment, be required to withhold with respect to the exercise of the Option; or
(iv) by a combination of the methods described in (i), (ii) and (iii). Payment
in full of the Option Price need not accompany the written notice of exercise if
the Option is exercised pursuant to the cashless exercise/sale procedure
described above. If the person exercising the Option is not the Optionee, such
person shall also deliver with the notice of exercise appropriate proof of his
or her right to exercise the Option. An attempt to exercise the Option granted
hereunder other than as set forth above shall be invalid and of no force and
effect. Promptly after exercise of the Option as provided for above, the
Company shall deliver to the person exercising the Option a certificate or
certificates for the shares of Stock being purchased. If (a) the Option is
exercised before the date that is six months from the Grant Date and (b) a sale
of the shares of Stock purchased under the Option would subject the individual
exercising the Option to liability under Section 16 of the Exchange Act then
such certificate or certificates shall bear a legend restricting the transfer of
the Stock covered thereby until the expiration of six months from the Grant
Date.
5. Limitations on Transfer. The Option is not transferable by the Optionee,
-----------------------
other than by will or the laws of descent and distribution in the event of death
of the Optionee.
6. Rights as Shareholder. Neither the Optionee nor any executor,
---------------------
administrator, distributee, or legatee of the Optionee's estate shall be, or
have any of the rights or privileges of, a shareholder of the Company in respect
of any shares of Stock transferable hereunder unless and until such shares have
been fully paid and certificates representing such shares have been
4
<PAGE>
endorsed, transferred, and delivered and the name of the Optionee (or of such
personal representative, administrator, distributee, or legatee of the
Optionee's estate) has been entered as the shareholder of record on the books
of the Company.
7. Effect of Changes in Capitalization.
-----------------------------------
A. Changes in Stock. If the outstanding shares of Stock are increased or
----------------
decreased or changed into or exchanged for a different number or kind of shares
or other securities of the Company by reason of any recapitalization,
reclassification, stock split-up, combination of shares, exchange of shares,
stock dividend, or other distribution payable in capital stock, or other
increase or decrease in such shares effected without receipt of consideration by
the Company occurring after the Grant Date, a proportionate receipt and
appropriate adjustment shall be made by the Company in the number and kind of
shares subject to the Option, so that the proportionate interest of the Optionee
immediately following such event shall, to the extent practicable, be the same
as immediately prior to such event. Any such adjustment in the Option shall not
change the total Option Price with respect to shares subject to the unexercised
portion of the Option but shall include a corresponding proportionate adjustment
in the Option Price per share. If there is a distribution payable in the
capital stock of a subsidiary corporation of the Company ("Spin-off Shares"), to
the extent consistent with Treasury Regulation Section 1.425-1(a)(6) or the
corresponding provision of any subsequent regulation, the Option shall
thereafter additionally pertain to the number of Spin-off Shares that would have
been received in such distribution by a shareholder of the Company who owned a
number of shares of Common Stock equal to the number of shares that are subject
to the Option at the time of such distribution, and the aggregate Option Price
of the Option shall be allocated between the Spin-off Shares and the Common
Stock in proportion to the relative fair market values of a Spin-off Share and a
share of Common Stock immediately after the distribution of Spin-off Shares.
B. Reorganization in Which the Company Is the Surviving Corporation. Subject to
----------------------------------------------------------------
Subsection C of this Section, if the Company shall be the surviving corporation
in any reorganization, merger, or consolidation of the Company with one or more
other corporations, the Option shall pertain to and apply to the securities to
which a holder of the number of shares of Stock subject to the Option would have
been entitled immediately following such reorganization, merger, or
consolidation, with a corresponding proportionate adjustment of the Option Price
per share so that the aggregate Option Price thereafter shall be the same as the
aggregate Option Price of the shares remaining subject to the Option immediately
prior to such reorganization, merger, or consolidation.
C. Reorganization in Which the Company Is Not the Surviving Corporation or Sale
----------------------------------------------------------------------------
of Assets or Stock. Upon the consolidation or liquidation of the Company, or
- ------------------
upon a merger, consolidation, or reorganization of the Company with one or more
other corporations in which the Company is not the surviving corporation, or
upon a sale of all or substantially all of the assets of the Company to another
corporation, or upon any transaction (including, without limitation, a merger or
reorganization in which the Company is the surviving corporation) approved by
the Board, that results in any person or entity owning 80 percent or more of the
combined voting power of all classes of stock of the Company, the Option
hereunder shall terminate, except to the extent provision is made in connection
with such transaction for the continuation and/or the assumption of the Option,
or for the substitution for the Option of new
5
<PAGE>
options covering the stock of a successor employer corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kinds of
shares and exercise prices, in which event the Option shall continue in the
manner and under the terms so provided. In the event of any such termination
of the Option, the Optionee shall have the right (subject to the limitations
on exercise set forth in Subsection G of Section 3 above), for 30 days
immediately prior to the occurrence of such termination, to exercise the
Option in whole or in part. The Company shall send written notice of an event
that will result in such a termination to the Optionee not later than the time
at which the Company gives notice thereof to its shareholders.
