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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
Schedule 13D
Under the Securities Exchange Act of 1934
Telebanc Financial Corporation
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(Name of Issuer)
Common Stock, $.01 Par Value
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(Title of Class of Securities)
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(CUSIP Number)
Thomas A. Bevilacqua
E*TRADE Group, Inc.
Four Embarcadero Place
2400 Geng Road
Palo Alto, CA 94303
(650) 842-2500
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
May 31, 1999
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(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box [_]
(Continued on following pages)
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CUSIP NO. 13D
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1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
E*TRADE Group, Inc.
I.R.S. I.D. # -
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [_]
(b) [_]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
00
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [_]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
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7 SOLE VOTING POWER
NUMBER OF
SHARES 3,369,881
BENEFICIALLY -----------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 2,681,639
PERSON -----------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
3,369,881
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10 SHARED DISPOSITIVE POWER
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,051,520
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES*
[_]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
26.4%
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14 TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT
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Neither the filing of this Schedule 13D nor any of its contents shall be deemed
to constitute an admission by E*TRADE Group, Inc. that it is the beneficial
owner of any of the Common Stock of Telebanc Financial Corporation referred to
herein for purposes of Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Act"), or for any other purpose, and such beneficial ownership is
expressly disclaimed.
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Item 1. Security and Issuer.
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This statement on Schedule 13D relates to the common stock, par value
$.01 per share (the "Issuer Common Stock"), of Telebanc Financial Corporation, a
Delaware corporation (the "Issuer"). The principal executive offices of the
Issuer are located at 1111 North Highland Street, Arlington, VA 22201-2807.
Item 2. Identity and Background.
------------------------
(a) The name of the person filing this statement is E*TRADE Group, Inc., a
Delaware corporation ("E*TRADE").
(b) The address of the principal office and principal business of E*TRADE
is Four Embarcadero Place, 2400 Geng Road, Palo Alto, CA 94303.
(c) E*TRADE, through its wholly-owned subsidiary, E*TRADE Securities,
Inc., is a leading provider of online investing services and has established a
popular, branded destination Web site for self-directed investors. E*TRADE
believes that its technology can be adapted to provide transaction-enabling
services related to other aspects of electronic commerce. Set forth in Schedule
A is the name and present principle occupation or employment and the name,
principal business and address of any corporation or other organization in which
such employment is conducted, of each of E*TRADE's directors and executive
officers, as of the date hereof.
(d) During the past five years, neither E*TRADE nor, to E*TRADE's
knowledge, any person named in Schedule A to this Statement, has been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) During the past five years, neither E*TRADE nor, to E*TRADE's
knowledge, any person named in Schedule A to this Statement, was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
as a result of which such person was or is subject to a judgment, decree or
final order enjoining future violations of or prohibiting or mandating activity
subject to Federal or State securities laws or finding any violation with
respect to such laws.
(f) Not applicable.
Item 3. Source and Amount of Funds or Other Consideration.
--------------------------------------------------
Pursuant to an Agreement and Plan of Merger and Reorganization dated
as of May 31, 1999 (the "Reorganization Agreement"), by and among E*TRADE, Turbo
Acquisition Corp., a Delaware corporation and wholly owned subsidiary of E*TRADE
("Merger Sub"), and the Issuer, and subject to the conditions set forth therein,
Merger Sub will be merged with and into the Issuer (the "Merger"), with each
share of Issuer Common Stock being converted into the right to receive 2.1
shares of E*TRADE Common Stock (the "Exchange Ratio"). The Merger is subject to
the approval of the Reorganization Agreement by the stockholders of Issuer, the
approval of an increase in the authorized capital stock of E*TRADE by its
stockholders, the approval of the Merger by the Office of Thrift Supervision and
any other required regulatory
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approvals, and the satisfaction or waiver of certain other conditions as more
fully described in the Reorganization Agreement. The foregoing summary of the
Merger is qualified in its entirety by reference to the copy of the
Reorganization Agreement included as Exhibit 1 to this Schedule 13D and
incorporated herein in its entirety by reference.
Item 4. Purpose of Transaction.
-----------------------
(a) - (b) As described in Item 3 above, this statement relates to the
Merger of Merger Sub, a wholly owned subsidiary of E*TRADE, with and into Issuer
in a statutory merger pursuant to the Delaware General Corporation Law. At the
effective time of the Merger, the separate existence of Merger Sub will cease to
exist and Issuer will continue as the surviving corporation and as a wholly
owned subsidiary of E*TRADE (the "Surviving Corporation"). Holders of
outstanding Issuer Common Stock will receive, in exchange for each share of
Issuer Common Stock held by them immediately prior to the Merger, 2.1 shares of
E*TRADE Common Stock. E*TRADE will assume the Issuer's 1994 Stock Option Plan,
1997 Stock Option Plan and 1998 Stock Incentive Plan, each as amended, as well
as the outstanding options issued under such plans or certain other agreements.