D. Adjustments. Adjustments specified in this Section relating to stock or
-----------
securities of the Company shall be made by the Board or the Committee, whose
determination in that respect shall be final, binding, and conclusive. No
fractional share of Stock or units of other securities shall be issued pursuant
to any such adjustment, and any fractions resulting from any such adjustment
shall be eliminated in each case by rounding downward to the nearest whole share
or unit.
8. General Restrictions. The Company shall not be required to sell or issue
--------------------
any shares of Stock under the Option if the sale or issuance of such shares
would constitute a violation by the individual exercising the Option or by the
Company of any provision of any law or regulation of any governmental authority,
including without limitation any federal or state securities laws or
regulations. If at any time the Company shall determine, in its discretion,
that the listing, registration, or qualification of any shares subject to the
Option upon any securities exchange or under any state or federal law, or the
consent or approval of any government regulatory body, is necessary or desirable
as a condition of, or in connection with, the issuance or purchase of shares
hereunder, the Option may not be exercised in whole or in part unless such
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the company, and
any delay caused thereby shall in no way affect the date of termination of the
Option. Specifically, in connection with the Securities Act of 1933 (as now in
effect or as hereafter amended), unless a registration statement under such Act
is in effect with respect to the shares of Stock covered by the Option, the
Company shall not be required to sell or issue such shares unless the Company
has received evidence satisfactory to it that the holder of the Option may
acquire such shares pursuant to an exemption from registration under such Act.
Any determination in this connection by the Company shall be final, binding, and
conclusive. The Company may, but shall in no event be obligated to, register
any securities covered hereby pursuant to the Securities Act of 1933 (as now in
effect or as hereafter amended). The Company shall not be obligated to take any
affirmative action in order to cause the exercise of the Option or the issuance
of shares pursuant thereto to comply with any law or regulation of any
governmental authority. As to any jurisdiction that expressly imposes the
requirement that the Option shall not be exercisable unless and until the shares
of Stock covered by the Option are registered or are subject to an available
exemption from registration, the exercise of the Option (under circumstances in
which the laws of such jurisdiction apply) shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.
9. Withholding of Taxes. The parties hereto recognize that the Company or a
--------------------
Subsidiary may be obligated to withhold federal and local income taxes and
Social Security taxes to the extent that the Optionee realizes ordinary income
in connection with the exercise of
6
<PAGE>
the Option. The Optionee agrees that the Company or a Subsidiary may withhold
amounts needed to cover such taxes from payments otherwise due and owing to
the Optionee, and also agrees that upon demand the Optionee will promptly pay
to the Company or a Subsidiary having such obligation any additional amounts
as may be necessary to satisfy such withholding tax obligation. Such payment
shall be made in cash or cash equivalent or by the withholding of shares of
Stock
10. Disclaimer of Rights. No provision in this Option Agreement shall be
--------------------
construed to confer upon the Optionee the right to be employed by the Company or
any Subsidiary, or to interfere in any way with the right and authority of the
Company or any Subsidiary either to increase or decrease the compensation of the
Optionee at any time, or to terminate any employment or other relationship
between the Optionee and the Company or any Subsidiary.
11. Interpretation of this Option Agreement. All decisions and interpretations
---------------------------------------
made by the Committee or the Board with regard to any question arising under
this Option Agreement shall be binding and conclusive on the Company and the
Optionee and any other person entitled to exercise the Option as provided for
herein.
12. Governing Law. This Option Agreement is executed pursuant to and shall be
-------------
governed by the laws of the State of Delaware (but not including the choice of
law rules thereof).
13. Binding Effect. Subject to all restrictions provided for in this Option
--------------
Agreement and by applicable law relating to assignment and transfer of this
Option Agreement and the option provided for herein, this Option Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, successors, and assigns.
14. Notice. Any notice hereunder by the Optionee to the Company shall be in
------
writing and shall be deemed duly given if mailed or delivered to the Company at
its principal office, addressed to the attention of the Committee, or if so
mailed or delivered to such other address as the Company may hereafter designate
by notice to the Optionee. Any notice hereunder by the Company to the Optionee
shall be in writing and shall be deemed duly given if mailed or delivered to the
Optionee at the address specified below by the Optionee for such purpose, or if
so mailed or delivered to such other address as the Optionee may hereafter
designate by written notice given to the Company.
15. Entire Agreement. This Option Agreement constitutes the entire agreement
----------------
and supersedes all prior understandings and agreements, written or oral, of the
parties hereto with respect to the subject matter hereof, other than any written
employment agreement to which the Optionee is a party. Neither this Option
Agreement nor any term hereof may be amended, waived, discharged, or terminated
except by a written instrument signed by the Company and the Optionee; provided,
however, that the Company unilaterally may waive any provision hereof in writing
to the extent that such waiver does not adversely affect the interests of the
Optionee hereunder, but no such waiver shall operate as or be construed to be a
subsequent waiver of the same provision or a waiver of any other provision
hereof.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Option
Agreement, or caused this Option Agreement to be duly executed on their behalf,
as of the day and year first above written.
ATTEST: TELEBANC FINANCIAL CORPORATION
- --------------------------- By:
-------------------------------------
Title:
----------------------------------
OPTIONEE:
----------------------------------------
ADDRESS FOR NOTICE TO OPTIONEE:
----------------------------------------
Number Street
----------------------------------------
City State Zip Code
8
<PAGE>
EXHIBIT 99.8
E*TRADE GROUP, INC.
STOCK OPTION ASSUMPTION AGREEMENT
TELEBANC FINANCIAL CORPORATION
1994 STOCK OPTION PLAN
AND
1997 STOCK OPTION PLAN
Optionee: ((First_Name)) ((Last_Name)),
STOCK OPTION ASSUMPTION AGREEMENT effective as of the 12th day of
January, 2000 by E*TRADE Group, Inc., a Delaware corporation ("E*TRADE").
WHEREAS, the undersigned individual ("Optionee") holds one or more
outstanding options to purchase shares of the common stock of TeleBanc Financial
Corporation, a Delaware corporation ("TeleBanc"), which were granted to Optionee
under the TeleBanc 1994 Stock Option Plan and/or the TeleBanc 1997 Stock Option
Plan (the "Plans") and which rights are evidenced by a stock option agreement
(the "Option Agreement").
WHEREAS, TeleBanc has been acquired by E*TRADE through the merger of
Turbo Acquisition Corp. ("Merger Sub") with and into TeleBanc, whereby TeleBanc
has become a wholly-owned subsidiary of E*TRADE (the "Merger") pursuant to the
Agreement and Plan of Merger and Reorganization, by and between E*TRADE,
TeleBanc and Merger Sub (the "Merger Agreement").
WHEREAS, the provisions of the Merger Agreement require E*TRADE to
assume all obligations of TeleBanc under all outstanding options under the Plans
at the consummation of the Merger and to issue to the holder of each outstanding
option an agreement evidencing the assumption of such option.
WHEREAS, pursuant to the provisions of the Merger Agreement, the
exchange ratio (the "Exchange Ratio") in effect for the Merger is 1.05 shares of
E*TRADE common stock, par value $0.01 par value per share ("E*TRADE Stock"), for
each outstanding share of TeleBanc common stock ("TeleBanc Stock").
WHEREAS, this Agreement became effective immediately upon the
consummation of the Merger (the "Effective Time") in order to reflect certain
adjustments to Optionee's outstanding options which have become necessary by
reason of the assumption of those options by E*TRADE in connection with the
Merger.
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of TeleBanc Stock subject to the options
held by Optionee immediately prior to the Effective Time (the "TeleBanc
Options") and the exercise price payable per share are set forth below. E*TRADE
hereby assumes, as of the Effective
<PAGE>
Time, all the duties and obligations of TeleBanc under each of the TeleBanc
Options. In connection with such assumption, the number of shares of E*TRADE
Stock purchasable under each TeleBanc Option hereby assumed and the exercise
price payable thereunder have been adjusted to reflect the Exchange Ratio.
Accordingly, the number of shares of E*TRADE Stock subject to each TeleBanc
Option hereby assumed shall be as specified for that option below, and the
adjusted exercise price payable per share of E*TRADE Stock under the assumed
TeleBanc Option shall also be as indicated for that option below.