As an inducement to E*TRADE to enter into the Reorganization
Agreement, certain stockholders (collectively, the "Stockholder Agreement
Stockholders") of Telebanc Financial Corporation have entered into a Stockholder
Agreement, dated as of May 31, 1999 (the "Stockholder Agreement"), with E*TRADE
and have, by executing the Stockholder Agreement, irrevocably appointed E*TRADE
(or any nominee of E*TRADE) as his, her or its lawful attorney and proxy. Such
proxy gives E*TRADE the limited right to vote each of the 2,681,639 shares of
Issuer Common Stock beneficially and collectively owned, including options and
warrants exercisable within 60 days as reported in Issuer's 1999 Definitive
Proxy Statement, by the Stockholder Agreement Stockholders in all matters
related to the Merger. The shared voting power with the Stockholder Agreement
Stockholders of Issuer relates to 2,681,639 shares (including options and
warrants exercisable within 60 days as reported in Issuer's 1999 Definitive
Proxy Statement) of Issuer Common Stock (the "Shares"). The Stockholder
Agreement Stockholders and the number of Shares beneficially owned by each of
them is set forth in Schedule B hereto which is hereby incorporated by this
reference. The foregoing summary of the Stockholder Agreement is qualified in
its entirety by reference to the copy of the form of Stockholder Agreement
included as Exhibit 2 to this Schedule 13D and incorporated herein in its
entirety by reference.
In exercising its right to vote the Shares as lawful attorney and
proxy of the Stockholder Agreement Stockholders, E*TRADE (or any nominee of
E*TRADE) will be limited, at every Issuer stockholders meeting and every written
consent in lieu of such meeting to vote the Shares in favor of approval of the
Merger and the Reorganization Agreement. The Stockholder Agreement Stockholders
may vote the Shares on all other matters. The Stockholder Agreement terminates
upon the earlier to occur of (i) such date and time as the Merger shall become
effective in accordance with the terms and provisions of the Reorganization
Agreement and (ii) the date of termination of the Reorganization Agreement.
In connection with the Reorganization Agreement, E*TRADE and Issuer
entered into a Stock Option Agreement, dated as of May 31, 1999 ("Option
Agreement"). The Option
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Agreement grants E*TRADE the right, under certain conditions, to purchase up to
3,369,881 shares of Issuer Common Stock at a price of $93.45 per share. Subject
to certain conditions, the Option Agreement may be exercised in whole or in part
by E*TRADE after the occurrence of any of the events described in Sections
7.3(b) of the Reorganization Agreement or if a Takeover Proposal or Trigger
Event is consummated as set forth in Section 7.3(c) of the Reorganization
Agreement. The foregoing summary of the Option Agreement is qualified in its
entirety by reference to the copy of the Option Agreement included as Exhibit 3
to this Schedule 13D and incorporated herein in its entirety by reference.
(c) Not applicable.
(d) Upon consummation of the Merger, the directors of the Surviving
Corporation shall be the directors of Merger Sub, until their respective
successors are duly elected or appointed and qualified. The officers of the
Surviving Corporation shall be the officers of Issuer, until their respective
successors are duly elected or appointed and qualified.
(e) Other than as a result of the Merger described in Item 3 above, not
applicable.
(f) Not applicable.
(g) Upon consummation of the Merger, the Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Merger, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by Delaware Law and such Certificate of Incorporation;
provided, however, that Article I of the Certificate of Incorporation of the
Surviving Corporation shall be amended to read as follows: "The name of the
corporation is Telebanc Financial Corporation." Upon consummation of the
Merger, the Bylaws of Merger Sub, as in effect immediately prior to the Merger,
shall be the Bylaws of the Surviving Corporation until thereafter amended.
(h) - (i) If the Merger is consummated as planned, the Issuer Common Stock
will be deregistered under the Act and delisted from The Nasdaq Stock Market's
National Market.
(j) Other than described above, E*TRADE currently has no plan or proposals
which relate to, or may result in, any of the matters listed in Items 4(a) - (j)
of Schedule 13D (although E*TRADE reserves the right to develop such plans).
Item 5. Interest in Securities of the Issuer.
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(a) - (b) The number of Shares covered by the Option is 3,369,881 which
constitutes, based on the number of shares outstanding on May 28, 1999 as
represented by the Issuer in the Reorganization Agreement together with the
shares underlying options and warrants reported in this Schedule 13D,
approximately 14.7% of the Issuer Common Stock.
Prior to exercise of the Option, the Reporting Person (i) is not
entitled to any rights as a stockholder of Issuer as to the Shares covered by
the Option and (ii) disclaims any beneficial ownership of the shares of Issuer
Common Stock which are purchasable by the Reporting Person upon exercise of the
Option because the Option is exercisable only in the limited circumstances as
set forth in the Option Agreement, none of which has occurred as of the
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date hereof. If the Option were exercised, the Reporting Person would have the
sole right to vote and dispose of the shares of Issuer Common Stock issued as a
result of such exercise, subject to the terms and conditions of the Option
Agreement.