- --------------------------------------------------------------------------------
TELEBANC STOCK OPTIONS E*TRADE ASSUMED OPTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
# of Shares of Exercise Price # of Shares of Adjusted Exercise
TeleBanc Common per Share E*TRADE Common Price per Share
Stock Stock
- --------------------------------------------------------------------------------
TeleBanc Shares $TeleBanc Price E*TRADE Shares $E*TRADE Price
- --------------------------------------------------------------------------------
2. The intent of the foregoing adjustments to each assumed TeleBanc
Option is to assure that the spread between the aggregate fair market value of
the shares of E*TRADE Stock purchasable under each such option and the aggregate
exercise price as adjusted pursuant to this Agreement will, immediately after
the consummation of the Merger, be not less than the spread which existed,
immediately prior to the Merger, between the then aggregate fair market value of
the TeleBanc Stock subject to the TeleBanc Option and the aggregate exercise
price in effect at such time under the Option Agreement. Such adjustments are
also intended to preserve, immediately after the Merger, on a per share basis,
the same ratio of exercise price per option share to fair market value per share
which existed under the TeleBanc Option immediately prior to the Merger.
3. The following provisions shall govern each TeleBanc Option hereby
assumed by E*TRADE:
(a) Unless the context otherwise requires, all references in the
Option Agreements and, if applicable, in the Plans (as incorporated into
such Option Agreements) (i) to "TeleBanc" or the "Company" shall mean
E*TRADE, (ii) to "Share" shall mean a share of E*TRADE Stock, (iii) to
"Stock" or "Common Stock" shall mean E*TRADE Stock, (iv) to the "Board"
shall mean the Board of Directors of E*TRADE and (v) to the "Committee"
shall mean the Compensation Committee of the E*TRADE Board of Directors.
(b) The grant date and the expiration date of each assumed
TeleBanc Option and all other provisions which govern either the exercise
or the termination of the assumed TeleBanc Option shall remain the same as
set forth in the Option Agreements applicable to that option, and the
provisions of the Option Agreements shall accordingly govern and control
Optionee's rights under this Agreement to purchase E*TRADE Stock.
2
<PAGE>
(c) Your options assumed by E*TRADE which were originally
designated in your Option Agreement as incentive stock options shall remain
such to the maximum extent allowed by law.
(d) Pursuant to the terms of your Option Agreement and the
Plans, none of your options assumed by E*TRADE in connection with the
transaction will vest and become exercisable on an accelerated basis upon
the consummation of the Merger. Each TeleBanc Option shall be assumed by
E*TRADE as of the Effective Time. Each such assumed TeleBanc Option shall
thereafter continue to vest for any remaining unvested shares of E*TRADE
Stock subject to that option in accordance with the same installment
vesting schedule in effect under the applicable Option Agreements
immediately prior to the Effective Time; provided, however, that the number
of shares subject to each such installment shall be adjusted to reflect the
Exchange Ratio.
(e) For purposes of applying any and all provisions of the
Option Agreements and/or the Plans relating to Optionee's status as an
employee or a consultant of TeleBanc, Optionee shall be deemed to continue
in such status as an employee or a consultant for so long as Optionee
renders services as an employee or a consultant to E*TRADE or any present
or future E*TRADE subsidiary. Accordingly, the provisions of the Option
Agreements governing the termination of the assumed TeleBanc Options or the
applicable repurchase rights of unvested shares upon Optionee's cessation
of service as an employee or a consultant of TeleBanc shall hereafter be
applied on the basis of Optionee's cessation of employee or consultant
status with E*TRADE and its subsidiaries, and each assumed TeleBanc Option
shall accordingly terminate, within the designated time period in effect
under the Option Agreements for that option, generally a three (3)-month
period, following such cessation of service as an employee or a consultant
of E*TRADE and its subsidiaries.
(f) The adjusted exercise price payable for the E*TRADE Stock
subject to each assumed TeleBanc Option shall be payable in any of the
forms authorized under the Incentive Agreement applicable to that option.
For purposes of determining the holding period of any shares of E*TRADE
Stock delivered in payment of such adjusted exercise price, the period for
which such shares were held as TeleBanc Stock prior to the Merger shall be
taken into account.
(g) In order to exercise each assumed TeleBanc Option, Optionee
must deliver to E*TRADE a written notice of exercise in which the number of
shares of E*TRADE Stock to be purchased thereunder must be indicated. The
exercise notice must be accompanied by payment of the adjusted exercise
price payable for the purchased shares of E*TRADE Stock and should be
delivered to E*TRADE at the following address:
3
<PAGE>
E*TRADE Group, Inc.
4500 Bohannon Drive
Menlo Park, California 94025
Attention: Stock Plan Administration
4. Except to the extent specifically modified by this Option
Assumption Agreement, all of the terms and conditions of each Option Agreement
as in effect immediately prior to the Merger shall continue in full force and
effect and shall not in any way be amended, revised or otherwise affected by
this Stock Option Assumption Agreement.
IN WITNESS WHEREOF, E*TRADE Group, Inc. has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly-authorized officer
as of the _______ day of ______________, 2000.
E*TRADE GROUP, INC.
By: _____________________________
Name: ___________________________
Title: __________________________
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock Option
Assumption Agreement and understands that all rights and liabilities with
respect to each of his or her TeleBanc Options hereby assumed by E*TRADE are as
set forth in the Option Agreement, the Plans, as applicable, and such Stock
Option Assumption Agreement.
_______________________________________
((First_Name)) ((Last_Name)), OPTIONEE
DATED: ________ ___, 2000
4
<PAGE>
EXHIBIT 99.9
FULL ACCELERATION
E*TRADE GROUP, INC.
STOCK OPTION ASSUMPTION AGREEMENT
TELEBANC FINANCIAL CORPORATION
1997 STOCK OPTION PLAN
AND
1998 STOCK INCENTIVE PLAN
Optionee: ((First_Name)) ((Last_Name)),
STOCK OPTION ASSUMPTION AGREEMENT effective as of the 12th day of
January, 2000 by E*TRADE Group, Inc., a Delaware corporation ("E*TRADE").
WHEREAS, the undersigned individual ("Optionee") holds one or more
outstanding options to purchase shares of the common stock of TeleBanc Financial
Corporation, a Delaware corporation ("TeleBanc"), which were granted to Optionee
under the TeleBanc 1998 Stock Incentive Plan and/or the TeleBanc 1997 Stock
Option Plan (the "Plans") and are each evidenced by a Stock Option Agreement
(the "Option Agreement").
WHEREAS, TeleBanc has been acquired by E*TRADE through the merger of
Turbo Acquisition Corp. ("Merger Sub") with and into TeleBanc, whereby TeleBanc
has become a wholly-owned subsidiary of E*TRADE (the "Merger") pursuant to the
Agreement and Plan of Merger and Reorganization, by and between E*TRADE,
TeleBanc and Merger Sub (the "Merger Agreement").
WHEREAS, the provisions of the Merger Agreement require E*TRADE to
assume all obligations of TeleBanc under all outstanding options under the Plans
at the consummation of the Merger and to issue to the holder of each outstanding
option an agreement evidencing the assumption of such option.
WHEREAS, pursuant to the provisions of the Merger Agreement, the
exchange ratio (the "Exchange Ratio") in effect for the Merger is 1.05 shares of
E*TRADE common stock, par value $0.01 par value per share ("E*TRADE Stock"), for
each outstanding share of TeleBanc common stock ("TeleBanc Stock").
WHEREAS, this Agreement became effective immediately upon the
consummation of the Merger (the "Effective Time") in order to reflect certain
adjustments to Optionee's outstanding options which have become necessary by
reason of the assumption of those options by E*TRADE in connection with the
Merger.
NOW, THEREFORE, it is hereby agreed as follows:
<PAGE>
1. The number of shares of TeleBanc Stock subject to the options
held by Optionee immediately prior to the Effective Time (the "TeleBanc
Options") and the exercise price payable per share are set forth below. E*TRADE
hereby assumes, as of the Effective Time, all the duties and obligations of
TeleBanc under each of the TeleBanc Options. In connection with such assumption,
the number of shares of E*TRADE Stock purchasable under each TeleBanc Option
hereby assumed and the exercise price payable thereunder have been adjusted to
reflect the Exchange Ratio. Accordingly, the number of shares of E*TRADE Stock
subject to each TeleBanc Option hereby assumed shall be as specified for that
option below, and the adjusted exercise price payable per share of E*TRADE Stock
under the assumed TeleBanc Option shall also be as indicated for that option
below.