As a result of the Stockholder Agreement, E*TRADE may be deemed to be
the beneficial owner of at least 2,681,639 shares of Issuer Common Stock. Such
Issuer Common Stock constitutes, based on the number of shares outstanding on
May 28, 1999 as represented by the Issuer in the Reorganization Agreement
together with the shares underlying options and warrants reported in this
Schedule 13D, approximately 11.7% of the issued and outstanding shares of Issuer
Common Stock.
E*TRADE has shared power to vote all of the Shares for the limited
purposes described above in connection with the Stockholder Agreement. E*TRADE
does not have the sole power to vote or to direct the vote or to dispose or to
direct the disposition of any shares of Issuer Common Stock pursuant to the
Stockholder Agreement. However, the Reporting Person (i) is not entitled to any
rights as a stockholder of Issuer as to the Shares covered by the Stockholder
Agreement and (ii) disclaims any beneficial ownership of the shares of Issuer
Common stock which are covered by the Stockholder Agreement. To the best of
E*TRADE's knowledge, no shares of Issuer Common Stock are beneficially owned by
any of the persons named in Schedule A.
(c) Neither E*TRADE nor, to the knowledge of E*TRADE, any person named in
Schedule A, has effected any transaction in the Issuer Common Stock during the
past 60 days.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
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to Securities of the Issuer.
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Other than the Reorganization Agreement, Stockholder Agreement and
Option Agreement, to the knowledge of E*TRADE, there are no contracts,
arrangements, understandings or relationships (legal or otherwise) among the
persons named in Item 2 and between such persons and any person with respect to
any securities of the Issuer, including but not limited to transfer or voting of
any of the securities, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, division of profits or loss,
or the giving or withholding of proxies.
Item 7. Materials to be Filed as Exhibits.
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The following documents are filed as exhibits:
1.* Agreement and Plan of Merger and Reorganization, dated as of May
31, 1999, by and among E*TRADE Group, Inc., a Delaware
corporation, Turbo Acquisition Corp., a Delaware corporation and
wholly owned subsidiary of E*TRADE Group, Inc., and Telebanc
Financial Corporation, a Delaware corporation.
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2.* Stockholder Agreement, dated as of May 31, 1999, by and among
E*TRADE Group, Inc., a Delaware corporation and certain
stockholders of Telebanc Financial Corporation, a Delaware
corporation.
3.* Stock Option Agreement, dated as of May 31, 1999, by and between
E*TRADE Group, Inc., a Delaware corporation, and Telebanc
Financial Corporation, a Delaware corporation.
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* Previously filed
SIGNATURE
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After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: July 29, 1999
E*TRADE GROUP, INC.
By: /s/ Thomas A. Bevilacqua
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Thomas A. Bevilacqua, Esq.
Executive Vice President
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Schedule A
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DIRECTORS AND EXECUTIVE OFFICERS OF
E*TRADE GROUP, INC.
<TABLE>
<CAPTION>
Present Principal
Occupation Including
Name and Title Name of Employer
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<S> <C>
Christos M. Cotsakos Chairman of the Board and Chief Executive of E*TRADE Group, Inc.
William A. Porter Chairman Emeritus of E*TRADE Group, Inc.
Richard S. Braddock Chairman and Chief Executive Officer of priceline.com
Masayoshi Son President and Chief Executive Officer of SOFTBANK CORP.
William E. Ford Managing Member, General Atlantic Partners, LLC
George Hayter Partner, George Hayter Associates
Lewis E. Randall Private Investor
Lester C. Thurow Professor of Economics Massachusetts Institute of Technology
Kathy Levinson President and Chief Operating Officer of E*TRADE Group, Inc.
Leonard C. Purkis Chief Financial Officer and Executive Vice President, Finance
and Administration of E*TRADE Group, Inc.
Thomas A. Bevilacqua Executive Vice President, Corporate Development, General
Counsel and Secretary of E*TRADE Group, Inc.
Judy Balint President and Chief Operating Officer of E*TRADE International
Debra Chrapaty President and Chief Operating Officer of E*TRADE Technologies
Jerry D. Gramaglia Senior Vice President, Sales, Marketing and Communications
of E*TRADE Group, Inc.
Stephen C. Richards Senior Vice President, Corporate Development and New
Ventures of E*TRADE Group, Inc.
Connie M. Dotson Senior Vice President, Service Quality of E*TRADE Group, Inc.
</TABLE>
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Schedule B
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<TABLE>
<CAPTION>
Stockholder Shares Beneficially Owned
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<S> <C>
Mitchell H. Caplan 829,277
David A. Smilow and Carol Lynton 1,305,350
Aileen Lopez Pugh 116,961
Laurence P. Greenberg 87,907
Stephen G. Dervenis 5,700
David R. DeCamp 19,000
Dean C. Kehler 4,000
Marcia Myerberg -
Steven F. Piaker 4,000
Mark Rollinson 20,500
Michael M. Lynton 288,944
</TABLE>
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