- --------------------------------------------------------------------------------
TELEBANC STOCK OPTIONS E*TRADE ASSUMED OPTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
# of Shares of Exercise Price # of Shares of Adjusted Exercise
TeleBanc Common per Share E*TRADE Common Price per Share
Stock Stock
- --------------------------------------------------------------------------------
TeleBanc Shares $TeleBanc Price E*TRADE Shares $E*TRADE Price
- --------------------------------------------------------------------------------
2. The intent of the foregoing adjustments to each assumed TeleBanc
Option is to assure that the spread between the aggregate fair market value of
the shares of E*TRADE Stock purchasable under each such option and the aggregate
exercise price as adjusted pursuant to this Agreement will, immediately after
the consummation of the Merger, be not less than the spread which existed,
immediately prior to the Merger, between the then aggregate fair market value of
the TeleBanc Stock subject to the TeleBanc Option and the aggregate exercise
price in effect at such time under the Option Agreement. Such adjustments are
also intended to preserve, immediately after the Merger, on a per share basis,
the same ratio of exercise price per option share to fair market value per share
which existed under the TeleBanc Option immediately prior to the Merger.
3. The following provisions shall govern each TeleBanc Option hereby
assumed by E*TRADE:
(a) Unless the context otherwise requires, all references
in each Option Agreement and, if applicable, in the Plans (as incorporated
into such Option Agreement) (i) to "TeleBanc" or the "Company" shall mean
E*TRADE, (ii) to "Share" shall mean share of E*TRADE Stock, (iii) to
"Stock" or "Common Stock" shall mean E*TRADE Stock, (iv) to the "Board"
shall mean the Board of Directors of E*TRADE and (v) to the "Committee"
shall mean the Compensation Committee of the E*TRADE Board of Directors.
(b) The grant date and the expiration date of each assumed
TeleBanc Option and all other provisions which govern either the exercise
or the termination of the assumed TeleBanc Option shall remain the same as
set forth in the Option Agreements applicable to that option, and the
provisions of the Option
2
<PAGE>
Agreements shall accordingly govern and control Optionee's rights under
this Agreement to purchase E*TRADE Stock.
(c) Your TeleBanc Option shall be assumed by E*TRADE as of
the Effective Time. Pursuant to the terms of the Option Agreement, your
option assumed by E*TRADE in connection with the transaction will become
fully vested and exercisable upon the consummation of the Merger.
(d) Your option as assumed by E*TRADE which was originally
designated on your Notice of Grant as an Incentive Option shall remain an
Incentive Stock Option to the maximum extent allowed by law. The
acceleration of vesting of your option may have caused a portion of your
Incentive Option to become a non-statutory option. In such an instance, the
portion of the Incentive Option that has been converted into a non-
statutory option is identified on the attached exhibit.
(e) For purposes of applying any and all provisions of the
Option Agreement and/or the Plans relating to Optionee's status as an
employee or a consultant of TeleBanc, Optionee shall be deemed to continue
in such status as an employee or a consultant for so long as Optionee
renders services as an employee or a consultant to E*TRADE or any present
or future E*TRADE subsidiary. Accordingly, the provisions of the Option
Agreement governing the termination of the assumed TeleBanc Options upon
Optionee's cessation of service as an employee or a consultant of TeleBanc
shall hereafter be applied on the basis of Optionee's cessation of employee
or consultant status with E*TRADE and its subsidiaries, and each assumed
TeleBanc Option shall accordingly terminate, within the designated time
period in effect under the Option Agreement for that option, generally a
three (3)-month period, following such cessation of service as an employee
or a consultant of E*TRADE and its subsidiaries.
(f) The adjusted exercise price payable for the E*TRADE
Stock subject to each assumed TeleBanc Option shall be payable in any of
the forms authorized under the Option Agreement applicable to that option.
For purposes of determining the holding period of any shares of E*TRADE
Stock delivered in payment of such adjusted exercise price, the period for
which such shares were held as TeleBanc Stock prior to the Merger shall be
taken into account.
(g) In order to exercise each assumed TeleBanc Option,
Optionee must deliver to E*TRADE a written notice of exercise in which the
number of shares of E*TRADE Stock to be purchased thereunder must be
indicated. The exercise notice must be accompanied by payment of the
adjusted exercise price payable for the purchased shares of E*TRADE Stock
and should be delivered to E*TRADE at the following address:
3
<PAGE>
E*TRADE Group, Inc.
4500 Bohannon Drive
Menlo Park, California 94025
Attention: Stock Administration
4. Except to the extent specifically modified by this Option
Assumption Agreement, all of the terms and conditions of each Option Agreement
as in effect immediately prior to the Merger shall continue in full force and
effect and shall not in any way be amended, revised or otherwise affected by
this Stock Option Assumption Agreement.
IN WITNESS WHEREOF, E*TRADE Group, Inc. has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly-authorized officer
as of the ______ day of ___________, 2000.
E*TRADE GROUP, INC.
By: __________________________________
Name: ________________________________
Title: _______________________________
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock Option
Assumption Agreement and understands that all rights and liabilities with
respect to each of his or her TeleBanc Options hereby assumed by E*TRADE are as
set forth in the Option Agreement, the Plans, as applicable, and such Stock
Option Assumption Agreement.
______________________________________
((First_Name)) ((Last_Name)), OPTIONEE
DATED: __________________, 2000
4
<PAGE>
EXHIBIT 99.10
INVOLUNTARY TERMINATION
E*TRADE GROUP, INC.
STOCK OPTION ASSUMPTION AGREEMENT
TELEBANC FINANCIAL CORPORATION
1994 STOCK OPTION PLAN
AND
1997 STOCK OPTION PLAN
Optionee: ((First_Name)) ((Last_Name)),
STOCK OPTION ASSUMPTION AGREEMENT effective as of the 12th day of
January, 2000 by E*TRADE Group, Inc., a Delaware corporation ("E*TRADE").
WHEREAS, the undersigned individual ("Optionee") holds one or more
outstanding options to purchase shares of the common stock of TeleBanc Financial
Corporation, a Delaware corporation ("TeleBanc"), which were granted to Optionee
under the TeleBanc 1997 Stock Option Plan (the "Plan") and are each evidenced by
a Stock Option Agreement (the "Option Agreement").
WHEREAS, TeleBanc has been acquired by E*TRADE through the merger of
Turbo Acquisition Corp. ("Merger Sub") with and into TeleBanc, whereby TeleBanc
has become a wholly-owned subsidiary of E*TRADE (the "Merger") pursuant to the
Agreement and Plan of Merger, by and between E*TRADE, TeleBanc and Merger Sub
(the "Merger Agreement").
WHEREAS, the provisions of the Merger Agreement require E*TRADE to
assume all obligations of TeleBanc under all outstanding options under the Plan
at the consummation of the Merger and to issue to the holder of each outstanding
option an agreement evidencing the assumption of such option.
WHEREAS, pursuant to the provisions of the Merger Agreement, the
exchange ratio (the "Exchange Ratio") in effect for the Merger is 1.05 shares of
E*TRADE common stock ("E*TRADE Stock") for each outstanding share of TeleBanc
common stock ("TeleBanc Stock").
WHEREAS, this Agreement became effective immediately upon the
consummation of the Merger (the "Effective Time") in order to reflect certain
adjustments to Optionee's outstanding options which have become necessary by
reason of the assumption of those options by E*TRADE in connection with the
Merger.
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of TeleBanc Stock subject to the options
held by Optionee immediately prior to the Effective Time (the "TeleBanc
Options") and the exercise price payable per share are set forth below. E*TRADE
hereby assumes, as of the Effective
<PAGE>
Time, all the duties and obligations of TeleBanc under each of the TeleBanc
Options. In connection with such assumption, the number of shares of E*TRADE
Stock purchasable under each TeleBanc Option hereby assumed and the exercise
price payable thereunder have been adjusted to reflect the Exchange Ratio.
Accordingly, the number of shares of E*TRADE Stock subject to each TeleBanc
Option hereby assumed shall be as specified for that option below, and the
adjusted exercise price payable per share of E*TRADE Stock under the assumed
TeleBanc Option shall also be as indicated for that option below.
- -------------------------------------------------------------------------------
TELEBANC STOCK OPTIONS E*TRADE ASSUMED OPTIONS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
# of Shares of # of Shares of
TeleBanc Exercise Price E*TRADE Adjusted Exercise
Common Stock per Share Common Stock Price per Share
- -------------------------------------------------------------------------------
TeleBanc Shares $TeleBanc Price E*TRADE Shares $E*TRADE Price
- -------------------------------------------------------------------------------
2. The intent of the foregoing adjustments to each assumed TeleBanc
Option is to assure that the spread between the aggregate fair market value of
the shares of E*TRADE Stock purchasable under each such option and the aggregate
exercise price as adjusted pursuant to this Agreement will, immediately after
the consummation of the Merger, be not less than the spread which existed,
immediately prior to the Merger, between the then aggregate fair market value of
the TeleBanc Stock subject to the TeleBanc Option and the aggregate exercise
price in effect at such time under the Option Agreement. Such adjustments are
also intended to preserve, immediately after the Merger, on a per share basis,
the same ratio of exercise price per option share to fair market value per share
which existed under the TeleBanc Option immediately prior to the Merger.
3. The following provisions shall govern each TeleBanc Option hereby
assumed by E*TRADE:
(a) Unless the context otherwise requires, all references
in each Option Agreement and, if applicable, in the Plan (as incorporated
into such Option Agreement) (i) to "TeleBanc" or the "Company" shall mean
E*TRADE, (ii) to "Share" shall mean a share of E*TRADE Stock, (iii) to
"Common Stock" or "Stock" shall mean E*TRADE Stock, (iv) to the "Board"
shall mean the Board of Directors of E*TRADE and (v) to the "Committee"
shall mean the Compensation Committee of the E*TRADE Board of Directors.
(b) The grant date and the expiration date of each assumed
TeleBanc Option and all other provisions which govern either the exercise
or the termination of the assumed TeleBanc Option shall remain the same as
set forth in the Option Agreement applicable to that option, and the
provisions of the Option Agreement shall accordingly govern and control
Optionee's rights under this Agreement to purchase E*TRADE Stock.
(c) Your options assumed by E*TRADE which were originally
designated in your Option Agreement as incentive stock options shall remain
such to the maximum extent allowed by law.
2
<PAGE>
(d) Each TeleBanc Option shall be assumed by E*TRADE as of
the Effective Time. Pursuant to the terms of your Option Agreement, none of
your TeleBanc Options will vest or become exercisable on an accelerated
basis because of the transaction. Each such assumed TeleBanc Option shall
thereafter continue to vest for any remaining unvested shares of E*TRADE
Stock subject to that option in accordance with the same installment
vesting schedule in effect under the applicable Option Agreement
immediately prior to the Effective Time; provided, however, that the number
of shares subject to each such installment shall be adjusted to reflect the
Exchange Ratio. As provided in you Option Agreement, if your employment is
terminated under certain circumstances within two years following the
Effective Time, the remaining unvested portion of your TeleBanc Options
will vest and become exercisable until the earlier of the Expiration Date
or three years from the date of your termination.
(e) For purposes of applying any and all provisions of the
Option Agreement and/or the Plan relating to Optionee's status as an
employee or a consultant of TeleBanc, Optionee shall be deemed to continue
in such status as an employee or a consultant for so long as Optionee
renders services as an employee or a consultant to E*TRADE or any present
or future E*TRADE subsidiary. Accordingly, the provisions of the Option
Agreement governing the termination of the assumed TeleBanc Options upon
Optionee's cessation of service as an employee or a consultant of TeleBanc
shall hereafter be applied on the basis of Optionee's cessation of employee
or consultant status with E*TRADE and its subsidiaries, and each assumed
TeleBanc Option shall accordingly terminate, within the designated time
period in effect under the Option Agreement for that option, generally a
three (3)-month period, following such cessation of service as an employee
or a consultant of E*TRADE and its subsidiaries.
(f) The adjusted exercise price payable for the E*TRADE
Stock subject to each assumed TeleBanc Option shall be payable in any of
the forms authorized under the Option Agreement applicable to that option.
For purposes of determining the holding period of any shares of E*TRADE
Stock delivered in payment of such adjusted exercise price, the period for
which such shares were held as TeleBanc Stock prior to the Merger shall be
taken into account.
(g) In order to exercise each assumed TeleBanc Option,
Optionee must deliver to E*TRADE a written notice of exercise in which the
number of shares of E*TRADE Stock to be purchased thereunder must be
indicated. The exercise notice must be accompanied by payment of the
adjusted exercise price payable for the purchased shares of E*TRADE Stock
and should be delivered to E*TRADE at the following address:
E*TRADE Group, Inc.
4500 Bohannon Drive
Menlo Park, CA 94025
Attention: Stock Administration
3
<PAGE>
Except to the extent specifically modified by this Option Assumption
Agreement, all of the terms and conditions of each Option Agreement as in effect
immediately prior to the Merger shall continue in full force and effect and
shall not in any way be amended, revised or otherwise affected by this Stock
Option Assumption Agreement.
IN WITNESS WHEREOF, E*TRADE Group, Inc. has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly-authorized officer
as of the _______ day of ______________, 2000.
E*TRADE GROUP, INC.
By: __________________________________
Name: ________________________________
Title: _______________________________
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock Option
Assumption Agreement and understands that all rights and liabilities with
respect to each of his or her TeleBanc Options hereby assumed by E*TRADE are as
set forth in the Option Agreement, the Plans, as applicable, and such Stock
Option Assumption Agreement.
______________________________________
((First_Name)) ((Last_Name)), OPTIONEE
DATED: ________ ___, 2000
4
